McKesson 2015 Annual Report Download - page 84

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
On December 2, 2014, the Domination Agreement between Celesio and McKesson, through its wholly-
owned subsidiary, McKesson Deutschland, became effective as previously discussed in Financial Note 2,
“Business Combinations”. Prior to the effectiveness of the Domination Agreement, the net income or loss from
Celesio was attributed to the noncontrolling shareholders of Celesio based on their proportionate ownership
interest in Celesio. Upon the effectiveness of the Domination Agreement, McKesson became obligated to pay the
$50 million Guaranteed Dividend to the noncontrolling shareholders of Celesio in relation to Celesio’s fiscal year
ended December 31, 2014. Under the Domination Agreement, McKesson also became obligated to pay the
annual recurring Compensation Amount of €0.83 per Celesio share effective January 1, 2015. The Compensation
Amount is recognized ratably during the applicable annual period. As a result, during 2015, we recorded a total
attribution of net income to the noncontrolling shareholders of Celesio of $62 million. All amounts were
recorded in our consolidated statement of operations within the caption, “Net Income Attributable to
Noncontrolling Interests,” and the corresponding liability balance was recorded within other accrued liabilities on
our consolidated balance sheet.
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 from “Total Equity” to “Redeemable Noncontrolling Interests” on our
consolidated balance sheet. During the fourth quarter of 2015, we paid $8 million to purchase 0.3 million shares
of Celesio through the exercise of the put right by the noncontrolling shareholders, which decreased the carrying
value of redeemable noncontrolling interests by $9 million. The balance of redeemable noncontrolling interests is
reported at the greater of its carrying value or its maximum redemption value at each reporting date. The
redemption value is the Put Amount adjusted for exchange rate fluctuations each period. At March 31, 2015, the
carrying value of redeemable noncontrolling interests of $1.4 billion exceeded the maximum redemption value of
$1.2 billion. At March 31, 2015, we owned approximately 76.0% of Celesio’s outstanding common shares.
Changes in noncontrolling interests and redeemable noncontrolling interests were as follows:
(In millions)
Noncontrolling
Interests
Redeemable
Noncontrolling
Interests
Balance, March 31, 2014 $ 1,796 $ —
Net income attributable to noncontrolling interests (1) 562
Other comprehensive loss (174) (105)
Purchase of noncontrolling interests (60) (9)
Reclassification from Total Equity to Redeemable Noncontrolling Interests (2) (1,500) 1,500
Reclassification of guaranteed dividends and recurring compensation to other
accrued liabilities — (62)
Other 17 —
Balance, March 31, 2015 $ 84 $1,386
(1) Includes the Guaranteed Dividend of $50 million for Celesio’s fiscal year ended December 31, 2014 and the
Compensation Amount of $12 million for the fourth quarter of 2015
(2) Includes net foreign currency losses of $138 million attributable to noncontrolling interests
The effect of changes in our ownership interests with noncontrolling interests on our equity of $2 million
was recorded as a net decrease to McKesson’s stockholders’ paid-in capital during 2015. Net income attributable
to McKesson and transfers from noncontrolling interests amounted to $1,474 million during 2015.
79