McKesson 2011 Annual Report Download - page 41

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
35
As a result of our acquisition of US Oncology, we incurred a net $52 million of acquisition-related expenses as
follows:
(In millions)
Distribution
Solutions
Corporate &
Interest
Expense
Total
Operating expenses:
Transaction closing expenses
$
22
$
—
$
22
Severance and relocation
9
—
9
Other integration expenses
10
2
12
Total operating expenses
41
2
43
Other income: reimbursement of post-acquisition interest
expense from former shareholders
—
(16)
(16)
Interest expense: bridge loan fees
—
25
25
Total acquisition-related expenses
$
41
$
11
$
52
We anticipate incurring additional acquisition-related expenses in 2012 as we continue to integrate US
Oncology.
Technology Solutions segment’s operating expenses and operating expenses as a percentage of revenues
increased in 2011 and decreased in 2010. The growth in 2011 reflects our increased investment in research and
development activities and higher employee compensation and benefit costs, which includes PSIP expense, partially
offset by the sale of MAP in the second quarter of 2011. Operating expenses and operating expenses as a percentage
of revenues for 2010 benefited from lower PSIP expense, cost containment efforts and reduction in workforce plans
implemented in 2009, partially offset by our continued investment in research and development activities.
Corporate expenses for 2011 increased compared to 2010 primarily due to higher compensation and benefits
costs and an asset impairment charge for certain tangible property, partially offset by lower fees associated with our
accounts receivable facility. As a result of our adoption of a new accounting standard for transfers of financial
assets on April 1, 2010, fees associated with our accounts receivable sales facility are now recorded in interest
expense. Prior to 2011, these fees were recorded in Corporate administrative expenses. Corporate expenses for
2010 increased compared to 2009 primarily due to higher compensation and benefits costs, other business initiatives
and legal settlement charges.
In 2010, we recorded net credits of $20 million relating to settlements for the securities litigation, which were
recorded in Corporate expenses.
Other Income, net:
Years Ended March 31,
(In millions)
2011
2010
2009
By Segment
Distribution Solutions
$
5
$
29
$
(20)
Technology Solutions
4
5
7
Corporate
27
9
25
Total
$
36
$
43
$
12
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. Interest income was
$18 million, $16 million and $31 million in 2011, 2010 and 2009.
In 2010, other income, net included a $17 million pre-tax gain ($14 million after-tax) from the sale of our 50%
equity interest in McKesson Logistic Solutions, LLC (“MLS”). The gain on sale of our investment in MLS was
recorded within our Distribution Solutions segment. This increase was partially offset by a decrease in interest
income due to lower interest rates.