McKesson Reports Fiscal 2015 Second-Quarter Results

October 28, 2014

PRESS RELEASE

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

31, 2015.”

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

on acquisitions.

Segment Results

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

currency basis.

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

2.42%.

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

share.

• Acquisition expenses and related adjustments of 57 cents per diluted

share.

• LIFO inventory-related charges of 97 cents to $1.07 per diluted share.

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 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.

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; 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.

About McKesson

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.

###

Contact:

Erin Lampert, 415-983-8391 (Investors and Financial Media)

Erin.Lampert@McKesson.com

Kris Fortner, 415-983-8352 (General and Business Media)

Kris.Fortner@McKesson.com