10-KPeriod: FY2017

MCKESSON CORP Annual Report, Year Ended Mar 31, 2017

Filed May 22, 2017For Securities:MCK

Summary

McKesson Corporation's 2017 10-K filing reveals a year of significant growth and strategic repositioning. The company, a global leader in healthcare supply chain management, reported a 4% increase in total revenues to $198.5 billion, primarily driven by its Distribution Solutions segment. This growth was supported by market expansion, acquisitions, and increased business with existing customers, despite facing weaker pharmaceutical manufacturer pricing trends. A pivotal development during the fiscal year was the contribution of the majority of McKesson's Technology Solutions businesses to form a joint venture, Change Healthcare. This strategic move, which resulted in a significant pre-tax gain of $3.9 billion, allowed McKesson to focus more intently on its core distribution and specialty care offerings. Despite this large gain, the company also recorded a $290 million goodwill impairment charge related to its EIS business within the Technology Solutions segment, highlighting potential challenges in certain technology areas. McKesson continued its commitment to shareholder returns through share repurchases and dividends, reflecting a focus on enhancing shareholder value while navigating a complex and evolving healthcare landscape.

Financial Highlights

57 data points
Beta

Revenue

$198.53B

5.7% Gross Margin

Net Income

$5.07B

2.6% Net Margin

EPS (Diluted)

$22.73

Total Assets

$60.97B

Cash & Equivalents

$2.78B

Free Cash Flow

$4.34B

Financial Statements
Beta
Revenue$198.53B
Cost of Revenue$187.26B
Gross Profit$11.27B
R&D Expenses$341.00M
SG&A Expenses$7.45B
Operating Expenses$4.15B
Operating Income$7.12B
Net Income$5.07B
EPS (Basic)$22.95
EPS (Diluted)$22.73
Shares Outstanding (Basic)221.00M
Shares Outstanding (Diluted)223.00M

Key Highlights

  • 1Total revenues increased by 4% to $198.5 billion, driven by the Distribution Solutions segment.
  • 2Significant strategic move: Contribution of the majority of Technology Solutions businesses to form a 70%-owned joint venture, Change Healthcare, resulting in a $3.9 billion pre-tax gain.
  • 3Acquisitions in 2017, including Rexall Health, Vantage Oncology, Biologics, and UDG Healthcare, contributed to revenue growth.
  • 4Distribution Solutions segment experienced weaker pharmaceutical manufacturer pricing trends, which are expected to continue.
  • 5Recorded a $290 million goodwill impairment charge for the EIS business within the Technology Solutions segment.
  • 6Continued to return capital to shareholders through share repurchases totaling $2.25 billion and dividends of $253 million.
  • 7The company's largest customer, CVS Health, accounted for approximately 20.2% of total consolidated revenues.

Frequently Asked Questions

McKesson Corporation reported total revenues of $198.5 billion, a 4% increase compared to the previous year. Net income attributable to McKesson Corporation was $5.1 billion, a significant increase driven by a $3.9 billion pre-tax gain from the contribution of its Technology Solutions business to a joint venture.

The most significant strategic initiative was the contribution of the majority of its Technology Solutions businesses to form a joint venture named Change Healthcare, in which McKesson retained a 70% ownership. This move aimed to streamline operations and focus on core areas. Additionally, McKesson completed several acquisitions, including Rexall Health, Vantage Oncology, Biologics, and UDG Healthcare, to expand its market reach and service offerings.

Yes, the filing highlights several risks. These include ongoing weaker pharmaceutical manufacturer pricing trends, potential impacts from changes in the healthcare industry and regulatory environment, significant customer concentration (with CVS Health being the largest customer at 20.2% of revenue), and a $290 million goodwill impairment charge for its EIS business. Competition and industry consolidation are also noted as potential challenges.

McKesson actively managed its capital by repurchasing $2.25 billion of its common stock and paying $253 million in dividends during the fiscal year. The company also maintained access to liquidity through revolving credit facilities and commercial paper. The debt-to-capital ratio improved to 39.2%.