10-QPeriod: Q3 FY2016

MCKESSON CORP Quarterly Report for Q3 Ended Dec 31, 2015

Filed January 27, 2016For Securities:MCK

Summary

McKesson Corporation reported strong financial results for the nine months ended December 31, 2015, with revenues increasing by 8% to $144.2 billion and net income attributable to McKesson Corporation growing by 36% to $1.83 billion. This growth was driven by robust performance in its Distribution Solutions segment, particularly in North America, which saw an 12% increase in revenue. The company also demonstrated improved profitability, with income from continuing operations before income taxes rising 27% year-over-year. Operationally, McKesson managed its expenses effectively, with a decrease in operating expenses as a percentage of revenues. The company also returned capital to shareholders through dividends and share repurchases, signaling confidence in its financial stability and future prospects. While facing some international revenue headwinds due to currency fluctuations and specific market challenges, the overall financial health and operational execution remain positive, indicating a solid performance for the period.

Financial Highlights

53 data points
Beta

Revenue

$47.90B

6.0% Gross Margin

Net Income

$634.00M

1.3% Net Margin

EPS (Diluted)

$2.73

Total Assets

$55.09B

Cash & Equivalents

$3.41B

Free Cash Flow

-$779.00M

Financial Statements
Beta
Revenue$47.90B
Cost of Revenue$45.03B
Gross Profit$2.87B
Operating Expenses$1.95B
Operating Income$920.00M
Net Income$634.00M
EPS (Basic)$2.76
EPS (Diluted)$2.73
Shares Outstanding (Basic)230.00M
Shares Outstanding (Diluted)232.00M

Key Highlights

  • 1Revenue increased 8% to $144.2 billion for the nine months ended December 31, 2015, driven by the Distribution Solutions segment.
  • 2Net income attributable to McKesson Corporation surged by 36% to $1.83 billion for the nine-month period.
  • 3Diluted Earnings Per Common Share (EPS) grew by 37% to $7.81 for the nine months, demonstrating enhanced profitability on a per-share basis.
  • 4Operating income from continuing operations increased significantly, reflecting improved operational efficiency and strong demand.
  • 5The company actively managed its debt, with a notable decrease in its debt-to-capital ratio to 44.8% from 50.3%.
  • 6McKesson returned capital to shareholders, with dividends paid and a significant share repurchase program in place, totaling $1.6 billion authorized for repurchase at the end of the period.
  • 7Acquisitions are being strategically integrated, with ongoing efforts in acquiring businesses like UDG Healthcare Plc and J Sainsbury Plc, expected to contribute to future growth.

Frequently Asked Questions

The substantial growth in revenue and net income was primarily driven by the strong performance of McKesson's Distribution Solutions segment, especially within North America, which benefited from market growth, expanded business with existing customers, and effective management of product mix. This was complemented by improved operational efficiencies and effective cost management across segments.

McKesson has actively managed its debt, leading to an improvement in its debt-to-capital ratio, which decreased to 44.8% from 50.3%. This was achieved through a combination of debt repayments and an increase in McKesson's stockholders' equity, indicating a strengthening of the company's financial foundation.

McKesson is pursuing growth through strategic acquisitions, such as the planned acquisitions of UDG Healthcare Plc and J Sainsbury Plc, which are expected to be integrated into its Distribution Solutions segment. These initiatives, combined with continued market growth in key areas and disciplined expense management, suggest a positive outlook for future growth and enhanced shareholder value.

The company experienced revenue decreases in its International pharmaceutical distribution and services segment, primarily due to unfavorable foreign currency effects and a specific loss of a hospital contract in Norway. However, these were partially offset by growth in other international markets and new distribution agreements. McKesson continues to monitor and manage foreign currency fluctuations and international market dynamics.