10-QPeriod: Q1 FY2016

MCKESSON CORP Quarterly Report for Q1 Ended Jun 30, 2015

Filed July 29, 2015For Securities:MCK

Summary

McKesson Corporation reported strong financial performance for the quarter ended June 30, 2015, demonstrating significant year-over-year growth in key metrics. Revenues surged by 9% to $47.5 billion, driven primarily by the Distribution Solutions segment, particularly North America pharmaceutical distribution. This top-line growth translated into substantial bottom-line improvement, with Income from Continuing Operations increasing by 43% to $599 million and Net Income Attributable to McKesson Corporation rising by 43% to $576 million. Diluted Earnings Per Share (EPS) also saw a robust increase, growing 42% to $2.45 from $1.72 in the prior year's comparable quarter. This growth was fueled by increased operating profit across segments, strategic business gains such as the sale of the nurse triage business, and the favorable impact of antitrust legal settlements. The company maintained a solid financial position, with a healthy cash balance and effective management of its debt-to-capital ratio.

Financial Highlights

52 data points
Beta

Revenue

$47.55B

6.0% Gross Margin

Net Income

$576.00M

1.2% Net Margin

EPS (Diluted)

$2.45

Total Assets

$55.92B

Cash & Equivalents

$5.63B

Free Cash Flow

$377.00M

Financial Statements
Beta
Revenue$47.55B
Cost of Revenue$44.70B
Gross Profit$2.85B
Operating Expenses$1.92B
Operating Income$931.00M
Net Income$576.00M
EPS (Basic)$2.49
EPS (Diluted)$2.45
Shares Outstanding (Basic)232.00M
Shares Outstanding (Diluted)235.00M

Key Highlights

  • 1Revenues increased 9% year-over-year to $47.5 billion, driven by the Distribution Solutions segment.
  • 2Income from Continuing Operations grew significantly by 43% to $599 million.
  • 3Net Income Attributable to McKesson Corporation saw a substantial 43% increase, reaching $576 million.
  • 4Diluted Earnings Per Share (EPS) rose 42% to $2.45, indicating improved profitability on a per-share basis.
  • 5Operating expenses decreased by 7%, reflecting improved operational efficiency and cost management.
  • 6The company reported a pre-tax gain of $51 million from the sale of its nurse triage business.
  • 7McKesson received $59 million in cash proceeds from antitrust legal settlements within its Distribution Solutions segment.

Frequently Asked Questions

McKesson's revenue growth of 9% to $47.5 billion was primarily driven by its Distribution Solutions segment, which accounts for approximately 98% of consolidated revenues. Specifically, North America pharmaceutical distribution and services showed a 15% increase due to market growth, increased drug utilization, and expanded business with existing customers, partially offset by price deflation from generic drug conversions. International pharmaceutical distribution and services saw a revenue decrease of 17%, primarily due to a new distribution agreement in the UK being offset by lost hospital contracts in Norway (though constant currency revenue remained unchanged).

McKesson demonstrated strong profitability improvements. Income from Continuing Operations before income taxes increased by 42% to $855 million, and Income from Continuing Operations grew by 43% to $599 million. This led to a 43% increase in Net Income Attributable to McKesson Corporation to $576 million, and a corresponding 42% increase in Diluted Earnings Per Share to $2.45 from $1.72 in the prior year's quarter. This enhanced profitability was supported by higher operating profits and a significant gain from the sale of the nurse triage business.

McKesson maintains a solid financial position. Cash and cash equivalents increased to $5.6 billion. The company's debt-to-capital ratio improved to 52.5% from 55.2%, indicating a stronger balance sheet. Operating activities generated $454 million in cash, and the company expects its available cash and existing liquidity sources to be sufficient to fund its operations and capital requirements. The company also announced an increase in its quarterly dividend to $0.28 per share, reflecting confidence in its financial performance.

Yes, there were a few significant items. The company recorded a $51 million pre-tax gain from the sale of its nurse triage business. Additionally, McKesson received $59 million in cash proceeds from antitrust legal settlements within its Distribution Solutions segment. The reclassification of a workforce business from discontinued to continuing operations also involved a non-cash charge of $34 million for catch-up depreciation and amortization.