Full Press Release Details
McKESSON REPORTS FISCAL 2020 SECOND-QUARTER RESULTS
IRVING, Texas, October 30, 2019 McKesson Corporation (NYSE:MCK) today reported results for the second quarter ended September 30, 2019.
Fiscal 2020 Second-Quarter and Year-to-Date Result Summary
| Second Quarter | Year-to-Date | |||||||||||||||||||||||
| ($ in millions, except per share amounts) | FY20 | FY19 | Change | FY20 | FY19 | Change | ||||||||||||||||||
| Revenues | $ | 57,616 | $ | 53,075 | 9 | % | $ | 113,344 | $ | 105,682 | 7 | % | ||||||||||||
| Net income / (loss) 1 | ($ | 729 | ) | $ | 498 | (246 | )% | ($ | 300 | ) | $ | 359 | (184 | )% | ||||||||||
| Adjusted Earnings 1,2 | $ | 661 | $ | 714 | (7 | )% | $ | 1,286 | $ | 1,303 | (1 | )% | ||||||||||||
| Earnings / (loss) per diluted share | ($ | 3.99 | ) | $ | 2.51 | (259 | )% | ($ | 1.62 | ) | $ | 1.79 | (191 | )% | ||||||||||
| Adjusted Earnings per diluted share 2 | $ | 3.60 | $ | 3.60 | $ | 6.91 | $ | 6.50 | 6 | % |
McKesson s second-quarter results reflect continued momentum across the business as well as further progress against our cost savings initiatives, said Brian Tyler, chief executive officer. As we look forward to the second half of our fiscal year, we remain confident in the strength of our broad set of solutions and capabilities, delivering execution against our strategic imperatives as we become a more focused and efficient organization.
Revenues increased 9% year-over-year, primarily driven by growth in the U.S. Pharmaceutical and Specialty Solutions segment, largely due to branded pharmaceutical price increases and higher volumes from a retail national account customer.
Loss per diluted share of $(3.99) included charges of approximately $1.4 billion, or $5.73 per diluted share, primarily related to an impairment in connection with McKesson s planned exit of its investment in Change Healthcare. Adjusted Earnings per diluted share of $3.60 was flat year-over-year, as a lower share count and growth in the Medical-Surgical and McKesson Prescription Technology Solutions (MRxTS) businesses were offset primarily by the lapping of a prior year pre-tax benefit of $90 million, or $0.33 per diluted share, related to a reversal of a contractual liability associated with McKesson s investment in Change Healthcare. Excluding the prior year benefit of $0.33 per diluted share from Adjusted Earnings, second-quarter results per diluted share increased 10%.
During the first half of the fiscal year, McKesson returned $1.6 billion of cash to shareholders via $1.4 billion of common stock repurchases and $148 million of dividend payments. For the first half of the fiscal year, McKesson used cash from operations of $159 million, and invested $184 million internally, resulting in negative free cash flow of $343 million.
U.S. Pharmaceutical and Specialty Solutions Segment
European Pharmaceutical Solutions Segment
Medical-Surgical Solutions Segment
Other remaining businesses
Company Updates
Fiscal 2020 Outlook
Conference Call Details
The company has scheduled a conference call for today, Wednesday, October 30 th , at 8:00 AM ET to discuss the company s financial results. A live audio webcast of the conference call will be available on McKesson s Investor Relations website at http://investor.mckesson.com . The conference call can also be accessed by dialing 786-815-8297. The password is McKesson . A telephonic replay of this conference call will be available for 14 calendar days. For individuals wishing to listen to the replay, the dial-in number is 404-537-3406 and the pass code is 6206708. 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 conference:
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, transaction-related expenses and adjustments, LIFO inventory-related adjustments, gains from antitrust legal settlements, restructuring, impairment and related charges, and other adjustments as well as the related income tax effects for each of these items, as applicable. 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, impairment and related 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. 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 (used in) 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, that involve risks and uncertainties that could cause actual results to differ materially from those in those statements. It is not possible to identify all such risks and uncertainties. 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. 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. We encourage investors to read the 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 healthcare industry and regulatory environment; fluctuations in foreign currency exchange rates; the impact of the Change Healthcare joint venture on the company s results of operations; the company s ability to manage and complete divestitures and distributions; material adverse resolution of pending legal proceedings, including those related to the distribution of controlled substances; cyberattack, natural disaster, or malfunction of sophisticated internal computer systems to perform as designed; and the potential inadequacy of insurance to cover property loss or liability claims.
About McKesson Corporation
McKesson Corporation, currently ranked 7th on the FORTUNE 500, is a global leader in healthcare supply chain management solutions, retail pharmacy, healthcare technology, community oncology and specialty care. McKesson partners with life sciences companies, manufacturers, providers, pharmacies, governments and other healthcare organizations 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 to improve patient care in every setting one product, one partner, one patient at a time. McKesson has been named a 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)
David Matthews, 214-952-0833 (General and Business Media)
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP
(in millions, except per share amounts)
| Quarter Ended September 30, | Six Months Ended September 30, | |||||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||||
| Revenues | $ | 57,616 | $ | 53,075 | 9 | % | $ | 113,344 | $ | 105,682 | 7 | % | ||||||||||||
| Cost of sales | (54,749 | ) | (50,271 | ) | 9 | (107,690 | ) | (100,099 | ) | 8 | ||||||||||||||
| Gross profit | 2,867 | 2,804 | 2 | 5,654 | 5,583 | 1 | ||||||||||||||||||
| Operating expenses (1) (2) | (2,196 | ) | (2,033 | ) | 8 | (4,326 | ) | (4,063 | ) | 6 | ||||||||||||||
| Goodwill impairment charges (3) | (570 | ) | (100 | ) | ||||||||||||||||||||
| Restructuring, impairment and related charges (4) | (45 | ) | (82 | ) | (45 | ) | (68 | ) | (178 | ) | (62 | ) | ||||||||||||
| Total operating expenses | (2,241 | ) | (2,115 | ) | 6 | (4,394 | ) | (4,811 | ) | (9 | ) | |||||||||||||
| Operating income | 626 | 689 | (9 | ) | 1,260 | 772 | 63 | |||||||||||||||||
| Other income (expense), net (5) | (78 | ) | 20 | (490 | ) | (41 | ) | 60 | (168 | ) | ||||||||||||||
| Equity earnings and charges from investment in Change Healthcare Joint Venture (6) (7) (8) | (1,454 | ) | (56 | ) | NM | (1,450 | ) | (112 | ) | NM | ||||||||||||||
| Interest expense | (64 | ) | (66 | ) | (3 | ) | (120 | ) | (127 | ) | (6 | ) | ||||||||||||
| Income (loss) from continuing operations before income taxes | (970 | ) | 587 | (265 | ) | (351 | ) | 593 | (159 | ) | ||||||||||||||
| Income tax benefit (expense) | 294 | (35 | ) | (940 | ) | 158 | (122 | ) | (230 | ) | ||||||||||||||
| Income (loss) from continuing operations after tax | (676 | ) | 552 | (222 | ) | (193 | ) | 471 | (141 | ) | ||||||||||||||
| Income (loss) from discontinued operations, net of tax | (1 | ) | 1 | (200 | ) | (7 | ) | 2 | (450 | ) | ||||||||||||||
| Net income (loss) | (677 | ) | 553 | (222 | ) | (200 | ) | 473 | (142 | ) | ||||||||||||||
| Net income attributable to noncontrolling interests | (53 | ) | (54 | ) | (2 | ) | (107 | ) | (112 | ) | (4 | ) | ||||||||||||
| Net income (loss) attributable to McKesson Corporation | $ | (730 | ) | $ | 499 | (246 | )% | $ | (307 | ) | $ | 361 | (185 | )% | ||||||||||
| Earnings (loss) per common share attributable to McKesson Corporation (a) | ||||||||||||||||||||||||
| Diluted (b) | ||||||||||||||||||||||||
| Continuing operations | $ | (3.99 | ) | $ | 2.51 | (259 | )% | $ | (1.62 | ) | $ | 1.79 | (191 | )% | ||||||||||
| Discontinued operations | (0.03 | ) | 0.01 | (400 | ) | |||||||||||||||||||
| Total | $ | (3.99 | ) | $ | 2.51 | (259 | )% | $ | (1.65 | ) | $ | 1.80 | (192 | )% | ||||||||||
| Basic | ||||||||||||||||||||||||
| Continuing operations | $ | (3.99 | ) | $ | 2.52 | (258 | )% | $ | (1.62 | ) | $ | 1.80 | (190 | )% | ||||||||||
| Discontinued operations | (0.03 | ) | 0.01 | (400 | ) | |||||||||||||||||||
| Total | $ | (3.99 | ) | $ | 2.52 | (258 | )% | $ | (1.65 | ) | $ | 1.81 | (191 | )% | ||||||||||
| Dividends declared per common share | $ | 0.41 | $ | 0.39 | $ | 0.80 | $ | 0.73 | ||||||||||||||||
| Weighted average common shares | ||||||||||||||||||||||||
| Diluted | 183 | 199 | (8 | )% | 185 | 201 | (8 | )% | ||||||||||||||||
| Basic | 183 | 198 | (8 | ) | 185 | 200 | (8 | ) |
Refer to the section entitled Financial Statement Notes of this release.
For additional disclosures, refer to our applicable filings with the SEC, including our Quarterly Reports on Form 10-Q for fiscal 2020 and 2019 as well as our Annual Report on Form 10-K for fiscal 2019.
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
(in millions, except per share amounts)
| Quarter Ended September 30, 2019 | Change Vs. Prior Quarter | |||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Transaction- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring, Impairment and Related Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | As Reported (GAAP) | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||
| Gross profit | $ | 2,867 | $ | $ | $ | (33 | ) | $ | $ | (2 | ) | $ | $ | 2,832 | 2 | % | 2 | % | ||||||||||||||||||||||
| Operating expenses (2) (4) | $ | (2,241 | ) | $ | 118 | $ | 16 | $ | $ | $ | 45 | $ | 84 | $ | (1,978 | ) | 6 | % | 5 | % | ||||||||||||||||||||
| Other income (expense), net (5) | $ | (78 | ) | $ | $ | 3 | $ | $ | $ | $ | 105 | $ | 30 | (490 | )% | 50 | % | |||||||||||||||||||||||
| Equity earnings and charges from investment in Change Healthcare Joint Venture (6) (7) (8) | $ | (1,454 | ) | $ | 63 | $ | 263 | $ | $ | $ | $ | 1,167 | $ | 39 | NM | (30 | )% | |||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | (970 | ) | $ | 181 | $ | 282 | $ | (33 | ) | $ | $ | 43 | $ | 1,356 | $ | 859 | (265 | )% | (6 | )% | |||||||||||||||||||
| Income tax benefit (expense) | $ | 294 | $ | (42 | ) | $ | (72 | ) | $ | 8 | $ | $ | (10 | ) | $ | (323 | ) | $ | (145 | ) | (940 | )% | (3 | )% | ||||||||||||||||
| Income (loss) from continuing operations, net of tax, attributable to McKesson Corporation | $ | (729 | ) | $ | 139 | $ | 210 | $ | (25 | ) | $ | $ | 33 | $ | 1,033 | $ | 661 | (246 | )% | (7 | )% | |||||||||||||||||||
| Earnings (loss) per diluted common share from continuing operations, net of tax, attributable to McKesson Corporation (a) (b) | $ | (3.99 | ) | $ | 0.76 | $ | 1.14 | $ | (0.14 | ) | $ | $ | 0.18 | $ | 5.62 | $ | 3.60 | (c) | (259 | )% | % | |||||||||||||||||||
| Diluted weighted average common shares | 183 | 184 | 184 | 184 | 184 | 184 | 184 | 184 | (8 | )% | (8 | )% | ||||||||||||||||||||||||||||
| Quarter Ended September 30, 2018 | ||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Transaction- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring, Impairment and Related Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||||
| Gross profit | $ | 2,804 | $ | $ | $ | (22 | ) | $ | $ | $ | $ | 2,782 | ||||||||||||||||||||||||||||
| Operating expenses (4) | $ | (2,115 | ) | $ | 121 | $ | 37 | $ | $ | $ | 82 | $ | $ | (1,875 | ) | |||||||||||||||||||||||||
| Other income, net | $ | 20 | $ | $ | $ | $ | $ | $ | $ | 20 | ||||||||||||||||||||||||||||||
| Equity earnings and charges from investment in Change Healthcare Joint Venture (8) | $ | (56 | ) | $ | 77 | $ | 34 | $ | $ | $ | $ | 1 | $ | 56 | ||||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 587 | $ | 198 | $ | 71 | $ | (22 | ) | $ | $ | 82 | $ | 1 | $ | 917 | ||||||||||||||||||||||||
| Income tax expense | $ | (35 | ) | $ | (48 | ) | $ | (17 | ) | $ | 5 | $ | $ | (15 | ) | $ | (39 | ) | $ | (149 | ) | |||||||||||||||||||
| Income from continuing operations, net of tax, attributable to McKesson Corporation | $ | 498 | $ | 150 | $ | 54 | $ | (17 | ) | $ | $ | 67 | $ | (38 | ) | $ | 714 | |||||||||||||||||||||||
| Earnings per diluted common share from continuing operations, net of tax, attributable to McKesson Corporation (a) | $ | 2.51 | $ | 0.75 | $ | 0.27 | $ | (0.08 | ) | $ | $ | 0.34 | $ | (0.19 | ) | $ | 3.60 | |||||||||||||||||||||||
| Diluted weighted average common shares | 199 | 199 | 199 | 199 | 199 | 199 | 199 | 199 |
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)
| Six Months Ended September 30, 2019 | Change Vs. Prior Period | |||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Transaction- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring, Impairment and Related Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | As Reported (GAAP) | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||
| Gross profit | $ | 5,654 | $ | $ | $ | (48 | ) | $ | $ | (5 | ) | $ | $ | 5,601 | 1 | % | 2 | % | ||||||||||||||||||||||
| Operating expenses (2) (4) | $ | (4,394 | ) | $ | 230 | $ | 33 | $ | $ | $ | 68 | $ | 86 | $ | (3,977 | ) | (9 | )% | 3 | % | ||||||||||||||||||||
| Other income (expense), net (5) | $ | (41 | ) | $ | $ | 3 | $ | $ | $ | $ | 123 | $ | 85 | (168 | )% | 39 | % | |||||||||||||||||||||||
| Equity earnings and charges from investment in Change Healthcare Joint Venture (6) (7) (8) | $ | (1,450 | ) | $ | 140 | $ | 290 | $ | $ | $ | $ | 1,167 | $ | 147 | NM | 23 | % | |||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | (351 | ) | $ | 370 | $ | 326 | $ | (48 | ) | $ | $ | 63 | $ | 1,376 | $ | 1,736 | (159 | )% | 1 | % | |||||||||||||||||||
| Income tax benefit (expense) | $ | 158 | $ | (87 | ) | $ | (83 | ) | $ | 12 | $ | $ | (15 | ) | $ | (328 | ) | $ | (343 | ) | (230 | )% | 15 | % | ||||||||||||||||
| Income (loss) from continuing operations, net of tax, attributable to McKesson Corporation | $ | (300 | ) | $ | 283 | $ | 243 | $ | (36 | ) | $ | $ | 48 | $ | 1,048 | $ | 1,286 | (184 | )% | (1 | )% | |||||||||||||||||||
| Earnings (loss) per diluted common share from continuing operations, net of tax, attributable to McKesson Corporation (a) (b) | $ | (1.62 | ) | $ | 1.52 | $ | 1.31 | $ | (0.19 | ) | $ | $ | 0.26 | $ | 5.63 | $ | 6.91 | (c) | (191 | )% | 6 | % | ||||||||||||||||||
| Diluted weighted average common shares | 185 | 186 | 186 | 186 | 186 | 186 | 186 | 186 | (8 | )% | (7 | )% | ||||||||||||||||||||||||||||
| Six Months Ended September 30, 2018 | ||||||||||||||||||||||||||||||||||||||||
| As Reported (GAAP) | Amortization of Acquisition- Related Intangibles | Transaction- Related Expenses and Adjustments | LIFO Inventory- Related Adjustments | Gains from Antitrust Legal Settlements | Restructuring, Impairment and Related Charges, Net | Other Adjustments, Net | Adjusted Earnings (Non-GAAP) | |||||||||||||||||||||||||||||||||
| Gross profit | $ | 5,583 | $ | $ | 1 | $ | (43 | ) | $ | (35 | ) | $ | $ | $ | 5,506 | |||||||||||||||||||||||||
| Operating expenses (1) (3) (4) | $ | (4,811 | ) | $ | 242 | $ | 57 | $ | $ | $ | 178 | $ | 487 | $ | (3,847 | ) | ||||||||||||||||||||||||
| Other income, net | $ | 60 | $ | 1 | $ | $ | $ | $ | $ | $ | 61 | |||||||||||||||||||||||||||||
| Equity earnings and charges from investment in Change Healthcare Joint Venture (8) | $ | (112 | ) | $ | 154 | $ | 74 | $ | $ | $ | $ | 4 | $ | 120 | ||||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 593 | $ | 397 | $ | 132 | $ | (43 | ) | $ | (35 | ) | $ | 178 | $ | 491 | $ | 1,713 | ||||||||||||||||||||||
| Income tax expense | $ | (122 | ) | $ | (98 | ) | $ | (33 | ) | $ | 11 | $ | 9 | $ | (26 | ) | $ | (39 | ) | $ | (298 | ) | ||||||||||||||||||
| Income from continuing operations, net of tax, attributable to McKesson Corporation | $ | 359 | $ | 299 | $ | 99 | $ | (32 | ) | $ | (26 | ) | $ | 152 | $ | 452 | $ | 1,303 | ||||||||||||||||||||||
| Earnings per diluted common share from continuing operations, net of tax, attributable to McKesson Corporation (a) | $ | 1.79 | $ | 1.49 | $ | 0.49 | $ | (0.16 | ) | $ | (0.13 | ) | $ | 0.76 | $ | 2.26 | $ | 6.50 | ||||||||||||||||||||||
| Diluted weighted average common shares | 201 | 201 | 201 | 201 | 201 | 201 | 201 | 201 |
Refer to the section entitled Financial Statement Notes 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 September 30, 2019 | Quarter Ended September 30, 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 | $ | 45,979 | $ | $ | 45,979 | $ | 41,610 | $ | $ | 41,610 | $ | $ | 45,979 | $ | $ | 45,979 | 10 | % | 10 | % | 10 | % | 10 | % | ||||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | 6,598 | 6,598 | 6,639 | 6,639 | 336 | 6,934 | 336 | 6,934 | (1 | ) | (1 | ) | 4 | 4 | ||||||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 2,056 | 2,056 | 1,948 | 1,948 | 2,056 | 2,056 | 6 | 6 | 6 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other (a) | 2,983 | 2,983 | 2,878 | 2,878 | 30 | 3,013 | 30 | 3,013 | 4 | 4 | 5 | 5 | ||||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 57,616 | $ | $ | 57,616 | $ | 53,075 | $ | $ | 53,075 | $ | 366 | $ | 57,982 | $ | 366 | $ | 57,982 | 9 | % | 9 | % | 9 | % | 9 | % | ||||||||||||||||||||||||||||||
| OPERATING PROFIT (LOSS) (4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions | $ | 639 | $ | 2 | $ | 641 | $ | 610 | $ | 25 | $ | 635 | $ | $ | 639 | $ | $ | 641 | 5 | % | 1 | % | 5 | % | 1 | % | ||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | 1 | 40 | 41 | 10 | 43 | 53 | (1 | ) | 2 | 43 | (90 | ) | (23 | ) | (100 | ) | (19 | ) | ||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 129 | 37 | 166 | 105 | 33 | 138 | 129 | 166 | 23 | 20 | 23 | 20 | ||||||||||||||||||||||||||||||||||||||||||||
| Other (a) (6) (7) (8) | (1,311 | ) | 1,532 | 221 | 95 | 205 | 300 | 1 | (1,310 | ) | 221 | NM | (26 | ) | NM | (26 | ) | |||||||||||||||||||||||||||||||||||||||
| Operating profit (loss) | (542 | ) | 1,611 | 1,069 | 820 | 306 | 1,126 | (542 | ) | 2 | 1,071 | (166 | ) | (5 | ) | (166 | ) | (5 | ) | |||||||||||||||||||||||||||||||||||||
| Corporate (2) (5) | (364 | ) | 218 | (146 | ) | (167 | ) | 24 | (143 | ) | (364 | ) | (146 | ) | 118 | 2 | 118 | 2 | ||||||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations before interest expense and income taxes | $ | (906 | ) | $ | 1,829 | $ | 923 | $ | 653 | $ | 330 | $ | 983 | $ | $ | (906 | ) | $ | 2 | $ | 925 | (239 | )% | (6 | )% | (239 | )% | (6 | )% | |||||||||||||||||||||||||||
| OPERATING PROFIT AS A % OF REVENUES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions | 1.39 | % | 1.39 | % | 1.47 | % | 1.53 | % | 1.39 | % | 1.39 | % | (8 | )bp | (14 | )bp | (8 | )bp | (14 | )bp | ||||||||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | 0.02 | 0.62 | 0.15 | 0.80 | 0.62 | (13 | ) | (18 | ) | (15 | ) | (18 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 6.27 | 8.07 | 5.39 | 7.08 | 6.27 | 8.07 | 88 | 99 | 88 | 99 |
Refer to the section entitled Financial Statement Notes 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)
| Six Months Ended September 30, 2019 | Six Months Ended September 30, 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 | $ | 90,144 | $ | $ | 90,144 | $ | 82,587 | $ | $ | 82,587 | $ | $ | 90,144 | $ | $ | 90,144 | 9 | % | 9 | % | 9 | % | 9 | % | ||||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | 13,308 | 13,308 | 13,574 | 13,574 | 748 | 14,056 | 748 | 14,056 | (2 | ) | (2 | ) | 4 | 4 | ||||||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 3,959 | 3,959 | 3,651 | 3,651 | 3,959 | 3,959 | 8 | 8 | 8 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other (a) | 5,933 | 5,933 | 5,870 | 5,870 | 128 | 6,061 | 128 | 6,061 | 1 | 1 | 3 | 3 | ||||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 113,344 | $ | $ | 113,344 | $ | 105,682 | $ | $ | 105,682 | $ | 876 | $ | 114,220 | $ | 876 | $ | 114,220 | 7 | % | 7 | % | 8 | % | 8 | % | ||||||||||||||||||||||||||||||
| OPERATING PROFIT (4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions | $ | 1,218 | $ | 23 | $ | 1,241 | $ | 1,153 | $ | 22 | $ | 1,175 | $ | $ | 1,218 | $ | $ | 1,241 | 6 | % | 6 | % | 6 | % | 6 | % | ||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions (3) | 6 | 70 | 76 | (550 | ) | 677 | 127 | 6 | 4 | 80 | 101 | (40 | ) | 101 | (37 | ) | ||||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 254 | 71 | 325 | 198 | 65 | 263 | 254 | 325 | 28 | 24 | 28 | 24 | ||||||||||||||||||||||||||||||||||||||||||||
| Other (a) (1) (6) (7) (8) | (1,170 | ) | 1,667 | 497 | 209 | 304 | 513 | 1 | (1,169 | ) | 3 | 500 | (660 | ) | (3 | ) | (659 | ) | (3 | ) | ||||||||||||||||||||||||||||||||||||
| Operating profit | 308 | 1,831 | 2,139 | 1,010 | 1,068 | 2,078 | 1 | 309 | 7 | 2,146 | (70 | ) | 3 | (69 | ) | 3 | ||||||||||||||||||||||||||||||||||||||||
| Corporate (2) (5) | (539 | ) | 256 | (283 | ) | (290 | ) | 52 | (238 | ) | (539 | ) | (1 | ) | (284 | ) | 86 | 19 | 86 | 19 | ||||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations before interest expense and income taxes | $ | (231 | ) | $ | 2,087 | $ | 1,856 | $ | 720 | $ | 1,120 | $ | 1,840 | $ | 1 | $ | (230 | ) | $ | 6 | $ | 1,862 | (132 | )% | 1 | % | (132 | )% | 1 | % | ||||||||||||||||||||||||||
| OPERATING PROFIT (LOSS) AS A % OF REVENUES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Pharmaceutical and Specialty Solutions | 1.35 | % | 1.38 | % | 1.40 | % | 1.42 | % | 1.35 | % | 1.38 | % | (5 | )bp | (4 | )bp | (5 | )bp | (4 | )bp | ||||||||||||||||||||||||||||||||||||
| European Pharmaceutical Solutions | 0.05 | 0.57 | (4.05 | ) | 0.94 | 0.04 | 0.57 | 410 | (37 | ) | 409 | (37 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Medical-Surgical Solutions | 6.42 | 8.21 | 5.42 | 7.20 | 6.42 | 8.21 | 100 | 101 | 100 | 101 |
Refer to the section entitled Financial Statement Notes 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
| September 30, 2019 | March 31, 2019 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 1,356 | $ | 2,981 | ||||
| Receivables, net | 18,984 | 18,246 | ||||||
| Inventories, net | 16,356 | 16,709 | ||||||
| Prepaid expenses and other | 657 | 529 | ||||||
| Total Current Assets | 37,353 | 38,465 | ||||||
| Property, Plant and Equipment, Net | 2,493 | 2,548 | ||||||
| Operating Lease Right-of-Use Assets | 2,002 | |||||||
| Goodwill | 9,408 | 9,358 | ||||||
| Intangible Assets, Net | 3,489 | 3,689 | ||||||
| Investment in Change Healthcare Joint Venture | 2,167 | 3,513 | ||||||
| Other Noncurrent Assets | 2,082 | 2,099 | ||||||
| Total Assets | $ | 58,994 | $ | 59,672 | ||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Drafts and accounts payable | $ | 32,560 | $ | 33,853 | ||||
| Short-term borrowings | 549 | |||||||
| Current portion of long-term debt | 302 | 330 | ||||||
| Current portion of operating lease liabilities | 362 | |||||||
| Other accrued liabilities | 3,372 | 3,443 | ||||||
| Total Current Liabilities | 37,145 | 37,626 | ||||||
| Long-Term Debt | 7,342 | 7,265 | ||||||
| Long-Term Deferred Tax Liabilities | 2,718 | 2,998 | ||||||
| Long-Term Operating Lease Liabilities | 1,763 | |||||||
| Other Noncurrent Liabilities | 1,950 | 2,103 | ||||||
| Redeemable Noncontrolling Interests | 1,384 | 1,393 | ||||||
| McKesson Corporation Stockholders Equity | 6,482 | 8,094 | ||||||
| Noncontrolling Interests | 210 | 193 | ||||||
| Total Equity | 6,692 | 8,287 | ||||||
| Total Liabilities, Redeemable Noncontrolling Interests and Equity | $ | 58,994 | $ | 59,672 |
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended September 30, | ||||||||
| 2019 | 2018 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | (200 | ) | $ | 473 | |||
| Adjustments to reconcile to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 463 | 475 | ||||||
| Goodwill and other asset impairment charges | 12 | 611 | ||||||
| Deferred taxes | (380 | ) | 60 | |||||
| Credits associated with last-in, first-out inventory method | (48 | ) | (43 | ) | ||||
| Equity earnings and charges from investment in Change Healthcare Joint Venture | 1,450 | 112 | ||||||
| Non-cash operating lease expense | 180 | |||||||
| Other non-cash items | 144 | (138 | ) | |||||
| Changes in assets and liabilities, net of acquisitions: | ||||||||
| Receivables | (866 | ) | (1,705 | ) | ||||
| Inventories | 331 | (398 | ) | |||||
| Drafts and accounts payable | (1,203 | ) | 1,197 | |||||
| Taxes | 70 | (99 | ) | |||||
| Operating lease liabilities | (189 | ) | ||||||
| Other | 77 | (227 | ) | |||||
| Net cash provided by (used in) operating activities | (159 | ) | 318 | |||||
| INVESTING ACTIVITIES | ||||||||
| Payments for property, plant and equipment | (126 | ) | (178 | ) | ||||
| Capitalized software expenditures | (58 | ) | (70 | ) | ||||
| Acquisitions, net of cash, cash equivalents and restricted cash acquired | (95 | ) | (840 | ) | ||||
| Other | (6 | ) | 105 | |||||
| Net cash used in investing activities | (285 | ) | (983 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from short-term borrowings | 8,670 | 19,735 | ||||||
| Repayments of short-term borrowings | (8,122 | ) | (18,342 | ) | ||||
| Common stock transactions: | ||||||||
| Issuances | 78 | 38 | ||||||
| Share repurchases, including shares surrendered for tax withholding | (1,452 | ) | (888 | ) | ||||
| Dividends paid | (148 | ) | (139 | ) | ||||
| Other | (229 | ) | (206 | ) | ||||
| Net cash provided by (used in) financing activities | (1,203 | ) | 198 | |||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 22 | (87 | ) | |||||
| Net decrease in cash, cash equivalents and restricted cash | (1,625 | ) | (554 | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 2,981 | 2,672 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 1,356 | $ | 2,118 |
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 the formation of joint ventures.
Transaction-related expenses and adjustments - Transaction, integration and other expenses that are directly related to business combinations, the formation of joint ventures, divestitures and other transaction-related costs including initial public offering costs. Examples include transaction closing costs, professional service fees, legal fees, 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, and gains or losses on business combinations and divestitures of businesses that do not qualify as discontinued operations.
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, impairment and related charges - Restructuring charges that are incurred for 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 as well as long-lived asset impairments. 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, integration of acquired businesses, and/or company-wide cost saving initiatives. The amount and/or frequency of these restructuring charges are not part of our underlying business, which include normal levels of reinvestment in the business. Any credit adjustments due to subsequent changes in estimates are also excluded from Adjusted Earnings.
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: adjustments to claim and litigation reserves for estimated probable losses and settlements; other asset impairments; certain discrete benefits and subsequent true-up adjustments related to the December 2017 enactment of the 2017 Tax Cuts and Jobs Act; gains or losses from debt extinguishment; and other similar substantive and/or infrequent items as deemed appropriate. Prior to fiscal 2020, this category also included certain gains or losses from divestitures of businesses that did not qualify as discontinued operations.
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, the Company s investment in Change Healthcare Joint Venture s financial results are adjusted for the above noted items, except for the effect of potentially dilutive securities issued by the joint venture on our adjusted earnings per diluted share.
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (continued)
The Company internally uses both GAAP and Non-GAAP financial measures in connection with its own financial planning and reporting processes. Specifically, Adjusted Earnings serves as one of the measures management utilizes when allocating resources, deploying capital and assessing business performance and employee incentive compensation. The Company conducts its businesses internationally in local currencies, including Euro, British pound sterling and Canadian dollars. As a result, the comparability of our results reported in U.S. dollars can be affected by changes in foreign currency exchange rates. We present FX-Adjusted information to provide a framework for assessing how our business performed excluding the estimated effect of foreign currency exchange rate fluctuations. Nonetheless, Non-GAAP financial results and related measures disclosed by the Company should not be considered a substitute for, nor superior to, financial results and measures as determined or calculated in accordance with GAAP.