Summary
McKesson Corporation's 2018 10-K filing reveals a complex operating landscape, marked by significant goodwill impairments and strategic adjustments. While the company experienced revenue growth in its core Distribution Solutions segment, driven by market expansion and acquisitions, the overall profitability was heavily impacted by substantial non-cash goodwill impairment charges totaling $1.7 billion related to its McKesson Europe and Rexall Health reporting units. These impairments stem from ongoing reimbursement pressures in the UK retail market and challenging dynamics in Canada. The company also divested its Enterprise Information Solutions (EIS) business and contributed a significant portion of its Technology Solutions business to a joint venture, Change Healthcare. Despite these headwinds, McKesson continues to return capital to shareholders through dividends and share repurchases, and it has announced a strategic growth initiative focused on efficiency and innovation. The company's financial health remains robust with significant cash flows from operations, although its significant customer concentration, particularly with CVS Health, and ongoing legal and regulatory scrutiny, especially concerning controlled substance distribution, represent key risks.
Financial Highlights
58 data points| Revenue | $208.36B |
| Cost of Revenue | $197.17B |
| Gross Profit | $11.18B |
| R&D Expenses | $125.00M |
| SG&A Expenses | $8.14B |
| Operating Expenses | $10.42B |
| Operating Income | $762.00M |
| Interest Expense | $283.00M |
| Net Income | $67.00M |
| EPS (Basic) | $0.32 |
| EPS (Diluted) | $0.32 |
| Shares Outstanding (Basic) | 208.00M |
| Shares Outstanding (Diluted) | 209.00M |
Key Highlights
- 1Significant goodwill impairment charges of $1.7 billion recognized in the fiscal year 2018, primarily impacting McKesson Europe and Rexall Health businesses due to market conditions and reimbursement pressures.
- 2Revenue growth of 5% to $208.4 billion, largely driven by the Distribution Solutions segment, but gross profit margins declined by 31 basis points due to various factors including UK reimbursement reductions and weaker pharmaceutical pricing.
- 3The company completed the sale of its Enterprise Information Solutions (EIS) business and contributed the majority of its Technology Solutions businesses to a joint venture, Change Healthcare, significantly altering its segment reporting structure for future periods.
- 4McKesson returned approximately $4.3 billion to shareholders through share repurchases and dividends during the fiscal year, demonstrating a commitment to capital allocation.
- 5The company announced a multi-year strategic growth initiative in April 2018 aimed at improving efficiency and driving profit growth, which includes a comprehensive review of operations and cost structure.
- 6Significant legal and regulatory challenges persist, notably related to the distribution of controlled substances, with ongoing litigation and investigations, including a $150 million settlement with the DEA in January 2017.