McKesson 2009 Annual Report Download - page 98

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
92
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 this divestiture, we allocated a portion of our Distribution Solutions segment’s Medical-
Surgical Distribution business’ goodwill to the Acute Care 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. 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.
In the second quarter of 2007, we also sold a wholly-owned subsidiary, Pharmaceutical Buyers Inc., for net cash
proceeds of $10 million. The divestiture resulted in an after-tax gain of $5 million resulting from the tax basis of the
subsidiary exceeding its carrying value. Financial results for this business, which were previously included in our
Distribution Solutions segment, were not material to our consolidated financial statements.
The results for discontinued operations for 2007 also include an after-tax gain of $6 million associated with the
collection of a note receivable from a business sold in 2003 and the sale of a small business.
In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”
financial results for these businesses have been classified as discontinued operations for all periods presented.
8. Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted average number of common
shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per
share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue
common stock were exercised or converted into common stock.