What is the primary driver behind the significant decrease in net income year-over-year?

The primary driver for the substantial decrease in net income attributable to McKesson Corporation was a $290 million pre-tax goodwill impairment charge recognized in the Technology Solutions segment, combined with increased operating expenses due to recent acquisitions and integration costs. These factors significantly impacted profitability despite a modest increase in revenue.

Can you explain the proposed joint venture with Change Healthcare?

McKesson is contributing the majority of its McKesson Technology Solutions (Core MTS) businesses to a new joint venture with Change Healthcare. McKesson will retain its RelayHealth Pharmacy and Enterprise Information Solutions (EIS) businesses. The JV aims to create a new healthcare information technology company. McKesson and Change Healthcare will hold approximately 70% and 30% ownership, respectively. The transaction is expected to close in the first half of calendar year 2017.

What is the company's outlook on liquidity and capital resources?

McKesson expects its available cash from operations, credit facilities, and commercial paper program to be sufficient to fund its ongoing operational and capital needs. The company generated strong operating cash flow of $2.93 billion in the first six months of the fiscal year. Additionally, a significant $4 billion share repurchase authorization was approved, indicating confidence in future financial performance and a commitment to returning capital to shareholders.

How are the recent acquisitions impacting the company's financial results?

Recent acquisitions, such as Vantage Oncology, Biologics, UDG Healthcare, and Sainsbury, are contributing to revenue growth, particularly within the Distribution Solutions segment. While these acquisitions are expanding the company's scale and offerings, they also contribute to increased operating expenses, which are being offset by cost savings initiatives and ongoing expense management efforts.

MCK 10-Q Quarterly Report Q2 FY2017 — Revenue, Net Income, EPS

Summary

McKesson Corporation's Q2 FY17 filing (ending September 30, 2016) reveals a notable shift in financial performance, with revenues growing 2% year-over-year to $49.96 billion, primarily driven by the Distribution Solutions segment. However, net income attributable to McKesson Corporation saw a significant decline of 50% to $307 million, or $1.34 per diluted share, compared to the prior year's $617 million ($2.63 per diluted share). This decline is largely attributable to a substantial $290 million goodwill impairment charge related to the Technology Solutions segment's EIS business and increased operating expenses, partially offset by a cost alignment plan. Strategic initiatives are a key theme, with the proposed formation of a joint venture with Change Healthcare to create a new healthcare IT company, expected to close in H1 2017. Assets and liabilities related to the Core MTS Business to be contributed to this JV were classified as held for sale. Furthermore, McKesson has made several strategic acquisitions in the oncology space (Vantage, Biologics) and in the UK (UDG, Sainsbury) to bolster its Distribution Solutions segment. Despite the net income drop, the company reported strong operating cash flow generation and maintained its commitment to returning capital to shareholders through dividends and an authorized $4 billion share repurchase program.

Financial Highlights

52 data points

Beta

Revenue

$49.96B

0.1% Gross Margin

Net Income

$307.00M

0.0% Net Margin

EPS (Diluted)

$1.34

Total Assets

$58.31B

Cash & Equivalents

$5.46B

Free Cash Flow

$994.00M

Financial Statements

Beta

Revenue	$49.96B
Cost of Revenue	$47.20B
Gross Profit	$2.76B
Operating Expenses	$1.89B
Operating Income	$580.00M
Net Income	$307.00M
EPS (Basic)	$1.36
EPS (Diluted)	$1.34
Shares Outstanding (Basic)	226.00M
Shares Outstanding (Diluted)	228.00M

Key Highlights

1Revenues increased by 2% to $49.96 billion, driven by the Distribution Solutions segment, partially offset by a decline in Technology Solutions.
2Net income attributable to McKesson Corporation decreased by 50% to $307 million ($1.34 per diluted share) compared to $617 million ($2.63 per diluted share) in the prior year.
3A significant $290 million pre-tax goodwill impairment charge was recorded in the Technology Solutions segment due to declining estimated cash flows for the EIS business.
4McKesson is forming a joint venture with Change Healthcare, contributing its McKesson Technology Solutions businesses (excluding RelayHealth Pharmacy and EIS), expected to close in the first half of calendar year 2017.
5The company completed several acquisitions in the oncology and UK markets (Vantage, Biologics, UDG, Sainsbury) to strengthen its Distribution Solutions segment.
6Operating cash flow for the first six months was strong at $2.93 billion.
7McKesson announced a new $4 billion share repurchase authorization in October 2016.

MCKESSON CORP Quarterly Report for Q2 Ended Sep 30, 2016

Summary

Financial Highlights

Key Highlights

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