01—Abstract
Summary
Summary of the 10-K filed May 22, 2020. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 billionb) 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.
02—Key points
Key Highlights
- Revenue increased by 8% to $231.1 billion, primarily driven by the U.S. Pharmaceutical and Specialty Solutions segment.
- Gross profit increased by 2%, with operating margins showing pressure due to various charges and increased operating expenses.
- The company completed the separation of its investment in Change Healthcare JV, recognizing an estimated gain of $414 million.
- McKesson recorded a $275 million charge related to the expected contribution of its German wholesale business to a joint venture.
- An opioid-related litigation settlement with two Ohio counties resulted in an $82 million charge.
- Shareholders received $2.2 billion in cash through stock repurchases ($1.9 billion) and dividends ($294 million).
- The 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, McKesson Corp kept $0.00.
- Revenue$231.05B100.0%
- Cost of revenue−$219.03B94.8%
- Gross profit$12.02B5.2%
- Operating costs−$9.53B4.1%
- Operating income$2.49B1.1%
- Interest, other & tax−$1.59B0.7%
- Net income$900.0M0.4%
Where FY2020 revenue went
$231.05B- Cost of revenue: $219.03B, 95% of revenue
- Net income: $900.0M, 0.4% of revenue
- R&D: $96.0M, 0.0% of revenue
- SG&A: $9.18B, 4.0% of revenue
- Interest, other & tax: $1.59B, 0.7% of revenue
Kept 0.4% as net incomeNet income $900.0M · 0.4%R&D $96.0M · 0.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed May 22, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $231.05B$214.32B | +7.8% |
| Cost of Revenue | $219.03B$202.56B | +8.1% |
| Gross Profit | $12.02B$11.75B | +2.3% |
| R&D Expenses | $96.00M$71.00M | +35.2% |
| SG&A Expenses | $9.18B$8.44B | +8.8% |
| Operating Expenses | $9.53B$10.87B | −12.3% |
| Operating Income | $2.49B$886.00M | +180.9% |
| Interest Expense | $249.00M$264.00M | −5.7% |
| Net Income | $900.00M$34.00M | +2547.1% |
| EPS (Basic) | $4.98$0.17 | +2829.4% |
| EPS (Diluted) | $4.95$0.17 | +2811.8% |
| Shares Outstanding (Basic) | 180.60M196.30M | −8.0% |
| Shares Outstanding (Diluted) | 181.60M197.30M | −8.0% |
05—Questions
Frequently Asked Questions
What was McKesson's revenue performance in fiscal year 2020?
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.
What were the major non-recurring items impacting McKesson's financial results in fiscal year 2020?
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.
How did McKesson manage its capital and return value to shareholders during fiscal year 2020?
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.
What were the key segment performances for McKesson in fiscal year 2020?
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.
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