McKesson 2005 Annual Report Download - page 34

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
In 2004, our reported tax rate benefited from various state tax initiatives. We recorded a $23.2 million tax benefit relating to favorable tax
settlements and adjustments with the U.S. Internal Revenue Service and with various taxing authorities. A large portion of this benefit, which
was not previously recognized by the Company, resulted from the filing of amended tax returns by our subsidiary, McKesson Information
Solutions LLC (formerly known as HBO & Company) for the years ended December 31, 1998 and 1997.
Net Income: Net income (loss) was ($156.7) million, $646.5 million and $555.4 million in 2005, 2004 and 2003. Diluted earnings (loss) per
share was ($0.53), $2.19 and $1.88 in 2005, 2004 and 2003. Excluding the Securities Litigation charge, 2005 net income and net income per
diluted share would have been $653.3 million and $2.19.
A reconciliation between our net loss per share reported for U.S. GAAP purposes and our earnings per diluted share, excluding the charge
for the Securities Litigation for 2005 is as follows:
Discontinued Operations: Net loss from discontinued operations was $6.7 million ($0.02 per diluted share) in 2003. Results from
discontinued operations include those of a marketing fulfillment business, which we sold in 2003, as well as adjustments made in 2003 relating
to the 2000 divestiture of our Water Products business.
Weighted Average Diluted Shares Outstanding: Diluted earnings (loss) per share were calculated based on an average number of shares
outstanding of 293.5 million, 298.6 million and 298.8 million for 2005, 2004 and 2003. For 2005, potentially dilutive securities were excluded
from the per share computations due to their antidilutive effect.
International Operations
International operations accounted for 6.7%, 6.7% and 6.3% of 2005, 2004 and 2003 of consolidated revenues. International operations are
subject to certain risks, including currency fluctuations. We monitor our operations and adopt strategies responsive to changes in the economic
and political environment in each of the countries in which we operate. Additional information regarding our international operations is also
included in Financial Notes 4 and 22, “Contracts” and “Segments of Business” to the accompanying consolidated financial statements.
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Year Ended
(In millions except per share amounts) March 31, 2005
Net loss, as reported $(156.7)
Exclude:
Securities Litigation charge (1,200.0)
Estimated income tax benefit 390.0
Securities Litigation charge, net of tax (810.0)
Net income, excluding Securities Litigation charge $ 653.3
Diluted earnings per common share, excluding Securities Litigation charge (1) $2.19
Shares on which diluted earnings per common share, excluding the Securities Litigation charge, were base
d
301.4
(1) Interest expense, net of related income taxes of $6.2 million, has been added to net income, excluding the Securities Litigation charge,
for purpose of calculating diluted earnings per share. This calculation also includes the impact of dilutive securities (stock options,
convertible junior subordinated debentures and restricted stock).