01—Abstract
Summary
Summary of the 10-K filed May 12, 2015. Cited figures are marked; the original filing is the authoritative source.
McKesson Corporation's 2015 10-K filing reveals a year of significant revenue growth, primarily driven by the acquisition of Celesio AG, which expanded its international footprint.
The company's Distribution Solutions segment continues to be the dominant revenue generator, accounting for approximately 98%a of total revenues. While the company reported strong revenue increases, it also faced increased operating expenses, partly due to acquisition-related costs and a significant settlement charge for controlled substance distribution claims. Despite these operational costs, McKesson demonstrated a commitment to shareholder returns through continued dividend payments and share repurchases.
The company's strategic acquisitions and diverse business offerings position it as a major player in the healthcare distribution and technology sectors. However, investors should remain aware of the competitive landscape and the ongoing regulatory environment within the healthcare industry, which could impact future performance.
02—Key points
Key Highlights
- Revenue increased significantly by 30% to $179.0 billion in fiscal year 2015, largely due to the acquisition of Celesio AG.
- The Distribution Solutions segment remained the core revenue driver, representing 98% of total revenues, with strong performance in North America pharmaceutical distribution.
- Operating expenses increased by 43% to $8.44 billion, impacted by acquisition-related expenses, intangible asset amortization, and a $150 million charge for settling controlled substance distribution claims.
- Net income attributable to McKesson Corporation increased by 17% to $1.476 billion, with diluted earnings per share from continuing operations at $7.54.
- The company repurchased 1.5 million shares for $340 million in fiscal year 2015 and authorized an additional $500 million in share repurchases.
- The acquisition of Celesio AG expanded McKesson's global reach, with international operations accounting for 20% of consolidated revenues in fiscal year 2015.
- The company continues to manage its debt, with a debt-to-capital ratio of 55.2% at the end of fiscal year 2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, McKesson Corp kept $0.01.
- Revenue$179.04B100.0%
- Cost of revenue−$167.63B93.6%
- Gross profit$11.41B6.4%
- Operating costs−$8.44B4.7%
- Operating income$2.97B1.7%
- Interest, other & tax−$1.49B0.8%
- Net income$1.48B0.8%
Where FY2015 revenue went
$179.04B- Cost of revenue: $167.63B, 94% of revenue
- Net income: $1.48B, 0.8% of revenue
- R&D: $392.0M, 0.2% of revenue
- SG&A: $7.90B, 4.4% of revenue
- Interest, other & tax: $1.49B, 0.8% of revenue
Kept 0.8% as net incomeNet income $1.48B · 0.8%R&D $392.0M · 0.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed May 12, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $179.04B$137.39B | +30.3% |
| Cost of Revenue | $167.63B$129.04B | +29.9% |
| Gross Profit | $11.41B$8.35B | +36.6% |
| R&D Expenses | $392.00M$457.00M | −14.2% |
| SG&A Expenses | $7.90B$5.39B | +46.6% |
| Operating Expenses | $8.44B$5.91B | +42.8% |
| Operating Income | $2.97B$2.44B | +21.7% |
| Net Income | $1.48B$1.26B | +16.9% |
| EPS (Basic) | $6.37$5.51 | +15.6% |
| EPS (Diluted) | $6.27$5.41 | +15.9% |
| Shares Outstanding (Basic) | 232.00M229.00M | +1.3% |
| Shares Outstanding (Diluted) | 235.00M233.00M | +0.9% |
05—Questions
Frequently Asked Questions
What was the primary driver of McKesson's revenue growth in fiscal year 2015?
The primary driver of McKesson's significant revenue growth in fiscal year 2015 was the acquisition of Celesio AG in February 2014, which substantially expanded the company's international operations and contributed significantly to the Distribution Solutions segment's performance.
What is the breakdown of McKesson's revenue by segment?
McKesson operates in two segments: Distribution Solutions and Technology Solutions. For fiscal year 2015, the Distribution Solutions segment generated approximately 98% of the company's total revenues, while the Technology Solutions segment accounted for the remaining 2%.
What were the major expenses impacting McKesson's profitability in fiscal year 2015?
Major expenses impacting McKesson's profitability included increased operating expenses, which rose by 43% due to acquisition-related costs (like intangible asset amortization and integration expenses), higher compensation and benefit costs, and a significant $150 million pre-tax charge related to the settlement of controlled substance distribution claims.
How is McKesson returning value to shareholders?
McKesson demonstrated its commitment to shareholder value by continuing to pay quarterly cash dividends, raising the dividend to $0.96 per share for fiscal year 2015. Additionally, the company actively engaged in share repurchases, buying back 1.5 million shares for $340 million in fiscal year 2015 and announcing a new $500 million repurchase authorization.
What are the key risks and challenges facing McKesson?
Key risks and challenges for McKesson include the highly competitive healthcare industry, potential changes in healthcare regulations and reimbursement policies, reliance on key customers (with the top ten customers accounting for 44% of revenue), the need to manage large international operations following the Celesio acquisition, and potential impacts from cyber security threats and data privacy regulations.
06—Continue