McKesson 2014 Annual Report Download - page 34

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
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Our reported income tax rates were 35.4%, 30.1% and 27.2% in 2014, 2013 and 2012. Fluctuations in our reported income
tax rates are primarily due to changes within our business mix, including varying proportions of income attributable to foreign
countries that have lower income tax rates, and discrete items. Income tax expense included $94 million of net discrete tax expense
in 2014, and $29 million and $66 million of net discrete tax benefit in 2013 and 2012. Discrete tax expense for 2014 primarily
related to a $122 million charge regarding an unfavorable decision from the Tax Court of Canada with respect to transfer pricing
issues. Included in the 2012 discrete tax benefit is a $31 million credit to income tax expense as a result of the reversal of an
unrecognized tax benefit relating to our AWP litigation.
During 2014, we committed to a plan to sell our International Technology business and our Hospital Automation business
from our Technology Solutions segment and certain small businesses from our Distribution Solutions segment. In the third quarter
of 2014, we recorded a non-cash pre-tax and after-tax impairment charge of $80 million to reduce the carrying value of our
International Technology business to its estimated net realizable value (fair value less costs to sell).
Net income attributable to McKesson Corporation was $1,263 million, $1,338 million and $1,403 million in 2014, 2013 and
2012, and diluted earnings per common share attributable to McKesson Corporation were $5.41, $5.59 and $5.59. Diluted earnings
per common share attributable to McKesson Corporation were favorably affected by decreases in our weighted average shares
outstanding primarily due to the cumulative effect of share repurchases.
On February 6, 2014, we completed the acquisition of 77.6% of the then outstanding common shares of Celesio and certain
convertible bonds of Celesio for cash consideration of $4.5 billion, net of cash acquired. Upon the acquisition, our ownership of
Celesio’s fully diluted shares was 75.6% and as required, we consolidated Celesio’s debt with a fair value of $2.3 billion as a
liability on our consolidated balance sheet. At March 31, 2014, we owned approximately 75.4% of Celesio’s outstanding and fully
diluted common shares. The acquisition was funded by utilizing a senior bridge loan, our existing accounts receivable facility and
cash on hand. Celesio is an international wholesale and retail company and a provider of logistics and services to the pharmaceutical
and healthcare sectors. Celesio’s headquarters is in Stuttgart, Germany and it operates in 14 countries around the world. The
acquisition of Celesio expands our global geographic area; the combined company will be one of the largest pharmaceutical
wholesalers and providers of logistics and services in the healthcare sector worldwide.
Revenues:
Years Ended March 31, Change
(Dollars in millions) 2014 2013 2012 2014 2013
Distribution Solutions
North America pharmaceutical distribution
& services $ 123,930 $ 115,443 $ 116,279 7 % (1) %
International pharmaceutical distribution & services 4,848 — — — —
Medical-Surgical distribution & services 5,648 3,603 3,145 57 15
Total Distribution Solutions 134,426 119,046 119,424 13 —
Technology Solutions - products and services 3,183 3,023 2,897 5 4
Total Revenues $ 137,609 $ 122,069 $ 122,321 13 —
Revenues for 2014 increased 13% to $137.6 billion from 2013 and revenues for 2013 of $122.1 billion approximated 2012.
Increases in our revenues were primarily driven by our Distribution Solutions segment, which accounted for approximately 98%
of our consolidated revenues.