Full Press Release Details
McKESSON REPORTS FISCAL 2018 THIRD-QUARTER RESULTS
SAN FRANCISCO, February 1, 2018 McKesson Corporation (NYSE:MCK) today reported that revenues for the third quarter ended December 31, 2017, were $53.6 billion, up 7% compared to $50.1 billion a year ago. On the basis of U.S. generally accepted accounting principles ( GAAP ), third-quarter earnings per diluted share from continuing operations was $4.32, compared to $2.86 a year ago. Third-quarter GAAP earnings per diluted share included a net tax benefit of approximately $370 million, or $1.78, driven by the Tax Cuts and Jobs Act of 2017.
Third-quarter Adjusted Earnings per diluted share, which excludes the $1.78 net tax benefit driven by the Tax Cuts and Jobs Act of 2017, was $3.41, up 12% compared to $3.04 a year ago. Third-quarter results were driven by a lower share count, organic growth across multiple business units, including the company s strategic sourcing benefits through ClarusONE, incremental profit contribution from acquisitions and a lower tax rate, which included discrete tax benefits unrelated to the Tax Cuts and Jobs Act of 2017. These positive drivers were partially offset by lower profit in our Technology Solutions segment driven by the contribution of the majority of the businesses to Change Healthcare and the sale of our Enterprise Information Solutions business, and the impact of reduced reimbursement in the company s U.K. retail pharmacy business. Prior year third-quarter results included two non-recurring charges totaling approximately $60 million in our Distribution Solutions segment.
Our third-quarter results reflected operating performance in line with our expectations, complemented by a lower share count and lower tax rate, said John H. Hammergren, chairman and chief executive officer. As a result of the lower tax rate and share count, we are raising and narrowing our Fiscal 2018 Adjusted Earnings outlook from a range of $11.80 to $12.50 per diluted share to a new range of $12.50 to $12.80 per diluted share.
For the first nine months of the fiscal year, McKesson generated cash from operations of $1.3 billion and ended the quarter with cash and cash equivalents of $2.6 billion. Through the first nine months of the year, McKesson repaid $545 million in long-term debt, paid $2.0 billion for acquisitions, repurchased $900 million of its common stock, invested $392 million internally and paid $192 million in dividends.
We deployed capital in line with our portfolio approach during the third quarter, announcing the RxCrossroads acquisition and repurchasing shares, providing a return to shareholders while continuing to position McKesson for growth in a rapidly evolving industry, concluded Hammergren.
Segment Results
Distribution Solutions revenues were $53.6 billion for the quarter, up 8% on a reported basis and 7% on a constant currency basis.
North America pharmaceutical distribution and services revenues of $44.9 billion for the quarter were up 8% on a reported basis and 7% on a constant currency basis, primarily reflecting market growth and acquisitions.
International pharmaceutical distribution and services revenues were $7.0 billion for the quarter, up 13% on a reported basis and 4% on a constant currency basis, driven by acquisitions and market growth.
Medical-Surgical distribution and services revenues were $1.7 billion for the quarter, up 9%, primarily driven by market growth.
In the third quarter, Distribution Solutions GAAP operating profit was $819 million and GAAP operating margin was 1.53%. Third-quarter adjusted operating profit was $991 million, up 23% from the prior year on a reported basis and 22% on a constant currency basis. Adjusted operating margin for the Distribution Solutions segment was 1.85% on a constant currency basis. Adjusted operating margin excluding noncontrolling interests for the Distribution Solutions segment was 1.77% on a constant currency basis.
Technology Solutions GAAP operating profit was $65 million for the third quarter, primarily driven by a gain on the sale of the company s Enterprise Information Solutions business. Third-quarter adjusted operating profit was $53 million, primarily driven by our proportionate share of the income from McKesson s equity investment in Change Healthcare.
Fiscal Year 2018 Outlook
McKesson expects GAAP earnings per diluted share of $7.65 to $9.00 for the fiscal year ending March 31, 2018, which includes the following items:
McKesson expects Adjusted Earnings of $12.50 to $12.80 per diluted share for the fiscal year ending March 31, 2018.
Dividend Declaration
The company s Board of Directors yesterday declared a regular dividend of $0.34 cents per share of common stock. The dividend will be payable on April 2, 2018, to stockholders of record on March 1, 2018.
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 charges, and other adjustments. A reconciliation of McKesson s GAAP financial results to Adjusted Earnings is provided in Schedules 2, 3 and 4 of the financial statement tables included with this release.
Constant Currency
McKesson also presents its financial results on a constant currency basis. 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. Constant currency 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 constant currency 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.
Adjusted Operating Profit Margin Excluding Noncontrolling Interests
McKesson also provides adjusted operating profit margin excluding noncontrolling interests. The company has arrangements involving third-party noncontrolling interests. As a result, pre-tax results are affected by the portion of pre-tax earnings attributable to noncontrolling interests. Adjusted operating profit margin excluding noncontrolling interests information is presented to provide a framework for assessing how the company s business performed excluding the effect of pre-tax earnings that is not attributable to McKesson. The supplemental adjusted operating profit margin excluding noncontrolling interests 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.
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; 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 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 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 or services 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; 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 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.
Conference Call Details
The company has scheduled a conference call for today, Thursday, February 1 st , at 8:00 AM ET. The dial-in number for individuals wishing to participate on the call is 323-794-2093. Craig Mercer, 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. The dial-in number for individuals wishing to listen to the replay is 719-457-0820 and the pass code is 3106087. An archive of the conference call will also be available on the company s Investor Relations website at http://investor.mckesson.com .
Shareholders are encouraged to review the company s filings with the Securities and Exchange Commission.
About McKesson Corporation
McKesson Corporation, currently ranked 5 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 .
Craig Mercer, 415-983-8391 (Investors and Financial Media)
Kristin Hunter Chasen, 415-983-8974 (General and Business Media)
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP
(in millions, except per share amounts)
| Quarter Ended December 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||||
| Revenues | $ | 53,617 | $ | 50,130 | 7 | % | $ | 156,729 | $ | 149,820 | 5 | % | ||||||||||||
| Cost of sales (1) | (50,902 | ) | (47,318 | ) | 8 | (148,620 | ) | (141,345 | ) | 5 | ||||||||||||||
| Gross profit | 2,715 | 2,812 | (3 | ) | 8,109 | 8,475 | (4 | ) | ||||||||||||||||
| Operating expenses (2) | (1,984 | ) | (1,981 | ) | (5,920 | ) | (5,802 | ) | 2 | |||||||||||||||
| Gain from sale of business (3) | 109 | 109 | ||||||||||||||||||||||
| Goodwill impairment charges (4) | (350 | ) | (290 | ) | 21 | |||||||||||||||||||
| Restructuring and asset impairment charges (5) | (6 | ) | (242 | ) | ||||||||||||||||||||
| Total operating expenses | (1,881 | ) | (1,981 | ) | (5 | ) | (6,403 | ) | (6,092 | ) | 5 | |||||||||||||
| Operating income | 834 | 831 | 1,706 | 2,383 | (28 | ) | ||||||||||||||||||
| Other income, net (6) | 20 | 23 | (13 | ) | 102 | 65 | 57 | |||||||||||||||||
| Loss from equity method investment in Change Healthcare (7) | (90 | ) | (271 | ) | ||||||||||||||||||||
| Interest expense | (67 | ) | (74 | ) | (9 | ) | (204 | ) | (231 | ) | (12 | ) | ||||||||||||
| Income from continuing operations before income taxes | 697 | 780 | (11 | ) | 1,333 | 2,217 | (40 | ) | ||||||||||||||||
| Income tax benefit (expense) (8) (9) | 263 | (131 | ) | (301 | ) | 46 | (570 | ) | (108 | ) | ||||||||||||||
| Income from continuing operations after tax | 960 | 649 | 48 | 1,379 | 1,647 | (16 | ) | |||||||||||||||||
| Income (Loss) from discontinued operations, net of tax (10) | 1 | (3 | ) | (133 | ) | 3 | (117 | ) | (103 | ) | ||||||||||||||
| Net income | 961 | 646 | 49 | 1,382 | 1,530 | (10 | ) | |||||||||||||||||
| Net income attributable to noncontrolling interests | (58 | ) | (13 | ) | 346 | (169 | ) | (48 | ) | 252 | ||||||||||||||
| Net income attributable to McKesson Corporation | $ | 903 | $ | 633 | 43 | % | $ | 1,213 | $ | 1,482 | (18 | )% | ||||||||||||
| Earnings (loss) per common share attributable to McKesson Corporation (11) | ||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||
| Continuing operations | $ | 4.32 | $ | 2.86 | 51 | % | $ | 5.75 | $ | 7.07 | (19 | )% | ||||||||||||
| Discontinued operations | 0.01 | (0.01 | ) | (200 | ) | 0.01 | (0.51 | ) | (102 | ) | ||||||||||||||
| Total | $ | 4.33 | $ | 2.85 | 52 | % | $ | 5.76 | $ | 6.56 | (12 | )% | ||||||||||||
| Basic | ||||||||||||||||||||||||
| Continuing operations | $ | 4.34 | $ | 2.89 | 50 | % | $ | 5.78 | $ | 7.14 | (19 | )% | ||||||||||||
| Discontinued operations | 0.01 | (0.02 | ) | (150 | ) | 0.02 | (0.52 | ) | (104 | ) | ||||||||||||||
| Total | $ | 4.35 | $ | 2.87 | 52 | % | $ | 5.80 | $ | 6.62 | (12 | )% | ||||||||||||
| Dividends declared per common share | $ | 0.34 | $ | 0.28 | $ | 0.96 | $ | 0.84 | ||||||||||||||||
| Weighted average common shares | ||||||||||||||||||||||||
| Diluted | 208 | 222 | (6 | )% | 210 | 226 | (7 | )% | ||||||||||||||||
| Basic | 207 | 221 | (6 | ) | 209 | 224 | (7 | ) |
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
(in millions, except per share amounts)
| Quarter Ended December 31, 2017 | 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 Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | As Reported (GAAP) | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||
| Gross profit | $ | 2,715 | $ | $ | 6 | $ | (2 | ) | $ | $ | (1 | ) | $ | $ | 2,718 | (3 | )% | 2 | % | |||||||||||||||||||||
| Operating expenses (1) (2) (3) | $ | (1,881 | ) | $ | 123 | $ | 24 | $ | $ | $ | 33 | $ | (157 | ) | $ | (1,858 | ) | (5 | )% | 3 | % | |||||||||||||||||||
| Other income, net | $ | 20 | $ | $ | 1 | $ | $ | $ | $ | 1 | $ | 22 | (13 | )% | (15 | )% | ||||||||||||||||||||||||
| Income (Loss) from equity method investment in Change Healthcare (4) | $ | (90 | ) | $ | 70 | $ | 63 | $ | $ | $ | $ | 12 | $ | 55 | % | % | ||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 697 | $ | 193 | $ | 94 | $ | (2 | ) | $ | $ | 32 | $ | (144 | ) | $ | 870 | (11 | )% | 8 | % | |||||||||||||||||||
| Income tax benefit (expense) (5) | $ | 263 | $ | (53 | ) | $ | (27 | ) | $ | 1 | $ | $ | (4 | ) | $ | (280 | ) | $ | (100 | ) | (301 | )% | (12 | )% | ||||||||||||||||
| Income from continuing operations, net of tax, attributable to McKesson Corporation | $ | 902 | $ | 140 | $ | 67 | $ | (1 | ) | $ | $ | 28 | $ | (424 | ) | $ | 712 | 42 | % | 5 | % | |||||||||||||||||||
| Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (6) | $ | 4.32 | $ | 0.67 | $ | 0.32 | $ | (0.01 | ) | $ | $ | 0.14 | $ | (2.03 | ) | $ | 3.41 | (7) | 51 | % | 12 | % | ||||||||||||||||||
| Diluted weighted average common shares | 208 | 208 | 208 | 208 | 208 | 208 | 208 | (6 | )% | (6 | )% | |||||||||||||||||||||||||||||
| Quarter Ended December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Acquisition- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||||
| Gross profit | $ | 2,812 | $ | $ | $ | (155 | ) | $ | (2 | ) | $ | (1 | ) | $ | $ | 2,654 | ||||||||||||||||||||||||
| Operating expenses | $ | (1,981 | ) | $ | 102 | $ | 72 | $ | $ | $ | 3 | $ | $ | (1,804 | ) | |||||||||||||||||||||||||
| Other income, net | $ | 23 | $ | $ | 3 | $ | $ | $ | $ | $ | 26 | |||||||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 780 | $ | 102 | $ | 75 | $ | (155 | ) | $ | (2 | ) | $ | 2 | $ | $ | 802 | |||||||||||||||||||||||
| Income tax expense | $ | (131 | ) | $ | (31 | ) | $ | (14 | ) | $ | 61 | $ | 1 | $ | $ | $ | (114 | ) | ||||||||||||||||||||||
| Income from continuing operations, net of tax, attributable to McKesson Corporation | $ | 636 | $ | 71 | $ | 61 | $ | (94 | ) | $ | (1 | ) | $ | 2 | $ | $ | 675 | |||||||||||||||||||||||
| Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (6) | $ | 2.86 | $ | 0.32 | $ | 0.27 | $ | (0.42 | ) | $ | $ | 0.01 | $ | $ | 3.04 | |||||||||||||||||||||||||
| Diluted weighted average common shares | 222 | 222 | 222 | 222 | 222 | 222 |
For more information relating to the Adjusted Earnings (Non-GAAP) and Constant Currency (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)
| Nine Months Ended December 31, 2017 | Change Vs. Prior Period | |||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Acquisition- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | As Reported (GAAP) | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||
| Gross profit | $ | 8,109 | $ | $ | 12 | $ | (5 | ) | $ | $ | (1 | ) | $ | $ | 8,115 | (4 | )% | (1 | )% | |||||||||||||||||||||
| Operating expenses (1) (2) (3) (4) | $ | (6,403 | ) | $ | 369 | $ | 19 | $ | $ | $ | 293 | $ | 182 | $ | (5,540 | ) | 5 | % | 4 | % | ||||||||||||||||||||
| Other income, net (5) | $ | 102 | $ | 1 | $ | 1 | $ | $ | $ | $ | (42 | ) | $ | 62 | 57 | % | (16 | )% | ||||||||||||||||||||||
| Income (Loss) from equity method investment in Change Healthcare (6) | $ | (271 | ) | $ | 214 | $ | 245 | $ | $ | $ | $ | 12 | $ | 200 | % | % | ||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 1,333 | $ | 584 | $ | 277 | $ | (5 | ) | $ | $ | 292 | $ | 152 | $ | 2,633 | (40 | )% | (3 | )% | ||||||||||||||||||||
| Income tax benefit (expense) (7) | $ | 46 | $ | (183 | ) | $ | (90 | ) | $ | 2 | $ | $ | (56 | ) | $ | (259 | ) | $ | (540 | ) | (108 | )% | (10 | )% | ||||||||||||||||
| Income from continuing operations, net of tax, attributable to McKesson Corporation | $ | 1,210 | $ | 401 | $ | 187 | $ | (3 | ) | $ | $ | 236 | $ | (107 | ) | $ | 1,924 | (24 | )% | (7 | )% | |||||||||||||||||||
| Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (8) | $ | 5.75 | $ | 1.90 | $ | 0.89 | $ | (0.01 | ) | $ | $ | 1.12 | $ | (0.51 | ) | $ | 9.14 | (9) | (19 | )% | % | |||||||||||||||||||
| Diluted weighted average common shares | 210 | 210 | 210 | 210 | 210 | 210 | 210 | (7 | )% | (7 | )% | |||||||||||||||||||||||||||||
| Nine Months Ended December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Acquisition- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||||
| Gross profit (10) | $ | 8,475 | $ | 3 | $ | 1 | $ | (151 | ) | $ | (144 | ) | $ | (2 | ) | $ | $ | 8,182 | ||||||||||||||||||||||
| Operating expenses (11) | $ | (6,092 | ) | $ | 328 | $ | 157 | $ | $ | $ | 16 | $ | 284 | $ | (5,307 | ) | ||||||||||||||||||||||||
| Other income, net | $ | 65 | $ | 1 | $ | 8 | $ | $ | $ | $ | $ | 74 | ||||||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 2,217 | $ | 332 | $ | 166 | $ | (151 | ) | $ | (144 | ) | $ | 14 | $ | 284 | $ | 2,718 | ||||||||||||||||||||||
| Income tax expense (12) | $ | (570 | ) | $ | (100 | ) | $ | (37 | ) | $ | 59 | $ | 56 | $ | (5 | ) | $ | (6 | ) | $ | (603 | ) | ||||||||||||||||||
| Income from continuing operations, net of tax, attributable to McKesson Corporation | $ | 1,599 | $ | 232 | $ | 129 | $ | (92 | ) | $ | (88 | ) | $ | 9 | $ | 278 | $ | 2,067 | ||||||||||||||||||||||
| Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (8) | $ | 7.07 | $ | 1.02 | $ | 0.57 | $ | (0.40 | ) | $ | (0.39 | ) | $ | 0.04 | $ | 1.23 | $ | 9.14 | ||||||||||||||||||||||
| Diluted weighted average common shares | 226 | 226 | 226 | 226 | 226 | 226 | 226 | 226 |
For more information relating to the Adjusted Earnings (Non-GAAP) and Constant Currency (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 December 31, 2017 | Quarter Ended December 31, 2016 | GAAP | Non-GAAP | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Adjustments | Adjusted Earnings (Non- GAAP) | As Reported (GAAP) | Adjustments | Adjusted Earnings (Non- GAAP) | Foreign Currency Effects | Constant Currency | Foreign Currency Effects | Constant Currency | As Reported (GAAP) | Adjusted Earnings (Non- GAAP) | Constant Currency (GAAP) | Constant Currency (Non- GAAP) | |||||||||||||||||||||||||||||||||||||||||||
| REVENUES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| North America pharmaceutical distribution & services | $ | 44,935 | $ | $ | 44,935 | $ | 41,685 | $ | $ | 41,685 | $ | (133 | ) | $ | 44,802 | $ | (133 | ) | $ | 44,802 | 8 | % | 8 | % | 7 | % | 7 | % | ||||||||||||||||||||||||||||
| International pharmaceutical distribution & services | 6,989 | 6,989 | 6,193 | 6,193 | (530 | ) | 6,459 | (530 | ) | 6,459 | 13 | 13 | 4 | 4 | ||||||||||||||||||||||||||||||||||||||||||
| Medical-Surgical distribution & services | 1,693 | 1,693 | 1,558 | 1,558 | 1,693 | 1,693 | 9 | 9 | 9 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Distribution Solutions | 53,617 | 53,617 | 49,436 | 49,436 | (663 | ) | 52,954 | (663 | ) | 52,954 | 8 | 8 | 7 | 7 | ||||||||||||||||||||||||||||||||||||||||||
| Technology Solutions - Products and Services | 694 | 694 | (100 | ) | (100 | ) | (100 | ) | (100 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 53,617 | $ | $ | 53,617 | $ | 50,130 | $ | $ | 50,130 | $ | (663 | ) | $ | 52,954 | $ | (663 | ) | $ | 52,954 | 7 | % | 7 | % | 6 | % | 6 | % | ||||||||||||||||||||||||||||
| GROSS PROFIT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | 2,715 | $ | 3 | $ | 2,718 | $ | 2,424 | $ | (158 | ) | $ | 2,266 | $ | (66 | ) | $ | 2,649 | $ | (65 | ) | $ | 2,653 | 12 | % | 20 | % | 9 | % | 17 | % | |||||||||||||||||||||||||
| Technology Solutions | 388 | 388 | (100 | ) | (100 | ) | (100 | ) | (100 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 2,715 | $ | 3 | $ | 2,718 | $ | 2,812 | $ | (158 | ) | $ | 2,654 | $ | (66 | ) | $ | 2,649 | $ | (65 | ) | $ | 2,653 | (3 | )% | 2 | % | (6 | )% | % | ||||||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions (1) | $ | (1,914 | ) | $ | 167 | $ | (1,747 | ) | $ | (1,628 | ) | $ | 147 | $ | (1,481 | ) | $ | 63 | $ | (1,851 | ) | $ | 56 | $ | (1,691 | ) | 18 | % | 18 | % | 14 | % | 14 | % | ||||||||||||||||||||||
| Technology Solutions (2) (3) | 155 | (157 | ) | (2 | ) | (256 | ) | 31 | (225 | ) | 155 | (2 | ) | (161 | ) | (99 | ) | (161 | ) | (99 | ) | |||||||||||||||||||||||||||||||||||
| Corporate | (122 | ) | 13 | (109 | ) | (97 | ) | (1 | ) | (98 | ) | 2 | (120 | ) | 1 | (108 | ) | 26 | 11 | 24 | 10 | |||||||||||||||||||||||||||||||||||
| Operating expenses | $ | (1,881 | ) | $ | 23 | $ | (1,858 | ) | $ | (1,981 | ) | $ | 177 | $ | (1,804 | ) | $ | 65 | $ | (1,816 | ) | $ | 57 | $ | (1,801 | ) | (5 | )% | 3 | % | (8 | )% | % | |||||||||||||||||||||||
| OTHER INCOME, NET | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | 18 | $ | 2 | $ | 20 | $ | 17 | $ | 3 | $ | 20 | $ | $ | 18 | $ | $ | 20 | 6 | % | % | 6 | % | % | ||||||||||||||||||||||||||||||||
| Technology Solutions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate | 2 | 2 | 6 | 6 | (1 | ) | 1 | (1 | ) | 1 | (67 | ) | (67 | ) | (83 | ) | (83 | ) | ||||||||||||||||||||||||||||||||||||||
| Other income, net | $ | 20 | $ | 2 | $ | 22 | $ | 23 | $ | 3 | $ | 26 | $ | (1 | ) | $ | 19 | $ | (1 | ) | $ | 21 | (13 | )% | (15 | )% | (17 | )% | (19 | )% | ||||||||||||||||||||||||||
| INCOME (LOSS) FROM EQUITY METHOD INVESTMENT IN CHANGE HEALTHCARE - Technology Solutions (4) | $ | (90 | ) | $ | 145 | $ | 55 | $ | $ | $ | $ | $ | (90 | ) | $ | $ | 55 | % | % | % | % | |||||||||||||||||||||||||||||||||||
| OPERATING PROFIT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions (1) | $ | 819 | $ | 172 | $ | 991 | $ | 813 | $ | (8 | ) | $ | 805 | $ | (3 | ) | $ | 816 | $ | (9 | ) | $ | 982 | 1 | % | 23 | % | % | 22 | % | ||||||||||||||||||||||||||
| Technology Solutions (2) (3) (4) (6) | 65 | (12 | ) | 53 | 132 | 31 | 163 | 65 | 53 | (51 | ) | (67 | ) | (51 | ) | (67 | ) | |||||||||||||||||||||||||||||||||||||||
| Operating profit | 884 | 160 | 1,044 | 945 | 23 | 968 | (3 | ) | 881 | (9 | ) | 1,035 | (6 | ) | 8 | (7 | ) | 7 | ||||||||||||||||||||||||||||||||||||||
| Corporate | (120 | ) | 13 | (107 | ) | (91 | ) | (1 | ) | (92 | ) | 1 | (119 | ) | (107 | ) | 32 | 16 | 31 | 16 | ||||||||||||||||||||||||||||||||||||
| Income from continuing operations before interest expense and income taxes | $ | 764 | $ | 173 | $ | 937 | $ | 854 | $ | 22 | $ | 876 | $ | (2 | ) | $ | 762 | $ | (9 | ) | $ | 928 | (11 | )% | 7 | % | (11 | )% | 6 | % | ||||||||||||||||||||||||||
| STATISTICS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating profit as a % of revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions | 1.53 | % | 1.85 | % | 1.64 | % | 1.63 | % | 1.54 | % | 1.85 | % | (11 | ) bp | 22 bp | (10 | ) bp | 22 bp | ||||||||||||||||||||||||||||||||||||||
| Adjusted operating profit excluding noncontrolling interests as a % of revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions (5) | 1.76 | % | 1.62 | % | 1.77 | % | 14 bp | 15 bp |
For more information relating to the Adjusted Earnings (Non-GAAP), Constant Currency (Non-GAAP) and Adjusted Operating Profit Margin Excluding Noncontrolling Interests (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)
| Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 | GAAP | Non-GAAP | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Adjustments | Adjusted Earnings (Non- GAAP) | As Reported (GAAP) | Adjustments | Adjusted Earnings (Non- GAAP) | Foreign Currency Effects | Constant Currency | Foreign Currency Effects | Constant Currency | As Reported (GAAP) | Adjusted Earnings (Non- GAAP) | Constant Currency (GAAP) | Constant Currency (Non- GAAP) | |||||||||||||||||||||||||||||||||||||||||||
| REVENUES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| North America pharmaceutical distribution & services | $ | 131,459 | $ | $ | 131,459 | $ | 124,271 | $ | $ | 124,271 | $ | (130 | ) | $ | 131,329 | $ | (130 | ) | $ | 131,329 | 6 | % | 6 | % | 6 | % | 6 | % | ||||||||||||||||||||||||||||
| International pharmaceutical distribution & services | 20,144 | 20,144 | 18,794 | 18,794 | (434 | ) | 19,710 | (434 | ) | 19,710 | 7 | 7 | 5 | 5 | ||||||||||||||||||||||||||||||||||||||||||
| Medical-Surgical distribution & services | 4,886 | 4,886 | 4,657 | 4,657 | 4,886 | 4,886 | 5 | 5 | 5 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Distribution Solutions | 156,489 | 156,489 | 147,722 | 147,722 | (564 | ) | 155,925 | (564 | ) | 155,925 | 6 | 6 | 6 | 6 | ||||||||||||||||||||||||||||||||||||||||||
| Technology Solutions - Products and Services | 240 | 240 | 2,098 | 2,098 | 240 | 240 | (89 | ) | (89 | ) | (89 | ) | (89 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 156,729 | $ | $ | 156,729 | $ | 149,820 | $ | $ | 149,820 | $ | (564 | ) | $ | 156,165 | $ | (564 | ) | $ | 156,165 | 5 | % | 5 | % | 4 | % | 4 | % | ||||||||||||||||||||||||||||
| GROSS PROFIT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions (1) | $ | 7,989 | $ | 5 | $ | 7,994 | $ | 7,333 | $ | (295 | ) | $ | 7,038 | $ | (39 | ) | $ | 7,950 | $ | (39 | ) | $ | 7,955 | 9 | % | 14 | % | 8 | % | 13 | % | |||||||||||||||||||||||||
| Technology Solutions | 120 | 1 | 121 | 1,142 | 2 | 1,144 | 120 | 121 | (89 | ) | (89 | ) | (89 | ) | (89 | ) | ||||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 8,109 | $ | 6 | $ | 8,115 | $ | 8,475 | $ | (293 | ) | $ | 8,182 | $ | (39 | ) | $ | 8,070 | $ | (39 | ) | $ | 8,076 | (4 | )% | (1 | )% | (5 | )% | (1 | )% | |||||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions (2) (3) | $ | (6,164 | ) | $ | 1,032 | $ | (5,132 | ) | $ | (4,784 | ) | $ | 413 | $ | (4,371 | ) | $ | 58 | $ | (6,106 | ) | $ | 28 | $ | (5,104 | ) | 29 | % | 17 | % | 28 | % | 17 | % | ||||||||||||||||||||||
| Technology Solutions (3) (4) (5) | 104 | (194 | ) | (90 | ) | (1,017 | ) | 369 | (648 | ) | 104 | (90 | ) | (110 | ) | (86 | ) | (110 | ) | (86 | ) | |||||||||||||||||||||||||||||||||||
| Corporate | (343 | ) | 25 | (318 | ) | (291 | ) | 3 | (288 | ) | 2 | (341 | ) | 1 | (317 | ) | 18 | 10 | 17 | 10 | ||||||||||||||||||||||||||||||||||||
| Operating expenses | $ | (6,403 | ) | $ | 863 | $ | (5,540 | ) | $ | (6,092 | ) | $ | 785 | $ | (5,307 | ) | $ | 60 | $ | (6,343 | ) | $ | 29 | $ | (5,511 | ) | 5 | % | 4 | % | 4 | % | 4 | % | ||||||||||||||||||||||
| OTHER INCOME, NET | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions (6) | $ | 95 | $ | (40 | ) | $ | 55 | $ | 43 | $ | 9 | $ | 52 | $ | $ | 95 | $ | $ | 55 | 121 | % | 6 | % | 121 | % | 6 | % | |||||||||||||||||||||||||||||
| Technology Solutions | 1 | 1 | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate | 6 | 6 | 21 | 21 | (1 | ) | 5 | (1 | ) | 5 | (71 | ) | (71 | ) | (76 | ) | (76 | ) | ||||||||||||||||||||||||||||||||||||||
| Other income, net | $ | 102 | $ | (40 | ) | $ | 62 | $ | 65 | $ | 9 | $ | 74 | $ | (1 | ) | $ | 101 | $ | (1 | ) | $ | 61 | 57 | % | (16 | )% | 55 | % | (18 | )% | |||||||||||||||||||||||||
| INCOME (LOSS) FROM EQUITY METHOD INVESTMENT IN CHANGE HEALTHCARE - Technology Solutions (7) | $ | (271 | ) | $ | 471 | $ | 200 | $ | $ | $ | $ | $ | (271 | ) | $ | $ | 200 | % | % | % | % | |||||||||||||||||||||||||||||||||||
| OPERATING PROFIT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions (1) (2) (3) (6) | $ | 1,920 | $ | 997 | $ | 2,917 | $ | 2,592 | $ | 127 | $ | 2,719 | $ | 19 | $ | 1,939 | $ | (11 | ) | $ | 2,906 | (26 | )% | 7 | % | (25 | )% | 7 | % | |||||||||||||||||||||||||||
| Technology Solutions (3) (4) (5) (7) (9) | (46 | ) | 278 | 232 | 126 | 371 | 497 | (46 | ) | 232 | (137 | ) | (53 | ) | (137 | ) | (53 | ) | ||||||||||||||||||||||||||||||||||||||
| Operating profit | 1,874 | 1,275 | 3,149 | 2,718 | 498 | 3,216 | 19 | 1,893 | (11 | ) | 3,138 | (31 | ) | (2 | ) | (30 | ) | (2 | ) | |||||||||||||||||||||||||||||||||||||
| Corporate | (337 | ) | 25 | (312 | ) | (270 | ) | 3 | (267 | ) | 1 | (336 | ) | (312 | ) | 25 | 17 | 24 | 17 | |||||||||||||||||||||||||||||||||||||
| Income from continuing operations before interest expense and income taxes | $ | 1,537 | $ | 1,300 | $ | 2,837 | $ | 2,448 | $ | 501 | $ | 2,949 | $ | 20 | $ | 1,557 | $ | (11 | ) | $ | 2,826 | (37 | )% | (4 | )% | (36 | )% | (4 | )% | |||||||||||||||||||||||||||
| STATISTICS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating profit as a % of revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions | 1.23 | % | 1.86 | % | 1.75 | % | 1.84 | % | 1.24 | % | 1.86 | % | (52 | ) bp | 2 | bp | (51 | ) bp | 2 | bp | ||||||||||||||||||||||||||||||||||||
| Adjusted operating profit excluding noncontrolling interests as a % of revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Solutions (8) | 1.78 | % | 1.83 | % | 1.78 | % | (5 | ) bp | (5 | ) bp |
For more information relating to the Adjusted Earnings (Non-GAAP), Constant Currency (Non-GAAP) and Adjusted Operating Profit Margin Excluding Noncontrolling Interests (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) - BY ADJUSTMENT TYPE
| Quarter Ended December 31, 2017 | Quarter Ended December 31, 2016 | |||||||||||||||||||||||||||||||
| Distribution Solutions | Technology Solutions | Corporate | Total | Distribution Solutions | Technology Solutions | Corporate | Total | |||||||||||||||||||||||||
| As Reported (GAAP): | ||||||||||||||||||||||||||||||||
| Revenues | $ | 53,617 | $ | $ | $ | 53,617 | $ | 49,436 | $ | 694 | $ | $ | 50,130 | |||||||||||||||||||
| Income from continuing operations before interest expense and income taxes (1) (2) (3) (4) (5) | $ | 819 | $ | 65 | $ | (120 | ) | $ | 764 | $ | 813 | $ | 132 | $ | (91 | ) | $ | 854 | ||||||||||||||
| Pre-Tax Adjustments: | ||||||||||||||||||||||||||||||||
| Amortization of acquisition-related intangibles (4) | $ | 122 | $ | 71 | $ | $ | 193 | $ | 100 | $ | 2 | $ | $ | 102 | ||||||||||||||||||
| Acquisition-Related Expenses and Adjustments | 31 | 61 | 2 | 94 | 43 | 33 | (1 | ) | 75 | |||||||||||||||||||||||
| LIFO Inventory-Related Adjustments | (2 | ) | (2 | ) | (155 | ) | (155 | ) | ||||||||||||||||||||||||
| Gains from Antitrust Legal Settlements | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||
| Restructuring Charges, Net | 20 | (1 | ) | 13 | 32 | 6 | (4 | ) | 2 | |||||||||||||||||||||||
| Other Adjustments, Net | 1 | (143 | ) | (2 | ) | (144 | ) | |||||||||||||||||||||||||
| Total pre-tax adjustments | $ | 172 | $ | (12 | ) | $ | 13 | $ | 173 | $ | (8 | ) | $ | 31 | $ | (1 | ) | $ | 22 | |||||||||||||
| Adjusted Earnings (Non-GAAP): | ||||||||||||||||||||||||||||||||
| Revenues | $ | 53,617 | $ | $ | $ | 53,617 | $ | 49,436 | $ | 694 | $ | $ | 50,130 | |||||||||||||||||||
| Income from continuing operations before interest expense and income taxes (4) (5) | $ | 991 | $ | 53 | $ | (107 | ) | $ | 937 | $ | 805 | $ | 163 | $ | (92 | ) | $ | 876 |
For more information relating to the Adjusted Earnings (Non-GAAP) definition, 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) - BY ADJUSTMENT TYPE
| Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 | |||||||||||||||||||||||||||||||
| Distribution Solutions | Technology Solutions | Corporate | Total | Distribution Solutions | Technology Solutions | Corporate | Total | |||||||||||||||||||||||||
| As Reported (GAAP): | ||||||||||||||||||||||||||||||||
| Revenues | $ | 156,489 | $ | 240 | $ | $ | 156,729 | $ | 147,722 | $ | 2,098 | $ | $ | 149,820 | ||||||||||||||||||
| Income from continuing operations before interest expense and income taxes (1) (2) (3) (4) (5) (6) (7) (8) | $ | 1,920 | $ | (46 | ) | $ | (337 | ) | $ | 1,537 | $ | 2,592 | $ | 126 | $ | (270 | ) | $ | 2,448 | |||||||||||||
| Pre-Tax Adjustments: | ||||||||||||||||||||||||||||||||
| Amortization of acquisition-related intangibles (6) | $ | 369 | $ | 215 | $ | $ | 584 | $ | 311 | $ | 21 | $ | $ | 332 | ||||||||||||||||||
| Acquisition-Related Expenses and Adjustments | 68 | 207 | 2 | 277 | 104 | 58 | 4 | 166 | ||||||||||||||||||||||||
| LIFO Inventory-Related Adjustments | (5 | ) | (5 | ) | (151 | ) | (151 | ) | ||||||||||||||||||||||||
| Gains from Antitrust Legal Settlements | (144 | ) | (144 | ) | ||||||||||||||||||||||||||||
| Restructuring Charges, Net | 261 | (1 | ) | 32 | 292 | 13 | 2 | (1 | ) | 14 | ||||||||||||||||||||||
| Other Adjustments, Net | 304 | (143 | ) | (9 | ) | 152 | (6 | ) | 290 | 284 | ||||||||||||||||||||||
| Total pre-tax adjustments | $ | 997 | $ | 278 | $ | 25 | $ | 1,300 | $ | 127 | $ | 371 | $ | 3 | $ | 501 | ||||||||||||||||
| Adjusted Earnings (Non-GAAP): | ||||||||||||||||||||||||||||||||
| Revenues | $ | 156,489 | $ | 240 | $ | $ | 156,729 | $ | 147,722 | $ | 2,098 | $ | $ | 149,820 | ||||||||||||||||||
| Income from continuing operations before interest expense and income taxes (6) (8) | $ | 2,917 | $ | 232 | $ | (312 | ) | $ | 2,837 | $ | 2,719 | $ | 497 | $ | (267 | ) | $ | 2,949 |
For more information relating to the Adjusted Earnings (Non-GAAP) definition, refer to the section entitled Supplemental Non-GAAP Financial Information of this release.
McKESSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, 2017 | March 31, 2017 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 2,619 | $ | 2,783 | ||||
| Receivables, net | 20,015 | 18,215 | ||||||
| Inventories, net | 17,103 | 15,278 | ||||||
| Prepaid expenses and other | 458 | 672 | ||||||
| Total Current Assets | 40,195 | 36,948 | ||||||
| Property, Plant and Equipment, Net | 2,401 | 2,292 | ||||||
| Goodwill | 11,828 | 10,586 | ||||||
| Intangible Assets, Net | 4,094 | 3,665 | ||||||
| Equity Method Investment in Change Healthcare | 3,704 | 4,063 | ||||||
| Other Noncurrent Assets | 1,991 | 3,415 | ||||||
| Total Assets | $ | 64,213 | $ | 60,969 | ||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Drafts and accounts payable | $ | 33,009 | $ | 31,022 | ||||
| Short-term borrowings | 749 | 183 | ||||||
| Deferred revenue | 68 | 346 | ||||||
| Current portion of long-term debt | 531 | 1,057 | ||||||
| Other accrued liabilities | 3,295 | 3,004 | ||||||
| Total Current Liabilities | 37,652 | 35,612 | ||||||
| Long-Term Debt | 7,514 | 7,305 | ||||||
| Long-Term Deferred Tax Liabilities | 2,833 | 3,678 | ||||||
| Other Noncurrent Liabilities | 2,807 | 1,774 | ||||||
| Redeemable Noncontrolling Interests | 1,435 | 1,327 | ||||||
| McKesson Corporation Stockholders Equity | 11,734 | 11,095 | ||||||
| Noncontrolling Interests | 238 | 178 | ||||||
| Total Equity | 11,972 | 11,273 | ||||||
| Total Liabilities, Redeemable Noncontrolling Interests and Equity | $ | 64,213 | $ | 60,969 |
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income | $ | 1,382 | $ | 1,530 | ||||
| Adjustments to reconcile to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 697 | 663 | ||||||
| Goodwill impairment and other asset impairment charges | 539 | 290 | ||||||
| Deferred taxes | (847 | ) | 122 | |||||
| Share-based compensation expense | 57 | 109 | ||||||
| LIFO credits | (5 | ) | (151 | ) | ||||
| Loss from equity method investment in Change Healthcare | 271 | |||||||
| Loss (gain) from sale of businesses and equity investments | (155 | ) | 113 | |||||
| Other non-cash items | (132 | ) | 50 | |||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||
| Receivables | (1,046 | ) | (654 | ) | ||||
| Inventories | (1,410 | ) | (374 | ) | ||||
| Drafts and accounts payable | 1,203 | 1,891 | ||||||
| Deferred revenue | (134 | ) | (58 | ) | ||||
| Taxes | 689 | 52 | ||||||
| Other | 214 | (274 | ) | |||||
| Net cash provided by operating activities | 1,323 | 3,309 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Property acquisitions | (269 | ) | (246 | ) | ||||
| Capitalized software expenditures | (123 | ) | (123 | ) | ||||
| Acquisitions, net of cash and cash equivalents acquired | (1,979 | ) | (4,174 | ) | ||||
| Proceeds from/(payments for) sale of businesses and equity investments, net | 329 | (91 | ) | |||||
| Payments received on Healthcare Technology Net Asset Exchange | 126 | |||||||
| Restricted cash for acquisitions | 1,469 | 935 | ||||||
| Other | (36 | ) | 80 | |||||
| Net cash used in investing activities | (483 | ) | (3,619 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from short-term borrowings | 12,699 | 2,803 | ||||||
| Repayments of short-term borrowings | (12,133 | ) | (1,405 | ) | ||||
| Repayments of long-term debt | (545 | ) | (392 | ) | ||||
| Common stock transactions: | ||||||||
| Issuances | 114 | 89 | ||||||
| Share repurchases, including shares surrendered for tax withholding | (951 | ) | (2,060 | ) | ||||
| Dividends paid | (192 | ) | (192 | ) | ||||
| Other | (139 | ) | 12 | |||||
| Net cash used in financing activities | (1,147 | ) | (1,145 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 143 | (159 | ) | |||||
| Net decrease in cash and cash equivalents | (164 | ) | (1,614 | ) | ||||
| Cash and cash equivalents at beginning of period | 2,783 | 4,048 | ||||||
| Cash and cash equivalents at end of period | $ | 2,619 | $ | 2,434 |
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 the Healthcare Technology Net Asset Exchange. 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.
LIFO inventory-related adjustments LIFO inventory-related non-cash expense or credit adjustments.
Gains from antitrust legal settlements Net cash proceeds representing the Company s share of antitrust lawsuit settlements.
Restructuring charges Non-acquisition related restructuring charges that are incurred for significant programs in which we change our operations, the scope of a business undertaken by our business units, or the manner in which that business is conducted. Such charges may include employee severance, retention bonuses, facility closure or consolidation costs, lease or contract termination costs, asset impairments, accelerated depreciation and amortization, and other related expenses. The restructuring programs may be implemented due to the sale or discontinuation of a product line, reorganization or management structure changes, headcount rationalization, realignment of operations or products, and/or Company-wide cost saving initiatives. The amount and/or frequency of these restructuring charges are not part of our underlying business, which includes normal levels of reinvestment in the business. Any credit adjustments due to subsequent changes in estimates are also excluded.
Other adjustments The Company evaluates the nature and significance of transactions qualitatively and quantitatively on an individual basis and may include them in the determination of our Adjusted Earnings from time to time. While not all-inclusive, other adjustments may include: gains or losses from divestitures of businesses that do not qualify as discontinued operations and from dispositions of assets; asset impairments; adjustments to claim and litigation reserves for estimated probable losses; certain discrete benefits related to the December 2017 enactment of the 2017 Tax Cuts and Jobs Act; and other similar substantive and/or infrequent items as deemed appropriate.
Income taxes on Adjusted Earnings are calculated in accordance with Accounting Standards Codification ( ASC ) 740, Income Taxes, which is the same accounting principle used by the Company when presenting its GAAP financial results.
Additionally, our equity method investments financial results are adjusted for the above noted items.