McKesson 2014 Annual Report Download - page 77

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
74
During the third quarter of 2014, we recorded an $80 million pre-tax ($80 million after-tax) non-cash impairment charge to
reduce the carrying value of our International Technology business to its estimated net realizable value (fair value less costs to
sell). The charge was primarily the result of the terms of the preliminary purchase offers received for this business during the
third quarter of 2014. The impairment charge was primarily attributed to goodwill and other long-lived assets and as a result,
there was no tax benefit associated with this charge. The ultimate selling price of our International Technology business may be
higher or lower than our current assessment of fair value.
During the third quarter of 2014, we sold our Hospital Automation business for net cash proceeds of $55 million and recorded
a pre-tax and after-tax loss of $5 million and $7 million.
A summary of results of discontinued operations is as follows:
Years Ended March 31,
(In millions) 2014 2013 2012
Revenues $ 421 $ 386 $ 413
Income (loss) from discontinued operations $(102) $ (9) $ 26
Loss on sale (5) — —
Income (loss) from discontinued operations before income tax (107)(9) 26
Income tax (expense) benefit 11 — (2)
Income (loss) from discontinued operations, net of tax $(96) $ (9) $ 24
The assets and liabilities of our discontinued operations were classified as held-for-sale effective June 30, 2013. All applicable
assets of the businesses to be sold are included under the caption “Prepaid expenses and other” and all applicable liabilities under
the caption “Other accrued liabilities” within our consolidated balance sheet at March 31, 2014. The carrying values of the assets
and liabilities classified as held-for-sale were $267 million and $248 million at March 31, 2014.
4. Asset Impairments and Product Alignment Charges
In 2014, 2013 and 2012, we recorded asset impairments and product alignment charges of $57 million, $46 million and $51
million in our Technology Solutions segment.
Fiscal 2014
During the third quarter of 2014, our Technology Solutions segment recorded pre-tax charges totaling $57 million. These
charges primarily consist of $35 million of product alignment charges, $15 million of integration-related expenses and $7 million
of reduction-in-workforce severance charges. Included in the total charge was $35 million for severance for employees primarily
in our research and development, customer services and sales functions, and $15 million for asset impairments which primarily
represents the write-off of deferred costs related to a product that will no longer be developed. Charges were recorded in our
consolidated statement of operations as follows: $34 million in cost of sales and $23 million in operating expenses.
Fiscal 2013
During the fourth quarter of 2013, we recorded $46 million of non-cash pre-tax impairment charges. These charges were the
result of a significant decrease in estimated revenues for a software product. The charge included a $36 million goodwill impairment
to reduce the carrying value of goodwill within the applicable reporting unit to its implied fair value. In addition, the goodwill
had a nominal tax basis. This impairment charge was recorded in operating expenses within our consolidated statement of operations.
Refer to Financial Note 19, “Fair Value Measurements,” for more information on this nonrecurring fair value measurement. The
balance of the charge represents a $10 million impairment to reduce the carrying value of the unamortized capitalized software
held for sale costs for this product to its net realizable value. We concluded that the estimated future undiscounted revenues, net
of estimated related costs, were insufficient to recover its carrying value. This impairment charge was recorded in cost of sales
within our consolidated statement of operations.