McKesson Reports Fiscal 2015 Second-Quarter Results
• Revenues of $44.8 billion for the second quarter, up 36%.
• Second-quarter GAAP earnings per diluted share from continuing operations
of $2.05, up 13%.
• Second-quarter Adjusted Earnings per diluted share from continuing
operations of $2.79, up 21%.
• Fiscal 2015 Outlook: Adjusted Earnings per diluted share of $10.50 to $10.90.
SAN FRANCISCO, October 28, 2014 — McKesson Corporation (NYSE:MCK)
today reported that revenues for the second quarter ended September 30, 2014
were $44.8 billion, up 36% compared to $33 billion a year ago. On the basis of
U.S. generally accepted accounting principles (“GAAP”), second-quarter
earnings per diluted share from continuing operations was $2.05 compared to
$1.82 a year ago.
Second-quarter Adjusted Earnings per diluted share from continuing
operations was $2.79, up 21% compared to $2.30 a year ago.
“McKesson delivered another quarter of solid results reflecting strong
execution across our business. We are very pleased with our performance for the
first half of Fiscal 2015,” said John H. Hammergren, chairman and chief
executive officer. “We continue to expect Adjusted Earnings per diluted share
from continuing operations of $10.50 to $10.90 for the fiscal year ending March
For the first half of the fiscal year, McKesson generated cash from
operations of $165 million, and ended the quarter with cash and cash equivalents
of $3.8 billion. During the first half of the fiscal year, McKesson paid $115 million
in dividends, had internal capital spending of $272 million, and spent $31 million
Distribution Solutions revenues were $44 billion, up 37% for the quarter on
a reported and constant currency basis, mainly driven by the contribution from
our acquisition of Celesio and market growth.
North America pharmaceutical distribution and services revenues, which
include results from U.S. Pharmaceutical, McKesson Canada and McKesson
Specialty Health, were up 14% as reported and 15% on a constant currency
basis for the quarter, reflecting continued demand for two recently launched
drugs for the treatment of Hepatitis C, market growth and our mix of business.
International pharmaceutical distribution and services revenues were $7.3
billion, an increase of 4% on the underlying results of Celesio on a constant
Medical-Surgical distribution and services revenues were up 4% for the
quarter, driven by market growth.
In the second quarter, Distribution Solutions GAAP operating profit was
$793 million and GAAP operating margin was 1.80%. Second-quarter adjusted
operating profit was $1,063 million and the adjusted operating margin was
Technology Solutions revenues were $770 million, down 6% in the second
quarter compared to the prior year, driven by anticipated revenue softness from
the Horizon clinical software platform and the planned elimination of a product
line, partially offset by growth in other technology businesses. GAAP operating
profit was $125 million for the second quarter and GAAP operating margin was
16.23%. Adjusted operating profit was $139 million for the second quarter and
adjusted operating margin was 18.05%.
Fiscal Year 2015 Outlook
McKesson expects Adjusted Earnings per diluted share from continuing
operations between $10.50 and $10.90 for the fiscal year ending March 31,
2015, based on an updated exchange rate of $1.31 per Euro, which excludes the
following GAAP items:
• Amortization of acquisition-related intangible assets of $1.32 per diluted
• Acquisition expenses and related adjustments of 57 cents per diluted
• LIFO inventory-related charges of 97 cents to $1.07 per diluted share.
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 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.
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; changes in the Canadian
healthcare industry and regulatory environment; changes in the European
regulatory environment with respect to privacy and data protection regulations;
managing foreign expansion, including the related operating, economic, political
and regulatory risks; the company’s ability to successfully identify, consummate,
finance and integrate acquisitions; material adverse resolution of pending legal
proceedings; exposure to European economic conditions, including recent
austerity measures taken by certain European governments; 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; 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 5:00 PM ET. The dialin
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 2208902. 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.
McKesson Corporation, currently ranked 15th on the FORTUNE 500, is a
healthcare services and information technology company dedicated to making
the business of healthcare run better. We partner 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.
Erin Lampert, 415-983-8391 (Investors and Financial Media)
Kris Fortner, 415-983-8352 (General and Business Media)