01—Abstract
Summary
Summary of the 10-K filed May 15, 2019. Cited figures are marked; the original filing is the authoritative source.
McKesson Corporation's (MCK) 10-K filing for the fiscal year ended March 31, 2019, reveals a company navigating a dynamic healthcare landscape.
The report highlights the company's core business in pharmaceutical and medical-surgical distribution, alongside its specialty care and technology solutions. While revenues saw an increase, driven by market growth and acquisitions, significant goodwill and asset impairments, particularly in the European segment, impacted profitability. The company also detailed ongoing restructuring initiatives aimed at improving efficiency and cost structures.
Investors should note the company's substantial revenue generation but also the substantial goodwill impairments and restructuring charges. Key operational segments include U.S. Pharmaceutical and Specialty Solutions, European Pharmaceutical Solutions, and Medical-Surgical Solutions. The company continues to manage risks associated with regulatory changes, pricing pressures, and supply chain complexities, while also actively engaging in share repurchases and dividend payments.
02—Key points
Key Highlights
- Revenues increased by 2.9% to $214,319 million, driven by market growth and acquisitions.
- Significant goodwill and long-lived asset impairments totaling over $2 billion impacted the European Pharmaceutical Solutions segment.
- The company is undertaking multiple restructuring initiatives to optimize operating models and cost structures, with significant charges recorded.
- McKesson reported a net income attributable to McKesson Corporation of $34 million, a substantial decrease from the prior year, largely due to impairments and restructuring charges.
- The U.S. Pharmaceutical and Specialty Solutions segment remains the largest revenue generator.
- The company repurchased $1.4 billion of its common stock and paid $292 million in dividends during the fiscal year.
- McKesson highlighted its significant customer concentration, with the top ten customers accounting for approximately 49.9% of total revenues, including CVS Health at 19.4%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, McKesson Corp kept $0.00.
- Revenue$214.32B100.0%
- Cost of revenue−$202.56B94.5%
- Gross profit$11.75B5.5%
- Operating costs−$10.87B5.1%
- Operating income$886.0M0.4%
- Interest, other & tax−$852.0M0.4%
- Net income$34.0M0.0%
Where FY2019 revenue went
$214.32B- Cost of revenue: $202.56B, 95% of revenue
- Net income: $34.0M, 0.0% of revenue
- R&D: $71.0M, 0.0% of revenue
- SG&A: $8.44B, 3.9% of revenue
- Other operating costs: $2.36B, 1.1% of revenue
Kept 0.0% as net incomeNet income $34.0M · 0.0%R&D $71.0M · 0.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed May 15, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $214.32B$208.36B | +2.9% |
| Cost of Revenue | $202.56B$197.17B | +2.7% |
| Gross Profit | $11.75B$11.18B | +5.1% |
| R&D Expenses | $71.00M$125.00M | −43.2% |
| SG&A Expenses | $8.44B$8.14B | +3.7% |
| Operating Expenses | $10.87B$10.42B | +4.3% |
| Operating Income | $886.00M$762.00M | +16.3% |
| Interest Expense | $264.00M$283.00M | −6.7% |
| Net Income | $34.00M$67.00M | −49.3% |
| EPS (Basic) | $0.17$0.32 | −46.9% |
| EPS (Diluted) | $0.17$0.32 | −46.9% |
| Shares Outstanding (Basic) | 196.30M208.00M | −5.6% |
| Shares Outstanding (Diluted) | 197.30M209.00M | −5.6% |
05—Questions
Frequently Asked Questions
What were the main drivers of McKesson's revenue growth in fiscal 2019?
McKesson's revenue growth in fiscal 2019 was primarily driven by market growth, which includes increased drug utilization, price increases, and the launch of new products. Additionally, business acquisitions contributed to the revenue increase. However, these were partially offset by the loss of customers within the U.S. Pharmaceutical and Specialty Solutions segment.
What significant charges affected McKesson's profitability in fiscal 2019?
McKesson recorded substantial non-cash pre-tax goodwill impairment charges of $1,776 million, primarily for its European Pharmaceutical Solutions segment. The company also incurred pre-tax restructuring and asset impairment charges of $597 million related to strategic growth initiatives and business optimization efforts. These significant charges materially impacted the company's net income.
How diversified is McKesson's customer base?
McKesson's customer base exhibits a significant concentration. Sales to its ten largest customers, including group purchasing organizations (GPOs), accounted for approximately 49.9% of total consolidated revenues in fiscal 2019. The largest customer, CVS Health, represented about 19.4% of total consolidated revenues.
What is McKesson's outlook regarding dividends and share repurchases?
McKesson anticipates continuing to pay quarterly cash dividends, having raised its quarterly dividend from $0.34 to $0.39 per common share. The company also has an active share repurchase program, with $3.5 billion authorized for repurchase as of March 31, 2019, indicating a commitment to returning capital to shareholders.
06—Continue