McKesson 2008 Annual Report Download - page 40

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
33
2007
−$60 million of share-based compensation expense, or $44 million more than the previous year. The incremental
compensation expense was recorded as follows: $13 million and $18 million in our Distribution Solutions and
Technology Solutions segments, and $13 million in Corporate expenses,
−$15 million of severance restructuring expense primarily to reallocate product development and marketing
resources and to realign one of the international businesses within our Technology Solutions segment, and
−an $11 million credit to our Distribution Solution’ s operating expenses due to a favorable adjustment to a legal
reserve.
2006
−a $45 million net charge for our Securities Litigation and a decrease in legal expenses associated with the
litigation which were both recorded in Corporate expenses, and
−a $15 million credit to our Distribution Solutions’ bad debt expense due to a recovery of a previously reserved
customer account.
Other Income, net:
Years Ended March 31,
(In millions) 2008 2007 2006
By Segment
Distribution Solutions $ 35 $ 39 $ 40
Technology Solutions 11 10 13
Corporate 75 83 86
Total $ 121 $ 132 $ 139
Other income, net decreased in 2008 primarily reflecting a decrease in interest income due to lower cash
balances and lower interest rates. Other income, net in 2007 approximated that of 2006. Interest income, which is
primarily recorded in Corporate expenses, was $89 million, $103 million and $105 million in 2008, 2007 and 2006.
Segment Operating Profit and Corporate Expenses:
Years Ended March 31,
(Dollars in millions) 2008 2007 2006
Segment Operating Profit
Distribution Solutions $ 1,483 $ 1,395 $ 1,250
Technology Solutions 319 206 187
Subtotal 1,802 1,601 1,437
Corporate Expenses, net (208) (211) (127)
Securities Litigation credit (charge), net 5 6 (45)
Interest Expense (142) (99) (94)
Income from Continuing Operations Before Income
Taxes $ 1,457 $ 1,297 $ 1,171
Segment Operating Profit Margin
Distribution Solutions 1.50% 1.54% 1.47%
Technology Solutions 10.69 9.20 10.14
Segment operating profit includes gross margin, net of operating expenses, and other income for our two
operating segments. Operating profit increased in 2008 primarily reflecting revenue growth and improved operating
profit in both of our segments and for 2007, primarily reflecting revenue growth and improved operating profit in
our Distribution Solutions segment.