10-KPeriod: FY2020

MCKESSON CORP Annual Report, Year Ended Mar 31, 2020

Filed May 22, 2020For Securities:MCK

Summary

McKesson Corporation's 2020 10-K filing highlights a year of significant revenue growth, driven primarily by its U.S. Pharmaceutical and Specialty Solutions segment. The company experienced an 8% increase in revenues, reaching $231.1 billion, fueled by market growth, branded pharmaceutical price increases, and increased volumes. Despite revenue growth, gross profit saw a more modest 2% increase, impacted by factors like lower net cash proceeds from antitrust legal settlements and unfavorable foreign currency exchange fluctuations. The company's financial performance was also significantly affected by non-recurring items. These included substantial goodwill impairment charges in previous years, notably impacting the European Pharmaceutical Solutions segment, and more recently, charges related to the remeasurement of assets for a German wholesale business joint venture. Notably, McKesson completed the separation of its investment in Change Healthcare JV, recognizing a significant gain related to this transaction. The company also addressed ongoing opioid-related litigation, recording a substantial charge for a settlement with two Ohio counties. Operationally, McKesson continued to return value to shareholders through share repurchases ($1.9 billion) and dividends ($294 million). The company maintained a strong liquidity position throughout the year, even as it navigated the initial impacts of the COVID-19 pandemic late in the fiscal year, which had a muted financial impact due to its timing. Looking ahead, McKesson faces ongoing risks related to litigation, regulatory changes, competition, and supply chain disruptions, particularly in light of the evolving COVID-19 situation.

Financial Statements
Beta
Revenue$231.05B
Cost of Revenue$219.03B
Gross Profit$12.02B
R&D Expenses$96.00M
SG&A Expenses$9.18B
Operating Expenses$9.53B
Operating Income$2.49B
Interest Expense$249.00M
Net Income$900.00M
EPS (Basic)$4.98
EPS (Diluted)$4.95
Shares Outstanding (Basic)180.60M
Shares Outstanding (Diluted)181.60M

Key Highlights

  • 1Revenue increased by 8% to $231.1 billion, primarily driven by the U.S. Pharmaceutical and Specialty Solutions segment.
  • 2Gross profit increased by 2%, with operating margins showing pressure due to various charges and increased operating expenses.
  • 3The company completed the separation of its investment in Change Healthcare JV, recognizing an estimated gain of $414 million.
  • 4McKesson recorded a $275 million charge related to the expected contribution of its German wholesale business to a joint venture.
  • 5An opioid-related litigation settlement with two Ohio counties resulted in an $82 million charge.
  • 6Shareholders received $2.2 billion in cash through stock repurchases ($1.9 billion) and dividends ($294 million).
  • 7The company reported diluted earnings per common share from continuing operations of $4.99, an improvement from the prior year, largely due to divestitures and lower share counts.

Frequently Asked Questions

McKesson reported an 8% increase in revenues for the fiscal year ended March 31, 2020, reaching $231.1 billion. This growth was mainly driven by market expansion within its U.S. Pharmaceutical and Specialty Solutions segment, including branded pharmaceutical price increases and higher volumes from key customers.

The company's results were impacted by several significant non-recurring items. These included a $414 million estimated gain from the separation of its Change Healthcare JV investment, $275 million in charges related to its German wholesale business joint venture, and an $82 million charge for an opioid-related litigation settlement with two Ohio counties. Additionally, an other-than-temporary impairment charge of $1.2 billion and a dilution loss of $246 million were recorded related to its investment in Change Healthcare JV.

McKesson returned $2.2 billion in cash to shareholders, comprising $1.9 billion in common stock repurchases and $294 million in dividend payments. The company maintained a strong liquidity position, with $4.0 billion in cash and cash equivalents at the end of the fiscal year, and access to a $4 billion revolving credit facility.

The U.S. Pharmaceutical and Specialty Solutions segment showed strong revenue growth of 9%. The Medical-Surgical Solutions segment also grew revenues by 9%. The European Pharmaceutical Solutions segment experienced a 1% revenue increase (4% excluding foreign currency effects), while the 'Other' segment saw a 3% revenue increase, driven by McKesson Canada and MRxTS businesses.