Full Press Release Details
CORRECTING and REPLACING McKesson Reports Fourth Quarter and Full Year 2019 Results
CORRECTION by McKesson Corporation.
IRVING, Texas, May 8, 2019 - (BUSINESS WIRE) - Schedule 5, Condensed Consolidated Statements of Cash Flows is corrected to include the line Gain from Sale of Businesses and Investments and the corresponding amounts for the years ended March 31, 2018 and 2019. This correction does not impact net cash provided by operating activities as previously presented for either period.
The corrected release reads:
McKESSON REPORTS FISCAL 2019 FOURTH-QUARTER AND FULL-YEAR RESULTS
IRVING, Texas, May 8, 2019 McKesson Corporation (NYSE:MCK) today reported that revenues for the fourth quarter ended March 31, 2019, were $52.4 billion compared to $51.6 billion a year ago, an increase of 2% on a reported basis and an increase of 3% on an FX-adjusted basis. For the fiscal year, McKesson had revenues of $214.3 billion, compared to $208.4 billion a year ago, an increase of 3% on a reported and FX-adjusted basis.
McKesson delivered solid adjusted operating results, and we are pleased to conclude fiscal 2019 with adjusted EPS growth of 8%, said Brian Tyler, chief executive officer. We successfully executed in a challenging environment and took action to address the headwinds in our European business. McKesson exits fiscal 2019 with improving momentum across many of our businesses. Our financial flexibility, reinforced by a strong balance sheet and solid cash flow generation, positions us to continue delivering shareholder value.
On the basis of U.S. generally accepted accounting principles ( GAAP ), fourth-quarter loss per diluted share from continuing operations was $(4.17), compared to loss per diluted share of $(5.58) a year ago. Full-year GAAP earnings per diluted share from continuing operations was $0.17, compared to GAAP earnings per diluted share from continuing operations of $0.30 a year ago. Fourth-quarter GAAP loss per diluted share and full-year GAAP earnings per diluted shared included after-tax net charges totaling approximately $1.5 billion and $2.2 billion, respectively, or $7.63 and $11.00 per diluted share, respectively, reflecting non-cash goodwill and long-lived asset impairment charges, as well as restructuring charges largely in the company s European businesses.
Fourth-quarter Adjusted Earnings per diluted share was $3.69, an increase of 6% compared to $3.49 a year ago, primarily driven by a lower share count and growth in the Medical-Surgical business, partially offset by weakness in the U.K. retail pharmacy business, including an inventory charge recorded in the fourth quarter, and a higher adjusted tax rate. Full-year Adjusted Earnings per diluted share was $13.57, an increase of 8% compared to $12.62 for the prior year, primarily driven by a lower share count, growth in the McKesson Prescription Technology Solutions (MRxTS) and Medical-Surgical businesses and a lower adjusted tax rate, partially offset by lower profit contribution from the U.S. Pharmaceutical business related to the fourth quarter fiscal 2018 customer losses and weakness in the U.K. retail pharmacy business.
For the full year, McKesson generated cash from operations of $4.0 billion, and invested $557 million internally, resulting in free cash flow of $3.5 billion. During the year, McKesson paid $905 million for acquisitions, repurchased approximately $1.6 billion of its common stock, and paid $292 million in dividends. The company ended the quarter with cash and cash equivalents of $3.0 billion.
U.S. Pharmaceutical and Specialty Solutions Segment
European Pharmaceutical Solutions Segment
Medical-Surgical Solutions Segment
Other remaining businesses (primarily including McKesson Canada, MRxTS and equity accounting method investment in Change Healthcare)
Company Updates
Cost Savings Target Update
As a result of actions taken in the second half of fiscal 2019 to address challenges in the European business and to better position the U.S. and Canadian businesses, the company now anticipates it will generate approximately $400 million to $500 million in annual pre-tax savings that will be substantially realized by the end of fiscal 2021, an increase from the prior expectation of $300 million to $400 million as previously announced on October 25, 2018.
We are making important progress towards our initiatives and are confident that the actions we are taking position us for growth in fiscal 2020 and beyond, Tyler concluded.
Fiscal 2020 Outlook and Key Assumptions
McKesson expects full-year fiscal 2020 Adjusted Earnings per diluted share of $13.85 to $14.45, which reflects solid growth across the company s operating segments, a continuation of disciplined, efficient capital deployment, investments in the business, increased costs for opioids litigation and modest improvement in the U.K. business.
The fiscal 2020 outlook is based on the following key assumptions and expectations, and is also subject to risk factors such as those described below:
The guidance range assumes a full-year adjusted tax rate of approximately 18-19%, which may vary from quarter to quarter.
Conference Call Details
The company has scheduled a conference call for today, Wednesday, May 8 th , at 8:00 AM ET. The dial-in number for individuals wishing to participate on the call is 323-794-2093. Holly Weiss, senior vice president, Investor Relations, is the leader of the call, and the password to join the call is McKesson . A telephonic replay of this conference call will be available for five calendar days. For individuals wishing to listen to the replay, the dial-in number is 719-457-0820 and the pass code is 3096337. An archive of the conference call will also be available on the company s Investor Relations website at http://investor.mckesson.com.
Upcoming Investor Events
McKesson management will be participating in the following investor conferences:
Audio webcasts will be available live and archived on the company s Investor Relations website at http://investor.mckesson.com. A complete listing of upcoming events for the investment community is available on the company s Investor Relations website.
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-related expenses and adjustments, LIFO inventory-related adjustments, gains from antitrust legal settlements, restructuring and asset impairment charges, and other adjustments. A reconciliation of McKesson s GAAP financial results to Adjusted Earnings is provided in Schedules 2 and 3 of the financial statement tables included with this release.
The company does not provide forward-looking guidance on a GAAP basis prospectively as McKesson is unable to provide a quantitative reconciliation of this forward-looking non-GAAP measure to the most directly comparable forward-looking GAAP measure, without unreasonable effort, because McKesson cannot reliably forecast LIFO inventory-related adjustments, gains from antitrust legal settlements, restructuring and asset impairment charges, and other adjustments, which are difficult to predict and estimate. These items are inherently uncertain and depend on various factors, many of which are beyond the company s control, and as such, any associated estimate and its impact on GAAP performance could vary materially.
McKesson also presents its financial results on an FX-adjusted basis, which is the same measure formerly designated Constant Currency. The company conducts business worldwide in local currencies, including the 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. FX-adjusted information is presented to provide a framework for assessing how the company s business performed excluding the effect of foreign currency exchange rate fluctuations. The supplemental FX-adjusted information of the company s GAAP financial results and Adjusted Earnings (Non-GAAP) is provided in Schedule 3 of the financial statement tables included with this release.
McKesson also provides free cash flow, a non-GAAP measure. Free cash flow is defined as net cash provided by operating activities less payments for property, plant and equipment and capitalized software expenditures, as outlined in the company s condensed consolidated statements of cash flows.
Cautionary Statements
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 in those statements. Forward-looking statements may be identified by their use of 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, assumptions or intentions may also include forward-looking statements. It is not possible to predict or identify all such risks and uncertainties. We encourage investors to read important risk factors described in the company s Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission. These risk factors 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; fluctuations in foreign currency exchange rates; the company s ability to successfully identify, consummate, finance and integrate acquisitions; the performance of the company s investment in Change Healthcare; the company s ability to manage and complete divestitures; material adverse resolution of pending legal proceedings; competition and industry consolidation; 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; cyberattack, natural disaster, or malfunction of sophisticated internal computer systems to perform as designed; the adequacy of insurance to cover property loss or liability claims; 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 or services to conform to specifications; disaster or other event causing interruption of customer access to data residing in our service centers; 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; withdrawal from participation in multiemployer pension plans or if such plans are reported to have underfunded liabilities; inability to realize the expected benefits from the company s restructuring and business process initiatives; difficulties with outsourcing and similar third party relationships; risks associated with the company s retail expansion; and the company s inability to keep existing retail store locations or open new retail locations in desirable places. 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 update forward-looking statements.
About McKesson Corporation
McKesson Corporation, currently ranked 6 th on the FORTUNE 500, is a global leader in healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information technology. McKesson partners with pharmaceutical manufacturers, providers, pharmacies, governments and other organizations in healthcare to help provide the right medicines, medical products and healthcare services to the right patients at the right time, safely and cost-effectively. United by our ICARE shared principles, our employees work every day to innovate and deliver opportunities that make our customers and partners more successful all for the better health of patients. McKesson has been named the Most Admired Company in the healthcare wholesaler category by FORTUNE, a Best Place to Work by the Human Rights Campaign Foundation, and a top military-friendly company by Military Friendly. For more information, visit www.mckesson.com.
Holly Weiss, 972-969-9174 (Investors and Financial Media)
Kristin Chasen, 415-983-8974 (General and Business Media)
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP
(in millions, except per share amounts)
| Quarter Ended March 31, | Year Ended March 31, | |||||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||||
| Revenues | $ | 52,429 | $ | 51,628 | 2 | % | $ | 214,319 | $ | 208,357 | 3 | % | ||||||||||||
| Cost of sales (1) | (49,228 | ) | (48,553 | ) | 1 | (202,565 | ) | (197,173 | ) | 3 | ||||||||||||||
| Gross profit | 3,201 | 3,075 | 4 | 11,754 | 11,184 | 5 | ||||||||||||||||||
| Operating expenses (2) (3) (4) | (2,255 | ) | (2,316 | ) | (3 | ) | (8,474 | ) | (8,226 | ) | 3 | |||||||||||||
| Goodwill impairment charges (5) | (1,206 | ) | (1,388 | ) | (13 | ) | (1,797 | ) | (1,738 | ) | 3 | |||||||||||||
| Restructuring and asset impairment charges (6) | (309 | ) | (315 | ) | (2 | ) | (597 | ) | (567 | ) | 5 | |||||||||||||
| Gain from sale of business (7) | 109 | (100 | ) | |||||||||||||||||||||
| Total operating expenses | (3,770 | ) | (4,019 | ) | (6 | ) | (10,868 | ) | (10,422 | ) | 4 | |||||||||||||
| Operating income (loss) | (569 | ) | (944 | ) | (40 | ) | 886 | 762 | 16 | |||||||||||||||
| Other income, net (8) | 38 | 28 | 36 | 182 | 130 | 40 | ||||||||||||||||||
| Income (loss) from equity method investment in Change Healthcare (9) | (32 | ) | 23 | (239 | ) | (194 | ) | (248 | ) | (22 | ) | |||||||||||||
| Loss on debt extinguishment (10) | (122 | ) | (100 | ) | (122 | ) | (100 | ) | ||||||||||||||||
| Interest expense | (70 | ) | (79 | ) | (11 | ) | (264 | ) | (283 | ) | (7 | ) | ||||||||||||
| Income (loss) from continuing operations before income taxes | (633 | ) | (1,094 | ) | (42 | ) | 610 | 239 | 155 | |||||||||||||||
| Income tax (expense) benefit (11) | (111 | ) | 7 | NM | (356 | ) | 53 | (772 | ) | |||||||||||||||
| Income (loss) from continuing operations after tax | (744 | ) | (1,087 | ) | (32 | ) | 254 | 292 | (13 | ) | ||||||||||||||
| Income from discontinued operations, net of tax | 2 | (100 | ) | 1 | 5 | (80 | ) | |||||||||||||||||
| Net income (loss) | (744 | ) | (1,085 | ) | (31 | ) | 255 | 297 | (14 | ) | ||||||||||||||
| Net income attributable to noncontrolling interests | (52 | ) | (61 | ) | (15 | ) | (221 | ) | (230 | ) | (4 | ) | ||||||||||||
| Net income (loss) attributable to McKesson Corporation | $ | (796 | ) | $ | (1,146 | ) | (31 | )% | $ | 34 | $ | 67 | (49 | )% | ||||||||||
| Earnings (loss) per common share attributable to McKesson Corporation (a) | ||||||||||||||||||||||||
| Diluted (b) | ||||||||||||||||||||||||
| Continuing operations | $ | (4.17 | ) | $ | (5.58 | ) | (25 | )% | $ | 0.17 | $ | 0.30 | (43 | )% | ||||||||||
| Discontinued operations | 0.02 | (100 | ) | |||||||||||||||||||||
| Total | $ | (4.17 | ) | $ | (5.58 | ) | (25 | )% | $ | 0.17 | $ | 0.32 | (47 | )% | ||||||||||
| Basic | ||||||||||||||||||||||||
| Continuing operations | $ | (4.17 | ) | $ | (5.58 | ) | (25 | )% | $ | 0.17 | $ | 0.30 | (43 | )% | ||||||||||
| Discontinued operations | 0.02 | (100 | ) | |||||||||||||||||||||
| Total | $ | (4.17 | ) | $ | (5.58 | ) | (25 | )% | $ | 0.17 | $ | 0.32 | (47 | )% | ||||||||||
| Dividends declared per common share | $ | 0.39 | $ | 0.34 | $ | 1.51 | $ | 1.30 | ||||||||||||||||
| Weighted average common shares | ||||||||||||||||||||||||
| Diluted | 191 | 206 | (7 | )% | 197 | 209 | (6 | )% | ||||||||||||||||
| Basic | 191 | 206 | (7 | ) | 196 | 208 | (6 | ) |
Refer to the section entitled Financial Statement Notes at the end of this release.
Refer to our applicable filings with the SEC for additional disclosures including our Annual Report on Form 10-K for fiscal 2019 and 2018.
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
(in millions, except per share amounts)
| Quarter Ended March 31, 2019 | Change Vs. Prior Quarter | |||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Acquisition- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring and Asset Impairment Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | As Reported (GAAP) | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||
| Gross profit (1) | $ | 3,201 | $ | $ | $ | (146 | ) | $ | (63 | ) | $ | 4 | $ | $ | 2,996 | 4 | % | % | ||||||||||||||||||||||
| Operating expenses (5) (6) | $ | (3,770 | ) | $ | 121 | $ | 34 | $ | $ | $ | 309 | $ | 1,228 | $ | (2,078 | ) | (6 | )% | 1 | % | ||||||||||||||||||||
| Other income, net | $ | 38 | $ | $ | $ | $ | $ | $ | $ | 38 | 36 | % | 36 | % | ||||||||||||||||||||||||||
| Income (loss) from equity method investment in Change Healthcare (9) | $ | (32 | ) | $ | 75 | $ | 27 | $ | $ | $ | $ | $ | 70 | (239 | )% | (3 | )% | |||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | (633 | ) | $ | 196 | $ | 61 | $ | (146 | ) | $ | (63 | ) | $ | 313 | $ | 1,228 | $ | 956 | (42 | )% | 1 | % | |||||||||||||||||
| Income tax expense | $ | (111 | ) | $ | (47 | ) | $ | (15 | ) | $ | 37 | $ | 16 | $ | (58 | ) | $ | (19 | ) | $ | (197 | ) | NM | 21 | % | |||||||||||||||
| Income (loss) from continuing operations, net of tax, attributable to McKesson Corporation | $ | (796 | ) | $ | 149 | $ | 46 | $ | (109 | ) | $ | (47 | ) | $ | 255 | $ | 1,209 | $ | 707 | (31 | )% | (2 | )% | |||||||||||||||||
| Diluted earnings (loss) per common share from continuing operations, net of tax, attributable to McKesson Corporation (a) (b) | $ | (4.17 | ) | $ | 0.78 | $ | 0.24 | $ | (0.56 | ) | $ | (0.24 | ) | $ | 1.33 | $ | 6.30 | $ | 3.69 | (c) | (25 | )% | 6 | % | ||||||||||||||||
| Diluted weighted average common shares | 191 | 192 | 192 | 192 | 192 | 192 | 192 | 192 | (7 | )% | (7 | )% | ||||||||||||||||||||||||||||
| Quarter Ended March 31, 2018 | ||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Acquisition- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring and Asset Impairment Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||||
| Gross profit (1) | $ | 3,075 | $ | $ | 2 | $ | (94 | ) | $ | $ | $ | $ | 2,983 | |||||||||||||||||||||||||||
| Operating expenses (5) (6) | $ | (4,019 | ) | $ | 134 | $ | 49 | $ | $ | $ | 387 | $ | 1,389 | $ | (2,060 | ) | ||||||||||||||||||||||||
| Other income, net | $ | 28 | $ | $ | 1 | $ | $ | $ | $ | (1 | ) | $ | 28 | |||||||||||||||||||||||||||
| Income from equity method investment in Change Healthcare (9) | $ | 23 | $ | 74 | $ | 48 | $ | $ | $ | $ | (73 | ) | $ | 72 | ||||||||||||||||||||||||||
| Loss on debt extinguishment (10) | $ | (122 | ) | $ | $ | $ | $ | $ | $ | 122 | $ | |||||||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | (1,094 | ) | $ | 208 | $ | 100 | $ | (94 | ) | $ | $ | 387 | $ | 1,437 | $ | 944 | |||||||||||||||||||||||
| Income tax benefit (expense) (11) | $ | 7 | $ | (64 | ) | $ | (34 | ) | $ | 33 | $ | $ | (33 | ) | $ | (72 | ) | $ | (163 | ) | ||||||||||||||||||||
| Income (loss) from continuing operations, net of tax, attributable to McKesson Corporation | $ | (1,148 | ) | $ | 144 | $ | 66 | $ | (61 | ) | $ | $ | 354 | $ | 1,365 | $ | 720 | |||||||||||||||||||||||
| Diluted earnings (loss) per common share from continuing operations, net of tax, attributable to McKesson Corporation (a) (b) | $ | (5.58 | ) | $ | 0.70 | $ | 0.31 | $ | (0.29 | ) | $ | $ | 1.72 | $ | 6.60 | $ | 3.49 | |||||||||||||||||||||||
| Diluted weighted average common shares | 206 | 207 | 207 | 207 | 207 | 207 | 207 | 207 |
Refer to the section entitled Financial Statement Notes at the end of this release.
For more information relating to the Adjusted Earnings (Non-GAAP) and FX-Adjusted (Non-GAAP) definitions, refer to the section entitled Supplemental Non-GAAP Financial Information of this release.
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
(in millions, except per share amounts)
| Year Ended March 31, 2019 | Change Vs. Prior Year | |||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Acquisition- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring and Asset Impairment Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | As Reported (GAAP) | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||
| Gross profit (1) | $ | 11,754 | $ | $ | 1 | $ | (210 | ) | $ | (202 | ) | $ | 4 | $ | $ | 11,347 | 5 | % | 2 | % | ||||||||||||||||||||
| Operating expenses (3) (5) (6) | $ | (10,868 | ) | $ | 485 | $ | 118 | $ | $ | $ | 597 | $ | 1,736 | $ | (7,932 | ) | 4 | % | 4 | % | ||||||||||||||||||||
| Other income, net (8) | $ | 182 | $ | 1 | $ | $ | $ | $ | $ | (56 | ) | $ | 127 | 40 | % | 41 | % | |||||||||||||||||||||||
| Income (loss) from equity method investment in Change Healthcare (9) | $ | (194 | ) | $ | 304 | $ | 126 | $ | $ | $ | $ | 6 | $ | 242 | (22 | )% | (11 | )% | ||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | 610 | $ | 790 | $ | 245 | $ | (210 | ) | $ | (202 | ) | $ | 601 | $ | 1,686 | $ | 3,520 | 155 | % | (2 | )% | ||||||||||||||||||
| Income tax expense | $ | (356 | ) | $ | (195 | ) | $ | (61 | ) | $ | 54 | $ | 52 | $ | (102 | ) | $ | (17 | ) | $ | (625 | ) | (772 | )% | (11 | )% | ||||||||||||||
| Income from continuing operations, net of tax, attributable to McKesson Corporation | $ | 33 | $ | 595 | $ | 184 | $ | (156 | ) | $ | (150 | ) | $ | 499 | $ | 1,669 | $ | 2,674 | (47 | )% | 1 | % | ||||||||||||||||||
| Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (a) | $ | 0.17 | $ | 3.02 | $ | 0.93 | $ | (0.79 | ) | $ | (0.76 | ) | $ | 2.53 | $ | 8.47 | $ | 13.57 | (b) | (43 | )% | 8 | % | |||||||||||||||||
| Diluted weighted average common shares | 197 | 197 | 197 | 197 | 197 | 197 | 197 | 197 | (6 | )% | (6 | )% | ||||||||||||||||||||||||||||
| Year Ended March 31, 2018 | ||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Acquisition- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring and Asset Impairment Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||||
| Gross profit (1) | $ | 11,184 | $ | $ | 14 | $ | (99 | ) | $ | $ | (1 | ) | $ | $ | 11,098 | |||||||||||||||||||||||||
| Operating expenses (2) (4) (5) (6) (7) | $ | (10,422 | ) | $ | 503 | $ | 68 | $ | $ | $ | 680 | $ | 1,571 | $ | (7,600 | ) | ||||||||||||||||||||||||
| Other income, net (8) | $ | 130 | $ | 1 | $ | 2 | $ | $ | $ | $ | (43 | ) | $ | 90 | ||||||||||||||||||||||||||
| Income (loss) from equity method investment in Change Healthcare (9) | $ | (248 | ) | $ | 288 | $ | 293 | $ | $ | $ | $ | (61 | ) | $ | 272 | |||||||||||||||||||||||||
| Loss on debt extinguishment (10) | $ | (122 | ) | $ | $ | $ | $ | $ | $ | 122 | $ | |||||||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 239 | $ | 792 | $ | 377 | $ | (99 | ) | $ | $ | 679 | $ | 1,589 | $ | 3,577 | ||||||||||||||||||||||||
| Income tax benefit (expense) (11) | $ | 53 | $ | (247 | ) | $ | (124 | ) | $ | 35 | $ | $ | (89 | ) | $ | (331 | ) | $ | (703 | ) | ||||||||||||||||||||
| Income from continuing operations, net of tax, attributable to McKesson Corporation | $ | 62 | $ | 545 | $ | 253 | $ | (64 | ) | $ | $ | 590 | $ | 1,258 | $ | 2,644 | ||||||||||||||||||||||||
| Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (a) | $ | 0.30 | $ | 2.60 | $ | 1.20 | $ | (0.31 | ) | $ | $ | 2.82 | $ | 6.01 | $ | 12.62 | ||||||||||||||||||||||||
| Diluted weighted average common shares | 209 | 209 | 209 | 209 | 209 | 209 | 209 | 209 |
Refer to the section entitled Financial Statement Notes at the end of this release.
For more information relating to the Adjusted Earnings (Non-GAAP) and FX-Adjusted (Non-GAAP) definitions, refer to the section entitled Supplemental Non-GAAP Financial Information of this release.
McKESSON CORPORATION
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
| Quarter Ended March 31, 2019 | Quarter Ended March 31, 2018 | GAAP | Non-GAAP | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Adjustments | Adjusted Earnings (Non-GAAP) | As Reported (GAAP) | Adjustments | Adjusted Earnings (Non-GAAP) | Foreign Currency Effects | FX- Adjusted | Foreign Currency Effects | FX- Adjusted | As Reported (GAAP) | Adjusted Earnings (Non- GAAP) | FX- Adjusted (GAAP) | FX- Adjusted (Non- GAAP) | |||||||||||||||||||||||||||||||||||||||||||
| REVENUES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions | $ | 40,897 | $ | $ | 40,897 | $ | 39,733 | $ | $ | 39,733 | $ | $ | 40,897 | $ | $ | 40,897 | 3 | % | 3 | % | 3 | % | 3 | % | ||||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | 6,757 | 6,757 | 7,176 | 7,176 | 536 | 7,293 | 536 | 7,293 | (6 | ) | (6 | ) | 2 | 2 | ||||||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 1,955 | 1,955 | 1,725 | 1,725 | 1,955 | 1,955 | 13 | 13 | 13 | 13 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other (a) | 2,820 | 2,820 | 2,994 | 2,994 | 131 | 2,951 | 131 | 2,951 | (6 | ) | (6 | ) | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 52,429 | $ | $ | 52,429 | $ | 51,628 | $ | $ | 51,628 | $ | 667 | $ | 53,096 | $ | 667 | $ | 53,096 | 2 | % | 2 | % | 3 | % | 3 | % | ||||||||||||||||||||||||||||||
| OPERATING PROFIT (LOSS) (5) (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions (1) | $ | 873 | $ | (121 | ) | $ | 752 | $ | 785 | $ | (23 | ) | $ | 762 | $ | $ | 873 | $ | $ | 752 | 11 | % | (1 | )% | 11 | % | (1 | )% | ||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | (1,454 | ) | 1,477 | 23 | (1,185 | ) | 1,267 | 82 | (108 | ) | (1,562 | ) | 3 | 26 | 23 | (72 | ) | 32 | (68 | ) | ||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 121 | 51 | 172 | 112 | 30 | 142 | 121 | 172 | 8 | 21 | 8 | 21 | ||||||||||||||||||||||||||||||||||||||||||||
| Other (a) (8) (9) | 111 | 147 | 258 | (378 | ) | 621 | 243 | 3 | 114 | 3 | 261 | 129 | 6 | 130 | 7 | |||||||||||||||||||||||||||||||||||||||||
| Operating profit (loss) | (349 | ) | 1,554 | 1,205 | (666 | ) | 1,895 | 1,229 | (105 | ) | (454 | ) | 6 | 1,211 | (48 | ) | (2 | ) | (32 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||
| Corporate | (214 | ) | 35 | (179 | ) | (227 | ) | 21 | (206 | ) | (214 | ) | (179 | ) | (6 | ) | (13 | ) | (6 | ) | (13 | ) | ||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations before interest expense and income taxes | $ | (563 | ) | $ | 1,589 | $ | 1,026 | $ | (893 | ) | $ | 1,916 | $ | 1,023 | $ | (105) | $ | (668 | ) | $ | 6 | $ | 1,032 | (37 | )% | % | (25 | )% | 1 | % | ||||||||||||||||||||||||||
| OPERATING PROFIT (LOSS) AS A % OF REVENUES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions | 2.13 | % | 1.84 | % | 1.98 | % | 1.92 | % | 2.13 | % | 1.84 | % | 15 | bp | (8 | ) bp | 15 | bp | (8 | ) bp | ||||||||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | (21.52 | ) | 0.34 | (16.51 | ) | 1.14 | (21.42 | ) | 0.36 | (501 | ) | (80 | ) | (491 | ) | (78 | ) | |||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 6.19 | 8.80 | 6.49 | 8.23 | 6.19 | 8.80 | (30 | ) | 57 | (30 | ) | 57 |
Refer to the section entitled Financial Statement Notes at the end of this release.
For more information relating to the Adjusted Earnings (Non-GAAP) and FX-Adjusted (Non-GAAP) definitions, refer to the section entitled Supplemental Non-GAAP Financial Information of this release.
McKESSON CORPORATION
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
| Year Ended March 31, 2019 | Year Ended March 31, 2018 | GAAP | Non-GAAP | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Adjustments | Adjusted Earnings (Non-GAAP) | As Reported (GAAP) | Adjustments | Adjusted Earnings (Non- GAAP) | Foreign Currency Effects | FX- Adjusted | Foreign Currency Effects | FX- Adjusted | As Reported (GAAP) | Adjusted Earnings (Non-GAAP) | FX- Adjusted (GAAP) | FX- Adjusted (Non- GAAP) | |||||||||||||||||||||||||||||||||||||||||||
| REVENUES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions | $ | 167,763 | $ | $ | 167,763 | $ | 162,587 | $ | $ | 162,587 | $ | $ | 167,763 | $ | $ | 167,763 | 3 | % | 3 | % | 3 | % | 3 | % | ||||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | 27,242 | 27,242 | 27,320 | 27,320 | 345 | 27,587 | 345 | 27,587 | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 7,618 | 7,618 | 6,611 | 6,611 | 7,618 | 7,618 | 15 | 15 | 15 | 15 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other (a) | 11,696 | 11,696 | 11,839 | 11,839 | 246 | 11,942 | 246 | 11,942 | (1 | ) | (1 | ) | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 214,319 | $ | $ | 214,319 | $ | 208,357 | $ | $ | 208,357 | $ | 591 | $ | 214,910 | $ | 591 | $ | 214,910 | 3 | % | 3 | % | 3 | % | 3 | % | ||||||||||||||||||||||||||||||
| OPERATING PROFIT (5) (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions (1) (8) | $ | 2,697 | $ | (177 | ) | $ | 2,520 | $ | 2,535 | $ | 31 | $ | 2,566 | $ | $ | 2,697 | $ | $ | 2,520 | 6 | % | (2 | )% | 6 | % | (2 | )% | |||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | (1,978 | ) | 2,197 | 219 | (1,681 | ) | 2,021 | 340 | (87 | ) | (2,065 | ) | 1 | 220 | 18 | (36 | ) | 23 | (35 | ) | ||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 455 | 150 | 605 | 461 | 83 | 544 | 455 | 605 | (1 | ) | 11 | (1 | ) | 11 | ||||||||||||||||||||||||||||||||||||||||||
| Other (a) (2) (3) (4) (7) (8) (9) | 394 | 601 | 995 | (107 | ) | 1,035 | 928 | (6 | ) | 388 | 6 | 1,001 | 468 | 7 | 463 | 8 | ||||||||||||||||||||||||||||||||||||||||
| Operating profit | 1,568 | 2,771 | 4,339 | 1,208 | 3,170 | 4,378 | (93 | ) | 1,475 | 7 | 4,346 | 30 | (1 | ) | 22 | (1 | ) | |||||||||||||||||||||||||||||||||||||||
| Corporate | (694 | ) | 139 | (555 | ) | (564 | ) | 46 | (518 | ) | (694 | ) | (555 | ) | 23 | 7 | 23 | 7 | ||||||||||||||||||||||||||||||||||||||
| Income from continuing operations before interest expense and income taxes | $ | 874 | $ | 2,910 | $ | 3,784 | $ | 644 | $ | 3,216 | $ | 3,860 | $ | (93 | ) | $ | 781 | $ | 7 | $ | 3,791 | 36 | % | (2 | )% | 21 | % | (2 | )% | |||||||||||||||||||||||||||
| OPERATING PROFIT (LOSS) AS A % OF REVENUES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions | 1.61 | % | 1.50 | % | 1.56 | % | 1.58 | % | 1.61 | % | 1.50 | % | 5 | bp | (8 | ) bp | 5 | bp | (8 | ) bp | ||||||||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | (7.26 | ) | 0.80 | (6.15 | ) | 1.24 | (7.49 | ) | 0.80 | (111 | ) | (44 | ) | (134 | ) | (44 | ) | |||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 5.97 | 7.94 | 6.97 | 8.23 | 5.97 | 7.94 | (100 | ) | (29 | ) | (100 | ) | (29 | ) |
Refer to the section entitled Financial Statement Notes at the end of this release.
For more information relating to the Adjusted Earnings (Non-GAAP) and FX-Adjusted (Non-GAAP) definitions, refer to the section entitled Supplemental Non-GAAP Financial Information of this release.
McKESSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2019 | March 31, 2018 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 2,981 | $ | 2,672 | ||||
| Receivables, net | 18,246 | 17,711 | ||||||
| Inventories, net | 16,709 | 16,310 | ||||||
| Prepaid expenses and other | 529 | 443 | ||||||
| Total Current Assets | 38,465 | 37,136 | ||||||
| Property, Plant and Equipment, Net | 2,548 | 2,464 | ||||||
| Goodwill | 9,358 | 10,924 | ||||||
| Intangible Assets, Net | 3,689 | 4,102 | ||||||
| Equity Method Investment in Change Healthcare | 3,513 | 3,728 | ||||||
| Other Noncurrent Assets | 2,099 | 2,027 | ||||||
| Total Assets | $ | 59,672 | $ | 60,381 | ||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Drafts and accounts payable | $ | 33,853 | $ | 32,177 | ||||
| Current portion of long-term debt | 330 | 1,129 | ||||||
| Other accrued liabilities | 3,443 | 3,379 | ||||||
| Total Current Liabilities | 37,626 | 36,685 | ||||||
| Long-Term Debt | 7,265 | 6,751 | ||||||
| Long-Term Deferred Tax Liabilities | 2,998 | 2,804 | ||||||
| Other Noncurrent Liabilities | 2,103 | 2,625 | ||||||
| Redeemable Noncontrolling Interests | 1,393 | 1,459 | ||||||
| McKesson Corporation Stockholders Equity | 8,094 | 9,804 | ||||||
| Noncontrolling Interests | 193 | 253 | ||||||
| Total Equity | 8,287 | 10,057 | ||||||
| Total Liabilities, Redeemable Noncontrolling Interests and Equity | $ | 59,672 | $ | 60,381 |
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income | $ | 255 | $ | 297 | ||||
| Adjustments to reconcile to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 949 | 951 | ||||||
| Goodwill and other asset impairment charges | 2,079 | 2,217 | ||||||
| Deferred taxes | 189 | (868 | ) | |||||
| Credits associated with last-in, first-out inventory method | (210 | ) | (99 | ) | ||||
| Loss from equity method investment in Change Healthcare | 194 | 248 | ||||||
| Gain from sale of businesses and investments | (86 | ) | (169 | ) | ||||
| Other non-cash items | 52 | 30 | ||||||
| Changes in assets and liabilities, net of acquisitions: | ||||||||
| Receivables | (967 | ) | 1,175 | |||||
| Inventories | (368 | ) | (458 | ) | ||||
| Drafts and accounts payable | 1,976 | 271 | ||||||
| Taxes | (95 | ) | 671 | |||||
| Other | 68 | 79 | ||||||
| Net cash provided by operating activities | 4,036 | 4,345 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Payments for property, plant and equipment | (426 | ) | (405 | ) | ||||
| Capitalized software expenditures | (131 | ) | (175 | ) | ||||
| Acquisitions, net of cash, cash equivalents and restricted cash acquired | (905 | ) | (2,893 | ) | ||||
| Proceeds from sale of businesses and investments, net | 101 | 374 | ||||||
| Payments received on Healthcare Technology Net Asset Exchange, net | 126 | |||||||
| Other | (20 | ) | (20 | ) | ||||
| Net cash used in investing activities | (1,381 | ) | (2,993 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from short-term borrowings | 37,265 | 20,542 | ||||||
| Repayments of short-term borrowings | (37,268 | ) | (20,725 | ) | ||||
| Proceeds from issuances of long-term debt | 1,099 | 1,522 | ||||||
| Repayments of long-term debt | (1,112 | ) | (2,287 | ) | ||||
| Payments for debt extinguishments | (112 | ) | ||||||
| Common stock transactions: | ||||||||
| Issuances | 75 | 132 | ||||||
| Share repurchases, including shares surrendered for tax withholding | (1,639 | ) | (1,709 | ) | ||||
| Dividends paid | (292 | ) | (262 | ) | ||||
| Other | (355 | ) | (185 | ) | ||||
| Net cash used in financing activities | (2,227 | ) | (3,084 | ) | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (119 | ) | 150 | |||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 309 | (1,582 | ) | |||||
| Cash, cash equivalents and restricted cash at beginning of year | 2,672 | 4,254 | ||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 2,981 | $ | 2,672 |
McKESSON CORPORATION
FINANCIAL STATEMENT NOTES
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
In an effort to provide investors with additional information regarding the Company s financial results as determined by generally accepted accounting principles ( GAAP ), McKesson Corporation (the Company or we ) also presents the following Non-GAAP measures in this press release. The Company believes the presentation of Non-GAAP measures provides useful supplemental information to investors with regard to its operating performance, as well as assists with the comparison of its past financial performance to the Company s future financial results. Moreover, the Company believes that the presentation of Non-GAAP measures assists investors ability to compare its financial results to those of other companies in the same industry. However, the Company s Non-GAAP measures used in the press tables may be defined and calculated differently by other companies in the same industry.
Amortization of acquisition-related intangibles Amortization expenses of intangible assets directly related to business combinations and/or the formation of joint ventures and equity method investments.
Acquisition-related expenses and adjustments Transaction, integration and other expenses that are directly related to business combinations, the formation of joint ventures, and other transaction-related costs including initial public offering costs. Examples include transaction closing costs, professional service fees, legal fees, restructuring or severance charges, retention payments and employee relocation expenses, facility or other exit-related expenses, certain fair value adjustments including deferred revenues, contingent consideration and inventory, recoveries of acquisition-related expenses or post-closing expenses, bridge loan fees, gains or losses related to foreign currency contracts entered into directly due to acquisitions, gains or losses on business combinations, and gain on the Healthcare Technology Net Asset Exchange.