McKesson 2012 Annual Report Download - page 76

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
72
4. Product Alignment and Asset Impairment Charges
During the third quarter of 2012, we approved a plan to align our hospital clinical and revenue cycle healthcare
software products within our Technology Solutions segment. As part of this alignment strategy, we will be
converging our core clinical and revenue cycle Horizon and Paragon product lines onto Paragon’s Microsoft®–
based platform over time. Additionally, we have stopped development of our Horizon Enterprise Revenue
Management™ (“HzERM”) software product. The plan resulted in a pre-tax charge of $51 million in 2012, of which
$31million was recorded to cost of sales and $20 million was recorded to operating expenses within our Technology
Solutions segment. The majority of these charges were incurred in the third quarter of 2012. The pre-tax charge
includes $24 million of non-cash asset impairment charges, primarily for the write-off of prepaid licenses and
commissions and capitalized internal use software that were determined to be obsolete as they would not be utilized
going forward, $10 million for severance, $7 million for customer allowances and $10 million for other charges.
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.
5. Other Income, Net
Years Ended March 31,
(In millions) 2012 2011 2010
Interest income $ 19 $ 18 $ 16
Equity in earnings (loss), net
(
1
)
9 (6) 6
Reimbursement of post-acquisition interest expense — 16 —
Gain on sale of investment
(
1
)
— — 17
Impairment of an investment (6) — —
Other, net (1) 8 4
Total $ 21 $ 36 $ 43
(1) Recorded within our Distribution Solutions segment.
In 2011, other income, net included a credit of $16 million representing the reimbursement of post-acquisition
interest expense by the former shareholders of US Oncology, which is recorded in Corporate.
In 2010, we sold our 50% equity interest in McKesson Logistics Solutions LLC, a Canadian logistics company,
for a pre-tax gain of $17 million or $14 million after-tax.
We evaluate our investments for impairment when events or changes in circumstances indicate that the carrying
values of such investments may have experienced an other-than-temporary decline in value.