- Revenues of $47.5 billion for the first quarter, up 9%.
- First-quarter GAAP earnings per diluted share from continuing operations of $2.50, up 42%.
- First-quarter Adjusted Earnings per diluted share of $3.14, up 27%.
- Consolidated results include a pre-tax gain of $51 million, or 16 cents per diluted share, from the completed sale of the nurse triage business.
- Fiscal 2016 Outlook: Adjusted Earnings per diluted share of $12.36 to $12.86.
- Board of Directors approved raising the quarterly dividend by 17% from 24 cents to 28 cents per share.
SAN FRANCISCO, July 29, 2015 – McKesson Corporation (NYSE:MCK) today reported that revenues for the first quarter ended June 30, 2015 were $47.5 billion, up 9% compared to $43.5 billion a year ago. On the basis of U.S. generally accepted accounting principles (“GAAP”), first-quarter earnings per diluted share from continuing operations was $2.50 compared to $1.76 a year ago.
First-quarter Adjusted Earnings per diluted share was $3.14, up 27% compared to $2.47 a year ago. On a constant currency basis, Adjusted Earnings per diluted share increased 30% over the prior year. First-quarter results include a pre-tax gain of $51 million, or 16 cents per diluted share, related to the sale of the nurse triage business within Technology Solutions.
“McKesson’s first quarter results represent a good start to the fiscal year driven by solid execution across both segments,” said John H. Hammergren, chairman and chief executive officer. “We are updating our outlook to reflect the gain on the sale of our nurse triage business, and now expect Adjusted Earnings per diluted share of $12.36 to $12.86 for the fiscal year ending March 31, 2016.”
For the first quarter, McKesson generated cash from operations of $454 million, and ended the quarter with cash and cash equivalents of $5.6 billion. During the quarter, McKesson paid $59 million in dividends and had internal capital spending of $120 million.
Earlier today, the Board of Directors approved an increase to the quarterly dividend from 24 cents to 28 cents per share. In addition, Celesio announced plans to acquire Sainsbury’s UK-based pharmacy operations.
“We are pleased with the dividend increase and are excited about the planned acquisition of Sainsbury’s pharmacies. The acquisition will add 281 new pharmacies to the Lloyd’s Pharmacy brand in the United Kingdom and complements the more than 12,000 owned or banner pharmacies across McKesson,” said Hammergren. “We have a strong track record of creating value for our shareholders with our portfolio approach to capital deployment through a mixture of internal investments, acquisitions, share repurchases and dividends. The acquisition of Sainsbury’s pharmacies and dividend increase further demonstrate our commitment to this approach and our commitment to long-term shareholder value creation,” Hammergren concluded.
Segment Results
Distribution Solutions revenues were $46.8 billion for the quarter, up 10% on a reported basis and 13% on a constant currency basis.
North America pharmaceutical distribution and services revenues for the quarter were up 15% on a reported basis and 16% on a constant currency basis, primarily reflecting market growth and our mix of business.
International pharmaceutical distribution and services revenues were $5.8 billion for the quarter, down 17% on a reported basis and flat on a constant currency basis.
Medical-Surgical distribution and services revenues were up 4% for the quarter, driven by market growth.
In the first quarter, Distribution Solutions GAAP operating profit was $910 million and GAAP operating margin was 1.94%. First-quarter adjusted operating profit was $1.1 billion, up 14% from the prior year, driven by solid performance across the segment. Adjusted operating margin for the Distribution Solutions segment was 2.42%.
Technology Solutions revenues were down 4% in the first quarter primarily driven by an anticipated year-over-year decline in our hospital software business, partially offset by growth in our other technology businesses.
GAAP operating profit was $158 million for the first quarter and GAAP operating margin was 21.47%. Adjusted operating profit was $167 million for the first quarter and adjusted operating margin was 22.69%. Technology Solutions first quarter results reflect a pre-tax gain of $51 million, or 16 cents per diluted share, related to the sale of the nurse triage business.
Fiscal Year 2016 Outlook
McKesson expects Adjusted Earnings per diluted share between $12.36 and $12.86 for the fiscal year ending March 31, 2016, based on an exchange rate of $1.10 per Euro, which excludes the following GAAP items:
- Amortization of acquisition-related intangible assets of $1.24 per diluted share.
- Acquisition expenses and related adjustments of 30 cents per diluted share.
- LIFO inventory-related charges of 86 cents to 96 cents per diluted share.
The Fiscal 2016 guidance range does not include any potential claim or litigation reserve adjustments, or the impact of any potential new acquisitions and divestitures, and impairments or material restructurings.
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 expenses and related adjustments, certain claim and litigation reserve adjustments reflecting changes to the company’s reserves for controlled substance distribution claims and average wholesale price litigation matters, and Last-In-First-Out (“LIFO”) inventory-related 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
The company also presents supplemental financial information calculated on a constant currency basis. Information on the calculation of constant currency and its effects on results of operations is available in the company’s first quarter 2016 Form 10-Q report filed with the Securities and Exchange Commission (“SEC”)
Risk Factors
Except for historical information contained in this press release, matters discussed may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 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 SEC 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; foreign currency fluctuations; 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; 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; malfunction, failure or breach of sophisticated internal information systems to perform as designed; cyber attacks or other privacy and data security incidents; 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 and solutions 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; and withdrawal from participation in multiemployer pension plans or if such plans are reported to have underfunded liabilities. 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.
The company has scheduled a conference call for 5:00PM ET. The dial-in number for individuals wishing to participate on the call is 719-234-7317. Erin Lampert, senior vice president, Investor Relations, is the leader of the call, and the password to join the call is ‘McKesson’. A 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 8668681. A webcast of the conference call will also be available live and archived on the company’s Investor Relations website at http://investor.McKesson.com.
Shareholders are encouraged to review SEC filings and more information about McKesson, which are located on the company’s website.
About McKesson Corporation
McKesson Corporation, currently ranked 11th on the FORTUNE 500, is a healthcare services and information technology company dedicated to making the business of healthcare run better. McKesson partners with payers, hospitals, physician offices, pharmacies, pharmaceutical companies and others across the spectrum of care to build healthier organizations that deliver better care to patients in every setting. McKesson helps its customers improve their financial, operational, and clinical performance with solutions that include pharmaceutical and medical-surgical supply management, healthcare information technology, and business and clinical services. For more information, visit http://www.McKesson.com.
Tables and full-text of earnings release also available for viewing and download in PDF format: McKesson Reports Fiscal 2016 First-Quarter Results (PDF, 130 KB)