McKesson 2009 Annual Report Download - page 92

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
86
Restructuring Activities and Asset Impairment – Expenses
During 2009, there were no material restructuring costs incurred.
During 2008, we incurred $19 million of restructuring expenses which primarily consisted of:
−$4 million of severance costs associated with the closure of two facilities within our Distribution Solutions
segment,
−$1 million and $3 million of severance and asset impairments associated with the integration of OTN
within our Distribution Solutions segment, and
−$5 million of severance and exit-related costs and a $4 million asset impairment charge for the write-off of
capitalized software costs associated with the termination of a software project within our Technology
Solutions segment.
During 2007, we recorded $15 million of restructuring expenses, of which $8 million pertained to employee
severance costs associated with the reallocation of product development and marketing resources and the
realignment of an international business within our Technology Solutions segment.
Restructuring Activities – Liabilities Related to Acquisitions
In connection with our OTN acquisition within our Distribution Solutions segment, to date we recorded a total
of $7 million of employee severance costs and $4 million of facility exit costs. In connection with our Per-Se
acquisition within our Technology Solutions segment, we recorded a total of $19 million of employee severance
costs and $3 million of facility exit and contract termination costs. In 2007, in connection with the Company’s
investment in Parata, $13 million of contract termination costs that were initially estimated as part of a prior year
acquisition were extinguished and as a result, the Company decreased goodwill and its restructuring liability.
As of March 31, 2009, the majority of the restructuring accruals of $13 million, which primarily consist of
employee severance costs and facility exit and contract termination costs, are anticipated to be disbursed through
2010. Accrued restructuring liabilities are included in other accrued and other noncurrent liabilities in the
consolidated balance sheets.
Based on our current existing initiatives, we expect to complete the majority of these activities by the end of
2010. Expenses associated with these existing initiatives are not anticipated to be material. We are however,
continuing to evaluate other restructuring initiatives primarily pertaining to our newly acquired businesses, which
may have an impact on future net income. Approximately 935 employees, consisting primarily of distribution,
general and administrative staffs were planned to be terminated as part of our restructuring plans, of which 661
employees had been terminated as of March 31, 2009. Restructuring expenses are included in cost of sales and
operating expenses in our consolidated statements of operations.
Other Workforce Reduction Charges
In 2009 and 2008, we recorded $32 million ($7 million for our Distribution Solutions Segment and $25 million
for our Technology Solutions segment) and $8 million of charges (for our Technology Solutions segment)
associated with various reductions in workforce. Although these actions do not constitute a restructuring plan (as
defined under GAAP), they do represent independent actions taken from time to time, as appropriate. These charges
were recorded within our consolidated statements of operations as follows: $5 million and $7 million in cost of sales
in 2009 and 2008 and $28 million and $20 million within operating expenses.