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MCKESSON CORP Annual Report, Year Ended Mar 31, 2000

Filing Date
Filed June 13, 2000
Period End
March 31, 2000
Security
MCK
In the record · 2016–202610-K1110-Q328-K146

MCK filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 146 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Mar ’17Mar ’17
  2. Leadership change8-K · Apr ’19Apr ’19
  3. Leadership change8-K · Apr ’21Apr ’21
  4. FY2025 annual report10-K · May ’25May ’25

01—Abstract

Summary

Summary of the 10-K filed June 13, 2000. Cited figures are marked; the original filing is the authoritative source.

McKesson HBOC's fiscal 2000 10-K (year ended March 31, 2000) shows revenue of $36.7 billiona, up 22% from $30.0 billion, driven almost entirely by the Health Care Supply Management segment (about 97% of sales).

Reported net income of $723.7 millionb, or $2.57 diluted EPS, is inflated by a $515.9 million after-tax gain on the February 2000 sale of Water Products and $259 million of pre-tax gains on equity investments (largely Healtheon/WebMD). Income from continuing operations was only $184.6 million ($0.66 per share), and before unusual items it fell 23% to $265.0 million. Operating profit margins compressed as gross margin in distribution declined, and the Health Care Information Technology segment saw revenue fall 22% to $1.2 billion with operating profit down about 31%.

Balance sheet and cash flow results are mixed. Operating cash flow was negative $416 millionc, driven by working capital build, receivables, and inventory growth, and the $400 million receivables sale from the prior year was not repeated. Total debt rose to $1.26 billion, and the net debt-to-capital ratio improved to 14.8% after the Water Products proceeds.

The senior debt ratings (BBB / Baa2) are on negative outlook. Rite Aid accounts for roughly 15%d of revenue, and the ten largest customers about 52%, a meaningful concentration risk. The dominant investor concern is the HBOC accounting restatement.

As of June 1, 2000, 79 lawsuits were pending, along with SEC and U.S. Attorney investigations, and management says it cannot estimate potential losses. Any adverse outcome could be material. The filing also discloses ongoing antitrust exposure from pharmacy class actions and FoxMeyer-related litigation seeking at least $400 million in damages.

02—Key points

Key Highlights

  1. Revenue rose 22% to $36.7 billion, with Health Care Supply Management contributing about 97% of sales ($35.5 billion).
  2. Reported net income of $723.7 million ($2.57 diluted EPS) is inflated by a $515.9 million after-tax gain on the Water Products sale and equity investment gains; continuing operations earned only $184.6 million ($0.66 per share).
  3. Income from continuing operations before unusual items fell 23% to $265.0 million, and unusual items totaled $127.5 million pre-tax in fiscal 2000.
  4. Health Care Information Technology revenue fell 22% to $1.2 billion, with operating profit down about 31% to $127.6 million, partly due to the HBOC restatement fallout and product rationalization charges of $232.7 million.
  5. Operating cash flow was negative $416 million, and total debt increased to $1.26 billion, though the net debt-to-capital ratio improved to 14.8% after the $1.1 billion Water Products sale.
  6. 79 lawsuits and SEC and U.S. Attorney investigations relate to the HBOC restatement; management says the outcome cannot be predicted and could be materially adverse.
  7. Customer concentration is high: the ten largest customers represent about 52% of revenue and Rite Aid alone about 15%.

03—Questions

Frequently Asked Questions

  1. Why is reported net income so much higher than income from continuing operations?

    Net income of $723.7 million includes $515.9 million after-tax from the February 2000 sale of the Water Products business to Groupe Danone and $20.3 million of other equity gains, plus roughly $23 million from discontinued operations. Income from continuing operations was $184.6 million, or $0.66 per diluted share.

  2. What is the main legal risk facing McKesson HBOC?

    The company faces 79 lawsuits in federal and state courts alleging securities violations tied to the restatement of HBOC's previously reported results, which involved improperly recorded software revenue. The SEC and the U.S. Attorney's Office for the Northern District of California are also investigating. Management says it cannot predict or estimate the outcome, and a judgment or settlement could have a material adverse effect.

  3. Is the core distribution business growing profitably?

    Revenue grew about 25% in Health Care Supply Management, but the operating profit margin declined to 2.0% of revenue from 2.4%, and gross profit margin fell to 6.8% from 7.4%. Competitive pressure, a shift toward lower-margin chain customers, and lower procurement profits contributed. Operating profit grew only 3% to $536.4 million.

  4. How strong is the balance sheet and liquidity position?

    Cash and marketable securities rose to $606 million, and the net debt-to-capital ratio fell to 14.8%. However, operating cash flow was negative $416 million due to working capital growth. Available committed credit was $1.275 billion, plus an $850 million receivables sale facility. Credit ratings (BBB/Baa2) are on negative outlook.

04—Continue

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