01—Abstract
Summary
Summary of the 10-K filed May 22, 2017. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 billionb, 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.
02—Key points
Key Highlights
- Total revenues increased by 4% to $198.5 billion, driven by the Distribution Solutions segment.
- Significant 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.
- Acquisitions in 2017, including Rexall Health, Vantage Oncology, Biologics, and UDG Healthcare, contributed to revenue growth.
- Distribution Solutions segment experienced weaker pharmaceutical manufacturer pricing trends, which are expected to continue.
- Recorded a $290 million goodwill impairment charge for the EIS business within the Technology Solutions segment.
- Continued to return capital to shareholders through share repurchases totaling $2.25 billion and dividends of $253 million.
- The company's largest customer, CVS Health, accounted for approximately 20.2% of total consolidated revenues.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, McKesson Corp kept $0.03.
- Revenue$198.53B100.0%
- Cost of revenue−$187.26B94.3%
- Gross profit$11.27B5.7%
- Operating costs−$4.15B2.1%
- Operating income$7.12B3.6%
- Interest, other & tax−$2.05B1.0%
- Net income$5.07B2.6%
04—Financials
Financial Highlights
Figures from 10-KFY2017filed May 22, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $198.53B$190.88B | +4.0% |
| Cost of Revenue | $187.26B$179.47B | +4.3% |
| Gross Profit | $11.27B$11.42B | −1.3% |
| R&D Expenses | $341.00M$392.00M | −13.0% |
| SG&A Expenses | $7.45B$7.38B | +0.9% |
| Operating Expenses | $4.15B$7.87B | −47.3% |
| Operating Income | $7.12B$3.54B | +100.9% |
| Net Income | $5.07B$2.26B | +124.5% |
| EPS (Basic) | $22.95$9.82 | +133.7% |
| EPS (Diluted) | $22.73$9.70 | +134.3% |
| Shares Outstanding (Basic) | 221.00M230.00M | −3.9% |
| Shares Outstanding (Diluted) | 223.00M233.00M | −4.3% |
05—Questions
Frequently Asked Questions
What was the financial performance of McKesson Corporation in the fiscal year ending March 31, 2017?
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.
What were the key strategic initiatives undertaken by McKesson during this period?
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.
Are there any significant risks or challenges highlighted in the filing?
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.
How did McKesson manage its capital and shareholder returns?
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%.
06—Continue