McKesson 2015 Annual Report Download - page 41

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
operations were $7.54, $6.08 and $5.69 and diluted loss per common share attributable to McKesson Corporation
from discontinued operations were $1.27, $0.67 and $0.10 in 2015, 2014 and 2013.
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 (the
“Acquisition”). Upon the Acquisition, as required, we consolidated Celesio’s debt with a fair value of
$2.3 billion as a liability on our consolidated balance sheet and our ownership of Celesio’s fully diluted common
shares was 75.6%. We owned approximately 75.4% of Celesio’s outstanding and fully diluted common shares at
March 31, 2014. Financial results for Celesio are included within our International pharmaceutical distribution
and services business, which is part of our Distribution Solutions segment, since the date of Acquisition.
On May 22, 2014, Celesio and McKesson, through its wholly-owned subsidiary, McKesson Deutschland
GmbH & Co. KGaA (“McKesson Deutschland,” formerly known as Dragonfly GmbH & Co. KGaA), entered
into the Domination Agreement. On July 15, 2014, the Domination Agreement was approved at the general
shareholders’ meeting of Celesio. On December 2, 2014, the Domination Agreement became effective upon its
registration in the commercial register of Celesio at the local court of Stuttgart, Germany. Upon the effectiveness
of the Domination Agreement, the noncontrolling shareholders of Celesio no longer participate in their
percentage ownership of Celesio’s profits and losses. Instead, McKesson became obligated to pay a one-time
$50 million dividend (“Guaranteed Dividend”) for their fiscal year ended December 31, 2014, and an annual
recurring compensation amount of €0.83 per Celesio share (effective January 1, 2015) to the noncontrolling
shareholders of Celesio. The recurring compensation amount is recognized ratably during the applicable annual
period. For fiscal 2016, the estimated annual recurring compensation is $44 million based on the Euro to U.S.
dollar exchange rate and shares owned by the noncontrolling interests at April 1, 2015.
In addition, upon effectiveness of the Domination Agreement, the noncontrolling interests in Celesio
became redeemable as a result of a put right. Accordingly, the carrying value of noncontrolling interests related
to Celesio of $1.5 billion was reclassified in the third quarter of 2015 from “Total Equity” to “Redeemable
Noncontrolling Interests” on our consolidated balance sheet. The balance of redeemable noncontrolling interests
will be reported at the greater of its carrying value or its maximum redemption value at each reporting date. At
March 31, 2015, the carrying value of redeemable noncontrolling interests amounted to $1.4 billion, which
exceeded the maximum redemption value of $1.2 billion.
Revenues:
Years Ended March 31, Change
(Dollars in millions) 2015 2014 2013 2015 2014
Distribution Solutions
North America pharmaceutical distribution &
services $143,711 $123,929 $115,443 16% 7%
International pharmaceutical distribution & services 26,358 4,485 — 488 —
Medical-Surgical distribution & services 5,907 5,648 3,603 5 57
Total Distribution Solutions 175,976 134,062 119,046 31 13
Technology Solutions—products and services 3,069 3,330 3,150 (8) 6
Total Revenues $179,045 $137,392 $122,196 30% 12%
Revenues for 2015 increased 30% to $179.0 billion from 2014 and revenues for 2014 increased 12% to
$137.4 billion from 2013. Increases in our revenues were primarily driven by our Distribution Solutions segment,
which accounted for approximately 98% of our consolidated revenues.
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