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MCKESSON CORP Annual Report, Year Ended Mar 31, 2003

Filing Date
Filed June 6, 2003
Period End
March 31, 2003
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 6, 2003. Cited figures are marked; the original filing is the authoritative source.

McKesson Corporation's fiscal 2003 (year ended March 31, 2003) results show strong top-line growth and improving profitability.

Revenues rose 14.3% to $57.1 billiona, driven almost entirely by the Pharmaceutical Solutions segment (93% of revenue), which grew to $53.2 billion. Diluted EPS increased to $1.88 from $1.43, net income rose to $555.4 million from $418.6 million, and return on stockholders' equity improved to 13.3% from 11.4%. Gross margin on total revenues slipped to 5.43% from 5.58%, largely due to mix shift toward lower-margin pharmaceutical distribution, while operating expenses as a share of revenue fell to 3.80% from 4.18%.

Operating cash flow more than doubled to $695.5 millionb, and the debt-to-capital ratio improved to 21.6%. The filing's most significant risk for investors is litigation tied to the 1999 HBO & Company (HBOC) accounting restatement. As of April 29, 2003, 91 lawsuits had been filed, including a consolidated federal securities class action, ERISA claims, and state actions, alongside ongoing U.S. Attorney and SEC investigations.

Management states it cannot predict the outcome or estimate potential losses, and warns that adverse results could be material. Customer concentration is also elevated: the ten largest customers account for about 50% of revenue, and Rite Aid alone accounts for about 12%. The Information Solutions segment returned to profitability, with operating profit of $94.4 millionc versus $21.7 million a year earlier, though it still carries a $51.0 million provision for expected losses on five international contracts.

The company also completed the A.L.I. Technologies acquisition for $347 milliond and sold a marketing fulfillment business. Its credit ratings (BBB/Baa2) carry a negative outlook.

02—Key points

Key Highlights

  1. Revenue grew 14.3% to $57.1 billion, with Pharmaceutical Solutions contributing $53.2 billion (about 93% of total).
  2. Diluted EPS rose to $1.88 from $1.43 (up 31%), and net income increased to $555.4 million from $418.6 million.
  3. Return on stockholders' equity improved to 13.3% from 11.4%, and operating cash flow reached $695.5 million versus $326.2 million in fiscal 2002.
  4. Gross margin on total revenue declined to 5.43% from 5.58%, reflecting mix shift toward lower-margin pharmaceutical distribution; operating expenses fell to 3.80% of revenue from 4.18%.
  5. Information Solutions segment operating profit increased to $94.4 million from $21.7 million, though it absorbed a $51.0 million loss provision on five international contracts, partly offset by a $22.3 million settlement reserve reversal.
  6. Ninety-one HBOC-related lawsuits remain pending, alongside U.S. Attorney and SEC investigations; management cannot estimate potential losses, which could be material.
  7. Customer concentration is high: the top ten customers represent about 50% of revenue and Rite Aid about 12%; credit ratings are BBB/Baa2 with a negative outlook.

03—Questions

Frequently Asked Questions

  1. How did McKesson perform financially in fiscal 2003?

    Revenue rose 14.3% to $57.1 billion, net income increased 33% to $555.4 million, and diluted EPS reached $1.88, up from $1.43. Growth was driven mainly by the Pharmaceutical Solutions segment, which increased 15% and now represents about 93% of total revenue.

  2. What is the biggest legal risk facing McKesson?

    The largest risk stems from the 1999 restatement of HBOC's financial statements. Ninety-one lawsuits have been filed, including a federal securities class action, ERISA suits, and state actions, and the U.S. Attorney's Office and SEC are investigating. Management says it cannot predict the outcome or estimate potential losses, and adverse rulings or settlements could have a material impact on financial position and cash flows.

  3. How concentrated is McKesson's customer base?

    Concentration is significant. The ten largest customers accounted for roughly 50% of fiscal 2003 revenue and 43% of receivables, while the largest customer, Rite Aid, represented about 12% of revenue and 10% of receivables. Loss of or payment defaults from these customers could materially affect results.

  4. Is McKesson's balance sheet and liquidity position healthy?

    Liquidity appears solid. Operating cash flow was $695.5 million, the debt-to-capital ratio fell to 21.6% from 25.7%, and net debt to net capital employed dropped to 14.0%. Total debt was $1.30 billion, and the company had about $1.6 billion in undrawn revolving credit and receivables sale facilities. Credit ratings are BBB/Baa2, though on a negative outlook.

  5. What drove the Information Solutions segment's improvement?

    Segment operating profit nearly quadrupled to $94.4 million, aided by higher-margin software revenue, lower restructuring charges, and the elimination of goodwill amortization. Results were partly offset by a $51.0 million provision for expected losses on five multi-year international contracts. A $22.3 million reversal of prior customer settlement reserves also helped results.

04—Continue

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