McKesson 2008 Annual Report Download - page 45

Download and view the complete annual report

Please find page 45 of the 2008 McKesson annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 119

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
38
These pro forma amounts are non-GAAP financial measures. We use these measures internally and consider
these results to be useful to investors as they provide relevant benchmarks of core operating performance.
Weighted Average Diluted Shares Outstanding: Diluted earnings per share was calculated based on a weighted
average number of shares outstanding of 298 million, 305 million and 316 million for 2008, 2007 and 2006. The
decrease in the number of weighted average diluted shares outstanding over the past two years primarily reflects
stock repurchased, partially offset by exercised stock options.
International Operations
International operations accounted for 8.2%, 7.5% and 7.0% of 2008, 2007 and 2006 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 Note 21,
“Segments of Business” to the accompanying consolidated financial statements.
Acquisitions and Investments
In April 2008, we entered into an agreement to acquire McQueary Brothers Drug Company, Inc. (“McQueary
Brothers”), of Springfield, Missouri for approximately $190 million. McQueary Brothers is a regional distributor of
pharmaceutical, health, and beauty products to independent and regional chain pharmacies in the Midwestern U.S.
This acquisition will expand our existing U.S. pharmaceutical distribution business. The acquisition is expected to
close in the first quarter of 2009, subject to customary closing conditions including regulatory review and will be
funded with cash on hand. When completed, financial results for McQueary Brothers will be included within our
Distribution Solutions segment.
In 2008, we made the following acquisition:
−On October 29, 2007, we acquired all of the outstanding shares of OTN of San Francisco, California for
approximately $531 million, including the assumption of debt and net of $31 million of cash acquired from
OTN. OTN is a U.S. distributor of specialty pharmaceuticals. The acquisition of OTN expanded our existing
specialty pharmaceutical distribution business. The acquisition was funded with cash on hand. Financial
results for OTN are included within our Distribution Solutions segment. Approximately $257 million of the
preliminary purchase price allocation has been assigned to goodwill. Included in the purchase price allocation
are acquired identifiable intangibles of $119 million representing customer relationships with a weighted-
average life of 9 years, developed technology of $3 million with a weighted-average life of 4 years and
trademarks and trade names of $7 million with a weighted-average life of 5 years.
In 2007, we made the following acquisitions and investment:
−On January 26, 2007, we acquired all of the outstanding shares of Per-Se of Alpharetta, Georgia for $28.00 per
share in cash plus the assumption of Per-Se’ s debt, or approximately $1.8 billion in aggregate, including cash
acquired of $76 million. Per-Se is a leading provider of financial and administrative healthcare solutions for
hospitals, physicians and retail pharmacies. The acquisition of Per-Se is consistent with the Company’ s strategy
of providing products that help solve clinical, financial and business processes within the healthcare industry.
The acquisition was initially funded with cash on hand and through the use of an interim credit facility. In
March 2007, we issued $1 billion of long-term debt, with such net proceeds after offering expenses from the
issuance, together with cash on hand, being used to fully repay borrowings outstanding under the interim credit
facility (refer to Financial Note 10, “Long-Term Debt and Other Financing” to the accompanying consolidated
financial statements). Financial results for Per-Se are primarily included within our Technology Solutions
segment.