McKesson 2015 Annual Report Download - page 45

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
During the fourth quarter of 2015, the Company reached an agreement in principle with the DEA, DOJ and
various U.S. Attorney’s offices to settle all potential administrative and civil claims relating to investigations
about the Company’s suspicious order reporting practices for controlled substances. The global settlement with
the DEA and DOJ is subject to the execution of final settlement agreements. Under the terms of the agreement in
principle, the Company has agreed to pay the sum of $150 million, implement certain remedial measures and the
suspension of four distribution centers’ DEA registrations for the specified products and time periods.
Accordingly, during the fourth quarter of 2015, we recorded a pre-tax and after-tax charge of $150 million in
operating expenses within our Distribution Solutions segment. Refer to Financial Note 23, “Other Commitments
and Contingent Liabilities,” to the consolidated financial statements in this Annual Report on Form 10-K for
further information on the controlled substance distribution claim and the AWP litigation matter.
Technology Solutions
Technology Solutions segment’s operating expenses and operating expenses as a percentage of revenue in
2015 decreased compared to 2014 primarily due to lower research and development expenses, and integration-
related expenses and severance charges recorded in 2014.
The segment’s operating expenses increased in 2014 compared to 2013 primarily due to small business
acquisitions, integration-related expenses, reduction-in-workforce severance charges, and continued investment
in research and development activities. These increases were partially offset by a $36 million goodwill
impairment charge incurred in 2013. The segment’s operating expenses as a percentage of revenues decreased in
2014 compared to 2013 primarily reflecting an increase in revenue.
Corporate
Corporate expenses increased in 2015 compared to 2014 primarily due to higher compensation and benefit
costs and asset impairments, partially offset by lower acquisition-related expenses and lower costs associated
with corporate initiatives. Corporate expenses increased in 2014 primarily due to higher compensation and
benefit costs and higher acquisition-related expenses. Additionally, 2013 corporate expenses include a non-cash
pre-tax gain of $81 million gain ($51 million after-tax) related to our purchase of the remaining 50% ownership
interest in our corporate headquarters building located in San Francisco, California.
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