- Revenues of $34.3 billion for the third quarter, up 10%.
- Distributions Solutions adjusted operating profit growth of 37%.
- Third-quarter GAAP earnings per diluted share from continuing operations of $0.67, down 47%.
- Third-quarter Adjusted Earnings per diluted share from continuing operations of $1.45, up 1%.
- Fiscal 2014 Outlook: Adjusted Earnings per diluted share from continuing operations of $8.05 to $8.20.
SAN FRANCISCO, January 30, 2014 –
McKesson Corporation (NYSE:MCK) today reported that revenues for the third
quarter ended December 31, 2013 were $34.3 billion, up 10% compared to $31.1
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 $0.67 compared to $1.27 a year ago. Third-quarter GAAP earnings
per diluted share from continuing operations includes charges of $142 million,
or 37 cents per share, related to LIFO adjustments, $122 million, or 52 cents
per share, related to an ongoing dispute with the Canada Revenue Agency and $42
million, or 18 cents per share, in the Technology Solutions segment from
restructuring actions in the Horizon Clinicals software platform. Third-quarter GAAP earnings per diluted
share was $0.28 which includes a 39 cent loss from discontinued operations.
Third-quarter Adjusted Earnings
per diluted share from continuing operations was $1.45 compared to $1.44 a year
ago. Third-quarter Adjusted Earnings per share includes charges of $122 million,
or 52 cents per share, related to the Canadian dispute and $42 million, or 18
cents per share, in the Technology Solutions segment.
“We are extremely pleased
by the third-quarter performance of our Distribution Solutions segment where adjusted
operating profit grew by 37% and our full-year view of the performance in
Distribution Solutions is better than our previous expectations,” said John H.
Hammergren, chairman and chief executive officer. “This operating strength is offset by an
increase in our tax reserves due to a dispute with the Canadian tax authorities
and a charge in our Technology Solutions segment as we continue to align our
Horizon Clinicals software platform development efforts and size the organization
appropriately given regulatory delays.
As a result, we are updating our previous outlook and now expect
Adjusted Earnings per diluted share of $8.05 to $8.20 for the fiscal year
ending March 31, 2014.”
For the first nine months
of the fiscal year, McKesson generated cash from operations of $472 million,
and ended the quarter with cash and cash
equivalents of $2.4 billion. During the first nine months of the fiscal
year, McKesson paid $154 million in dividends, had internal capital spending of
$296 million, and spent $116 million on acquisitions.
Segment Results
Distribution Solutions revenues were up 10% in the third
quarter, driven mainly by strong growth in U.S. pharmaceutical direct
distribution and services revenues due to market growth and our mix of business.
Canadian revenues, on a constant currency basis, increased
12% for the third quarter primarily due to market growth and new customer wins.
Including an unfavorable currency impact of 6%, Canadian revenues increased 6% for
the third quarter.
Medical-Surgical distribution and services revenues were
up 67% for the third quarter driven primarily by the acquisition of PSS World
Medical and market growth.
In the third quarter, Distribution Solutions GAAP
operating profit was $552 million and GAAP operating margin was 1.65%. Third-quarter
adjusted operating profit was $783 million and the adjusted operating margin was
2.34%.
Technology
Solutions revenues were up 6% in the third quarter compared to the prior year
driven primarily by acquisitions completed in the prior year. GAAP operating profit was $37 million for the
third quarter and GAAP operating margin was 4.72%. Adjusted operating profit was
$67 million for the third quarter and adjusted operating margin was 8.55%. Technology
Solutions third-quarter segment results include a charge of $42 million
driven by restructuring actions in the Horizon Clinicals software platform.
Fiscal Year 2014
Outlook
McKesson expects Adjusted Earnings per diluted share from
continuing operations between $8.05 and $8.20 for the fiscal year ending March
31, 2014,
which excludes the following GAAP items:
- Amortization
of acquisition-related intangible assets of 76 cents per diluted share,
based on acquisitions closed to date.
- Acquisition expenses and related adjustments
of 55 cents per diluted share.
-
Litigation reserve adjustments of
approximately 23 cents per diluted share.
-
LIFO inventory-related charges of 71 to 77
cents per diluted share.
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 litigation reserve adjustments, and
Last-In-First-Out (“LIFO”) inventory-related adjustments. A reconciliation of McKesson’s financial
results determined in accordance with GAAP to Adjusted Earnings is provided in
Schedules 2, 3 and 4 of the financial statement tables included with this
release.
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 Securities and Exchange Commission and include, but are
not limited to: material adverse resolution of pending legal proceedings;
changes in the U.S. healthcare industry and regulatory environment; changes in
the Canadian healthcare industry and regulatory environment; 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; 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; foreign currency fluctuations or disruptions to
our foreign operations; new or revised tax legislation or challenges to our tax
positions; the company’s ability to successfully identify, consummate, finance
and integrate strategic acquisitions; 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; and changes in accounting
principles generally accepted in the United States of America. 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
888-203-1112 (from the U.S. and Canada) or 719-457-0820 (from all other
countries) and the pass code is 8657683. 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
McKesson Corporation,
currently ranked 14th on the FORTUNE 500, is a healthcare services and
information technology company dedicated to making the business of healthcare
run better. We
partner 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 2014 Third-Quarter Results (496KB, PDF)
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