SAN FRANCISCO--(BUSINESS WIRE)--McKesson Corporation (NYSE:MCK) today reported that revenues for the
first quarter ended June 30, 2015 were $47.5 billion, up 9% compared to
$43.5 billion a year ago. On the basis of U.S. generally accepted
accounting principles (“GAAP”), first-quarter earnings per diluted share
from continuing operations was $2.50 compared to $1.76 a year ago.
First-quarter Adjusted Earnings per diluted share was $3.14, up 27%
compared to $2.47 a year ago. On a constant currency basis, Adjusted
Earnings per diluted share increased 30% over the prior year.
First-quarter results include a pre-tax gain of $51 million, or 16 cents
per diluted share, related to the sale of the nurse triage business
within Technology Solutions.
“McKesson’s first quarter results represent a good start to the fiscal
year driven by solid execution across both segments,” said John H.
Hammergren, chairman and chief executive officer. “We are updating our
outlook to reflect the gain on the sale of our nurse triage business,
and now expect Adjusted Earnings per diluted share of $12.36 to $12.86
for the fiscal year ending March 31, 2016.”
For the first quarter, McKesson generated cash from operations of $454
million, and ended the quarter with cash and cash equivalents of $5.6
billion. During the quarter, McKesson paid $59 million in dividends and
had internal capital spending of $120 million.
Earlier today, the Board of Directors approved an increase to the
quarterly dividend from 24 cents to 28 cents per share. In addition,
Celesio announced plans to acquire Sainsbury’s UK-based pharmacy
operations.
“We are pleased with the dividend increase and are excited about the
planned acquisition of Sainsbury’s pharmacies. The acquisition will add
281 new pharmacies to the Lloyd’s Pharmacy brand in the United Kingdom
and complements the more than 12,000 owned or banner pharmacies across
McKesson,” said Hammergren. “We have a strong track record of creating
value for our shareholders with our portfolio approach to capital
deployment through a mixture of internal investments, acquisitions,
share repurchases and dividends. The acquisition of Sainsbury’s
pharmacies and dividend increase further demonstrate our commitment to
this approach and our commitment to long-term shareholder value
creation,” Hammergren concluded.
Segment Results
Distribution Solutions revenues were $46.8 billion for the quarter, up
10% on a reported basis and 13% on a constant currency basis.
North America pharmaceutical distribution and services revenues for the
quarter were up 15% on a reported basis and 16% on a constant currency
basis, primarily reflecting market growth and our mix of business.
International pharmaceutical distribution and services revenues were
$5.8 billion for the quarter, down 17% on a reported basis and flat on a
constant currency basis.
Medical-Surgical distribution and services revenues were up 4% for the
quarter, driven by market growth.
In the first quarter, Distribution Solutions GAAP operating profit was
$910 million and GAAP operating margin was 1.94%. First-quarter adjusted
operating profit was $1.1 billion, up 14% from the prior year, driven by
solid performance across the segment. Adjusted operating margin for the
Distribution Solutions segment was 2.42%.
Technology Solutions revenues were down 4% in the first quarter
primarily driven by an anticipated year-over-year decline in our
hospital software business, partially offset by growth in our other
technology businesses.
GAAP operating profit was $158 million for the first quarter and GAAP
operating margin was 21.47%. Adjusted operating profit was $167 million
for the first quarter and adjusted operating margin was 22.69%.
Technology Solutions first quarter results reflect a pre-tax gain of $51
million, or 16 cents per diluted share, related to the sale of the nurse
triage business.
Fiscal Year 2016 Outlook
McKesson expects Adjusted Earnings per diluted share between $12.36 and
$12.86 for the fiscal year ending March 31, 2016, based on an exchange
rate of $1.10 per Euro, which excludes the following GAAP items:
-
Amortization of acquisition-related intangible assets of $1.24 per
diluted share.
-
Acquisition expenses and related adjustments of 30 cents per diluted
share.
-
LIFO inventory-related charges of 86 cents to 96 cents per diluted
share.
The Fiscal 2016 guidance range does not include any potential claim or
litigation reserve adjustments, or the impact of any potential new
acquisitions and divestitures, and impairments or material
restructurings.
Adjusted Earnings
McKesson separately reports financial results on the basis of Adjusted
Earnings. Adjusted Earnings is a non-GAAP financial measure defined as
GAAP income from continuing operations, excluding amortization of
acquisition-related intangible assets, acquisition expenses and related
adjustments, certain claim and litigation reserve adjustments reflecting
changes to the company’s reserves for controlled substance distribution
claims and average wholesale price litigation matters, and
Last-In-First-Out (“LIFO”) inventory-related adjustments. A
reconciliation of McKesson’s GAAP financial results to Adjusted Earnings
is provided in Schedules 2, 3 and 4 of the financial statement tables
included with this release.
Constant Currency
The company also presents supplemental financial information calculated
on a constant currency basis. Information on the calculation of constant
currency and its effects on results of operations is available in the
company’s first quarter 2016 Form 10-Q report filed with the Securities
and Exchange Commission (“SEC”).
Risk Factors
Except for historical information contained in this press release,
matters discussed may constitute “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties that could cause actual results to differ materially from
those projected, anticipated or implied. These statements may be
identified by their use of forward-looking terminology such as
“believes”, “expects”, “anticipates”, “may”, “will”, “should”, “seeks”,
“approximately”, “intends”, “plans”, “estimates” or the negative of
these words or other comparable terminology. The discussion of financial
trends, strategy, plans or intentions may also include forward-looking
statements. It is not possible to predict or identify all such risks and
uncertainties; however, the most significant of these risks and
uncertainties are described in the company’s Form 10-K, Form 10-Q and
Form 8-K reports filed with the SEC and include, but are not limited to:
changes in the U.S. healthcare industry and regulatory environment;
managing foreign expansion, including the related operating, economic,
political and regulatory risks; changes in the Canadian healthcare
industry and regulatory environment; exposure to European economic
conditions, including recent austerity measures taken by certain
European governments; changes in the European regulatory environment
with respect to privacy and data protection regulations; foreign
currency fluctuations; the company’s ability to successfully identify,
consummate, finance and integrate acquisitions; the company’s ability to
manage and complete divestitures; material adverse resolution of pending
legal proceedings; competition; substantial defaults in payment or a
material reduction in purchases by, or the loss of, a large customer or
group purchasing organization; the loss of government contracts as a
result of compliance or funding challenges; public health issues in the
U.S. or abroad; malfunction, failure or breach of sophisticated internal
information systems to perform as designed; cyber attacks or other
privacy and data security incidents; the adequacy of insurance to cover
property loss or liability claims; the company’s failure to attract and
retain customers for its software products and solutions due to
integration and implementation challenges, or due to an inability to
keep pace with technological advances; the company’s proprietary
products and services may not be adequately protected, and its products
and solutions may be found to infringe on the rights of others; system
errors or failure of our technology products and solutions to conform to
specifications; disaster or other event causing interruption of customer
access to data residing in our service centers; the delay or extension
of our sales or implementation cycles for external software products;
changes in circumstances that could impair our goodwill or intangible
assets; new or revised tax legislation or challenges to our tax
positions; general economic conditions, including changes in the
financial markets that may affect the availability and cost of credit to
the company, its customers or suppliers; changes in accounting
principles generally accepted in the United States of America; and
withdrawal from participation in multiemployer pension plans or if such
plans are reported to have underfunded liabilities. The reader should
not place undue reliance on forward-looking statements, which speak only
as of the date they are first made. Except to the extent required by
law, the company undertakes no obligation to publicly release the result
of any revisions to these forward-looking statements to reflect events
or circumstances after the date hereof, or to reflect the occurrence of
unanticipated events.
The company has scheduled a conference call for 5:00PM ET. The dial-in
number for individuals wishing to participate on the call is
719-234-7317. Erin Lampert, senior vice president, Investor Relations,
is the leader of the call, and the password to join the call is
‘McKesson’. A replay of this conference call will be available for five
calendar days. The dial-in number for individuals wishing to listen to
the replay is 719-457-0820 and the pass code is 8668681. A webcast of
the conference call will also be available live and archived on the
company’s Investor Relations website at http://investor.mckesson.com.
Shareholders are encouraged to review SEC filings and more information
about McKesson, which are located on the company’s website.
About McKesson Corporation
McKesson Corporation, currently ranked 11th on the FORTUNE 500, is a
healthcare services and information technology company dedicated to
making the business of healthcare run better. McKesson partners with
payers, hospitals, physician offices, pharmacies, pharmaceutical
companies and others across the spectrum of care to build healthier
organizations that deliver better care to patients in every setting.
McKesson helps its customers improve their financial, operational, and
clinical performance with solutions that include pharmaceutical and
medical-surgical supply management, healthcare information technology,
and business and clinical services. For more information, visit http://www.mckesson.com.
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Schedule 1
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McKESSON CORPORATION
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP
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(unaudited)
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(in millions, except per share amounts)
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Quarter Ended June 30,
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2015
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2014
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Change
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Revenues
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$
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47,546
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$
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43,476
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9
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%
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Cost of sales (1) (2)
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(44,698
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)
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(40,744
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)
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10
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Gross profit
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2,848
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2,732
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4
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Operating expenses (3)
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(1,917
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)
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(2,051
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)
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(7
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)
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Operating income
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931
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681
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37
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Other income, net
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13
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19
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(32
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)
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Interest expense
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(89
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)
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(96
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)
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(7
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)
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Income from continuing operations before income taxes
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855
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604
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42
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Income tax expense
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(256
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)
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(185
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)
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38
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Income from continuing operations after tax
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599
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419
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43
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Loss from discontinued operations, net of tax
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(10
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)
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(8
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)
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25
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Net income
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589
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411
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43
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Net income attributable to noncontrolling interests (4)
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(13
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)
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(8
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)
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63
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Net income attributable to McKesson Corporation
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$
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576
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$
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403
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43
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%
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Earnings (loss) per common share attributable to McKesson
Corporation (5)
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Diluted
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Continuing operations
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$
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2.50
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$
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1.76
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42
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%
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Discontinued operations
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(0.05
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)
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(0.04
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)
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25
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Total
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$
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2.45
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$
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1.72
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42
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%
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Basic
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Continuing operations
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$
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2.53
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$
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1.79
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41
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%
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Discontinued operations
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(0.04
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)
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(0.04
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)
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-
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Total
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$
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2.49
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$
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1.75
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42
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%
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Dividends declared per common share
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$
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0.24
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$
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0.24
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Weighted average common shares
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Diluted
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235
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235
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-
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%
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Basic
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232
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231
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-
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(1)
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Distribution Solutions segment results for fiscal year 2016 and 2015
include charges of $91 million and $98 million related to our
last-in-first-out ("LIFO") method of accounting for inventories, and
for fiscal year 2016 include $59 million of cash proceeds
representing our share of antitrust legal settlements.
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(2)
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Technology Solutions segment results for fiscal year 2015 reflect a
non-cash pre-tax charge of $34 million primarily relating to
depreciation and amortization expense due to the reclassification of
the workforce business within our International Technology business
from discontinued operations to continuing operations. The charge
was primarily recorded in cost of sales.
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(3)
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Fiscal year 2016 reflects a pre-tax gain of $51 million ($38
million after-tax) recognized upon the sale of our nurse triage
business within our Technology Solutions segment.
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(4)
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Fiscal year 2016 primarily reflects the recurring compensation that
McKesson is obligated to pay to the noncontrolling interests of
McKesson's subsidiary, Celesio AG ("Celesio"), under the domination
and profit and loss transfer agreement (the "Domination Agreement").
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(5)
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Certain computations may reflect rounding adjustments.
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Schedule 2
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McKESSON CORPORATION
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RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS
(NON-GAAP)
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(unaudited)
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(in millions, except per share amounts)
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Change
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Quarter Ended June 30, 2015
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Vs. Prior Quarter
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Amortization
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Acquisition
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Claim and
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of Acquisition-
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Expenses and
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Litigation
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Adjusted
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As
|
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Adjusted
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As Reported
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Related
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Related
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Reserve
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LIFO-Related
|
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Earnings
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Reported
|
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Earnings
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(GAAP)
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Intangibles
|
|
Adjustments
|
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Adjustments
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Adjustments
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(Non-GAAP)
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(GAAP)
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|
(Non-GAAP)
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Gross profit (1)
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$
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2,848
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$
|
1
|
|
|
$
|
-
|
|
|
$
|
-
|
|
$
|
91
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$
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2,940
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|
4
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%
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4
|
|
%
|
Operating expenses (2)
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|
|
|
(1,917
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)
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110
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|
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|
29
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|
-
|
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-
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(1,778
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)
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(7
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)
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(5
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)
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Other income, net
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13
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|
1
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1
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-
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-
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15
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(32
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)
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(25
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)
|
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Interest expense
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(89
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)
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-
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-
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-
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-
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(89
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(7
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(7
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Income from continuing operations before income taxes
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855
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112
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30
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-
|
|
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91
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|
|
|
1,088
|
|
|
42
|
|
|
24
|
|
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Income tax expense
|
|
|
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(256
|
)
|
|
|
(35
|
)
|
|
|
(11
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)
|
|
|
-
|
|
|
(36
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)
|
|
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(338
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)
|
|
38
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|
|
21
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Income from continuing operations after tax
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|
|
599
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|
77
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19
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-
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55
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|
750
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|
43
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|
25
|
|
|
Income from continuing operations, net of tax, attributable to
noncontrolling interests (3)
|
|
|
|
(13
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)
|
|
|
-
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|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
(13
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)
|
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63
|
|
|
(43
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)
|
|
Income from continuing operations, net of tax, attributable to
McKesson Corporation
|
|
|
$
|
586
|
|
|
$
|
77
|
|
|
$
|
19
|
|
|
$
|
-
|
|
$
|
55
|
|
|
$
|
737
|
|
|
43
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share from continuing operations, net of
tax, attributable to McKesson Corporation (4)
|
|
|
$
|
2.50
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|
|
$
|
0.32
|
|
|
$
|
0.08
|
|
|
$
|
-
|
|
$
|
0.24
|
|
|
$
|
3.14
|
|
|
42
|
|
%
|
27
|
|
%
|
Diluted weighted average common shares
|
|
|
|
235
|
|
|
|
235
|
|
|
|
235
|
|
|
|
-
|
|
|
235
|
|
|
|
235
|
|
|
-
|
|
%
|
-
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
|
Quarter Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
Acquisition
|
|
Claim and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Acquisition-
|
|
Expenses and
|
|
Litigation
|
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|
|
Adjusted
|
|
|
|
|
|
|
|
As Reported
|
|
Related
|
|
Related
|
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Reserve
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|
LIFO-Related
|
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Earnings
|
|
|
|
|
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(GAAP)
|
|
Intangibles
|
|
Adjustments
|
|
Adjustments
|
|
Adjustments
|
|
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Gross profit (5)
|
|
|
$
|
2,732
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
-
|
|
$
|
98
|
|
|
$
|
2,832
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
(2,051
|
)
|
|
|
126
|
|
|
|
49
|
|
|
|
-
|
|
|
-
|
|
|
|
(1,876
|
)
|
|
|
|
|
|
Other income, net
|
|
|
|
19
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
20
|
|
|
|
|
|
|
Interest expense
|
|
|
|
(96
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
(96
|
)
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
|
604
|
|
|
|
129
|
|
|
|
49
|
|
|
|
-
|
|
|
98
|
|
|
|
880
|
|
|
|
|
|
|
Income tax expense
|
|
|
|
(185
|
)
|
|
|
(41
|
)
|
|
|
(15
|
)
|
|
|
-
|
|
|
(38
|
)
|
|
|
(279
|
)
|
|
|
|
|
|
Income from continuing operations after tax
|
|
|
|
419
|
|
|
|
88
|
|
|
|
34
|
|
|
|
-
|
|
|
60
|
|
|
|
601
|
|
|
|
|
|
|
Income from continuing operations, net of tax, attributable to
noncontrolling interests
|
|
|
|
(8
|
)
|
|
|
(11
|
)
|
|
|
(4
|
)
|
|
|
-
|
|
|
-
|
|
|
|
(23
|
)
|
|
|
|
|
|
Income from continuing operations, net of tax, attributable to
McKesson Corporation
|
|
|
$
|
411
|
|
|
$
|
77
|
|
|
$
|
30
|
|
|
$
|
-
|
|
$
|
60
|
|
|
$
|
578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share from continuing operations, net of
tax, attributable to McKesson Corporation (4)
|
|
|
$
|
1.76
|
|
|
$
|
0.33
|
|
|
$
|
0.13
|
|
|
$
|
-
|
|
$
|
0.25
|
|
|
$
|
2.47
|
|
|
|
|
|
|
Diluted weighted average common shares
|
|
|
|
235
|
|
|
|
235
|
|
|
|
235
|
|
|
|
-
|
|
|
235
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Distribution Solutions segment results for fiscal year 2016 reflect
$59 million of cash proceeds representing our share of antitrust
legal settlements.
|
(2)
|
|
Fiscal year 2016 includes a pre-tax gain of $51 million ($38
million after-tax) recognized upon the sale of our nurse triage
business within our Technology Solutions segment.
|
(3)
|
|
Primarily reflects the recurring compensation that McKesson is
obligated to pay to the noncontrolling interests of McKesson's
subsidiary, Celesio, under the Domination Agreement.
|
(4)
|
|
Certain computations may reflect rounding adjustments.
|
(5)
|
|
Technology Solutions segment results for fiscal year 2015 reflect a
non-cash pre-tax charge of $34 million primarily relating to
depreciation and amortization expense due to the reclassification of
the workforce business within our International Technology business
from discontinued operations to continuing operations. The charge
was primarily recorded in cost of sales.
|
|
|
|
Refer to the definitions related to Adjusted Earnings (Non-GAAP)
financial information.
|
|
Schedule 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
McKESSON CORPORATION
|
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED
EARNINGS (NON-GAAP)
|
(unaudited)
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2015
|
|
Quarter Ended June 30, 2014
|
|
Change
|
|
|
|
|
|
|
|
|
Adjusted
|
|
|
|
|
|
Adjusted
|
|
As
|
|
Adjusted
|
|
|
|
|
As Reported
|
|
|
|
Earnings
|
|
As Reported
|
|
|
|
Earnings
|
|
Reported
|
|
Earnings
|
|
|
|
|
(GAAP)
|
|
Adjustments
|
|
(Non-GAAP)
|
|
(GAAP)
|
|
Adjustments
|
|
(Non-GAAP)
|
|
(GAAP)
|
|
(Non-GAAP)
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America pharmaceutical distribution & services
|
|
|
$
|
39,532
|
|
|
$
|
-
|
|
$
|
39,532
|
|
|
$
|
34,304
|
|
|
$
|
-
|
|
$
|
34,304
|
|
|
15
|
|
%
|
15
|
|
%
|
International pharmaceutical distribution & services
|
|
|
|
5,838
|
|
|
|
-
|
|
|
5,838
|
|
|
|
7,025
|
|
|
|
-
|
|
|
7,025
|
|
|
(17
|
)
|
|
(17
|
)
|
|
Medical-Surgical distribution & services
|
|
|
|
1,440
|
|
|
|
-
|
|
|
1,440
|
|
|
|
1,379
|
|
|
|
-
|
|
|
1,379
|
|
|
4
|
|
|
4
|
|
|
Total Distribution Solutions
|
|
|
|
46,810
|
|
|
|
-
|
|
|
46,810
|
|
|
|
42,708
|
|
|
|
-
|
|
|
42,708
|
|
|
10
|
|
|
10
|
|
|
Technology Solutions - Products and Services
|
|
|
|
736
|
|
|
|
-
|
|
|
736
|
|
|
|
768
|
|
|
|
-
|
|
|
768
|
|
|
(4
|
)
|
|
(4
|
)
|
|
Revenues
|
|
|
$
|
47,546
|
|
|
$
|
-
|
|
$
|
47,546
|
|
|
$
|
43,476
|
|
|
$
|
-
|
|
$
|
43,476
|
|
|
9
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions (1)
|
|
|
$
|
2,493
|
|
|
$
|
91
|
|
$
|
2,584
|
|
|
$
|
2,393
|
|
|
$
|
98
|
|
$
|
2,491
|
|
|
4
|
|
|
4
|
|
|
Technology Solutions (2)
|
|
|
|
355
|
|
|
|
1
|
|
|
356
|
|
|
|
339
|
|
|
|
2
|
|
|
341
|
|
|
5
|
|
|
4
|
|
|
Gross profit
|
|
|
$
|
2,848
|
|
|
$
|
92
|
|
$
|
2,940
|
|
|
$
|
2,732
|
|
|
$
|
100
|
|
$
|
2,832
|
|
|
4
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions
|
|
|
$
|
(1,592
|
)
|
|
$
|
130
|
|
$
|
(1,462
|
)
|
|
$
|
(1,670
|
)
|
|
$
|
158
|
|
$
|
(1,512
|
)
|
|
(5
|
)
|
|
(3
|
)
|
|
Technology Solutions (3)
|
|
|
|
(198
|
)
|
|
|
8
|
|
|
(190
|
)
|
|
|
(271
|
)
|
|
|
10
|
|
|
(261
|
)
|
|
(27
|
)
|
|
(27
|
)
|
|
Corporate
|
|
|
|
(127
|
)
|
|
|
1
|
|
|
(126
|
)
|
|
|
(110
|
)
|
|
|
7
|
|
|
(103
|
)
|
|
15
|
|
|
22
|
|
|
Operating expenses
|
|
|
$
|
(1,917
|
)
|
|
$
|
139
|
|
$
|
(1,778
|
)
|
|
$
|
(2,051
|
)
|
|
$
|
175
|
|
$
|
(1,876
|
)
|
|
(7
|
)
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions
|
|
|
$
|
9
|
|
|
$
|
2
|
|
$
|
11
|
|
|
$
|
17
|
|
|
$
|
1
|
|
$
|
18
|
|
|
(47
|
)
|
|
(39
|
)
|
|
Technology Solutions
|
|
|
|
1
|
|
|
|
-
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Corporate
|
|
|
|
3
|
|
|
|
-
|
|
|
3
|
|
|
|
2
|
|
|
|
-
|
|
|
2
|
|
|
50
|
|
|
50
|
|
|
Other income, net
|
|
|
$
|
13
|
|
|
$
|
2
|
|
$
|
15
|
|
|
$
|
19
|
|
|
$
|
1
|
|
$
|
20
|
|
|
(32
|
)
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions (1)
|
|
|
$
|
910
|
|
|
$
|
223
|
|
$
|
1,133
|
|
|
$
|
740
|
|
|
$
|
257
|
|
$
|
997
|
|
|
23
|
|
|
14
|
|
|
Technology Solutions (2) (3)
|
|
|
|
158
|
|
|
|
9
|
|
|
167
|
|
|
|
68
|
|
|
|
12
|
|
|
80
|
|
|
132
|
|
|
109
|
|
|
Operating profit
|
|
|
|
1,068
|
|
|
|
232
|
|
|
1,300
|
|
|
|
808
|
|
|
|
269
|
|
|
1,077
|
|
|
32
|
|
|
21
|
|
|
Corporate
|
|
|
|
(124
|
)
|
|
|
1
|
|
|
(123
|
)
|
|
|
(108
|
)
|
|
|
7
|
|
|
(101
|
)
|
|
15
|
|
|
22
|
|
|
Interest Expense
|
|
|
|
(89
|
)
|
|
|
-
|
|
|
(89
|
)
|
|
|
(96
|
)
|
|
|
-
|
|
|
(96
|
)
|
|
(7
|
)
|
|
(7
|
)
|
|
Income from continuing operations before income taxes
|
|
|
$
|
855
|
|
|
$
|
233
|
|
$
|
1,088
|
|
|
$
|
604
|
|
|
$
|
276
|
|
$
|
880
|
|
|
42
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATISTICS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit as a % of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions
|
|
|
|
1.94
|
|
%
|
|
|
|
2.42
|
|
%
|
|
1.73
|
|
%
|
|
|
|
|
2.33
|
|
%
|
21
|
|
bp
|
9
|
|
bp
|
Technology Solutions
|
|
|
|
21.47
|
|
|
|
|
|
|
22.69
|
|
|
|
8.85
|
|
|
|
|
|
|
10.42
|
|
|
1,262
|
|
|
1,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Fiscal year 2016 reflects $59 million of cash proceeds representing
our share of antitrust legal settlements.
|
(2)
|
|
Fiscal year 2015 reflects a non-cash pre-tax charge of $34 million
primarily relating to depreciation and amortization expense due to
the reclassification of the workforce business within our
International Technology business from discontinued operations to
continuing operations. The charge was primarily recorded in cost of
sales.
|
(3)
|
|
Fiscal year 2016 includes a pre-tax gain of $51 million ($38
million after-tax) recognized upon the sale of our nurse triage
business within our Technology Solutions segment.
|
|
|
|
Refer to the definitions related to Adjusted Earnings (Non-GAAP)
financial information.
|
|
Schedule 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
McKESSON CORPORATION
|
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED
EARNINGS (NON-GAAP) - BY ADJUSTMENT TYPE
|
(unaudited)
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2015
|
|
Quarter Ended June 30, 2014
|
|
|
|
|
|
|
|
Corporate &
|
|
|
|
|
|
|
|
Corporate &
|
|
|
|
|
|
Distribution
|
|
Technology
|
|
Interest
|
|
|
|
Distribution
|
|
Technology
|
|
Interest
|
|
|
|
|
|
Solutions
|
|
Solutions
|
|
Expense
|
|
Total
|
|
Solutions
|
|
Solutions
|
|
Expense
|
|
Total
|
As Reported (GAAP):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
46,810
|
|
$
|
736
|
|
$
|
-
|
|
|
$
|
47,546
|
|
$
|
42,708
|
|
$
|
768
|
|
$
|
-
|
|
|
$
|
43,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before interest expense and income
taxes (1) (2) (3)
|
|
|
$
|
910
|
|
$
|
158
|
|
$
|
(124
|
)
|
|
$
|
944
|
|
$
|
740
|
|
$
|
68
|
|
$
|
(108
|
)
|
|
$
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Tax Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related intangibles
|
|
|
$
|
103
|
|
$
|
9
|
|
$
|
-
|
|
|
$
|
112
|
|
$
|
117
|
|
$
|
12
|
|
$
|
-
|
|
|
$
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition expenses and related adjustments
|
|
|
|
29
|
|
|
-
|
|
|
1
|
|
|
|
30
|
|
|
42
|
|
|
-
|
|
|
7
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claim and litigation reserve adjustments
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFO-related adjustments
|
|
|
|
91
|
|
|
-
|
|
|
-
|
|
|
|
91
|
|
|
98
|
|
|
-
|
|
|
-
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax adjustments
|
|
|
$
|
223
|
|
$
|
9
|
|
$
|
1
|
|
|
$
|
233
|
|
$
|
257
|
|
$
|
12
|
|
$
|
7
|
|
|
$
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings (Non-GAAP):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
46,810
|
|
$
|
736
|
|
$
|
-
|
|
|
$
|
47,546
|
|
$
|
42,708
|
|
$
|
768
|
|
$
|
-
|
|
|
$
|
43,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before interest expense and income
taxes (1) (2) (3)
|
|
|
$
|
1,133
|
|
$
|
167
|
|
$
|
(123
|
)
|
|
$
|
1,177
|
|
$
|
997
|
|
$
|
80
|
|
$
|
(101
|
)
|
|
$
|
976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Fiscal year 2016 for our Distribution Solutions business reflects
$59 million of cash proceeds representing our share of antitrust
legal settlements.
|
(2)
|
|
Fiscal year 2015 for our Technology Solutions segment reflects a
non-cash pre-tax charge of $34 million primarily relating to
depreciation and amortization expense due to the reclassification of
the workforce business within our International Technology business
from discontinued operations to continuing operations. The charge
was primarily recorded in cost of sales.
|
(3)
|
|
Fiscal year 2016 includes a pre-tax gain of $51 million ($38
million after-tax) recognized upon the sale of our nurse triage
business within our Technology Solutions segment.
|
|
|
|
Refer to the definitions related to Adjusted Earnings (Non-GAAP)
financial information.
|
|
|
|
Schedule 5
|
McKESSON CORPORATION
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(unaudited)
|
(in millions)
|
|
|
|
|
June 30,
|
|
March 31,
|
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,635
|
|
|
$
|
5,341
|
|
Receivables, net
|
|
|
16,684
|
|
|
|
15,914
|
|
Inventories, net
|
|
|
14,932
|
|
|
|
14,296
|
|
Prepaid expenses and other
|
|
|
1,320
|
|
|
|
1,119
|
|
Total Current Assets
|
|
|
38,571
|
|
|
|
36,670
|
|
Property, Plant and Equipment, Net
|
|
|
2,100
|
|
|
|
2,045
|
|
Goodwill
|
|
|
9,949
|
|
|
|
9,817
|
|
Intangible Assets, Net
|
|
|
3,426
|
|
|
|
3,441
|
|
Other Assets
|
|
|
1,879
|
|
|
|
1,897
|
|
Total Assets
|
|
$
|
55,925
|
|
|
$
|
53,870
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Drafts and accounts payable
|
|
$
|
26,319
|
|
|
$
|
25,166
|
|
Short-term borrowings
|
|
|
144
|
|
|
|
135
|
|
Deferred revenue
|
|
|
939
|
|
|
|
1,078
|
|
Deferred tax liabilities
|
|
|
1,869
|
|
|
|
1,820
|
|
Current portion of long-term debt
|
|
|
1,510
|
|
|
|
1,529
|
|
Other accrued liabilities
|
|
|
3,892
|
|
|
|
3,769
|
|
Total Current Liabilities
|
|
|
34,673
|
|
|
|
33,497
|
|
Long-Term Debt
|
|
|
8,142
|
|
|
|
8,180
|
|
Other Noncurrent Liabilities
|
|
|
2,741
|
|
|
|
2,722
|
|
Commitments and Contingent Liabilities
|
|
|
|
|
|
|
Redeemable Noncontrolling Interests
|
|
|
1,430
|
|
|
|
1,386
|
|
|
|
|
|
|
|
|
McKesson Corporation Stockholders' Equity
|
|
|
8,853
|
|
|
|
8,001
|
|
Noncontrolling Interests
|
|
|
86
|
|
|
|
84
|
|
Total Equity
|
|
|
8,939
|
|
|
|
8,085
|
|
Total Liabilities, Redeemable Noncontrolling Interests and Equity
|
|
$
|
55,925
|
|
|
$
|
53,870
|
|
|
|
|
|
Schedule 6
|
|
McKESSON CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(unaudited)
|
(in millions)
|
|
|
|
Quarter Ended June 30,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net income
|
|
$
|
589
|
|
|
$
|
411
|
|
Adjustments to reconcile to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
229
|
|
|
|
280
|
|
Other deferred taxes
|
|
|
23
|
|
|
|
138
|
|
LIFO charges
|
|
|
91
|
|
|
|
98
|
|
Other non-cash items
|
|
|
(31
|
)
|
|
|
13
|
|
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
Receivables
|
|
|
(749
|
)
|
|
|
(693
|
)
|
Inventories
|
|
|
(635
|
)
|
|
|
(893
|
)
|
Drafts and accounts payable
|
|
|
1,003
|
|
|
|
1,367
|
|
Deferred revenue
|
|
|
(126
|
)
|
|
|
(134
|
)
|
Taxes
|
|
|
205
|
|
|
|
(134
|
)
|
Other
|
|
|
(145
|
)
|
|
|
(271
|
)
|
Net cash provided by operating activities
|
|
|
454
|
|
|
|
182
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Property acquisitions
|
|
|
(77
|
)
|
|
|
(83
|
)
|
Capitalized software expenditures
|
|
|
(43
|
)
|
|
|
(33
|
)
|
Acquisitions, less cash and cash equivalents acquired
|
|
|
(6
|
)
|
|
|
(14
|
)
|
Proceeds from sale of business
|
|
|
84
|
|
|
|
-
|
|
Other
|
|
|
25
|
|
|
|
18
|
|
Net cash used in investing activities
|
|
|
(17
|
)
|
|
|
(112
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
531
|
|
|
|
905
|
|
Repayments of short-term borrowings
|
|
|
(534
|
)
|
|
|
(747
|
)
|
Proceeds from issuances of long-term debt
|
|
|
-
|
|
|
|
6
|
|
Repayments of long-term debt
|
|
|
(96
|
)
|
|
|
(228
|
)
|
Common stock transactions:
|
|
|
|
|
|
|
Issuances
|
|
|
38
|
|
|
|
34
|
|
Share repurchases, including shares surrendered for tax withholding
|
|
|
(105
|
)
|
|
|
(102
|
)
|
Dividends paid
|
|
|
(59
|
)
|
|
|
(59
|
)
|
Other
|
|
|
22
|
|
|
|
24
|
|
Net cash used in financing activities
|
|
|
(203
|
)
|
|
|
(167
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
60
|
|
|
|
9
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
294
|
|
|
|
(88
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
5,341
|
|
|
|
4,193
|
|
Cash and cash equivalents at end of period
|
|
$
|
5,635
|
|
|
$
|
4,105
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings
|
McKesson separately reports financial results on the basis of
Adjusted Earnings. Adjusted Earnings is a Non-GAAP financial measure
defined as GAAP income from continuing operations, excluding
amortization of acquisition-related intangible assets, acquisition
expenses and related adjustments, certain claim and litigation
reserve adjustments, and Last-In-First-Out (“LIFO”)
inventory-related adjustments. A reconciliation of McKesson’s
financial results determined in accordance with GAAP to Adjusted
Earnings is provided in Schedules 2, 3 and 4 of the financial
statement tables included with this release.
|
|
|
****
|
|
|
Definitions related to Adjusted Earnings
(Non-GAAP) Financial Information
|
|
|
Adjusted Earnings represents income from continuing operations,
excluding the effects of the following items from the Company’s GAAP
financial results, including the related income tax effects. The
Company evaluates its definition of Adjusted Earnings on a periodic
basis and will update the definition from time to time. The
evaluation considers both the quantitative and qualitative aspect of
the Company’s presentation of Adjusted Earnings.
|
Amortization of acquisition-related
intangibles - Amortization expense of acquired intangible
assets purchased in connection with business acquisitions by the
Company.
|
Acquisition expenses and related adjustments
- Transaction and integration expenses that are directly related
to business acquisitions by the Company. Examples include
transaction closing costs, professional service fees,
restructuring or severance charges, retention payments, employee
relocation expenses, facility or other exit-related expenses,
recoveries of acquisition-related expenses or post-closing
expenses, bridge loan fees, gains or losses related to foreign
currency contracts, and gains or losses on business combinations.
|
Claim and litigation reserve adjustments
- Adjustments to the Company’s reserves, including accrued
interest, for estimated probable losses for its Controlled
Substance Distribution Claims and the Average Wholesale Price
litigation matters, as such terms are defined in the Company’s
Annual Report on Form 10-K for the fiscal year ended March 31,
2015.
|
LIFO-related adjustments -
Last-In-First-Out ("LIFO") inventory-related adjustments.
|
Income taxes on Adjusted Earnings are calculated in accordance with
Accounting Standards Codification ("ASC") 740, “Income Taxes,” which
is the same accounting principle used by the Company when presenting
its GAAP financial results.
|
The Company believes the presentation of Non-GAAP measures such as
Adjusted Earnings provides useful supplemental information to
investors with regard to its core operating performance, as well as
assists with the comparison of its past financial performance to the
Company’s future financial results. Moreover, the Company believes
that the presentation of Adjusted Earnings assists investors’
ability to compare its financial results to those of other companies
in the same industry. However, the Company's Adjusted Earnings
measure may be defined and calculated differently by other companies
in the same industry.
|
The Company internally uses Non-GAAP financial measures such as
Adjusted Earnings in connection with its own financial planning and
reporting processes. Specifically, Adjusted Earnings serves as one
of the measures management utilizes when allocating resources,
deploying capital and assessing business performance and employee
incentive compensation. Nonetheless, Non-GAAP financial results and
related measures disclosed by the Company should not be considered a
substitute for, nor superior to, financial results and measures as
determined or calculated in accordance with GAAP.
|
