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65
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Cumulative Translation Adjustments: In March 2013, amended guidance was issued for parent's accounting for the
cumulative translation adjustment upon derecognition of certain subsidiaries or group of assets within a foreign entity or of an
investment in a foreign entity. The amended guidance requires the release of any cumulative translation adjustment into net
income only upon complete or substantially complete liquidation of a controlling interest in a subsidiary or a group of assets
within a foreign entity. Also, it requires the release of all or a pro rata portion of the cumulative translation adjustment to net
income in case of sale of an equity method investment that is a foreign entity. The amended guidance is applicable to us
effective first quarter of fiscal 2015. Early adoption is permitted. We are currently evaluating the impact of this amended
guidance on our consolidated financial statements.
2. Business Combinations
Fiscal 2013
On February 22, 2013, we acquired all of the outstanding shares of PSS World Medical, Inc. (“PSS World Medical”) of
Jacksonville, Florida for $29.00 per share plus the assumption of PSS World Medical's debt, or approximately $1.9 billion in
aggregate, consisting of cash consideration of $1.3 billion, net of cash acquired, and the assumption of long-term debt with a
fair value of $0.6 billion. The cash paid at acquisition was funded from cash on hand and the issuance of long-term debt. PSS
World Medical markets and distributes medical products and services throughout the United States. The acquisition of PSS
World Medical expands our existing Medical-Surgical business.
The following table summarizes the preliminary recording of the fair values of the assets acquired and liabilities assumed
as of the acquisition date. Due to the recent timing of the acquisition, these amounts are subject to change within the
measurement period as our fair value assessments are finalized.
(In millions)
Amounts
Recognized as of
Acquisition Date
(Provisional)
Current assets, net of cash and cash equivalents acquired $ 706
Goodwill 1,145
Intangible assets 557
Other long-term assets 183
Current liabilities (376)
Current portion of long-term debt (635)
Other long-term liabilities (281)
Net assets acquired, less cash and cash equivalents $ 1,299
Included in the purchase price allocation are acquired identifiable intangibles of $557 million, the fair value of which was
primarily determined by applying the income approach, using several significant unobservable inputs for projected cash flows
and a discount rate. These inputs are considered Level 3 inputs under the fair value measurements and disclosure guidance.
Acquired intangibles primarily consist of $529 million of customer lists and $15 million of trademarks and trade names. The
estimated weighted average lives of the customer lists, trademarks and trade names and total intangible assets are nine years,
two years and nine years. The fair values of the debt acquired was determined using quoted market prices and other inputs
that were derived from available market information, which are considered to be Level 2 inputs under the fair value
measurements and disclosure guidance. Refer to Financial Note 14, "Debt and Financing Activities," for additional
information on the assumption and redemption of acquired debt and long-term debt issued to fund a portion of this
acquisition. The excess of the purchase price over the net tangible and intangible assets of approximately $1,145 million was
recorded as goodwill, which primarily reflects the expected future benefits to be realized upon integrating the business. Most
of the goodwill is not expected to be deductible for tax purposes.
Financial results for PSS World Medical since the acquisition date are included in the results of operations for the fourth
quarter and year ended March 31, 2013 within our Medical-Surgical distributions and services business, which is part of our
Distribution Solutions segment, and the effects were not material to the consolidated financial statements.