McKesson 2008 Annual Report Download - page 43

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
36
Discontinued Operations:
Results from discontinued operations were as follows:
Years Ended March 31,
(In millions) 2008 2007 2006
Income (loss) from discontinued operations
Acute Care $ 1 $ (9) $ (13)
BioServices - - 2
Other 1 - -
Income taxes (1) 4 4
Total $ 1 $ (5) $ (7)
Gain (loss) on sales of discontinued operations
Acute Care $ - $ (49) $ -
BioServices - - 22
Other - 10 -
Income taxes - (11) (9)
Total $ - $ (50) $ 13
Discontinued operations, net of taxes
Acute Care $ 1 $ (66) $ (8)
BioServices - - 14
Other - 11 -
Total $ 1 $ (55) $ 6
In the second quarter of 2007, we sold our Distribution Solutions segment’ s Medical-Surgical Acute Care
business to Owens & Minor, Inc. (“OMI”) for net cash proceeds of approximately $160 million. In accordance with
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the financial results of this
business are classified as a discontinued operation for all periods presented in the accompanying consolidated
financial statements. Revenues associated with the Acute Care business prior to its disposition were $1,062 million
for 2006 and $597 million for the first half of 2007.
Financial results for 2007 for this discontinued operation include an after-tax loss of $66 million, which
primarily consists of an after-tax loss of $61 million for the business’ disposition and $5 million of after-tax losses
associated with operations, other asset impairment charges and employee severance costs. The after-tax loss of $61
million for the business’ disposition includes a $79 million non-tax deductible write-off of goodwill, as further
described below.
In connection with the divestiture, we allocated a portion of our Distribution Solutions Medical-Surgical
business’ goodwill to the Acute Care supply business as required by SFAS No. 142, “Goodwill and Other Intangible
Assets.” The allocation was based on the relative fair values of the Acute Care business and the continuing
businesses that are being retained by the Company. The fair value of the Acute Care business was determined based
on the net cash proceeds resulting from the divestiture and the fair value of the continuing businesses. As a result,
we allocated $79 million of the segment’ s goodwill to the Acute Care business.
Additionally, as part of the divestiture, we entered into a transition services agreement (“TSA”) with OMI under
which we provided certain services to the Acute Care business during a transition period of approximately six
months. Financial results from the TSA, as well as employee severance charges over the transition period, were
recorded as part of discontinued operations. The continuing cash flows generated from the TSA were not material to
our consolidated financial statements and the TSA was completed as of March 31, 2007.