"While we expect certain challenges in the near term, I am very confident in the strength, scale and global competitive position of McKesson"
SAN FRANCISCO--(BUSINESS WIRE)--McKesson Corporation (NYSE:MCK) today announced an update to its outlook
for Adjusted Earnings per diluted share for the fiscal year ending March
31, 2016, from the previous range of $12.50 to $13.00 to a new range of
$12.60 to $12.90.
The updated outlook for Fiscal 2016 reflects McKesson’s expectation that
operating profit derived as a result of generic pharmaceutical pricing
trends will be weaker in the second half of the fiscal year compared to
This trend is partially offset by a reduction in the company’s expected
full year adjusted tax rate to 29.5%, resulting in a benefit of
approximately 28 cents per diluted share compared to prior expectations.
The reduction in the full-year adjusted tax rate is primarily driven by
a change in the expected mix of income and also includes certain
favorable discrete tax items totaling 7 cents per diluted share
recognized in the third quarter. Also, the company repurchased
approximately $350 million of its outstanding shares in the third
quarter and expects to continue to make progress against the current
outstanding share repurchase authorization in the fourth quarter.
Full-year weighted average diluted shares outstanding are now expected
to be approximately 233 million shares, resulting in an Adjusted
Earnings benefit of approximately 5 cents per diluted share compared to
Finally, McKesson is performing a review of its administrative cost
structure in the fourth quarter. The updated Fiscal 2016 guidance range
of $12.60 to $12.90 Adjusted Earnings per diluted share does not include
the impact of any potential restructuring charges that may result from
“While we continue to drive growth across our broad and diverse
businesses, we now expect the operating performance in our U.S.
Pharmaceutical distribution business in the second half of Fiscal 2016
will be below our previous expectations,” said John H. Hammergren,
chairman and chief executive officer.
Hammergren continued, “Despite our revised assumptions related to
generic pharmaceutical pricing trends and the impact of recent customer
consolidation, our company is performing well, both domestically and
internationally, and we continue to focus on our customers’ success in
this dynamic environment. In fact, I am pleased to report that in late
December, we signed a new agreement with CVS Health to serve as the
distribution partner for their recently acquired Target in-store
pharmacies. We also continue to prepare for the implementation of our
new sourcing and distribution agreement with Albertsons, which begins on
April 1, 2016. While our company has not been immune from the impact of
consolidation within the healthcare supply chain, our customers continue
to expand their relationships with us, driven by our ability to provide
exceptional service and value.”
McKesson expects weaker generic pharmaceutical pricing trends, specific
to the company’s mix of business, and recent customer consolidation to
impact the company’s outlook for Fiscal 2017. McKesson is in the early
phase of its budget development process and has a preliminary target of
7% to 12% growth in Adjusted Earnings per diluted share for Fiscal 2017.
The preliminary Fiscal 2017 outlook assumes 7% to 12% growth when
compared to the Fiscal 2016 outlook of $12.60 to $12.90 in Adjusted
Earnings per diluted share, less 48 cents per diluted share related to
gains on business dispositions and favorable discrete tax items in
“While we expect certain challenges in the near term, I am very
confident in the strength, scale and global competitive position of
McKesson,” said Hammergren. “With our deep culture of operational
excellence, you should expect us to continue our relentless focus on
efficiency and innovation. And we will continue to deploy capital using
our disciplined, portfolio approach, to create long-term value for our
shareholders,” concluded Hammergren.
Preliminary Key Assumptions for Fiscal 2017
In Fiscal 2017, the company anticipates an Adjusted Earnings headwind
of approximately 85 cents per diluted share year-over-year, driven by
continued weakness in generic pharmaceutical pricing trends for the
company’s mix of business, the expiration of its contract with Optum,
and the transition of its contracts with Omnicare and Target.
Pricing for brand pharmaceuticals for the company’s mix of business
will be modestly below the level experienced during Fiscal 2016.
McKesson’s existing sourcing and distribution relationship with Rite
Aid will continue through the end of Fiscal 2017 contributing revenues
of approximately $13 billion to the Distribution Solutions segment.
Adjusted tax rate of approximately 30% to 32%.
Capital deployment will drive 3% to 4% of Adjusted Earnings per
diluted share growth year-over-year.
Proceeds from anticipated antitrust litigation settlements are
projected at approximately $140 million, pre-tax, for Fiscal 2017.
No material impact from foreign currency exchange rates year-over-year.
McKesson will provide updated detailed financial guidance for Fiscal
2017 in its Fiscal 2016 fourth quarter earnings release expected in May
The company has scheduled a conference call for 11:00 AM ET today,
Monday, January 11th, to discuss this press release. 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 536480. 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.
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.
McKesson also presents its financial results on a Constant Currency
basis. The company conducts business worldwide in local currencies,
including 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.
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;
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.
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.