McKesson 2015 Annual Report Download - page 83

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Fiscal 2013
On February 22, 2013, we acquired all of the outstanding shares of PSS World Medical, Inc. (“PSSI”) of
Jacksonville, Florida for $29.00 per share plus the assumption of PSSI’s debt, or approximately $1.9 billion in
aggregate, consisting of cash consideration of $1.3 billion, net of cash acquired, and the assumption of long-term
debt with a fair value of $0.6 billion. The cash paid at acquisition was funded from cash on hand and the issuance
of long-term debt. PSSI markets and distributes medical products and services throughout the United States. The
acquisition of PSSI expanded our existing Medical-Surgical business.
Included in the purchase price allocation are acquired identifiable intangibles of $568 million, the fair value
of which was primarily determined by applying the income approach, using several significant unobservable
inputs for projected cash flows and a discount rate.These inputs are considered Level 3 inputs under the fair
value measurements and disclosure guidance. The excess of the purchase price over the net tangible and
intangible assets of approximately $1,149 million was recorded as goodwill, which primarily reflects the
expected future benefits to be realized upon integrating the business. Most of the goodwill is not expected to be
deductible for tax purposes.
Financial results for PSSI since the acquisition date are included in the results of operations within our
Medical-Surgical distributions and services business, which is part of our Distribution Solutions segment
beginning in the fourth quarter of 2013.
On April 6, 2012, we purchased the remaining 50% ownership interest in our corporate headquarters
building located in San Francisco, California, for $90 million, which was funded from cash on
hand. We previously held a 50% ownership interest and were the primary tenant in this building. This transaction
was accounted for as a step acquisition, which required that we re-measure our previously held 50% ownership
interest to fair value and record the difference between the fair value and carrying value as a gain in the
consolidated statements of operations. The re-measurement to fair value resulted in a non-cash pre-tax gain of
$81 million ($51 million after-tax), which was recorded as a gain on business combination within Corporate in
the consolidated statements of operations during the first quarter of 2013. The total fair value of the net assets
acquired was $180 million, which was allocated as follows: building and improvements of $113 million and land
of $58 million with the remainder allocated for settlement of our pre-existing lease and lease intangible assets.
Other Acquisitions
During the last three years, we also completed a number of other smaller acquisitions within both of our
operating segments. Financial results for our business acquisitions have been included in our consolidated
financial statements since their respective acquisition dates. Purchase prices for our business acquisitions have
been allocated based on estimated fair values at the date of acquisition.
Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax
purposes. However, if we acquire the assets of a company, the goodwill may be deductible for tax purposes.
3. Noncontrolling Interests
At March 31, 2014, we owned approximately 75.4% of Celesio’s outstanding and fully diluted common
shares and the noncontrolling interests in Celesio were presented within the permanent equity section of our
consolidated balance sheet. In April 2014, we completed a tender offer and paid $32 million in cash to acquire
approximately 1 million additional common shares of Celesio at €23.50 per share, which increased our
ownership share by 0.5% and decreased noncontrolling interests by $35 million.
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