01—Abstract
Summary
Summary of the 10-K filed May 9, 2023. Cited figures are marked; the original filing is the authoritative source.
McKesson Corporation's (MCK) 2023 10-K filing highlights a year of strategic divestitures and acquisitions, with a notable focus on exiting European operations while strengthening its Prescription Technology Solutions (RxTS) segment.
Revenues saw a 5%a increase, primarily driven by growth in the U.S. Pharmaceutical segment, which benefited from market growth, specialty pharmaceuticals, and higher branded drug prices. This top-line expansion was partially offset by divestitures in the International segment and unfavorable foreign currency impacts. Despite revenue growth, gross profit experienced a 6% decrease, mainly due to the European divestitures and foreign currency impacts, though this was partially mitigated by gains in specialty pharmaceuticals and generics within the U.S. Pharmaceutical segment.
The company demonstrated strong expense management, with total operating expenses decreasing by 28%b, largely due to the prior year's significant remeasurement charges related to European divestitures. Diluted earnings per share from continuing operations saw a substantial increase, primarily attributed to the reduced remeasurement charges compared to the prior year and a lower share count resulting from ongoing share repurchase programs. Key strategic moves included the acquisition of Rx Savings Solutions, LLC, to enhance patient affordability and adherence solutions, and the formation of SCRI Oncology, LLC with HCA Healthcare to advance cancer research.
The company also returned significant capital to shareholders through share repurchases and increased its quarterly dividend. Investors should monitor the ongoing opioid litigation, which continues to be a significant contingent liability, although the company has made substantial progress on settlements.
02—Key points
Key Highlights
- McKesson completed significant divestitures in Europe, streamlining its operations and focusing on core markets.
- The company acquired Rx Savings Solutions, LLC, enhancing its Prescription Technology Solutions (RxTS) segment with affordability and adherence capabilities.
- A strategic partnership was formed with HCA Healthcare to create SCRI Oncology, LLC, aimed at advancing cancer care and clinical research.
- Revenues increased by 5% to $276.7 billion, driven by growth in the U.S. Pharmaceutical segment.
- Diluted earnings per share from continuing operations increased significantly to $25.05, up from $7.26 in the prior year.
- McKesson returned $3.9 billion to shareholders through share repurchases ($3.6 billion) and dividends ($292 million).
- The company continues to manage its significant opioid-related litigation liability, with an estimated accrued liability of $7.2 billion at March 31, 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, McKesson Corp kept $0.01.
- Revenue$276.71B100.0%
- Cost of revenue−$264.35B95.5%
- Gross profit$12.36B4.5%
- Operating costs−$7.98B2.9%
- Operating income$4.38B1.6%
- Interest, other & tax−$821.0M0.3%
- Net income$3.56B1.3%
Where FY2023 revenue went
$276.71B- Cost of revenue: $264.35B, 96% of revenue
- Net income: $3.56B, 1.3% of revenue
- SG&A: $7.78B, 2.8% of revenue
Kept 1.3% as net incomeNet income $3.56B · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed May 9, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $276.71B$263.97B | +4.8% |
| Cost of Revenue | $264.35B$250.84B | +5.4% |
| Gross Profit | $12.36B$13.13B | −5.9% |
| SG&A Expenses | $7.78B$10.54B | −26.2% |
| Operating Expenses | $7.98B$11.09B | −28.1% |
| Operating Income | $4.38B$2.04B | +115.0% |
| Interest Expense | $248.00M$178.00M | +39.3% |
| Net Income | $3.56B$1.11B | +219.6% |
| EPS (Basic) | $25.23$7.32 | +244.7% |
| EPS (Diluted) | $25.03$7.23 | +246.2% |
| Shares Outstanding (Basic) | 141.10M152.30M | −7.4% |
| Shares Outstanding (Diluted) | 142.20M154.10M | −7.7% |
05—Questions
Frequently Asked Questions
What were McKesson's primary strategic initiatives during the fiscal year ended March 31, 2023?
McKesson's primary strategic initiatives included completing the divestiture of its European businesses, acquiring Rx Savings Solutions, LLC to bolster its RxTS segment, and forming an oncology research joint venture (SCRI Oncology, LLC) with HCA Healthcare. These actions reflect a focus on streamlining operations, expanding key service offerings, and advancing healthcare solutions.
How did the company's financial performance evolve in fiscal year 2023?
McKesson reported a 5% increase in revenues to $276.7 billion, largely due to growth in its U.S. Pharmaceutical segment. While gross profit decreased by 6%, the company effectively managed operating expenses, resulting in a significant increase in diluted earnings per share from continuing operations to $25.05. This improvement was also aided by substantial share repurchases.
What is the company's stance on returning capital to shareholders?
McKesson demonstrated a strong commitment to returning capital to shareholders, repurchasing $3.6 billion of its common stock and paying $292 million in dividends during fiscal year 2023. The Board of Directors also raised the quarterly dividend from $0.47 to $0.54 per common share.
What is the status of McKesson's opioid litigation and related liabilities?
McKesson continues to manage its opioid-related litigation, having entered into a significant settlement agreement with 48 states and participating subdivisions. As of March 31, 2023, the company had an estimated accrued liability of $7.2 billion for these claims, with payments structured over several years. While substantial progress has been made, this remains a material contingent liability.
06—Continue