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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
33
Our capitalized software held for sale is amortized over three years. At each balance sheet date, or earlier if an
indicator of an impairment exists, we evaluate the recoverability of unamortized capitalized software costs based on
estimated future undiscounted revenues net of estimated related costs over the remaining amortization period. At
the end of the second quarter of 2010, our HzERM software product became generally available. In October 2010,
we decreased our estimated revenues over the next 24 months for our HzERM software product and, as a result,
concluded that the estimated future revenues, net of estimated related costs, were insufficient to recover its carrying
value. Accordingly, we recorded a $72 million non-cash impairment charge in the second quarter of 2011 within
our Technology Solutions segment’s cost of sales to reduce the carrying value of the software product to its net
realizable value.
Operating Expenses:
Years Ended March 31, Change
(Dollars in millions) 2012 2011 2010 2012 2011
Operating Expenses
Distribution Solutions
(
1
)
$ 2,854 $ 2,673 $ 2,260 7% 18%
Technology Solutions 1,151 1,108 1,077 4 3
Corporate 413 368 351 12% 5
Subtotal 4,418 4,149 3,688 6 13
Litigation Credit, Net — — (20) — —
Total $ 4,418 $ 4,149 $ 3,668 6 13
Operating Expenses as a Percentage of Revenues
Distribution Solutions 2.39% 2.45% 2.14% (6)bp 31bp
Technology Solutions 34.77 34.68 34.48 9 20
Total 3.60 3.70 3.37 (10) 33
(1) Operating expenses for 2012 and 2011 include $149 million and $213 million of AWP litigation charges.
Operating expenses increased 6% to $4.4 billion in 2012 and 13% to $4.1 billion in 2011. Operating expenses
include pre-tax charges of $149 million and $213 million in 2012 and 2011 relating to our AWP litigation and a pre-
tax credit of $20 million in 2010 relating to our securities litigation matter. Operating expenses increased in 2012
primarily due to the addition of US Oncology, higher employee compensation and benefits costs and an increase in
expenses associated with supporting higher revenues, partially offset by a lower AWP litigation charge. Operating
expenses increased in 2011 primarily due to the AWP litigation charge, higher costs associated with employee
compensation and benefits, including our Profit Sharing Investment Plan (“PSIP”), and the acquisition of US
Oncology.
The McKesson Corporation PSIP was a member of the settlement class in the Consolidated Securities Litigation
Action. On April 27, 2009, the court issued an order approving the distribution of the settlement funds. On October
9, 2009, the PSIP received approximately $119 million of the Consolidated Securities Litigation Action proceeds.
Approximately $42 million of the proceeds were attributable to the allocated shares of McKesson common stock
owned by the PSIP participants during the Consolidated Securities Litigation Action class-holding period and were
allocated to the respective participants on that basis in the third quarter of 2010. Approximately $77 million of the
proceeds were attributable to the unallocated shares (the “Unallocated Proceeds”) of McKesson common stock
owned by the PSIP in an employee stock ownership plan (“ESOP”) suspense account. In accordance with the plan
terms, the PSIP distributed all of the Unallocated Proceeds to current PSIP participants after the close of the plan
year in April 2010. The receipt of the Unallocated Proceeds by the PSIP was reimbursement for the loss in value of
the Company’s common stock held by the PSIP in its ESOP suspense account during the Consolidated Securities
Litigation Action class-holding period and was not a contribution made by the Company to the PSIP or ESOP.
Accordingly, there were no accounting consequences to the Company’s financial statements relating to the receipt of
the Unallocated Proceeds by the PSIP.
As a result of the PSIP’s receipt of the Unallocated Proceeds, in 2010 the Company contributed $1 million to
the PSIP. Accordingly, PSIP expense for 2010 was nominal. Commencing in 2011, the Company resumed its
contributions to the PSIP.