10-QPeriod: Q1 FY2004

MCKESSON CORP Quarterly Report for Q1 Ended Jun 30, 2003

Filed July 31, 2003For Securities:MCK

Summary

McKesson Corporation reported a strong first quarter for fiscal year 2004, with revenues increasing 21% to $16.5 billion and net income growing 33% to $155.6 million. This growth was primarily driven by the Pharmaceutical Solutions segment, which represents over 94% of total revenue. The company saw significant year-over-year improvements in operational efficiency and profitability, evidenced by a 36% increase in diluted earnings per share, which rose to $0.53. The balance sheet also strengthened, with total assets growing and a notable increase in net cash provided by operating activities compared to the prior year. The company also continued its share repurchase program, buying back $75.3 million worth of its common stock in the quarter. While McKesson faces ongoing litigation related to past accounting improprieties, the company is actively managing its operations and financial condition. The report highlights a positive trend in liquidity and capital resources, with a reduced debt-to-capital ratio, indicating a sound financial footing.

Key Highlights

  • 1Revenue increased 21% year-over-year to $16.5 billion, driven by strong performance in the Pharmaceutical Solutions segment.
  • 2Net income grew 33% to $155.6 million, with diluted earnings per share up 36% to $0.53.
  • 3Operating expenses decreased by 2% year-over-year, indicating improved efficiency.
  • 4Net cash provided by operating activities was $43.3 million, a significant improvement from a negative $197.5 million in the prior year's comparable quarter.
  • 5The company repurchased $75.3 million of its common stock in the quarter as part of its ongoing share repurchase program.
  • 6The debt-to-capital ratio improved to 21.0% from 21.6% in the previous quarter, demonstrating a strengthening balance sheet.

Frequently Asked Questions

The primary driver of McKesson's revenue growth was its Pharmaceutical Solutions segment, which accounted for over 94% of the company's total revenues and saw a 23% increase in revenues year-over-year.

McKesson reported a significant improvement in cash flow from operations, with $43.3 million provided in the current quarter compared to a use of $197.5 million in the same quarter of the prior year. This improvement is attributed to better inventory management and changes in receivables and payables.

McKesson acknowledges the ongoing litigation and states in its financial notes that it is not feasible to predict or determine the outcome or estimate potential losses, and that resolution could have a material adverse impact on the company's financial position, results of operations, and cash flows. However, they are actively engaged in responding to the legal proceedings.

The acquisition of A.L.I. Technologies, which provides digital medical imaging solutions, was completed in the second quarter of fiscal 2003. Its results are included in the Information Solutions segment. The company stated that the acquisition's effect was not material enough to warrant separate pro forma disclosure of results of operations.