10-QPeriod: Q2 FY2010

MCKESSON CORP Quarterly Report for Q2 Ended Sep 30, 2009

Filed October 27, 2009For Securities:MCK

Summary

McKesson Corporation's Form 10-Q for the quarter ended September 30, 2009, indicates a period of modest revenue growth and increased profitability, driven by its Distribution Solutions segment. Total revenues rose by 2% year-over-year to $27.1 billion for the quarter, and by 1% to $53.8 billion for the six-month period. Net income saw a slight decrease of 8% to $301 million for the quarter, primarily due to a significant tax benefit recorded in the prior year's quarter. However, for the six-month period, net income increased by 5% to $589 million. Diluted Earnings Per Share (EPS) reflected these trends, decreasing 5% to $1.11 for the quarter but increasing 9% to $2.17 for the six-month period. The company's financial health appears solid, with a substantial increase in cash and cash equivalents to $3.2 billion, bolstered by strong operating cash flow. The company also addressed significant legal matters, including a substantial settlement payment related to AWP litigation and positive developments in other legal proceedings. Management anticipates sufficient liquidity to fund operations and capital expenditures.

Financial Highlights

47 data points
Beta

Revenue

$27.13B

4.9% Gross Margin

Net Income

$301.00M

1.1% Net Margin

EPS (Diluted)

$1.11

Total Assets

$26.62B

Cash & Equivalents

$3.21B

Free Cash Flow

$575.00M

Financial Statements
Beta
Revenue$27.13B
Cost of Revenue$25.80B
Gross Profit$1.33B
Operating Expenses$868.00M
Operating Income$467.00M
Net Income$301.00M
EPS (Basic)$1.13
EPS (Diluted)$1.11
Shares Outstanding (Basic)267.00M
Shares Outstanding (Diluted)271.00M

Key Highlights

  • 1Revenues increased by 2% to $27.1 billion for the quarter and 1% to $53.8 billion for the six months ended September 30, 2009.
  • 2Net income for the quarter decreased 8% to $301 million, primarily due to a prior year tax benefit, but increased 5% to $589 million for the six-month period.
  • 3Diluted EPS for the quarter was $1.11, down 5%, while for the six-month period it was $2.17, up 9%.
  • 4Cash and cash equivalents significantly increased to $3.2 billion, supported by strong operating cash flow of $1.5 billion for the six-month period.
  • 5The company made a $295 million payment as part of a settlement for AWP litigation.
  • 6Acquired McQueary Brothers Drug Company for approximately $190 million in the first quarter of 2009.
  • 7The company's Distribution Solutions segment remains the primary revenue driver, accounting for over 97% of consolidated revenues.

Frequently Asked Questions

McKesson reported a 2% increase in revenue to $27.1 billion for the quarter. While net income saw an 8% decrease to $301 million, this was largely due to a significant tax benefit recorded in the prior year. For the six-month period, net income increased by 5% to $589 million.

McKesson's cash and cash equivalents significantly increased to $3.2 billion. The company generated $1.5 billion in cash from operating activities during the first six months of the fiscal year, indicating strong operational cash flow. Management expects available cash and existing liquidity sources to be sufficient for its capital expenditures, working capital needs, and other cash requirements.

Yes, McKesson made a $295 million payment in October 2009 as the final installment for a settlement related to AWP litigation. The company also noted positive developments in other legal proceedings, including appeals related to its acquisition of HBO & Company. While the company believes it has adequate provisions for potential liabilities, the outcome of litigation is inherently uncertain and could materially impact financial results.

Revenue growth was primarily driven by the Distribution Solutions segment, which accounts for over 97% of total revenue. This growth was fueled by direct distribution and services, reflecting a shift to direct store delivery and market growth rates, partially offset by customer losses. Technology Solutions also saw modest revenue increases.