Delaware (State or other jurisdiction of incorporation) |
1-13252 (Commission File Number) |
94-3207296 (I.R.S. Employer Identification No.) |
McKesson Plaza, One Post Street, San Francisco, California (Address of principal executive offices) |
94104 (Zip Code) |
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. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit No. | Description | |||
99.1 | Press Release issued by the Company dated May 3, 2011. |
McKesson Corporation |
||||
By: | /s/ Jeffrey C. Campbell | |||
Jeffrey C. Campbell | ||||
Executive Vice President and Chief Financial Officer |
Exhibit No. | Description | |||
99.1 | Press
Release issued by the Company dated May 3, 2011. |
| Revenues of $28.9 billion for the fourth quarter and $112.1 billion for the full year. | |
| Fourth-quarter GAAP earnings of $1.62 per diluted share and full-year GAAP earnings of $4.57 per diluted share. | |
| Fourth-quarter earnings from continuing operations of $1.62 per diluted share, and full-year earnings from continuing operations, excluding AWP litigation charges, of $4.86 per diluted share. | |
| Results included US Oncology acquisition-related expenses of four cents per diluted share in the fourth quarter and 14 cents per diluted share for the full year. | |
| Fiscal 2011 cash flow from operations of $2.3 billion. | |
| Board of Directors authorized an additional $1 billion share repurchase program and approved a policy increasing the quarterly dividend from 18 cents to 20 cents per share. | |
| Fiscal 2012 Outlook: Earnings per diluted share of $5.55 to $5.75, excluding estimated US Oncology acquisition-related expenses of six cents per diluted share. |
1
2
3
| Distribution Solutions revenue growth should be modestly better than market rates, adjusted for our mix of business, due to the impact of the US Oncology acquisition. | |
| Branded and generic price trends in Fiscal 2012 are expected to be similar to those we experienced in Fiscal 2011. | |
| We expect strong growth in the contribution to profit from generic pharmaceuticals. | |
| Technology Solutions revenue growth should increase modestly from the level of growth experienced in Fiscal 2011. | |
| The guidance range assumes a full-year tax rate of 33%, which may vary from quarter to quarter. |
4
| Capital expenditures and capitalized software should be between $450 million and $500 million. | |
| Cash flow from operations is expected to be approximately $2.0 billion. | |
| Weighted average diluted shares used in the calculation of earnings are expected to be approximately 253 million for the year. | |
| We expect amortization of acquisition-related intangible assets of approximately 44 cents per diluted share in Fiscal 2012. | |
| We estimate that US Oncology acquisition-related expenses will be six cents per diluted share in Fiscal 2012. | |
| The Fiscal 2012 guidance range does not include any potential litigation reserve adjustments, or the impact of any potential acquisitions, divestitures, impairments, or material restructuring or integration-related actions. |
5
6
7
8
Quarter Ended March 31, | Year Ended March 31, | |||||||||||||||||||||||
2011 | 2010 | Chg. | 2011 | 2010 | Chg. | |||||||||||||||||||
Revenues |
$ | 28,853 | $ | 26,643 | 8 | % | $ | 112,084 | $ | 108,702 | 3 | % | ||||||||||||
Cost of sales (1) |
27,102 | 25,060 | 8 | 106,114 | 103,026 | 3 | ||||||||||||||||||
Gross profit |
1,751 | 1,583 | 11 | 5,970 | 5,676 | 5 | ||||||||||||||||||
Operating expenses |
1,128 | 1,010 | 12 | 3,936 | 3,688 | 7 | ||||||||||||||||||
Litigation charge (credit) (2) |
| | | 213 | (20 | ) | | |||||||||||||||||
Total operating expenses |
1,128 | 1,010 | 12 | 4,149 | 3,668 | 13 | ||||||||||||||||||
Operating income |
623 | 573 | 9 | 1,821 | 2,008 | (9) | ||||||||||||||||||
Other income, net |
17 | 4 | 325 | 36 | 43 | (16) | ||||||||||||||||||
Interest expense |
(82 | ) | (45 | ) | 82 | (222 | ) | (187 | ) | 19 | ||||||||||||||
Income from continuing operations before income taxes |
558 | 532 | 5 | 1,635 | 1,864 | (12) | ||||||||||||||||||
Income tax expense |
(136 | ) | (184 | ) | (26) | (505 | ) | (601 | ) | (16) | ||||||||||||||
Income from continuing operations |
422 | 348 | 21 | 1,130 | 1,263 | (11) | ||||||||||||||||||
Discontinued operation gain on sale, net of tax (3) |
| | | 72 | | | ||||||||||||||||||
Net income |
$ | 422 | $ | 348 | 21 | $ | 1,202 | $ | 1,263 | (5) | ||||||||||||||
Earnings per common share (4) |
||||||||||||||||||||||||
Diluted (5) |
||||||||||||||||||||||||
Continuing operations |
$ | 1.62 | $ | 1.26 | 29 | % | $ | 4.29 | $ | 4.62 | (7) | % | ||||||||||||
Discontinued operation gain on sale |
| | | 0.28 | | | ||||||||||||||||||
Total |
$ | 1.62 | $ | 1.26 | 29 | $ | 4.57 | $ | 4.62 | (1) | ||||||||||||||
Basic |
||||||||||||||||||||||||
Continuing operations |
$ | 1.65 | $ | 1.29 | 28 | % | $ | 4.37 | $ | 4.70 | (7) | % | ||||||||||||
Discontinued operation gain on sale |
| | | 0.28 | | | ||||||||||||||||||
Total |
$ | 1.65 | $ | 1.29 | 28 | $ | 4.65 | $ | 4.70 | (1) | ||||||||||||||
Shares on which earnings per common share were based |
||||||||||||||||||||||||
Diluted |
260 | 275 | (5) | % | 263 | 273 | (4) | % | ||||||||||||||||
Basic |
255 | 270 | (6) | 258 | 269 | (4) |
(1) | Cost of sales for the year ended March 31, 2011 includes an asset impairment charge of $72 million in our Technology Solutions segment for capitalized software held for sale and a credit of $51 million in our Distribution Solutions segment representing our share of a settlement of an antitrust class action lawsuit brought against a drug manufacturer. | |
(2) | Operating expenses for the year ended March 31, 2011 include an Average Wholesale Price (AWP) litigation charge of $213 million. Operating expenses for the year ended March 31, 2010 include a credit of $20 million relating to our securities litigation. | |
(3) | In the second quarter of 2011, we sold a Technology Solutions business for $109 million of net sales proceeds. The after-tax gain on sale of $72 million was recorded as a discontinued operation. Financial operating results for this business were immaterial. | |
(4) | Certain computations may reflect rounding adjustments. | |
(5) | Diluted earnings per share, excluding the impact of the AWP litigation charge and securities litigation credit is as follows: (a) |
Year Ended March 31, | ||||||||||||
2011 | 2010 | Chg. | ||||||||||
Income from continuing operations as reported |
$ | 1,130 | $ | 1,263 | (11) | % | ||||||
Exclude: Litigation charge (credit) |
213 | (20 | ) | | ||||||||
Income tax (benefit) expense on litigation charge (credit) |
(64 | ) | 8 | | ||||||||
149 | (12 | ) | | |||||||||
Income from continuing operations, excluding the litigation charge (credit) |
$ | 1,279 | $ | 1,251 | 2 | |||||||
Diluted earnings per common share from continuing operations,
excluding the litigation charge (credit) (4) |
$ | 4.86 | $ | 4.58 | 6 | % | ||||||
Shares on which diluted earnings per common share from continuing operations were based |
263 | 273 | (4) |
(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. |
Quarter Ended March 31, | Year Ended March 31, | |||||||||||||||||||||||
2011 | 2010 | Chg. | 2011 | 2010 | Chg. | |||||||||||||||||||
REVENUES |
||||||||||||||||||||||||
Distribution Solutions |
||||||||||||||||||||||||
Direct distribution & services |
$ | 20,460 | $ | 18,330 | 12 | % | $ | 77,554 | $ | 72,210 | 7 | % | ||||||||||||
Sales to customers warehouses |
4,498 | 4,553 | (1) | 18,631 | 21,435 | (13) | ||||||||||||||||||
Total U.S. pharmaceutical distribution & services |
24,958 | 22,883 | 9 | 96,185 | 93,645 | 3 | ||||||||||||||||||
Canada pharmaceutical distribution & services |
2,299 | 2,256 | 2 | 9,784 | 9,072 | 8 | ||||||||||||||||||
Medical-Surgical distribution & services |
720 | 684 | 5 | 2,920 | 2,861 | 2 | ||||||||||||||||||
Total Distribution Solutions |
27,977 | 25,823 | 8 | 108,889 | 105,578 | 3 | ||||||||||||||||||
Technology Solutions |
||||||||||||||||||||||||
Services |
656 | 627 | 5 | 2,483 | 2,439 | 2 | ||||||||||||||||||
Software & software systems |
181 | 161 | 12 | 590 | 571 | 3 | ||||||||||||||||||
Hardware |
39 | 32 | 22 | 122 | 114 | 7 | ||||||||||||||||||
Total Technology Solutions |
876 | 820 | 7 | 3,195 | 3,124 | 2 | ||||||||||||||||||
Revenues |
$ | 28,853 | $ | 26,643 | 8 | $ | 112,084 | $ | 108,702 | 3 | ||||||||||||||
GROSS PROFIT |
||||||||||||||||||||||||
Distribution Solutions |
$ | 1,326 | $ | 1,201 | 10 | $ | 4,565 | $ | 4,219 | 8 | ||||||||||||||
Technology Solutions |
425 | 382 | 11 | 1,477 | 1,457 | 1 | ||||||||||||||||||
Asset impairment charge capitalized software held for sale |
| | | (72 | ) | | | |||||||||||||||||
Subtotal |
425 | 382 | 11 | 1,405 | 1,457 | (4) | ||||||||||||||||||
Gross profit |
$ | 1,751 | $ | 1,583 | 11 | $ | 5,970 | $ | 5,676 | 5 | ||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||||||
Distribution Solutions |
$ | 710 | $ | 615 | 15 | $ | 2,460 | $ | 2,260 | 9 | ||||||||||||||
AWP litigation charge |
| | | 213 | | | ||||||||||||||||||
Subtotal |
710 | 615 | 15 | 2,673 | 2,260 | 18 | ||||||||||||||||||
Technology Solutions |
310 | 299 | 4 | 1,108 | 1,077 | 3 | ||||||||||||||||||
Corporate |
108 | 96 | 13 | 368 | 351 | 5 | ||||||||||||||||||
Securities litigation credit |
| | | | (20 | ) | | |||||||||||||||||
Operating expenses |
$ | 1,128 | $ | 1,010 | 12 | $ | 4,149 | $ | 3,668 | 13 | ||||||||||||||
OTHER INCOME, NET |
||||||||||||||||||||||||
Distribution Solutions |
$ | (4 | ) | $ | (1 | ) | 300 | $ | 5 | $ | 29 | (83) | ||||||||||||
Technology Solutions |
2 | 2 | | 4 | 5 | (20) | ||||||||||||||||||
Corporate |
19 | 3 | 533 | 27 | 9 | 200 | ||||||||||||||||||
Other income, net |
$ | 17 | $ | 4 | 325 | $ | 36 | $ | 43 | (16) | ||||||||||||||
OPERATING PROFIT |
||||||||||||||||||||||||
Distribution Solutions |
$ | 612 | $ | 585 | 5 | $ | 2,110 | $ | 1,988 | 6 | ||||||||||||||
AWP litigation charge |
| | | (213 | ) | | | |||||||||||||||||
Subtotal |
612 | 585 | 5 | 1,897 | 1,988 | (5) | ||||||||||||||||||
Technology Solutions |
117 | 85 | 38 | 373 | 385 | (3) | ||||||||||||||||||
Asset impairment charge capitalized software held for sale |
| | | (72 | ) | | | |||||||||||||||||
Subtotal |
117 | 85 | 38 | 301 | 385 | (22) | ||||||||||||||||||
Operating profit |
729 | 670 | 9 | 2,198 | 2,373 | (7) | ||||||||||||||||||
Corporate |
(89 | ) | (93 | ) | (4) | (341 | ) | (342 | ) | | ||||||||||||||
Securities litigation credit |
| | | | 20 | | ||||||||||||||||||
Income from continuing operations before interest expense and income taxes |
$ | 640 | $ | 577 | 11 | $ | 1,857 | $ | 2,051 | (9) | ||||||||||||||
STATISTICS |
||||||||||||||||||||||||
Operating profit as a % of revenues |
||||||||||||||||||||||||
Distribution Solutions |
2.19 | % | 2.27 | % | (8) | bp | 1.74 | % | 1.88 | % | (14) | bp | ||||||||||||
Distribution Solutions, excluding AWP litigation charge |
2.19 | 2.27 | (8) | 1.94 | 1.88 | 6 | ||||||||||||||||||
Technology Solutions |
13.36 | 10.37 | 299 | 9.42 | 12.32 | (290) | ||||||||||||||||||
Technology Solutions, excluding asset impairment charge capitalized
software held for sale |
13.36 | 10.37 | 299 | 11.67 | 12.32 | (65) |
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 3,612 | $ | 3,731 | ||||
Receivables, net |
9,187 | 8,075 | ||||||
Inventories, net |
9,225 | 9,441 | ||||||
Prepaid expenses and other |
333 | 257 | ||||||
Total |
22,357 | 21,504 | ||||||
Property, Plant and Equipment, Net |
991 | 851 | ||||||
Capitalized Software Held for Sale, Net |
152 | 234 | ||||||
Goodwill |
4,364 | 3,568 | ||||||
Intangible Assets, Net |
1,456 | 551 | ||||||
Other Assets |
1,566 | 1,481 | ||||||
Total Assets |
$ | 30,886 | $ | 28,189 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current Liabilities |
||||||||
Drafts and accounts payable |
$ | 14,090 | $ | 13,255 | ||||
Deferred revenue |
1,321 | 1,218 | ||||||
Deferred tax liabilities |
1,037 | 977 | ||||||
Current portion of long-term debt |
417 | 3 | ||||||
Other accrued liabilities |
1,861 | 1,559 | ||||||
Total |
18,726 | 17,012 | ||||||
Long-Term Debt |
3,587 | 2,293 | ||||||
Other Noncurrent Liabilities |
1,353 | 1,352 | ||||||
Stockholders Equity |
7,220 | 7,532 | ||||||
Total Liabilities and Stockholders Equity |
$ | 30,886 | $ | 28,189 | ||||
Year Ended March 31, | ||||||||
2011 | 2010 | |||||||
OPERATING ACTIVITIES |
||||||||
Net income |
$ | 1,202 | $ | 1,263 | ||||
Discontinued operation gain on sale, net of tax |
(72 | ) | | |||||
Adjustments to reconcile to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
496 | 474 | ||||||
Asset impairment charge capitalized software held for sale |
72 | | ||||||
Other deferred taxes |
184 | 161 | ||||||
Share-based compensation expense |
137 | 114 | ||||||
Other non-cash items |
30 | (3 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Receivables |
(673 | ) | (133 | ) | ||||
Inventories |
367 | (782 | ) | |||||
Drafts and accounts payable |
533 | 1,340 | ||||||
Deferred revenue |
42 | 27 | ||||||
Taxes |
33 | 88 | ||||||
Litigation charge (credit) |
213 | (20 | ) | |||||
Litigation settlement payments |
(26 | ) | (350 | ) | ||||
Deferred tax benefit (expense) on litigation |
(56 | ) | 116 | |||||
Other |
(144 | ) | 21 | |||||
Net cash provided by operating activities |
2,338 | 2,316 | ||||||
INVESTING ACTIVITIES |
||||||||
Property acquisitions |
(233 | ) | (199 | ) | ||||
Capitalized software expenditures |
(155 | ) | (179 | ) | ||||
Proceeds from sale of business |
109 | 1 | ||||||
Acquisitions of businesses, less cash and cash equivalents acquired |
(292 | ) | (18 | ) | ||||
Restricted cash for litigation charge |
| 55 | ||||||
Other |
(53 | ) | 31 | |||||
Net cash used in investing activities |
(624 | ) | (309 | ) | ||||
FINANCING ACTIVITIES |
||||||||
Proceeds from short-term borrowings |
1,000 | 5 | ||||||
Repayments of short-term borrowings |
(1,000 | ) | (6 | ) | ||||
Proceeds from issuances of long-term debt |
1,689 | | ||||||
Repayments of long-term debt |
(1,730 | ) | (218 | ) | ||||
Common stock transactions: |
||||||||
Issuances |
367 | 212 | ||||||
Share repurchases, including shares surrendered for tax withholding |
(2,050 | ) | (323 | ) | ||||
Dividends paid |
(171 | ) | (131 | ) | ||||
Other |
54 | 40 | ||||||
Net cash used in financing activities |
(1,841 | ) | (421 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
8 | 36 | ||||||
Net increase (decrease) in cash and cash equivalents |
(119 | ) | 1,622 | |||||
Cash and cash equivalents at beginning of period |
3,731 | 2,109 | ||||||
Cash and cash equivalents at end of period |
$ | 3,612 | $ | 3,731 | ||||
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