8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 26, 2010

McKesson Corporation

(Exact name of registrant as specified in its charter)

Delaware	1-13252	94-3207296
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer Identification No.)
incorporation)

McKesson Plaza, One Post Street, San Francisco, California	94104
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (415) 983-8300

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On January 26, 2010, McKesson Corporation (the “Company”) announced via press release the Company’s preliminary results for the third quarter ended December 31, 2009. A copy of the Company’s press release is attached hereto as Exhibit 99.1.

The information contained in this Form 8-K, including Exhibit 99.1, is furnished to the Securities and Exchange Commission (the “Commission”), but shall not be deemed “filed” with the Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

     (d) Exhibits.

Exhibit No.	Description
99.1	Press Release issued by the Company dated January 26, 2010.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: January 26, 2010

McKesson Corporation
By:	/s/ Jeffrey C. Campbell
	Jeffrey C. Campbell
	Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release issued by the Company dated January 26, 2010.

EX-99.1

Exhibit 99.1

McKESSON REPORTS FISCAL 2010 THIRD-QUARTER RESULTS

• Revenues of $28.3 billion for the third quarter, up 4%.

• Third-quarter earnings per diluted share of $1.19.

• Fiscal 2010 Outlook raised – earnings per diluted share of $4.55 to $4.70, excluding favorable second-quarter litigation credit.

SAN FRANCISCO, January 26, 2010 – McKesson Corporation (NYSE: MCK) today reported that revenues for the third quarter ended December 31, 2009 were $28.3 billion compared to $27.1 billion a year ago. Third quarter earnings per diluted share was $1.19 compared to a loss of seven cents per diluted share a year ago. Last year’s results included the impact of a pre-tax charge of $493 million, or $1.12 per diluted share, for the Average Wholesale Price (AWP) litigation.

     “McKesson demonstrated solid execution in the third quarter. Our results were driven by our performance in Distribution Solutions, including a strong contribution from the incremental demand we are experiencing across our businesses from the impact of the flu season,” said John H. Hammergren, chairman and chief executive officer.

     “Based on our year-to-date progress, we are raising our previous outlook and now expect that McKesson should earn between $4.55 and $4.70 per diluted share for the fiscal year ending March 31, 2010, excluding the favorable impact of the litigation credit in our second quarter,” Hammergren said.

     In the third quarter, Distribution Solutions revenues were up 4%. U.S. pharmaceutical distribution revenues were up 2% for the quarter, primarily reflecting market growth, which was partially offset by the loss of certain customers in late Fiscal 2009. In addition, we continued to see a shift of revenues to direct store delivery from sales to customers’ warehouses.

     Canadian revenues, on a constant currency basis, grew 8% for the quarter primarily due to market growth. Including a favorable currency impact of 15%, Canadian revenues grew 23% for the quarter. Medical-Surgical distribution revenues were up 11% for the quarter, reflecting an increase in demand related to the flu season and aided by acquisitions made in late Fiscal 2009.

     Distribution Solutions gross profit was $1,104 million compared to $988 million in the third quarter a year ago. Distribution Solutions gross profit margin in the third quarter was higher compared to the third quarter a year ago, primarily due to the impact of the H1N1 flu virus, which helped drive an improved mix of higher margin revenues stemming from increased flu-related demand across our distribution businesses. Gross profit margin also benefited from higher profit from the sale of generic drugs. These benefits were partially offset by lower sell margin in our U.S. pharmaceutical business and the timing of compensation from branded pharmaceutical manufacturers.

     Distribution Solutions operating profit of $558 million was up 27% when compared to operating profit before the AWP litigation charge of $493 million in the same period a year ago. In the third quarter, operating margin of 2.03% benefited from the higher gross profit margin and a $17 million pre-tax gain from the sale of our 50% equity interest in McKesson Logistics Solutions L.L.C., a Canadian logistics company.

     “I am extremely pleased with the team’s ability to execute on opportunities to increase our business and improve profitability,” Hammergren said. “In particular, I am proud of the tremendous effort across McKesson to safely and efficiently deliver over 100 million doses of H1N1 flu vaccine and ancillary medical supplies in partnership with the Centers for Disease Control and Prevention. Our success with this program is just one example of the operational excellence that we deliver to all of our customers.”

     In Technology Solutions, revenues were up 3% for the quarter. Services revenues grew 6% reflecting the steady nature of our offering. Software revenues were down 2% and hardware revenues were down 32%.

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     Technology Solutions operating profit in the third quarter was $81 million, down 11% from $91 million a year ago. The operating margin was 10.51% compared to 12.12% in the same period a year ago, primarily reflecting a decrease in gross profit margin due to a higher software deferral rate and additional amortization related to McKesson’s Horizon Enterprise Revenue Management^TM solution, which became generally available in the second quarter of this fiscal year.

     “We have the largest and most diverse technology offering in the industry with solutions that help hospitals, payors, pharmacies and physicians deliver high quality care in a cost efficient manner,” Hammergren said. “We are well-positioned to benefit from the increased focus on clinical solutions that has been created by the stimulus funding provided by the federal government, and we can also provide the connectivity that moves clinical and financial information through the entire healthcare network.”

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, as amended, 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 or furnished with the Securities and Exchange Commission and include, but are not limited to: material adverse resolution of pending legal proceedings; changes in

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the U.S. healthcare industry and regulatory environment; competition; the frequency or rate of branded drug price inflation and generic drug price deflation; substantial defaults in payment or a material reduction in purchases by, or loss of, a large customer; implementation delay, malfunction or failure of internal information systems; 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; loss of third party licenses for technology incorporated into the company’s products and solutions; 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; 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; increased costs or product delays required to comply with existing and changing regulations applicable to our businesses and products; changes in government regulations relating to sensitive personal information and to format and data content standards; 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; foreign currency fluctuations or disruptions to our foreign operations; new or revised tax legislation or challenges to our tax positions; the company’s ability to successfully identify, consummate and integrate strategic acquisitions; continued volatility and disruption to the global capital and credit markets; failure to adequately prepare for and accurately assess the scope, duration or financial impact of public health issues on our operations, particularly the company’s current H1N1 flu vaccine distribution effort with the Centers for Disease Control and Prevention, whether occurring in the United States or abroad; and changes in accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies. 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

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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.

     A web cast of the company’s regular conference call to review financial results with the financial community is available through McKesson’s website, www.mckesson.com, live at 5 PM ET today and on replay afterwards. Shareholders are encouraged to review SEC filings and more information about McKesson, which are located on the company’s website.

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About McKesson

     McKesson Corporation, currently ranked 15th on the FORTUNE 500, is a healthcare services and information technology company dedicated to helping its customers deliver high-quality healthcare by reducing costs, streamlining processes, and improving the quality and safety of patient care. McKesson has been in continuous operation for more than 175 years, making it the longest-operating company in healthcare today. Over the course of its history, McKesson has grown by providing pharmaceutical and medical-surgical supply management across the spectrum of care; healthcare information technology for hospitals, physicians, homecare and payors; hospital and retail pharmacy automation; and services for manufacturers and payors designed to improve outcomes for patients. For more information, visit www.mckesson.com.

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Contact:
Ana Schrank, 415-983-7153 (Investors and Financial Media)
Ana.Schrank@McKesson.com
James Larkin, 415-983-8736 (General and Business Media)
James.Larkin@McKesson.com

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Schedule I

McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions, except per share amounts)

	Quarter Ended December 31,									Nine Months Ended December 31,
	2009			2008			Chg.			2009			2008			Chg.
Revenues	$	28,272		$	27,130			4	%	$	82,059		$	80,408			2	%
Cost of sales		26,817			25,787			4			77,966			76,495			2
Gross profit		1,455			1,343			8			4,093			3,913			5
Operating expenses		946			904			5			2,678			2,722			(2)
Litigation charge (credit) (1) (2)		—			493			(100)			(20	)		493			—
Total operating expenses		946			1,397			(32)			2,658			3,215			(17)
Operating income (loss)		509			(54	)		—			1,435			698			106
Other income, net		25			17			47			39			71			(45)
Interest expense		(47	)		(33	)		42			(142	)		(102	)		39
Income (loss) before income taxes		487			(70	)		—			1,332			667			100
Income tax (expense) benefit (3) (4)		(161	)		50			—			(417	)		(125	)		234
Net income (loss)	$	326		$	(20	)		—		$	915		$	542			69
Earnings (loss) per common share (5)
Diluted (6) (7)	$	1.19		$	(0.07	)		—	%	$	3.36		$	1.94			73	%
Basic	$	1.21		$	(0.07	)		—		$	3.41		$	1.97			73
Shares on which earnings per common share were based
Diluted		274			274			—	%		272			279			(3)	%
Basic		269			274			(2)			269			275			(2)

(1)	Operating expenses for the nine months ended December 31, 2009 include a litigation credit of $20 million.
(2)	Operating expenses for the prior year include Average Wholesale Price (“AWP”) litigation charge of $493 million.
(3)	Income tax expense for the prior year includes $182 million income tax benefit for the AWP litigation charge of $493 million.
(4)	Income tax expense for the nine months ended December 31, 2008 includes $76 million of credits related to the recognition of previously unrecognized tax benefits and related interest expense as a result of the effective settlement of uncertain tax positions.
(5)	Certain computations may reflect rounding adjustments.
(6)	For the quarter ended December 31, 2008, potentially dilutive securities have been excluded from the per share computations due to their antidilutive effect.
(7)	Diluted earnings per share, excluding the impact of the litigation charge (credit) is as follows (a):

	Quarter Ended December 31,								Nine Months Ended December 31,
	2009		2008			Chg.			2009			2008			Chg.
Net income (loss) — as reported	$	326	$	(20	)		—	%	$	915		$	542			69	%
Exclude: Litigation charge (credit)		—		493			—			(20	)		493			—
Income tax (benefit) expense on litigation charge (credit)		—		(182	)		—			8			(182	)		—
		—		311			—			(12	)		311			—
Net income, excluding the litigation charge (credit)	$	326	$	291			12		$	903		$	853			6
Diluted earnings per common share, excluding the litigation charge (credit) (5)	$	1.19	$	1.05			13	%	$	3.31		$	3.05			9	%
Shares on which diluted earnings per common share were based		274		276			(1)			272			279			(3)

(a) These pro forma amounts are non-GAAP financial measures. The Company uses these measures internally and considers these results to be useful to investors as they provide relevant benchmarks of core operating performance.

Schedule II

McKESSON CORPORATION
CONDENSED CONSOLIDATED INCOME INFORMATION BY BUSINESS SEGMENT
(unaudited)
(in millions)

	Quarter Ended December 31,									Nine Months Ended December 31,
	2009			2008			Chg.			2009			2008			Chg.
REVENUES
Distribution Solutions
Direct distribution & services	$	18,992		$	17,037			11	%	$	53,880		$	50,076			8	%
Sales to customers’ warehouses		5,330			6,695			(20)			16,882			19,678			(14)
Total U.S. pharmaceutical distribution & services		24,322			23,732			2			70,762			69,754			1
Canada pharmaceutical distribution & services		2,421			1,967			23			6,816			6,390			7
Medical-Surgical distribution & services		758			680			11			2,177			2,007			8
Total Distribution Solutions		27,501			26,379			4			79,755			78,151			2
Technology Solutions
Services		610			576			6			1,812			1,722			5
Software & software systems		138			141			(2)			410			419			(2)
Hardware		23			34			(32)			82			116			(29)
Total Technology Solutions		771			751			3			2,304			2,257			2
Revenues	$	28,272		$	27,130			4		$	82,059		$	80,408			2
GROSS PROFIT
Distribution Solutions	$	1,104		$	988			12		$	3,018		$	2,873			5
Technology Solutions		351			355			(1)			1,075			1,040			3
Gross profit	$	1,455		$	1,343			8		$	4,093		$	3,913			5
OPERATING EXPENSES
Distribution Solutions	$	568		$	555			2		$	1,645		$	1,687			(2)
AWP litigation charge		—			493			(100)			—			493			(100)
Subtotal		568			1,048			(46)			1,645			2,180			(25)
Technology Solutions		271			265			2			778			817			(5)
Corporate		107			84			27			255			218			17
Litigation credit		—			—			—			(20)			—			—
Operating expenses	$	946		$	1,397			(32)		$	2,658		$	3,215			(17)
OTHER INCOME, NET
Distribution Solutions	$	22		$	6			267		$	30		$	43			(30)
Technology Solutions		1			1			—			3			5			(40)
Corporate		2			10			(80)			6			23			(74)
Other income, net	$	25		$	17			47		$	39		$	71			(45)
OPERATING PROFIT (LOSS)
Distribution Solutions	$	558		$	439			27		$	1,403		$	1,229			14
AWP litigation charge		—			(493	)		(100)			—			(493	)		(100)
Subtotal		558			(54	)		—			1,403			736			91
Technology Solutions		81			91			(11)			300			228			32
Operating profit		639			37			1,627			1,703			964			77
Corporate		(105	)		(74	)		42			(249	)		(195	)		28
Litigation credit		—			—			—			20			—			—
Income (loss) before interest expense and income taxes	$	534		$	(37	)		—		$	1,474		$	769			92
STATISTICS
Operating profit (loss) as a % of revenues
Distribution Solutions		2.03	%		(0.20	%)	223		bp		1.76	%		0.94	%		82	bp
Distribution Solutions, excluding AWP litigation charge		2.03	%		1.66	%	37		bp		1.76	%		1.57	%	19		bp
Technology Solutions		10.51	%		12.12	%	(161)		bp		13.02	%		10.10	%	292		bp

Schedule III

McKESSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions)

	December 31,		March 31,
	2009		2009
ASSETS
Current Assets
Cash and cash equivalents	$	3,428	$	2,109
Receivables, net		8,319		7,774
Inventories, net		8,842		8,527
Prepaid expenses and other		265		261
Total		20,854		18,671
Property, Plant and Equipment, Net		835		796
Capitalized Software Held for Sale, Net		236		221
Goodwill		3,559		3,528
Intangible Assets, Net		580		661
Other Assets		1,475		1,390
Total Assets	$	27,539	$	25,267
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Drafts and accounts payable	$	13,021	$	11,739
Deferred revenue		1,250		1,145
Current portion of long-term debt		217		219
Other accrued liabilities		2,430		2,503
Total		16,918		15,606
Long-Term Debt		2,294		2,290
Other Noncurrent Liabilities		1,204		1,178
Stockholders’ Equity		7,123		6,193
Total Liabilities and Stockholders’ Equity	$	27,539	$	25,267

Schedule IV

McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in millions)

	Nine Months Ended December 31,
	2009			2008
OPERATING ACTIVITIES
Net income	$	915		$	542
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization		350			330
Other deferred taxes		73			76
Income tax reserve reversals		—			(65	)
Share-based compensation expense		83			72
Other non-cash items		(7	)		(7	)
Changes in operating assets and liabilities, net of business acquisitions:
Receivables		(415	)		(881	)
Impact of accounts receivable sales facility		—			350
Inventories		(205	)		(490	)
Drafts and accounts payable		1,131			384
Deferred revenue		57			88
Taxes		95			107
Litigation charge (credit)		(20	)		493
Deferred tax (benefit) expense on litigation charge (credit)		116			(182	)
Litigation settlement payments		(350	)		—
Other		(98	)		(83	)
Net cash provided by operating activities		1,725			734
INVESTING ACTIVITIES
Property acquisitions		(137	)		(151	)
Capitalized software expenditures		(134	)		(137	)
Acquisitions of businesses, less cash and cash equivalents acquired		(18	)		(320	)
Restricted cash for litigation charge		55			—
Other		31			76
Net cash used in investing activities		(203	)		(532	)
FINANCING ACTIVITIES
Proceeds from short-term borrowings		5			3,602
Repayments of short-term borrowings		(6	)		(3,602	)
Common stock transactions, issuances		159			77
Common stock repurchases, including shares surrendered for tax withholding		(322	)		(147	)
Common stock repurchases, retirements		—			(204	)
Common stock transactions — other		26			10
Dividends paid		(98	)		(83	)
Other		(1	)		(2	)
Net cash used in financing activities		(237	)		(349	)
Effect of exchange rate changes on cash and cash equivalents		34			(40	)
Net increase (decrease) in cash and cash equivalents		1,319			(187	)
Cash and cash equivalents at beginning of period		2,109			1,362
Cash and cash equivalents at end of period	$	3,428		$	1,175