McKesson 2009 Annual Report Download - page 85

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
79
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the
acquisition date:
(In millions)
Accounts receivable $ 107
Property and equipment 41
Other current and noncurrent assets 115
Goodwill 1,258
Intangible assets 471
Accounts payable (8)
Other current liabilities (126)
Deferred revenue (30)
Long-term liabilities (96)
Net assets acquired, less cash and cash equivalents $ 1,732
Approximately $1,258 million of the purchase price allocation has been assigned to goodwill, which primarily
reflects the expected future benefits from synergies upon integrating the business. Included in the purchase
price allocation are acquired identifiable intangibles of $402 million representing customer relationships with a
weighted-average life of 10 years, developed technology of $56 million with a weighted-average life of 5 years,
and trademark and trade names of $13 million with a weighted-average life of 5 years.
In connection with the purchase price allocation, we have estimated the fair value of the support obligations
assumed from Per-Se in connection with the acquisition. The estimated fair value of these obligations was
determined utilizing a cost build-up approach. The cost build-up approach determines fair value by estimating
the costs relating to fulfilling the obligations plus a normal profit margin. The sum of the costs and operating
profit approximates, in theory, the amount that we would be required to pay a third party to assume these
obligations. As a result, in allocating the purchase price, we recorded an adjustment to reduce the carrying
value of Per-Se’s deferred revenue by $17 million to $30 million, which represents our estimate of the fair value
of the obligation assumed.
−Our Technology Solutions segment acquired RelayHealth Corporation (“RelayHealth”) based in Emeryville,
California. RelayHealth is a provider of secure online healthcare communication services linking patients,
healthcare professionals, payors and pharmacies. This segment also acquired two other entities, one
specializing in patient billing solutions designed to simplify and enhance healthcare providers’ financial
interactions with their patients as well as a provider of integrated software for electronic health records, medical
billing and appointment scheduling for independent physician practices. The total cost of these three entities
was $90 million, which was paid in cash. Goodwill recognized in these transactions amounted to $63 million.
−Our Distribution Solutions segment acquired Sterling Medical Services, LLC (“Sterling”) which is based in
Moorestown, New Jersey. Sterling is a national provider and distributor of disposable medical supplies, health
management services and quality management programs to the home care market. This segment also acquired a
medical supply sourcing agent. The total cost of these two entities was $95 million, which was paid in cash.
Goodwill recognized in these transactions amounted to $47 million.
−We contributed $36 million in cash and $45 million in net assets primarily from our Pharmacy Systems and
Automation business to Parata Systems, LLC (“Parata,”) in exchange for a significant minority interest in
Parata. Parata is a manufacturer of pharmacy robotic equipment. In connection with the investment, we
abandoned certain assets which resulted in a $15 million charge to cost of sales and we incurred $6 million of
other expenses related to the transaction which were recorded within operating expenses. We did not recognize
any additional gains or losses as a result of this transaction as we believed the fair value of our investment in
Parata approximated the carrying value of consideration contributed to Parata.