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67
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Included in the purchase price allocation are acquired identifiable intangibles of $442 million, the fair value of which was
determined by applying the income approach, using several unobservable inputs for projected cash flows and a discount rate.
These inputs are considered Level 3 inputs under the fair value measurement and disclosure guidance. Acquired intangibles
primarily consist of $318 million of service agreements and $114 million of trademarks and trade names. Service agreements,
trademarks and trade names and total acquired intangibles assets each has an estimated weighted average life of 20 years. The
excess of the purchase price over the net tangible and intangible assets of approximately $512 million was recorded as
goodwill, which primarily reflects the expected future benefits to be realized upon integrating the business. The amount of
goodwill expected to be deductible for tax purposes is $290 million.
Fiscal 2011
On December 30, 2010, we acquired all of the outstanding shares of US Oncology Holdings, Inc. (“US Oncology”) for
approximately $2.1 billion, consisting of cash consideration of $0.2 billion, net of cash acquired, and the assumption of
liabilities with a fair value of $1.9 billion. The cash paid at acquisition was funded from cash on hand. As an integrated
oncology company, US Oncology is affiliated with community-based oncologists, and works with patients, hospitals, payers
and the medical industry across all phases of the cancer research and delivery continuum. The acquisition of US Oncology
expands our existing specialty pharmaceutical distribution business and adds practice management services for oncologists.
Financial results for US Oncology have been included in the results of operations within our Distribution Solutions segment
beginning in the fourth quarter of 2011.
During the third quarter of 2012, the fair value measurements of assets acquired and liabilities assumed as of the
acquisition date were completed. The following table summarizes the final amounts of the fair values recognized for the
assets acquired and liabilities assumed as of the acquisition date, as well as measurement period adjustments made in the first
nine months of 2012 to the amounts initially recorded in 2011. The measurement period adjustments during the first nine
months of 2012 did not have a material impact on our consolidated statements of operations, balance sheets or cash flows in
any period, and, therefore, we have not retrospectively adjusted our financial statements.
(In millions)
Amounts
Previously
Recognized as of
Acquisition Date
(Provisional) (1)
Measurement
Period
Adjustments
Amounts
Recognized as of
Acquisition Date
(Final as
Adjusted)
Current assets, net of cash and cash equivalents acquired $ 662 $ (13) $ 649
Goodwill 808 20 828
Intangible assets 1,007 (14) 993
Other long-term assets 354 (6) 348
Current liabilities (489) (1) (490)
Current portion of long-term debt (1,735)
—
(1,735)
Other long-term liabilities (338) 16 (322)
Other stockholders' equity (25) (2) (27)
Net assets acquired, less cash and cash equivalents $ 244 $
—
$ 244
(1) As previously reported in our Form 10-K for the year ended March 31, 2011.
Included in the purchase price allocation are acquired identifiable intangibles of $993 million, the fair value of which was
determined by applying the income approach, using several unobservable inputs for projected cash flows and a discount rate.
These inputs are considered Level 3 inputs under the fair value measurement and disclosure guidance. Acquired intangible
assets primarily consist of $721 million of service agreements and $185 million of customer lists. The estimated weighted
average lives of the service agreements, customer lists and total acquired intangible assets are 18 years, 10 years and 16 years.
The fair value of the debt acquired was determined primarily by using Level 2 inputs. Refer to Financial Note 14, “Debt and
Financing Activities,” for additional information on the assumption and redemption of acquired debt. The excess of the
purchase price over the net tangible and intangible assets was recorded as goodwill, which primarily reflects the expected
future benefits to be realized upon integrating the business. This goodwill is not expected to be deductible for tax purposes.