10-QPeriod: Q3 FY2013

MCKESSON CORP Quarterly Report for Q3 Ended Dec 31, 2012

Filed January 31, 2013For Securities:MCK

Summary

McKesson Corporation's third-quarter and nine-month results for the period ending December 31, 2012, show modest revenue growth, with revenues increasing by 1% for both the quarter and the first nine months compared to the prior year. Net income for the nine-month period saw a significant 22% increase to $1,079 million, while the third quarter experienced a slight 1% decrease to $298 million. Diluted earnings per share for the nine-month period rose substantially by 28% to $4.49, indicating improved profitability on a year-to-date basis. The company is actively pursuing strategic growth through acquisitions, notably the pending $2.1 billion acquisition of PSS World Medical, Inc., and the recently completed $925 million acquisition of Katz Group's Canadian assets. These moves are expected to bolster the Distribution Solutions segment. McKesson also continues its share repurchase program, demonstrating a commitment to returning value to shareholders.

Financial Highlights

52 data points
Beta

Revenue

$31.10B

5.3% Gross Margin

Net Income

$298.00M

1.0% Net Margin

EPS (Diluted)

$1.24

Total Assets

$33.43B

Cash & Equivalents

$2.73B

Free Cash Flow

-$245.00M

Financial Statements
Beta
Revenue$31.10B
Cost of Revenue$29.45B
Gross Profit$1.65B
Operating Expenses$1.15B
Operating Income$498.00M
Net Income$298.00M
EPS (Basic)$1.27
EPS (Diluted)$1.24
Shares Outstanding (Basic)235.00M
Shares Outstanding (Diluted)240.00M

Key Highlights

  • 1Revenues grew by 1% for both the quarter and nine-month period, reaching $31.2 billion and $91.8 billion, respectively.
  • 2Net income for the nine months ended December 31, 2012, increased by 22% to $1,079 million, driven by growth in the Distribution Solutions segment and a gain on business combination.
  • 3Diluted Earnings Per Share (EPS) for the nine-month period increased significantly by 28% to $4.49, indicating strong operational performance.
  • 4McKesson announced a definitive agreement to acquire PSS World Medical, Inc. for approximately $2.1 billion, signaling a strategic move to expand its medical-surgical distribution services.
  • 5The company completed the acquisition of Katz Group's Canadian assets for $925 million, strengthening its presence in the Canadian pharmaceutical distribution market.
  • 6The share repurchase program remains active, with authorized repurchases totaling $640 million at the end of the period, demonstrating capital return to shareholders.
  • 7The company is managing significant litigation and government investigations, with substantial charges incurred in the prior year related to AWP litigation, and new charges related to a Canadian legal dispute.

Frequently Asked Questions

McKesson demonstrated modest revenue growth of 1% for both the quarter and the first nine months of the fiscal year. While net income for the quarter saw a slight decrease, the nine-month period showed a significant 22% increase in net income and a 28% rise in diluted EPS, indicating improved profitability and operational efficiency on a year-to-date basis.

McKesson is actively pursuing growth through acquisitions. The company has entered into an agreement to acquire PSS World Medical for approximately $2.1 billion, which will expand its Medical-Surgical distribution business. Additionally, the acquisition of Katz Group's Canadian assets for $925 million strengthens its Canadian operations. These acquisitions are expected to contribute to the company's Distribution Solutions segment.

McKesson is subject to various legal proceedings, including AWP litigation and government investigations. While the company incurred significant charges related to AWP litigation in the prior year, these charges were lower in the current period. New charges were recorded for a legal dispute in Canada. The company is actively managing these contingencies, believing it has adequately provided for potential adverse outcomes, though the ultimate resolution could impact future results.

McKesson continues to actively repurchase its common stock, with significant authorizations in place. As of December 31, 2012, the remaining authorization for share repurchases was $640 million. This indicates a commitment to returning capital to shareholders through buybacks, alongside strategic investments and debt management.