McKesson 2014 Annual Report Download - page 40

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
37
Segment Operating Profit, Corporate Expenses, Net and Interest Expense:
Years Ended March 31, Change
(Dollars in millions) 2014 2013 2012 2014 2013
Segment Operating Profit
Distribution Solutions $ 2,461 $ 2,195 $ 2,219 12 % (1) %
Technology Solutions 387 308 338 26 (9)
Subtotal 2,848 2,503 2,557 14 (2)
Corporate Expenses, Net (449) (335)(413) 34 (19)
Interest Expense (303) (240)(251) 26 (4)
Income From Continuing Operations Before
Income Taxes $ 2,096 $ 1,928 $ 1,893 9 2
Segment Operating Profit Margin
Distribution Solutions 1.83 % 1.84 % 1.86 % (1) bp (2) bp
Technology Solutions 12.16 10.19 11.67 197 (148)
Distribution Solutions: Operating profit margin for our Distribution Solutions segment in 2014 was flat compared to 2013,
primarily reflecting an increase in gross profit margin and the $191 million impairment charge on an equity investment incurred
in 2013, partially offset by higher operating expenses as a percentage of revenues, which includes the effects of our acquisitions.
Operating profit margin for our Distribution Solutions segment decreased in 2013 compared to 2012 primarily due to the $191
million impairment charge on an equity investment and higher operating expenses as a percentage of revenues, which included
the effects of our acquisitions. These 2013 increases were partially offset by an increase in gross profit margin.
Technology Solutions: Operating profit margin in our Technology Solutions segment increased in 2014 compared to 2013
primarily due to an increase in gross profit margin and a decrease in operating expenses as a percentage of revenues. Operating
profit margin in our Technology Solutions segment decreased in 2013 compared to 2012 primarily due to an increase in operating
expenses as a percentage of revenues.
Corporate: Corporate expenses, net of other income increased in 2014 compared to 2013 due to higher operating expenses.
Corporate expenses for 2013 also included the $81 million gain on business combination. Corporate expenses, net of other income
decreased in 2013 compared to 2012 primarily due to the gain on business combination and an increase in other income.
Interest Expense: Interest expense increased in 2014 compared to 2013 primarily due to our acquisition of Celesio, including
$46 million of bridge loan fees, interest on $4.1 billion of new debt issued to fund the acquisition and interest on debt of Celesio.
These increases are partially offset by repayment of $500 million of the current portion of our long-term debt in March 2013.
Interest expense decreased in 2013 compared to 2012 primarily due to the repayment of $400 million of long-term debt in February
2012, partially offset by $11 million of bridge loan fees paid in connection with our acquisition of PSS World Medical. Interest
expense fluctuates based on timing, amounts and interest rates of term debt that is repaid and new term debt issued, as well as
amounts incurred for bridge loan fees. Refer to our discussion under the caption “Credit Resources” within this Financial Review
for additional information regarding our financing activities.