SAN FRANCISCO--(BUSINESS WIRE)--McKesson Corporation (NYSE:MCK) today reported that revenues for the
first quarter ended June 30, 2016 were $49.7 billion, up 5% compared to
$47.5 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 $2.88 compared to $2.50 a year ago.
First-quarter Adjusted Earnings per diluted share was $3.50, up 11% as
compared to $3.14 a year ago. First-quarter results included: a pre-tax
gain of $142 million, or 38 cents per diluted share, related to cash
receipts representing our share of antitrust settlement proceeds within
Distribution Solutions; $37 million, or 16 cents per diluted share, in
discrete tax benefits related to the company’s adoption of amended
guidance by the Financial Accounting Standards Board on accounting for
share-based compensation; and pre-tax charges totaling $9 million, or
approximately 2 cents per diluted share, related to the company’s cost
alignment plan as disclosed in March 2016 (the “Cost Alignment Plan”).
Prior year first-quarter results included: 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; and $59 million, or 15
cents per diluted share, related to antitrust settlement proceeds within
Distribution Solutions.
“McKesson’s first-quarter operating results represent a solid start to
the fiscal year, consistent with our expectations,” said John H.
Hammergren, chairman and chief executive officer.
For the first quarter, McKesson generated cash from operations of $1.9
billion, and ended the quarter with cash and cash equivalents of $4.7
billion. During the quarter, McKesson paid $1.8 billion for
acquisitions, $66 million in dividends and had internal capital spending
of $114 million.
“We operate businesses that continue to produce strong cash flow
results,” continued Hammergren. “Our management team is focused on
driving long-term value for our shareholders. We were pleased to have
successfully closed several acquisitions during the quarter, further
extending our strong track record of value creation through our
portfolio approach to capital deployment.”
Segment Results
Distribution Solutions revenues were $49.0 billion for the quarter, up
5% both on a reported basis and on a constant currency basis.
North America pharmaceutical distribution and services revenues of $41.2
billion for the quarter were up 4% on a reported basis and 5% on a
constant currency basis, primarily reflecting market growth,
acquisitions and our mix of business.
International pharmaceutical distribution and services revenues were
$6.3 billion for the quarter, up 8% on a reported basis and 9% on a
constant currency basis, driven by acquisitions and market growth.
Medical-Surgical distribution and services revenues were up 2% for the
quarter, driven by market growth, partially offset by the prior year
sale of the ZEE Medical business in the second quarter of Fiscal 2016.
In the first quarter, Distribution Solutions GAAP operating profit was
$928 million and GAAP operating margin was 1.89%. First-quarter adjusted
operating profit was $1.1 billion, down 1% from the prior year on a
constant currency basis. Adjusted operating margin for the Distribution
Solutions segment was 2.29% on a constant currency basis.
Technology Solutions revenues were down 2% on a reported basis and 1% on
a constant currency basis in the first quarter, primarily driven by an
anticipated year-over-year decline in our hospital software business and
the prior year sale of the nurse triage business in the first quarter of
Fiscal 2016, partially offset by growth in our other technology
businesses.
Technology Solutions GAAP operating profit was $168 million for the
first quarter and GAAP operating margin was 23.20%. On a constant
currency basis, adjusted operating profit was $179 million for the first
quarter and adjusted operating margin was 24.69%.
Fiscal Year 2017 Outlook
McKesson expects GAAP earnings per diluted share between $10.70 to
$11.60 for the fiscal year ending March 31, 2017, which includes the
following items:
-
Amortization of acquisition-related intangible assets of $1.25 to
$1.35 per diluted share;
-
Acquisition expenses and related adjustments of 50 cents to 65 cents
per diluted share;
-
LIFO inventory-related charges of 40 cents to 60 cents per diluted
share; and
-
Claim and litigation reserve credits of 2 cents per diluted share for
average wholesale price litigation matters.
Excluding approximately 12 to 15 cents in expected charges to Adjusted
Earnings for the Cost Alignment Plan, McKesson expects $13.43 to $13.93
per diluted share for the fiscal year ending March 31, 2017.
The Fiscal 2017 guidance ranges do not include any potential claim or
litigation reserve adjustments, or the impact of any potential new
acquisitions and divestitures, and impairments or material
restructurings beyond those previously publicly disclosed.
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
McKesson also presents its financial results on a constant currency
basis. The company conducts business worldwide in local currencies,
including the Euro, British pound and Canadian dollar. As a result, the
comparability of the financial results reported in U.S. dollars can be
affected by changes in foreign currency exchange rates. Constant
currency information is presented to provide a framework for assessing
how the company’s business performed excluding the effect of foreign
currency exchange rate fluctuations. The supplemental constant currency
information of the company’s GAAP financial results and Adjusted
Earnings (Non-GAAP) is provided in Schedule 3 of the financial statement
tables included with this release.
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 Securities and Exchange Commission 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;
fluctuations in foreign currency exchange rates; 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
and industry consolidation; 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; cyberattack, natural disaster, or malfunction of
sophisticated internal computer systems to perform as designed; 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 or services 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; withdrawal from participation in multiemployer
pension plans or if such plans are reported to have underfunded
liabilities; inability to realize the expected benefits from the
company’s restructuring and business process initiatives; difficulties
with outsourcing and similar third party relationships; risks associated
with the company’s retail expansion; and the company’s inability to keep
existing retail store locations or open new retail locations in
desirable places. 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.
Conference Call Details
The company has scheduled a conference call for today, Wednesday, July 27th,
at 5:00 PM ET. The dial-in number for individuals wishing to participate
on the call is 719-234-7317. Craig Mercer, senior vice president,
Investor Relations, is the leader of the call, and the password to join
the call is ‘McKesson’. The live webcast and supplementary slide
presentation for the conference call can be accessed on the company’s
Investor Relations website at http://investor.mckesson.com.
A telephonic 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 7441116.
The audio webcast and supplemental slide presentation will be archived
on the company’s Investor Relations website after the conclusion of the
call. Shareholders are encouraged to review the company’s filings with
the Securities and Exchange Commission and the supplementary slide
presentation for the conference call, which are located on the company’s
website.
About McKesson Corporation
McKesson Corporation, currently ranked 5th 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 www.mckesson.com.
|
|
|
Schedule 1
|
|
McKESSON CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP
|
(unaudited)
|
(in millions, except per share amounts)
|
|
|
|
Quarter Ended June 30,
|
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
49,733
|
|
|
$
|
47,546
|
|
|
5
|
|
%
|
Cost of sales (1)
|
|
|
(46,826
|
)
|
|
|
(44,698
|
)
|
|
5
|
|
|
Gross profit
|
|
|
2,907
|
|
|
|
2,848
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (2)
|
|
|
(1,935
|
)
|
|
|
(1,917
|
)
|
|
1
|
|
|
Operating income
|
|
|
972
|
|
|
|
931
|
|
|
4
|
|
|
Other income, net
|
|
|
19
|
|
|
|
13
|
|
|
46
|
|
|
Interest expense
|
|
|
(79
|
)
|
|
|
(89
|
)
|
|
(11
|
)
|
|
Income from continuing operations before income taxes
|
|
|
912
|
|
|
|
855
|
|
|
7
|
|
|
Income tax expense (3)
|
|
|
(239
|
)
|
|
|
(256
|
)
|
|
(7
|
)
|
|
Income from continuing operations after tax
|
|
|
673
|
|
|
|
599
|
|
|
12
|
|
|
Loss from discontinued operations, net of tax (4)
|
|
|
(113
|
)
|
|
|
(10
|
)
|
|
1,030
|
|
|
Net income
|
|
|
560
|
|
|
|
589
|
|
|
(5
|
)
|
|
Net income attributable to noncontrolling interests
|
|
|
(18
|
)
|
|
|
(13
|
)
|
|
38
|
|
|
Net income attributable to McKesson Corporation
|
|
$
|
542
|
|
|
$
|
576
|
|
|
(6
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share attributable to
McKesson Corporation (5)
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
2.88
|
|
|
$
|
2.50
|
|
|
15
|
|
%
|
Discontinued operations
|
|
|
(0.50
|
)
|
|
|
(0.05
|
)
|
|
900
|
|
|
Total
|
|
$
|
2.38
|
|
|
$
|
2.45
|
|
|
(3
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
2.91
|
|
|
$
|
2.53
|
|
|
15
|
|
%
|
Discontinued operations
|
|
|
(0.50
|
)
|
|
|
(0.04
|
)
|
|
1,150
|
|
|
Total
|
|
$
|
2.41
|
|
|
$
|
2.49
|
|
|
(3
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
0.28
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
228
|
|
|
|
235
|
|
|
(3
|
)
|
%
|
Basic
|
|
|
225
|
|
|
|
232
|
|
|
(3
|
)
|
|
|
|
(1)
|
Fiscal year 2017 and 2016 include pre-tax charges of $47 million and
$91 million related to our last-in-first-out ("LIFO") method of
accounting for inventories within our Distribution Solutions
segment. Fiscal year 2017 and 2016 include $142 million and $59
million of net 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 from the sale of our nurse triage business
within our Technology Solutions segment.
|
(3)
|
Fiscal year 2017 includes a tax benefit of $37 million related to
the adoption of the amended accounting guidance on share-based
compensation in the first quarter of fiscal year 2017.
|
(4)
|
Fiscal year 2017 includes an after-tax loss of $113 million
recognized from the sale of our Brazilian pharmaceutical
distribution business within our discontinued operations.
|
(5)
|
Certain computations may reflect rounding adjustments.
|
|
|
|
Schedule 2
|
|
McKESSON CORPORATION
|
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS
(NON-GAAP)
|
(unaudited)
|
(in millions, except per share amounts)
|
|
|
|
|
|
Change
|
|
|
Quarter Ended June 30, 2016
|
|
Vs. Prior Quarter
|
|
|
As Reported (GAAP)
|
|
Amortization of Acquisition- Related
Intangibles
|
|
Acquisition Expenses and Related Adjustments
|
|
Claim and Litigation Reserve Adjustments
|
|
LIFO-Related Adjustments
|
|
Adjusted Earnings (Non-GAAP)
|
|
As Reported (GAAP)
|
|
Adjusted Earnings (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (1)
|
|
$
|
2,907
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
47
|
|
|
$
|
2,956
|
|
|
2
|
|
%
|
|
1
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
(1,935
|
)
|
|
$
|
113
|
|
|
$
|
46
|
|
|
$
|
(6
|
)
|
|
$
|
-
|
|
|
$
|
(1,782
|
)
|
|
1
|
|
%
|
|
-
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
$
|
19
|
|
|
$
|
-
|
|
|
$
|
4
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
23
|
|
|
46
|
|
%
|
|
53
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$
|
912
|
|
|
$
|
115
|
|
|
$
|
50
|
|
|
$
|
(6
|
)
|
|
$
|
47
|
|
|
$
|
1,118
|
|
|
7
|
|
%
|
|
3
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (2)
|
|
$
|
(239
|
)
|
|
$
|
(36
|
)
|
|
$
|
(12
|
)
|
|
$
|
2
|
|
|
$
|
(18
|
)
|
|
$
|
(303
|
)
|
|
(7
|
)
|
%
|
|
(10
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax, attributable to
McKesson Corporation
|
|
$
|
655
|
|
|
$
|
79
|
|
|
$
|
38
|
|
|
$
|
(4
|
)
|
|
$
|
29
|
|
|
$
|
797
|
|
|
12
|
|
%
|
|
8
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share from continuing operations, net
of tax, attributable to McKesson Corporation (3)
|
|
$
|
2.88
|
|
|
$
|
0.35
|
|
|
$
|
0.17
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.12
|
|
|
$
|
3.50
|
|
(4)
|
15
|
|
%
|
|
11
|
|
%
|
Diluted weighted average common shares
|
|
|
228
|
|
|
|
228
|
|
|
|
228
|
|
|
|
228
|
|
|
|
228
|
|
|
|
228
|
|
|
(3
|
)
|
%
|
|
(3
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2015
|
|
|
|
|
|
|
|
|
As Reported (GAAP)
|
|
Amortization of Acquisition- Related Intangibles
|
|
Acquisition Expenses and Related Adjustments
|
|
Claim and Litigation Reserve Adjustments
|
|
LIFO-Related Adjustments
|
|
Adjusted Earnings (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (1)
|
|
$
|
2,848
|
|
|
$
|
1
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
91
|
|
|
$
|
2,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (5)
|
|
$
|
(1,917
|
)
|
|
$
|
110
|
|
|
$
|
29
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(1,778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
$
|
13
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$
|
855
|
|
|
$
|
112
|
|
|
$
|
30
|
|
|
$
|
-
|
|
|
$
|
91
|
|
|
$
|
1,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
(256
|
)
|
|
$
|
(35
|
)
|
|
$
|
(11
|
)
|
|
$
|
-
|
|
|
$
|
(36
|
)
|
|
$
|
(338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax, attributable to
McKesson Corporation
|
|
$
|
586
|
|
|
$
|
77
|
|
|
$
|
19
|
|
|
$
|
-
|
|
|
$
|
55
|
|
|
$
|
737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share from continuing operations, net
of tax, attributable to McKesson Corporation (3)
|
|
$
|
2.50
|
|
|
$
|
0.32
|
|
|
$
|
0.08
|
|
|
$
|
-
|
|
|
$
|
0.24
|
|
|
$
|
3.14
|
|
|
|
|
|
|
|
Diluted weighted average common shares
|
|
|
235
|
|
|
|
235
|
|
|
|
235
|
|
|
|
-
|
|
|
|
235
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
(1)
|
Distribution Solutions segment results for fiscal year 2017 and 2016
include $142 million and $59 million of net cash proceeds
representing our share of antitrust legal settlements.
|
(2)
|
Fiscal year 2017 includes a tax benefit of $37 million related to
the adoption of the amended accounting guidance on share-based
compensation in the first quarter of fiscal year 2017.
|
(3)
|
Certain computations may reflect rounding adjustments.
|
(4)
|
Adjusted Earnings per share on a Constant Currency basis for the
first quarter of fiscal year 2017 was $3.51 per diluted share, which
excludes the foreign currency exchange effect of $0.01 per diluted
share.
|
(5)
|
Fiscal year 2016 includes a pre-tax gain of $51 million ($38 million
after-tax) recognized from the sale of our nurse triage business
within our Technology Solutions segment.
|
|
For more information relating to the Adjusted Earnings (Non-GAAP)
and Constant Currency (Non-GAAP) definitions, refer to the section
entitled “Supplemental Non-GAAP Financial Information” of this
release.
|
|
|
Schedule 3
|
|
McKESSON CORPORATION
|
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED
EARNINGS (NON-GAAP)
|
(unaudited)
|
(in millions)
|
|
|
|
|
Quarter Ended June 30, 2016
|
|
|
Quarter Ended June 30, 2015
|
|
|
GAAP
|
|
|
Non-GAAP
|
|
|
Change
|
|
|
|
As Reported (GAAP)
|
|
|
Adjustments
|
|
Adjusted Earnings (Non-GAAP)
|
|
|
As Reported (GAAP)
|
|
|
Adjustments
|
|
Adjusted Earnings (Non-GAAP)
|
|
|
Foreign Currency Effects
|
|
Constant Currency
|
|
|
Foreign Currency Effects
|
|
Constant Currency
|
|
|
As Reported (GAAP)
|
|
|
Adjusted Earnings (Non-GAAP)
|
|
|
Constant Currency (GAAP)
|
|
|
Constant Currency (Non-GAAP)
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America pharmaceutical distribution & services
|
|
$
|
41,211
|
|
|
|
$
|
-
|
|
$
|
41,211
|
|
|
|
$
|
39,532
|
|
|
|
$
|
-
|
|
$
|
39,532
|
|
|
|
$
|
113
|
|
|
$
|
41,324
|
|
|
|
$
|
113
|
|
|
$
|
41,324
|
|
|
|
4
|
|
%
|
|
4
|
|
%
|
|
5
|
|
%
|
|
5
|
|
%
|
International pharmaceutical distribution & services
|
|
|
6,330
|
|
|
|
|
-
|
|
|
6,330
|
|
|
|
|
5,838
|
|
|
|
|
-
|
|
|
5,838
|
|
|
|
|
35
|
|
|
|
6,365
|
|
|
|
|
35
|
|
|
|
6,365
|
|
|
|
8
|
|
|
|
8
|
|
|
|
9
|
|
|
|
9
|
|
|
Medical-Surgical distribution & services
|
|
|
1,468
|
|
|
|
|
-
|
|
|
1,468
|
|
|
|
|
1,440
|
|
|
|
|
-
|
|
|
1,440
|
|
|
|
|
-
|
|
|
|
1,468
|
|
|
|
|
-
|
|
|
|
1,468
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
Total Distribution Solutions
|
|
|
49,009
|
|
|
|
|
-
|
|
|
49,009
|
|
|
|
|
46,810
|
|
|
|
|
-
|
|
|
46,810
|
|
|
|
|
148
|
|
|
|
49,157
|
|
|
|
|
148
|
|
|
|
49,157
|
|
|
|
5
|
|
|
|
5
|
|
|
|
5
|
|
|
|
5
|
|
|
Technology Solutions - Products and Services
|
|
|
724
|
|
|
|
|
-
|
|
|
724
|
|
|
|
|
736
|
|
|
|
|
-
|
|
|
736
|
|
|
|
|
1
|
|
|
|
725
|
|
|
|
|
1
|
|
|
|
725
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Revenues
|
|
$
|
49,733
|
|
|
|
$
|
-
|
|
$
|
49,733
|
|
|
|
$
|
47,546
|
|
|
|
$
|
-
|
|
$
|
47,546
|
|
|
|
$
|
149
|
|
|
$
|
49,882
|
|
|
|
$
|
149
|
|
|
$
|
49,882
|
|
|
|
5
|
|
%
|
|
5
|
|
%
|
|
5
|
|
%
|
|
5
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions (1)
|
|
$
|
2,513
|
|
|
|
$
|
47
|
|
$
|
2,560
|
|
|
|
$
|
2,493
|
|
|
|
$
|
91
|
|
$
|
2,584
|
|
|
|
$
|
26
|
|
|
$
|
2,539
|
|
|
|
$
|
25
|
|
|
$
|
2,585
|
|
|
|
1
|
|
%
|
|
(1
|
)
|
%
|
|
2
|
|
%
|
|
-
|
|
%
|
Technology Solutions
|
|
|
394
|
|
|
|
|
2
|
|
|
396
|
|
|
|
|
355
|
|
|
|
|
1
|
|
|
356
|
|
|
|
|
(1
|
)
|
|
|
393
|
|
|
|
|
(1
|
)
|
|
|
395
|
|
|
|
11
|
|
|
|
11
|
|
|
|
11
|
|
|
|
11
|
|
|
Gross profit
|
|
$
|
2,907
|
|
|
|
$
|
49
|
|
$
|
2,956
|
|
|
|
$
|
2,848
|
|
|
|
$
|
92
|
|
$
|
2,940
|
|
|
|
$
|
25
|
|
|
$
|
2,932
|
|
|
|
$
|
24
|
|
|
$
|
2,980
|
|
|
|
2
|
|
%
|
|
1
|
|
%
|
|
3
|
|
%
|
|
1
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions
|
|
$
|
(1,599
|
)
|
|
|
$
|
140
|
|
$
|
(1,459
|
)
|
|
|
$
|
(1,592
|
)
|
|
|
$
|
130
|
|
$
|
(1,462
|
)
|
|
|
$
|
(21
|
)
|
|
$
|
(1,620
|
)
|
|
|
$
|
(19
|
)
|
|
$
|
(1,478
|
)
|
|
|
-
|
|
%
|
|
-
|
|
%
|
|
2
|
|
%
|
|
1
|
|
%
|
Technology Solutions (2)
|
|
|
(226
|
)
|
|
|
|
11
|
|
|
(215
|
)
|
|
|
|
(198
|
)
|
|
|
|
8
|
|
|
(190
|
)
|
|
|
|
(1
|
)
|
|
|
(227
|
)
|
|
|
|
(1
|
)
|
|
|
(216
|
)
|
|
|
14
|
|
|
|
13
|
|
|
|
15
|
|
|
|
14
|
|
|
Corporate
|
|
|
(110
|
)
|
|
|
|
2
|
|
|
(108
|
)
|
|
|
|
(127
|
)
|
|
|
|
1
|
|
|
(126
|
)
|
|
|
|
-
|
|
|
|
(110
|
)
|
|
|
|
1
|
|
|
|
(107
|
)
|
|
|
(13
|
)
|
|
|
(14
|
)
|
|
|
(13
|
)
|
|
|
(15
|
)
|
|
Operating expenses
|
|
$
|
(1,935
|
)
|
|
|
$
|
153
|
|
$
|
(1,782
|
)
|
|
|
$
|
(1,917
|
)
|
|
|
$
|
139
|
|
$
|
(1,778
|
)
|
|
|
$
|
(22
|
)
|
|
$
|
(1,957
|
)
|
|
|
$
|
(19
|
)
|
|
$
|
(1,801
|
)
|
|
|
1
|
|
%
|
|
-
|
|
%
|
|
2
|
|
%
|
|
1
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions
|
|
$
|
14
|
|
|
|
$
|
4
|
|
$
|
18
|
|
|
|
$
|
9
|
|
|
|
$
|
2
|
|
$
|
11
|
|
|
|
$
|
-
|
|
|
$
|
14
|
|
|
|
$
|
-
|
|
|
$
|
18
|
|
|
|
56
|
|
%
|
|
64
|
|
%
|
|
56
|
|
%
|
|
64
|
|
%
|
Technology Solutions
|
|
|
-
|
|
|
|
|
-
|
|
|
-
|
|
|
|
|
1
|
|
|
|
|
-
|
|
|
1
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(100
|
)
|
|
|
(100
|
)
|
|
|
(100
|
)
|
|
|
(100
|
)
|
|
Corporate
|
|
|
5
|
|
|
|
|
-
|
|
|
5
|
|
|
|
|
3
|
|
|
|
|
-
|
|
|
3
|
|
|
|
|
-
|
|
|
|
5
|
|
|
|
|
-
|
|
|
|
5
|
|
|
|
67
|
|
|
|
67
|
|
|
|
67
|
|
|
|
67
|
|
|
Other income, net
|
|
$
|
19
|
|
|
|
$
|
4
|
|
$
|
23
|
|
|
|
$
|
13
|
|
|
|
$
|
2
|
|
$
|
15
|
|
|
|
$
|
-
|
|
|
$
|
19
|
|
|
|
$
|
-
|
|
|
$
|
23
|
|
|
|
46
|
|
%
|
|
53
|
|
%
|
|
46
|
|
%
|
|
53
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions (1)
|
|
$
|
928
|
|
|
|
$
|
191
|
|
$
|
1,119
|
|
|
|
$
|
910
|
|
|
|
$
|
223
|
|
$
|
1,133
|
|
|
|
$
|
5
|
|
|
$
|
933
|
|
|
|
$
|
6
|
|
|
$
|
1,125
|
|
|
|
2
|
|
%
|
|
(1
|
)
|
%
|
|
3
|
|
%
|
|
(1
|
)
|
%
|
Technology Solutions (2)
|
|
|
168
|
|
|
|
|
13
|
|
|
181
|
|
|
|
|
158
|
|
|
|
|
9
|
|
|
167
|
|
|
|
|
(2
|
)
|
|
|
166
|
|
|
|
|
(2
|
)
|
|
|
179
|
|
|
|
6
|
|
|
|
8
|
|
|
|
5
|
|
|
|
7
|
|
|
Operating profit
|
|
|
1,096
|
|
|
|
|
204
|
|
|
1,300
|
|
|
|
|
1,068
|
|
|
|
|
232
|
|
|
1,300
|
|
|
|
|
3
|
|
|
|
1,099
|
|
|
|
|
4
|
|
|
|
1,304
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
Corporate
|
|
|
(105
|
)
|
|
|
|
2
|
|
|
(103
|
)
|
|
|
|
(124
|
)
|
|
|
|
1
|
|
|
(123
|
)
|
|
|
|
-
|
|
|
|
(105
|
)
|
|
|
|
1
|
|
|
|
(102
|
)
|
|
|
(15
|
)
|
|
|
(16
|
)
|
|
|
(15
|
)
|
|
|
(17
|
)
|
|
Income from continuing operations before interest expense and
income taxes
|
|
$
|
991
|
|
|
|
$
|
206
|
|
$
|
1,197
|
|
|
|
$
|
944
|
|
|
|
$
|
233
|
|
$
|
1,177
|
|
|
|
$
|
3
|
|
|
$
|
994
|
|
|
|
$
|
5
|
|
|
$
|
1,202
|
|
|
|
5
|
|
%
|
|
2
|
|
%
|
|
5
|
|
%
|
|
2
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATISTICS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit as a % of revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions
|
|
|
1.89
|
|
%
|
|
|
|
|
|
2.28
|
|
%
|
|
|
1.94
|
|
%
|
|
|
|
|
|
2.42
|
|
%
|
|
|
|
|
|
1.90
|
|
%
|
|
|
|
|
|
2.29
|
|
%
|
|
(5
|
)
|
bp
|
|
(14
|
)
|
bp
|
|
(4
|
)
|
bp
|
|
(13
|
)
|
bp
|
Technology Solutions
|
|
|
23.20
|
|
|
|
|
|
|
|
25.00
|
|
|
|
|
21.47
|
|
|
|
|
|
|
|
22.69
|
|
|
|
|
|
|
|
22.90
|
|
|
|
|
|
|
|
24.69
|
|
|
|
173
|
|
|
|
231
|
|
|
|
143
|
|
|
|
200
|
|
|
|
(1)
|
Fiscal year 2017 and 2016 include $142 million and $59 million of
net 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 from the sale of our nurse triage business.
|
|
For more information relating to the Adjusted Earnings (Non-GAAP)
and Constant Currency (Non-GAAP) definitions, refer to the section
entitled “Supplemental Non-GAAP Financial Information” of this
release.
|
|
|
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, 2016
|
|
Quarter Ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Solutions
|
|
Technology Solutions
|
|
Corporate
|
|
Total
|
|
Distribution Solutions
|
|
Technology Solutions
|
|
Corporate
|
|
Total
|
As Reported (GAAP):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
49,009
|
|
|
$
|
724
|
|
$
|
-
|
|
|
$
|
49,733
|
|
|
$
|
46,810
|
|
$
|
736
|
|
$
|
-
|
|
|
$
|
47,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before interest expense and income
taxes (1)(2)
|
|
$
|
928
|
|
|
$
|
168
|
|
$
|
(105
|
)
|
|
$
|
991
|
|
|
$
|
910
|
|
$
|
158
|
|
$
|
(124
|
)
|
|
$
|
944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Tax Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquisition-related intangibles
|
|
$
|
106
|
|
|
$
|
9
|
|
$
|
-
|
|
|
$
|
115
|
|
|
$
|
103
|
|
$
|
9
|
|
$
|
-
|
|
|
$
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition expenses and related adjustments
|
|
|
44
|
|
|
|
4
|
|
|
2
|
|
|
|
50
|
|
|
|
29
|
|
|
-
|
|
|
1
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claim and litigation reserve adjustments
|
|
|
(6
|
)
|
|
|
-
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFO-related adjustments
|
|
|
47
|
|
|
|
-
|
|
|
-
|
|
|
|
47
|
|
|
|
91
|
|
|
-
|
|
|
-
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax adjustments
|
|
$
|
191
|
|
|
$
|
13
|
|
$
|
2
|
|
|
$
|
206
|
|
|
$
|
223
|
|
$
|
9
|
|
$
|
1
|
|
|
$
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings (Non-GAAP):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
49,009
|
|
|
$
|
724
|
|
$
|
-
|
|
|
$
|
49,733
|
|
|
$
|
46,810
|
|
$
|
736
|
|
$
|
-
|
|
|
$
|
47,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before interest expense and income
taxes (1)(2)
|
|
$
|
1,119
|
|
|
$
|
181
|
|
$
|
(103
|
)
|
|
$
|
1,197
|
|
|
$
|
1,133
|
|
$
|
167
|
|
$
|
(123
|
)
|
|
$
|
1,177
|
|
|
(1)
|
Fiscal year 2017 and 2016 include $142 million and $59 million of
net cash proceeds representing our share of antitrust legal
settlements within our Distribution Solutions segment.
|
(2)
|
Fiscal year 2016 includes a pre-tax gain of $51 million ($38 million
after-tax) recognized from the sale of our nurse triage business
within our Technology Solutions segment.
|
|
|
For more information relating to the Adjusted Earnings (Non-GAAP)
definition, refer to the section entitled “Supplemental Non-GAAP
Financial Information” of this release.
|
|
|
Schedule 5
|
|
McKESSON CORPORATION
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(unaudited)
|
(in millions)
|
|
|
|
June 30,
|
|
March 31,
|
|
|
2016
|
|
2016
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,659
|
|
$
|
4,048
|
Receivables, net
|
|
|
18,334
|
|
|
17,980
|
Inventories, net
|
|
|
15,500
|
|
|
15,335
|
Prepaid expenses and other
|
|
|
545
|
|
|
1,072
|
Total Current Assets
|
|
|
39,038
|
|
|
38,435
|
Property, Plant and Equipment, Net
|
|
|
2,430
|
|
|
2,278
|
Goodwill
|
|
|
11,127
|
|
|
9,786
|
Intangible Assets, Net
|
|
|
3,143
|
|
|
3,021
|
Other Noncurrent Assets
|
|
|
2,166
|
|
|
3,003
|
Total Assets
|
|
$
|
57,904
|
|
$
|
56,523
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS
|
|
|
|
|
|
|
AND EQUITY
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Drafts and accounts payable
|
|
$
|
30,424
|
|
$
|
28,585
|
Deferred revenue
|
|
|
820
|
|
|
919
|
Current portion of long-term debt
|
|
|
2,168
|
|
|
1,610
|
Other accrued liabilities
|
|
|
3,162
|
|
|
3,955
|
Total Current Liabilities
|
|
|
36,574
|
|
|
35,069
|
Long-Term Debt
|
|
|
5,942
|
|
|
6,497
|
Long-Term Deferred Tax Liabilities
|
|
|
2,789
|
|
|
2,734
|
Other Noncurrent Liabilities
|
|
|
1,768
|
|
|
1,809
|
|
|
|
|
|
|
|
Redeemable Noncontrolling Interests
|
|
|
1,340
|
|
|
1,406
|
|
|
|
|
|
|
|
McKesson Corporation Stockholders' Equity
|
|
|
9,249
|
|
|
8,924
|
Noncontrolling Interests
|
|
|
242
|
|
|
84
|
Total Equity
|
|
|
9,491
|
|
|
9,008
|
Total Liabilities, Redeemable Noncontrolling Interests and Equity
|
|
$
|
57,904
|
|
$
|
56,523
|
|
|
Schedule 6
|
|
McKESSON CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(unaudited)
|
(in millions)
|
|
|
|
Quarter Ended June 30,
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
Net income
|
|
$
|
560
|
|
|
$
|
589
|
|
Adjustments to reconcile to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
242
|
|
|
|
229
|
|
Other deferred taxes
|
|
|
31
|
|
|
|
23
|
|
LIFO charges
|
|
|
47
|
|
|
|
91
|
|
Loss (gain) from sales of businesses
|
|
|
113
|
|
|
|
(51
|
)
|
Other non-cash items
|
|
|
29
|
|
|
|
20
|
|
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
Receivables
|
|
|
(300
|
)
|
|
|
(749
|
)
|
Inventories
|
|
|
(121
|
)
|
|
|
(635
|
)
|
Drafts and accounts payable
|
|
|
1,549
|
|
|
|
1,003
|
|
Deferred revenue
|
|
|
(113
|
)
|
|
|
(126
|
)
|
Taxes
|
|
|
95
|
|
|
|
205
|
|
Other
|
|
|
(273
|
)
|
|
|
(145
|
)
|
Net cash provided by operating activities
|
|
|
1,859
|
|
|
|
454
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
Property acquisitions
|
|
|
(76
|
)
|
|
|
(77
|
)
|
Capitalized software expenditures
|
|
|
(38
|
)
|
|
|
(43
|
)
|
Acquisitions, net of cash and cash equivalents acquired
|
|
|
(1,819
|
)
|
|
|
(6
|
)
|
Proceeds from/(payment for) sale of businesses, net
|
|
|
(101
|
)
|
|
|
84
|
|
Restricted cash for acquisitions
|
|
|
935
|
|
|
|
18
|
|
Other
|
|
|
(55
|
)
|
|
|
7
|
|
Net cash used in investing activities
|
|
|
(1,154
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
7
|
|
|
|
531
|
|
Repayments of short-term borrowings
|
|
|
(14
|
)
|
|
|
(534
|
)
|
Repayments of long-term debt
|
|
|
(1
|
)
|
|
|
(96
|
)
|
Common stock transactions:
|
|
|
|
|
Issuances
|
|
|
36
|
|
|
|
38
|
|
Share repurchases, including shares surrendered for tax withholding
|
|
|
(58
|
)
|
|
|
(105
|
)
|
Dividends paid
|
|
|
(66
|
)
|
|
|
(59
|
)
|
Other
|
|
|
14
|
|
|
|
22
|
|
Net cash used in financing activities
|
|
|
(82
|
)
|
|
|
(203
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(12
|
)
|
|
|
60
|
|
Net increase in cash and cash equivalents
|
|
|
611
|
|
|
|
294
|
|
Cash and cash equivalents at beginning of period
|
|
|
4,048
|
|
|
|
5,341
|
|
Cash and cash equivalents at end of period
|
|
$
|
4,659
|
|
|
$
|
5,635
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
In an effort to provide investors with additional information regarding
the company's financial results as determined by generally accepted
accounting principles ("GAAP"), McKesson Corporation (the "Company" or
"we") also presents the following non-GAAP measures in this press
release. The Company believes the presentation of non-GAAP measures
provides useful supplemental information to investors with regard to its
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 non-GAAP
measures assists investors’ ability to compare its financial results to
those of other companies in the same industry. However, the Company's
non-GAAP measures used in the press tables may be defined and calculated
differently by other companies in the same industry.
-
Adjusted Earnings (Non-GAAP): We define Adjusted Earnings 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, as well
as the related income tax effects. The Company evaluates its
definition of Adjusted Earnings on a periodic basis and updates the
definition from time to time. The evaluation considers both the
quantitative and qualitative aspect of the Company’s presentation of
Adjusted Earnings. A reconciliation of McKesson’s GAAP financial
results to Adjusted Earnings (Non-GAAP) is provided in Schedules 2, 3
and 4 of the financial statement tables included with this release.
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 and the
proposed Healthcare Technology net asset exchange 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, 2016.
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.
-
Constant Currency (Non-GAAP): To present our financial results
on a constant currency basis, we convert current year period results
of our operations in foreign countries, which are recorded in local
currencies, into U.S. dollars by applying the average foreign currency
exchange rates of the comparable prior year period. To present
Adjusted Earnings per diluted share on a constant currency basis, we
estimate the impact of foreign currency rate fluctuations on the
Company’s noncontrolling interests and adjusted income tax expense,
which may vary from quarter to quarter. The supplemental constant
currency information of the Company’s GAAP financial results and
Adjusted Earnings (Non-GAAP) is provided in Schedule 3 of the
financial statement tables included with this release.
The Company internally uses non-GAAP financial measures 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. The Company conducts
its business worldwide in local currencies, including Euro, British
pound and Canadian dollar. As a result, the comparability of our results
reported in U.S. dollars can be affected by changes in foreign currency
exchange rates. We present constant currency information to provide a
framework for assessing how our business performed excluding the
estimated effect of foreign currency exchange rate fluctuations.
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.