Second-Quarter Highlights, Year-over-Year:
- Total revenues of $60.8 billion, reflecting 6% growth.
- Earnings per diluted share increased by $7.53 to $3.54.
- Adjusted Earnings per diluted share of $4.80, an increase of
33%.
- Completed joint venture of German wholesale business with
Walgreens Boots Alliance on November 1, 2020.
Fiscal 2021 Guidance:
- Increased fiscal 2021 Adjusted Earnings per diluted share
guidance range to $16.00 to $16.50, from the previous range of
$14.70 to $15.50.
McKesson Corporation (NYSE:MCK) today reported results for the
second quarter ended September 30, 2020.
Fiscal 2021 Second-Quarter Result Summary
Second-Quarter
Year-to-Date
($ in millions, except per share
amounts)
FY21
FY20
Change
FY21
FY20
Change
Revenues
$
60,808
$
57,616
6
%
$
116,487
$
113,344
3
%
Income from Continuing
Operations1
577
(729
)
179
1,022
(300
)
441
Adjusted Earnings1,2
784
661
19
1,237
1,286
(4
)
Earnings per Diluted Share1
3.54
(3.99
)
189
6.26
(1.62
)
486
Adjusted Earnings per Diluted
Share1,2
4.80
3.60
33
7.58
6.91
10
1Reflects continuing operations
attributable to McKesson, net of tax
2Represents a non-GAAP financial measure;
refer to the reconciliations of non-GAAP financial measures
included in accompanying schedules
“The dedication and execution of our teams continue to deliver
outstanding results, responding to the evolving needs of our
customers,” said Brian Tyler, chief executive officer. “Our strong
second-quarter earnings results reflect the breadth of McKesson’s
differentiated portfolio and further improvement in volumes across
the business. At the same time, we continue to invest into the
business to support our long-term growth strategies. Based on our
year-to-date performance, we are raising our guidance range for
fiscal 2021 and now expect Adjusted Earnings per diluted share of
$16.00 to $16.50. With our steadfast commitment to our communities
and those in need, we will continue to play a critical role in the
fight against the global COVID-19 pandemic.”
Second-quarter revenues were $60.8 billion, up 6% from a year
ago, driven by growth in the U.S. Pharmaceutical segment, largely
due to market growth and higher volumes from retail national
account customers, partially offset by branded to generic
conversions.
Second-quarter Earnings per diluted share of $3.54 included a
GAAP-only pre- and post-tax goodwill impairment charge of $69
million recorded in connection with the segment realignment and a
GAAP-only after-tax charge of $37 million for an estimated
liability related to the New York State Opioid Stewardship Act.
Second-quarter Adjusted Earnings per diluted share does not include
these charges.
Second-quarter Adjusted Earnings per diluted share was $4.80
compared to $3.60 a year ago, an increase of 33%, driven by a lower
share count, a lower tax rate and growth in the Medical-Surgical
Solutions segment, partially offset by the lapping of the prior
year contribution from the company's now separated investment in
Change Healthcare LLC ("Change Healthcare"). Second-quarter
Adjusted Earnings per diluted share also includes pre-tax net gains
of approximately $49 million, or $0.22 per diluted share,
associated with McKesson Ventures’ equity investments.
For the first six months of the fiscal year, McKesson returned
$388 million of cash to shareholders via $248 million of common
stock repurchases and $140 million of dividend payments. During the
first six months of the fiscal year, McKesson used cash from
operations of $41 million, and invested $265 million internally,
resulting in negative Free Cash Flow of $306 million.
U.S. Pharmaceutical Segment
- Second-quarter revenues were $48.1 billion, up 5%, driven by
market growth and higher volumes from retail national account
customers, partially offset by branded to generic conversions.
- Second-quarter Segment Operating Profit was $623 million and
operating margin was 1.30%, and included a GAAP-only pre-tax charge
of $50 million for an estimated liability related to the New York
State Opioid Stewardship Act. Adjusted Segment Operating Profit was
$658 million, up 3% from a year ago, driven by growth in specialty,
partially offset by higher operating expenses in support of the
company’s strategic growth initiatives. Adjusted operating margin
was 1.37%, down 3 basis points.
International Segment
- Second-quarter revenues were $9.5 billion, up 2% on a reported
basis and down 1% on an FX-Adjusted basis, primarily driven by
lower volumes in the Canadian pharmaceutical distribution business
due to the exit of an unprofitable customer at the onset of fiscal
2021, partially offset by higher volumes in the European
business.
- Second-quarter Segment Operating Loss was ($45) million and
operating margin was (0.47%), driven by a GAAP-only goodwill
impairment charge of $69 million recorded in connection with the
segment realignment that commenced in the second quarter of fiscal
2021. Adjusted Segment Operating Profit was $116 million, up 20%.
On an FX-Adjusted basis, Adjusted Segment Operating Profit was $115
million, up 19%, driven by lower operating expenses in the European
business. Adjusted operating margin was 1.22%, up 18 basis points.
On an FX-Adjusted basis, adjusted operating margin was 1.24%, up 20
basis points.
Medical-Surgical Solutions Segment
- Second-quarter revenues were $2.5 billion, up 23%, driven by
demand for COVID-19 tests and personal protective equipment in the
Primary Care and Extended Care businesses.
- Second-quarter Segment Operating Profit was $187 million and
operating margin was 7.38%. Adjusted Segment Operating Profit was
$210 million, up 27%, driven by demand for COVID-19 tests and
organic growth in the segment. Adjusted operating margin was 8.29%,
up 22 basis points.
Prescription Technology Solutions Segment
- Second-quarter revenues were $668 million, up 7%, driven by new
brand support programs, partially offset by the impact of lower
prescription volume trends.
- Second-quarter Segment Operating Profit was $88 million and
operating margin was 13.17%. Adjusted Segment Operating Profit was
$104 million, down 10%, driven by higher operating expenses in
support of the company’s strategic growth initiatives. Adjusted
operating margin was 15.57%, down from 18.37% in the prior
year.
Other remaining businesses
- As a result of the segment realignment effective in the second
quarter of fiscal 2021, Other reflects equity earnings and charges
for retrospective periods for the company's previous investment in
Change Healthcare, which was separated from the company during the
fourth quarter of 2020. Operating loss for the second quarter of
fiscal 2020 included GAAP-only pre-tax charges of approximately
$1.4 billion, primarily related to an impairment in connection with
this planned exit.
Company Updates
- On August 14, 2020, McKesson announced the expansion of its
existing partnership with the Centers for Disease Control to
support the U.S. government’s Operation Warp Speed team as a
centralized distributor of future COVID-19 vaccines and ancillary
supplies needed to administer vaccinations. McKesson will leverage
the strength of its experience, expertise, and commitment to health
care delivery and access to make a difference in the fight against
the COVID-19 pandemic.
- Linda Mantia joined McKesson's Board of Directors as a new
independent director effective October 19, 2020.
- On November 1, 2020, McKesson completed the contribution of its
German wholesale business to a joint venture with Walgreens Boots
Alliance (WBA). WBA holds a 70% controlling equity interest in the
joint venture and McKesson holds the remaining 30%.
- McKesson was named to the Diversity Best Practices (DBP) fourth
annual Inclusion Index. McKesson was among the 98 organizations
that earned a top score.
Fiscal 2021 Outlook
McKesson raised fiscal 2021 Adjusted Earnings per diluted share
guidance to $16.00 to $16.50 from the previous range of $14.70 to
$15.50 to reflect strong execution and earlier improvement in
volumes relative to expectations through the first half of fiscal
2021. Fiscal 2021 guidance assumes approximately $0.15 to $0.20 of
Adjusted Earnings per diluted share related to the kitting and
storage of ancillary supplies for future COVID-19 vaccines.
Fiscal 2021 guidance assumes that a full recovery of
pharmaceutical prescription volumes and patient visits is not
likely to occur this fiscal year.
Conference Call Details
The company has scheduled a conference call for today, Tuesday,
November 3rd 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. An archive of the
conference call will also be available on the company’s Investor
Relations website at http://investor.mckesson.com.
Upcoming Investor Events
McKesson management will be participating in the following
investor conferences:
- 2nd Annual Wolfe Research Virtual Healthcare Conference,
November 18, 2020
- 39th Annual J.P. Morgan Healthcare Conference, January 11-14,
2021
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, including details
and updates, will be available on the company’s Investor Relations
website.
Non-GAAP Financial Measures
GAAP refers to the U.S. generally accepted accounting
principles. This press release includes GAAP financial measures as
well as Non-GAAP financial measures, including Adjusted Gross
Profit, Adjusted Operating Expenses, Adjusted Other Income,
Adjusted Equity Income from Change Healthcare, Adjusted Income Tax
Expense, Adjusted Earnings, Adjusted Earnings per Diluted Share,
Adjusted Segment Operating Profit, Adjusted Segment Operating
Profit Margin, Adjusted Corporate Expenses, Adjusted Operating
Profit, FX-Adjusted results and Free Cash Flow which are financial
measures not calculated in accordance with GAAP. Refer to the
“Supplemental Non-GAAP Financial Information” section of the
accompanying financial statement tables for the definitions and
usefulness of the Company’s Non-GAAP financial measures and the
attached schedules for reconciliations of the differences between
the Non-GAAP financial measures and their most directly comparable
GAAP financial measures.
The Company does not provide forward-looking guidance on a GAAP
basis 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.
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, such as financial performance forecasts, 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: we
experience costly and disruptive legal disputes, including
regarding our role in distributing controlled substances such as
opioids; we might experience losses not covered by insurance; we
might record significant charges from impairment to goodwill,
intangibles and other assets or investments; we may be unsuccessful
in retail pharmacy profitability; we might be harmed by large
customer purchase reductions, payment defaults or contract
non-renewal; our contracts with government entities involve future
funding and compliance risks; we might be harmed by changes in our
relationships or contracts with suppliers; we might be adversely
impacted by healthcare reform such as changes in pricing and
reimbursement models; we might be adversely impacted by changes or
disruptions in product supply and we have experienced and may
experience difficulties in sourcing products due to the effects of
the COVID-19 pandemic on supply chains; we might be adversely
impacted as a result of our distribution of generic
pharmaceuticals; we might be adversely impacted by an economic
slowdown (including the effects we have experienced from the
COVID-19 pandemic) or recession and by disruption in capital and
credit markets that might impede our access credit, increase our
borrowing costs and impair the financial soundness of our customers
and suppliers; we might be adversely impacted by fluctuations in
foreign currency exchange rates; we might be adversely impacted by
events outside of our control, such as widespread public health
issues (including the effects we have experienced from the COVID-19
pandemic), natural disasters, political events and other
catastrophic events; and we face uncertainties and risks related to
vaccination distribution programs.
About McKesson Corporation
McKesson Corporation is a global leader in healthcare supply
chain management solutions, retail pharmacy, community oncology and
specialty care, and healthcare information solutions. 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 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.
Schedule
1
McKESSON CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS - GAAP
(unaudited)
(in millions, except per share
amounts)
Three Months Ended September
30,
Six Months Ended September
30,
2020
2019
Change
2020
2019
Change
Revenues
$
60,808
$
57,616
6
%
$
116,487
$
113,344
3
%
Cost of sales
(57,808
)
(54,749
)
6
(110,787
)
(107,690
)
3
Gross profit
3,000
2,867
5
5,700
5,654
1
Operating expenses
(2,237
)
(2,196
)
2
(4,203
)
(4,326
)
(3
)
Goodwill impairment charges
(69
)
—
NM
(69
)
—
NM
Restructuring, impairment, and related
charges
(60
)
(45
)
33
(116
)
(68
)
71
Total operating expenses
(2,366
)
(2,241
)
6
(4,388
)
(4,394
)
-
Operating income
634
626
1
1,312
1,260
4
Other income (expense), net
71
(78
)
191
98
(41
)
339
Equity earnings and charges from
investment in Change Healthcare Joint Venture
—
(1,454
)
(100
)
—
(1,450
)
(100
)
Interest expense
(50
)
(64
)
(22
)
(110
)
(120
)
(8
)
Income (loss) from continuing operations
before income taxes
655
(970
)
168
1,300
(351
)
470
Income tax benefit (expense)
(28
)
294
(110
)
(178
)
158
(213
)
Income (loss) from continuing
operations
627
(676
)
193
1,122
(193
)
681
Loss from discontinued operations, net of
tax
—
(1
)
(100
)
(1
)
(7
)
(86
)
Net income (loss)
627
(677
)
193
1,121
(200
)
661
Net income attributable to noncontrolling
interests
(50
)
(53
)
(6
)
(100
)
(107
)
(7
)
Net income (loss) attributable to McKesson
Corporation
$
577
$
(730
)
179
%
$
1,021
$
(307
)
433
%
Earnings (loss) per common share
attributable to McKesson Corporation (a)
Diluted (b)
Continuing operations
$
3.54
$
(3.99
)
189
%
$
6.26
$
(1.62
)
486
%
Discontinued operations
—
—
NM
—
(0.03
)
(100
)
Total
$
3.54
$
(3.99
)
189
%
$
6.26
$
(1.65
)
479
%
Basic
Continuing operations
$
3.56
$
(3.99
)
189
%
$
6.31
$
(1.62
)
490
%
Discontinued operations
—
—
NM
(0.01
)
(0.03
)
(67
)
Total
$
3.56
$
(3.99
)
189
%
$
6.30
$
(1.65
)
482
%
Dividends declared per common share
$
0.42
$
0.41
$
0.83
$
0.80
Weighted-average common shares
outstanding
Diluted
163
183
(11
)%
163
185
(12
)%
Basic
162
183
(11
)
162
185
(12
)
(a)
Certain computations may reflect rounding
adjustments.
(b)
Net loss per diluted share for the three
and six months ended September 30, 2019 is calculated by excluding
dilutive securities from the denominator due to their antidilutive
effects.
NM Computation not meaningful
Refer to our applicable filings with the
SEC for additional disclosures including our Quarterly Reports on
Form 10-Q for fiscal 2021 and 2020 as well as our Annual Report on
Form 10-K for fiscal 2020.
Schedule
2
McKESSON CORPORATION
RECONCILIATION OF GAAP
OPERATING RESULTS TO ADJUSTED RESULTS (NON-GAAP)
(unaudited)
(in millions, except per share
amounts)
Three Months Ended September
30,
Six Months Ended September
30,
2020
2019
Change
2020
2019
Change
Income (loss) from continuing operations
(GAAP)
$
627
$
(676
)
193
%
$
1,122
$
(193
)
681
%
Net income attributable to noncontrolling
interests (GAAP)
(50
)
(53
)
(6
)
(100
)
(107
)
(7
)
Income (loss) from continuing
operations attributable to McKesson Corporation (GAAP)
577
(729
)
179
1,022
(300
)
441
Pre-tax adjustments:
Amortization of acquisition-related
intangibles (1)
106
181
(41
)
212
370
(43
)
Transaction-related expenses and
adjustments (2)
13
282
(95
)
29
326
(91
)
LIFO inventory-related adjustments
(52
)
(33
)
58
(104
)
(48
)
117
Gains from antitrust legal settlements
—
—
NM
—
—
NM
Restructuring, impairment, and related
charges, net (3)
62
43
44
119
63
89
Other adjustments, net (4) (5) (6) (7) (8)
(9)
119
1,356
(91
)
(6
)
1,376
(100
)
Income tax effect on pre-tax
adjustments
(37
)
(439
)
(92
)
(31
)
(501
)
(94
)
Net income attributable to noncontrolling
interests effect on other adjustments, net (8)
(4
)
—
NM
(4
)
—
NM
Adjusted Earnings (Non-GAAP)
$
784
$
661
19
%
$
1,237
$
1,286
(4
)%
Diluted weighted-average common shares
outstanding
163
184
(11
)%
163
186
(12
)%
Earnings (loss) per diluted common
share from continuing operations attributable to McKesson
Corporation (GAAP) (a) (b)
$
3.54
$
(3.99
)
189
%
$
6.26
$
(1.62
)
486
%
After-tax adjustments:
Amortization of acquisition-related
intangibles
0.50
0.76
(34
)
1.01
1.52
(34
)
Transaction-related expenses and
adjustments
0.07
1.14
(94
)
0.15
1.31
(89
)
LIFO inventory-related adjustments
(0.23
)
(0.14
)
64
(0.47
)
(0.19
)
147
Gains from antitrust legal settlements
—
—
NM
—
—
NM
Restructuring, impairment, and related
charges, net
0.29
0.18
61
0.57
0.26
119
Other adjustments, net
0.63
5.62
(89
)
0.06
5.63
(99
)
Adjusted Earnings per Diluted Share
(Non-GAAP) (b) (c)
$
4.80
$
3.60
33
%
$
7.58
$
6.91
10
%
(a)
Certain computations may reflect rounding
adjustments.
(b)
We calculate loss per diluted common share
from continuing operations attributable to McKesson Corporation
(GAAP) for the three and six months ended September 30, 2019 using
a weighted average of 183 million and 185 million common shares,
respectively, which excludes dilutive securities from the
denominator due to their antidilutive effect when calculating a net
loss per diluted share. We calculate adjusted earnings per diluted
share (Non-GAAP) for the three and six months ended September 30,
2019 on a fully diluted basis, using a weighted average of 184
million and 186 million common shares, respectively. Because we
show the GAAP to Non-GAAP per share reconciling items on a fully
diluted basis, any cross-footing differences in those items are due
to different weighted average share counts.
(c)
Adjusted earnings per diluted share on an
FX-adjusted basis for the three and six months ended September 30,
2020 was $4.80 and $7.58, respectively, which does not result in a
foreign currency exchange effect in either period.
NM Computation not meaningful
Refer to the section entitled "Financial
Statement Notes" of this release.
For more information relating to the
Adjusted Earnings (Non-GAAP) and Adjusted Earnings per Diluted
Share (Non-GAAP) definitions, refer to the section entitled
“Supplemental Non-GAAP Financial Information” of this release.
Schedule
2 (continued)
McKESSON CORPORATION
RECONCILIATION OF GAAP
OPERATING RESULTS TO ADJUSTED RESULTS (NON-GAAP)
(unaudited)
(in millions)
Three Months Ended September
30,
Six Months Ended September
30,
2020
2019
Change
2020
2019
Change
Gross profit (GAAP)
$
3,000
$
2,867
5
%
$
5,700
$
5,654
1
%
Pre-tax adjustments:
LIFO inventory-related adjustments
(52
)
(33
)
58
(104
)
(48
)
117
Restructuring, impairment, and related
charges, net
2
(2
)
200
3
(5
)
160
Other adjustments, net
1
—
NM
1
—
NM
Adjusted Gross Profit
(Non-GAAP)
$
2,951
$
2,832
4
%
$
5,600
$
5,601
-
%
Total operating expenses (GAAP)
$
(2,366
)
$
(2,241
)
6
%
$
(4,388
)
$
(4,394
)
-
%
Pre-tax adjustments:
Amortization of acquisition-related
intangibles
106
118
(10
)
212
230
(8
)
Transaction-related expenses and
adjustments
13
16
(19
)
29
33
(12
)
Restructuring, impairment, and related
charges, net (3)
60
45
33
116
68
71
Other adjustments, net (4) (5) (8) (9)
118
84
40
(7
)
86
(108
)
Adjusted Operating Expenses
(Non-GAAP)
$
(2,069
)
$
(1,978
)
5
%
$
(4,038
)
$
(3,977
)
2
%
Other income (expense), net
(GAAP)
$
71
$
(78
)
191
%
$
98
$
(41
)
339
%
Pre-tax adjustments:
Transaction-related expenses and
adjustments
—
3
(100
)
—
3
(100
)
Other adjustments, net (6)
—
105
(100
)
—
123
(100
)
Adjusted Other Income
(Non-GAAP)
$
71
$
30
137
%
$
98
$
85
15
%
Equity earnings and charges from
investment in Change Healthcare Joint Venture (GAAP)
$
—
$
(1,454
)
(100
)%
$
—
$
(1,450
)
(100
)%
Pre-tax adjustments:
Amortization of acquisition-related
intangibles (1)
—
63
(100
)
—
140
(100
)
Transaction-related expenses and
adjustments (2)
—
263
(100
)
—
290
(100
)
Other adjustments, net (7)
—
1,167
(100
)
—
1,167
(100
)
Adjusted Equity Income from Change
Healthcare (Non-GAAP)
$
—
$
39
(100
)%
$
—
$
147
(100
)%
NM Computation not meaningful
Refer to the section entitled "Financial
Statement Notes" of this release.
For more information relating to the
Adjusted Gross Profit (Non-GAAP), Adjusted Operating Expenses
(Non-GAAP), Adjusted Other Income (Non-GAAP), and Adjusted Equity
Income from Change Healthcare (Non-GAAP) definitions, refer to the
section entitled “Supplemental Non-GAAP Financial Information” of
this release.
Schedule
3
McKESSON CORPORATION
RECONCILIATION OF GAAP SEGMENT
OPERATING RESULTS TO ADJUSTED RESULTS (NON-GAAP)
(unaudited)
(in millions)
Three Months Ended September
30,
2020
2019
As reported
As adjusted
Change
As reported (GAAP)
Adjustments
As adjusted (Non- GAAP)
As reported (GAAP)
Adjustments
As adjusted (Non- GAAP)
Foreign currency effects
FX- Adjusted (Non- GAAP)
Foreign currency effects
FX- Adjusted (Non- GAAP)
As reported (GAAP)
As adjusted (Non- GAAP)
As reported FX-Adjusted
(Non-GAAP)
As adjusted FX-Adjusted
(Non-GAAP)
REVENUES
U.S. Pharmaceutical
$
48,067
$
—
$
48,067
$
45,613
$
—
$
45,613
$
—
$
48,067
$
—
$
48,067
5
%
5
%
5
%
5
%
International
9,540
—
9,540
9,321
—
9,321
(295
)
9,245
(295
)
9,245
2
2
(1
)
(1
)
Medical-Surgical Solutions
2,533
—
2,533
2,056
—
2,056
—
2,533
—
2,533
23
23
23
23
Prescription Technology Solutions
668
—
668
626
—
626
—
668
—
668
7
7
7
7
Revenues
$
60,808
$
—
$
60,808
$
57,616
$
—
$
57,616
$
(295
)
$
60,513
$
(295
)
$
60,513
6
%
6
%
5
%
5
%
OPERATING PROFIT (LOSS) (3)
U.S. Pharmaceutical (9)
$
623
$
35
$
658
$
641
$
(3
)
$
638
$
—
$
623
$
—
$
658
(3
)%
3
%
(3
)%
3
%
International (8)
(45
)
161
116
30
67
97
5
(40
)
(1
)
115
(250
)
20
(233
)
19
Medical-Surgical Solutions
187
23
210
129
37
166
—
187
—
210
45
27
45
27
Prescription Technology Solutions
88
16
104
98
17
115
—
88
—
104
(10
)
(10
)
(10
)
(10
)
Other (a) (1) (2) (7)
—
—
—
(1,454
)
1,493
39
—
—
—
—
(100
)
(100
)
(100
)
(100
)
Subtotal
853
235
1,088
(556
)
1,611
1,055
5
858
(1
)
1,087
253
3
254
3
Corporate expenses, net (5) (6)
(148
)
13
(135
)
(350
)
218
(132
)
—
(148
)
—
(135
)
(58
)
2
(58
)
2
Income (loss) from continuing operations
before interest expense and income taxes
$
705
$
248
$
953
$
(906
)
$
1,829
$
923
$
5
$
710
$
(1
)
$
952
178
%
3
%
178
%
3
%
OPERATING PROFIT (LOSS) AS A % OF
REVENUES
U.S. Pharmaceutical
1.30
%
1.37
%
1.41
%
1.40
%
1.30
%
1.37
%
(11
)bp
(3
)bp
(11
)bp
(3
)bp
International
(0.47
)
1.22
0.32
1.04
(0.43
)
1.24
(79
)
18
(75
)
20
Medical-Surgical Solutions
7.38
8.29
6.27
8.07
7.38
8.29
111
22
111
22
Prescription Technology Solutions
13.17
15.57
15.65
18.37
13.17
15.57
(248
)
(280
)
(248
)
(280
)
(a)
Operating profit (loss) for Other for the
three months ended September 30, 2019 includes equity earnings and
charges from investment in Change Healthcare Joint Venture. We
completed the separation from our investment in Change Healthcare
Joint Venture during the fourth quarter of fiscal 2020.
Refer to the section entitled "Financial Statement Notes" of
this release. For more information relating to the Adjusted Segment
Operating Profit (Non-GAAP), Adjusted Operating Profit (Non-GAAP),
Adjusted Corporate Expenses (Non-GAAP), FX-Adjusted (Non-GAAP), and
Adjusted Segment Operating Profit Margin (Non-GAAP) definitions,
refer to the section entitled “Supplemental Non-GAAP Financial
Information” of this release.
Schedule
3 (continued)
McKESSON CORPORATION
RECONCILIATION OF GAAP SEGMENT
OPERATING RESULTS TO ADJUSTED RESULTS (NON-GAAP)
(unaudited)
(in millions)
Six Months Ended September
30,
2020
2019
As reported
As adjusted
Change
As reported (GAAP)
Adjustments
As adjusted (Non- GAAP)
As reported (GAAP)
Adjustments
As adjusted (Non- GAAP)
Foreign currency effects
FX- Adjusted (Non-GAAP)
Foreign currency effects
FX- Adjusted (Non- GAAP)
As reported (GAAP)
As adjusted (Non- GAAP)
As reported FX-Adjusted
(Non-GAAP)
As adjusted FX-Adjusted
(Non-GAAP)
REVENUES
U.S. Pharmaceutical
$
92,737
$
—
$
92,737
$
89,402
$
—
$
89,402
$
—
$
92,737
$
—
$
92,737
4
%
4
%
4
%
4
%
International
18,092
—
18,092
18,728
—
18,728
(31
)
18,061
(31
)
18,061
(3
)
(3
)
(4
)
(4
)
Medical-Surgical Solutions
4,334
—
4,334
3,959
—
3,959
—
4,334
—
4,334
9
9
9
9
Prescription Technology Solutions
1,324
—
1,324
1,255
—
1,255
—
1,324
—
1,324
5
5
5
5
Revenues
$
116,487
$
—
$
116,487
$
113,344
$
—
$
113,344
$
(31
)
$
116,456
$
(31
)
$
116,456
3
%
3
%
3
%
3
%
OPERATING PROFIT (LOSS) (3)
U.S. Pharmaceutical (9)
$
1,236
$
12
$
1,248
$
1,217
$
11
$
1,228
$
—
$
1,236
$
—
$
1,248
2
%
2
%
2
%
2
%
International (8)
(42
)
231
189
61
118
179
6
(36
)
1
190
(169
)
6
(159
)
6
Medical-Surgical Solutions
276
58
334
254
71
325
—
276
—
334
9
3
9
3
Prescription Technology Solutions
156
34
190
198
35
233
—
156
—
190
(21
)
(18
)
(21
)
(18
)
Other (a) (1) (2) (7)
—
—
—
(1,450
)
1,597
147
—
—
—
—
(100
)
(100
)
(100
)
(100
)
Subtotal
1,626
335
1,961
280
1,832
2,112
6
1,632
1
1,962
481
(7
)
483
(7
)
Corporate expenses, net (4) (5) (6)
(216
)
(85
)
(301
)
(511
)
255
(256
)
(1
)
(217
)
(1
)
(302
)
(58
)
18
(58
)
18
Income (loss) from continuing operations
before interest expense and income taxes
$
1,410
$
250
$
1,660
$
(231
)
$
2,087
$
1,856
$
5
$
1,415
$
—
$
1,660
710
%
(11
)%
713
%
(11
)%
OPERATING PROFIT (LOSS) AS A % OF
REVENUES
U.S. Pharmaceutical
1.33
%
1.35
%
1.36
%
1.37
%
1.33
%
1.35
%
(3
)bp
(2
)bp
(3
)bp
(2
)bp
International
(0.23
)
1.04
0.33
0.96
(0.20
)
1.05
(56
)
8
(53
)
9
Medical-Surgical Solutions
6.37
7.71
6.42
8.21
6.37
7.71
(5
)
(50
)
(5
)
(50
)
Prescription Technology Solutions
11.78
14.35
15.78
18.57
11.78
14.35
(400
)
(422
)
(400
)
(422
)
(a)
Operating profit (loss) for Other for the
six months ended September 30, 2019 includes equity earnings and
charges from investment in Change Healthcare Joint Venture. We
completed the separation from our investment in Change Healthcare
Joint Venture during the fourth quarter of fiscal 2020.
Refer to the section entitled "Financial
Statement Notes" of this release.
For more information relating to the
Adjusted Segment Operating Profit (Non-GAAP), Adjusted Operating
Profit (Non-GAAP), Adjusted Corporate Expenses (Non-GAAP),
FX-Adjusted (Non-GAAP), and Adjusted Segment Operating Profit
Margin (Non-GAAP) definitions, refer to the section entitled
“Supplemental Non-GAAP Financial Information” of this release.
Schedule
4
McKESSON CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in millions, except per share
amounts)
September 30,
2020
March 31, 2020
ASSETS
Current assets
Cash and cash equivalents
$
3,091
$
4,015
Receivables, net
19,285
19,950
Inventories, net
18,435
16,734
Assets held for sale
833
906
Prepaid expenses and other
701
617
Total current assets
42,345
42,222
Property, plant, and equipment, net
2,471
2,365
Operating lease right-of-use assets
1,895
1,886
Goodwill
9,414
9,360
Intangible assets, net
3,030
3,156
Other non-current assets
2,403
2,258
Total assets
$
61,558
$
61,247
LIABILITIES, REDEEMABLE NONCONTROLLING
INTERESTS, AND EQUITY
Current liabilities
Drafts and accounts payable
$
36,255
$
37,195
Current portion of long-term debt
1,760
1,052
Current portion of operating lease
liabilities
367
354
Liabilities held for sale
537
683
Other accrued liabilities
3,805
3,340
Total current liabilities
42,724
42,624
Long-term debt
5,848
6,335
Long-term deferred tax liabilities
2,293
2,255
Long-term operating lease liabilities
1,669
1,660
Other non-current liabilities
1,669
1,662
Redeemable noncontrolling interests
1,265
1,402
McKesson Corporation stockholders’
equity
Preferred stock, $0.01 par value, 100
shares authorized, no shares issued or outstanding
—
—
Common stock, $0.01 par value, 800 shares
authorized and 273 and 272 shares issued at September 30, 2020 and
March 31, 2020, respectively
2
2
Additional paid-in capital
6,780
6,663
Retained earnings
13,890
13,022
Accumulated other comprehensive loss
(1,597
)
(1,703
)
Treasury shares, at cost, 112 and 110
shares at September 30, 2020 and March 31, 2020, respectively
(13,185
)
(12,892
)
Total McKesson Corporation stockholders’
equity
5,890
5,092
Noncontrolling interests
200
217
Total equity
6,090
5,309
Total liabilities, redeemable
noncontrolling interests, and equity
$
61,558
$
61,247
Schedule
5
McKESSON CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
(in millions)
Six Months Ended
September 30,
2020
2019
OPERATING ACTIVITIES
Net income (loss)
$
1,121
$
(200
)
Adjustments to reconcile to net cash used
in operating activities:
Depreciation
154
160
Amortization
285
303
Goodwill and other asset impairment
charges
104
12
Equity earnings and charges from
investment in Change Healthcare Joint Venture
—
1,450
Deferred taxes
(35
)
(380
)
Credits associated with last-in, first-out
inventory method
(104
)
(48
)
Non-cash operating lease expense
172
180
Loss (gain) from sales of businesses and
investments
1
(1
)
Other non-cash items
17
145
Changes in assets and liabilities, net of
acquisitions:
Receivables
981
(866
)
Inventories
(1,396
)
331
Drafts and accounts payable
(1,305
)
(1,203
)
Operating lease liabilities
(185
)
(189
)
Taxes
(58
)
70
Other
207
77
Net cash used in operating activities
(41
)
(159
)
INVESTING ACTIVITIES
Payments for property, plant, and
equipment
(174
)
(126
)
Capitalized software expenditures
(91
)
(58
)
Acquisitions, net of cash, cash
equivalents, and restricted cash acquired
(8
)
(95
)
Proceeds from sales of businesses and
investments, net
9
3
Other
(14
)
(9
)
Net cash used in investing activities
(278
)
(285
)
FINANCING ACTIVITIES
Proceeds from short-term borrowings
5,303
8,670
Repayments of short-term borrowings
(5,303
)
(8,122
)
Repayments of long-term debt
(5
)
(5
)
Common stock transactions:
Issuances
39
78
Share repurchases, including shares
surrendered for tax withholding
(272
)
(1,452
)
Dividends paid
(140
)
(148
)
Other
(23
)
(224
)
Net cash used in financing activities
(401
)
(1,203
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(63
)
22
Net decrease in cash, cash equivalents,
and restricted cash
(783
)
(1,625
)
Cash, cash equivalents, and restricted
cash at beginning of period
4,023
2,981
Cash, cash equivalents, and restricted
cash at end of period
3,240
1,356
Less: Restricted cash at end of period
included in Prepaid expenses and other
(149
)
—
Cash and cash equivalents at end of
period
$
3,091
$
1,356
Schedule
6
McKESSON CORPORATION
RECONCILIATION OF GAAP CASH
FLOW TO FREE CASH FLOW (NON-GAAP)
(unaudited)
(in millions)
Six Months Ended
September 30,
2020
2019
Change
GAAP CASH FLOW CATEGORIES
Net cash used in operating activities
$
(41
)
$
(159
)
(74
)%
Net cash used in investing activities
(278
)
(285
)
(2
)
Net cash used in financing activities
(401
)
(1,203
)
(67
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(63
)
22
(386
)
Net decrease in cash, cash equivalents,
and restricted cash
$
(783
)
$
(1,625
)
(52
)%
FREE CASH FLOW (NON-GAAP)
Net cash used in operating activities
$
(41
)
$
(159
)
(74
)%
Payments for property, plant, and
equipment
(174
)
(126
)
38
Capitalized software expenditures
(91
)
(58
)
57
Free Cash Flow (Non-GAAP)
$
(306
)
$
(343
)
(11
)%
For more information relating to the Free
Cash Flow (Non-GAAP) definition, refer to the section entitled
“Supplemental Non-GAAP Financial Information” of this release.
McKESSON CORPORATION FINANCIAL
STATEMENT NOTES
(1)
Amortization of
acquisition-related intangibles includes our proportionate share of
loss from investment in Change Healthcare Joint Venture within
Other. Such amount includes the amortization of equity investment
intangibles and other acquired intangibles of $63 million for the
three months ended September 30, 2019 and $140 million for the six
months ended September 30, 2019. These charges are included under
"equity earnings and charges from investment in Change Healthcare
Joint Venture" in the reconciliation of McKesson's GAAP operating
results to adjusted results (Non-GAAP provided in Schedule 2 of the
accompanying financial statement tables.
(2)
Transaction-related expenses and
adjustments for the three and six months ended September 30, 2019
primarily includes a pre-tax charge of $246 million ($184 million
after-tax) within Other, representing the difference between our
proportionate share of the IPO proceeds and the dilution effect on
our investment in Change Healthcare Joint Venture carrying value.
Upon the completion of the IPO by Change Healthcare Inc. in July
2019, McKesson's equity ownership interest in the joint venture
diluted from approximately 70% to 58.5%. This charge is included
under "equity earnings and charges from investment in Change
Healthcare Joint Venture" in the reconciliation of McKesson's GAAP
operating results to adjusted results (Non-GAAP) provided in
Schedule 2 of the accompanying financial statement tables.
(3)
Restructuring, impairment, and
related charges, net for the three and six months ended September
30, 2020 includes pre-tax charges of $60 million ($45 million
after-tax) and $116 million ($90 million after-tax), respectively,
primarily for our Europe business within International and
Corporate expenses, net. The three and six months ended September
30, 2019 includes charges of $45 million ($35 million after-tax)
and $68 million ($52 million after-tax), respectively, primarily
for our Europe business within International as well as Corporate
expenses, net. These charges are included under "total operating
expenses" in the reconciliation of McKesson's GAAP operating
results to adjusted results (Non-GAAP) provided in Schedule 2 of
the accompanying financial statement tables. Additionally,
restructuring, impairment, and related charges, net for the three
and six months ended September 30, 2020 and 2019 includes
immaterial amounts under “gross profit” in the reconciliation of
McKesson's GAAP operating results to adjusted results (Non-GAAP)
provided in Schedule 2 of the accompanying financial statement
tables.
(4)
Other adjustments, net for the
six months ended September 30, 2020 primarily includes a pre-tax
net gain of $131 million ($97 million after-tax) related to
insurance proceeds received, net of attorneys' fees and expenses
awarded to plaintiffs' counsel, in connection with the $175 million
settlement of the shareholder derivative action related to our
controlled substances monitoring program within Corporate expenses,
net. This gain is included under "total operating expenses" in the
reconciliation of McKesson's GAAP operating results to adjusted
results (Non-GAAP) provided in Schedule 2 of the accompanying
financial statement tables.
(5)
Other adjustments, net for the
three and six months ended September 30, 2019 primarily includes a
charge of $82 million (pre-tax and after-tax) recorded in
connection with an agreement to settle all opioids related claims
filed by two Ohio counties within Corporate expenses, net. These
charges are included under "total operating expenses" in the
reconciliation of McKesson's GAAP operating results to adjusted
results (Non-GAAP) provided in Schedule 2 of the accompanying
financial statement tables.
(6)
Other adjustments, net for the
three and six months ended September 30, 2019 primarily includes
pre-tax charges of $105 million ($78 million after-tax) and $122
million ($90 million after-tax), respectively, representing
settlement charges related to our frozen U.S. defined benefit
pension plan within Corporate expenses, net. This charge is
included under "other income (expense), net" in the reconciliation
of McKesson's GAAP operating results to adjusted results (Non-GAAP)
provided in Schedule 2 of the accompanying financial statement
tables.
(7)
Other adjustments, net for the
three and six months ended September 30, 2019 primarily includes a
pre-tax charge of $1,157 million ($864 million after-tax)
representing an other-than-temporary impairment of McKesson’s
investment in Change Healthcare Joint Venture within Other. This
charge is included under “equity earnings and charges from
investment in Change Healthcare Joint Venture” in the
reconciliation of McKesson’s GAAP operating results to adjusted
results (Non-GAAP) provided in Schedule 2 of the accompanying
financial statement tables.
(8)
Other adjustments, net for the
three and six months ended September 30, 2020 includes a non-cash
goodwill impairment charge of $69 million (pre-tax and after-tax)
within International related to our European retail business,
partially offset by the related indirect effect of $4 million
benefit in net income attributable to noncontrolling interests.
This impairment charge is included under "total operating expenses"
in the reconciliation of McKesson's GAAP operating results to
adjusted results (Non-GAAP) provided in Schedule 2 of the
accompanying financial statement tables.
(9)
Other adjustments, net for the three and six months ended September
30, 2020 includes a pre-tax charge of $50 million ($37 million
after-tax) related to our estimated liability under the New York
("NY") state Opioid Stewardship Act ("OSA") within U.S.
Pharmaceutical for calendar years 2017 and 2018. In December 2018,
a federal district court struck down the law as unconstitutional
and NY replaced the OSA with an excise tax on opioid sales in the
state of NY covering calendar year 2019 sales and beyond. In
September 2020, an appellate court reversed on procedural grounds
the district court’s decision. An amendment to the Act made clear
that the OSA applies only to NY opioid sales or distributions for
calendar years 2017 and 2018. To the extent that further court
decisions do not strike down the law, we will face liability under
the OSA and we believe the estimated OSA liability is one-time in
nature because the liability is retroactively imposed on sales or
distributions in 2017 and 2018, and is not indicative of future
results. Inclusion of this accrual in our adjusted results would
distort current period performance. This charge is included under
"total operating expenses" in the reconciliation of McKesson's GAAP
operating results to adjusted results (Non-GAAP) provided in
Schedule 2 of the accompanying financial statement tables.
McKESSON CORPORATION
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.
- Adjusted Gross Profit (Non-GAAP): We define Adjusted
Gross Profit as GAAP gross profit, excluding transaction-related
expenses and adjustments, last-in, first-out (“LIFO”)
inventory-related adjustments, gains from antitrust legal
settlements, restructuring, impairment, and related charges, and
other adjustments.
- Adjusted Operating Expenses (Non-GAAP): We define
Adjusted Operating Expenses as GAAP total operating expenses,
excluding amortization of acquisition-related intangibles,
transaction-related expenses and adjustments, restructuring,
impairment, and related charges, and other adjustments.
- Adjusted Other Income (Non-GAAP): We define Adjusted
Other Income as GAAP other income (expense), net, excluding
amortization of acquisition-related intangibles,
transaction-related expenses and adjustments, and other
adjustments.
- Adjusted Equity Income from Change Healthcare
(Non-GAAP): We define Adjusted Equity Income from Change
Healthcare as GAAP equity earnings and charges from investment in
Change Healthcare Joint Venture, excluding amortization of
acquisition-related intangibles, transaction-related expenses and
adjustments, and other adjustments. We completed the separation
from our investment in Change Healthcare Joint Venture during the
fourth quarter of fiscal 2020.
- Adjusted Income Tax Expense (Non-GAAP): We define
Adjusted Income Tax Expense as GAAP income tax benefit (expense),
excluding the income tax effects of amortization of
acquisition-related intangibles, transaction-related expenses and
adjustments, LIFO inventory-related adjustments, gains from
antitrust legal settlements, restructuring, impairment, and related
charges, and other adjustments. Income tax effects 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.
- Adjusted Earnings (Non-GAAP): We define Adjusted
Earnings as GAAP income (loss) from continuing operations
attributable to McKesson, excluding amortization of
acquisition-related intangibles, transaction-related expenses and
adjustments, LIFO inventory-related adjustments, gains from
antitrust legal settlements, restructuring, impairment, and related
charges, other adjustments as well as the related income tax
effects for each of these items, as applicable.
- Adjusted Earnings per Diluted Share (Non-GAAP): We
define Adjusted Earnings per Diluted Share as GAAP earnings (loss)
per diluted common share from continuing operations attributable to
McKesson, excluding per share impacts of amortization of
acquisition-related intangibles, transaction-related expenses and
adjustments, LIFO inventory-related adjustments, gains from
antitrust legal settlements, restructuring, impairment, and related
charges, other adjustments as well as the related income tax
effects for each of these items, as applicable, divided by diluted
weighted-average shares outstanding. Adjusted Earnings per Diluted
Share was not previously adjusted for the effect of potentially
dilutive securities issued by the Change Healthcare Joint
Venture.
- Adjusted Segment Operating Profit (Non-GAAP) and Adjusted
Segment Operating Profit Margin (Non-GAAP): We define Adjusted
Segment Operating Profit as GAAP segment operating profit (loss),
excluding amortization of acquisition-related intangibles,
transaction-related expenses and adjustments, LIFO
inventory-related adjustments, gains from antitrust legal
settlements, restructuring, impairment, and related charges, and
other adjustments. We define Adjusted Segment Operating Profit
Margin as Adjusted Segment Operating Profit (Non-GAAP) divided by
GAAP segment revenues.
- Adjusted Corporate Expenses (Non-GAAP): We define
Adjusted Corporate Expenses as GAAP corporate expenses, net,
excluding transaction-related expenses and adjustments,
restructuring, impairment, and related charges, and other
adjustments.
- Adjusted Operating Profit (Non-GAAP): We define Adjusted
Operating Profit as GAAP income (loss) from continuing operations
before interest expense and income taxes, excluding amortization of
acquisition-related intangibles, transaction-related expenses and
adjustments, LIFO inventory-related adjustments, gains from
antitrust legal settlements, restructuring, impairment, and related
charges, and other adjustments. The following provides further
details regarding the adjustments made to our GAAP financial
results to arrive at our Non-GAAP measures as defined above:
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 results. 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 results 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; gains or losses from debt extinguishment; and other
similar substantive and/or infrequent items as deemed appropriate.
The Company evaluates the aforementioned Non-GAAP measures on a
periodic basis and updates the definitions from time to time. The
evaluation considers both the quantitative and qualitative aspects
of the Company’s presentation of Non-GAAP adjusted results. A
reconciliation of McKesson’s GAAP financial results to Non-GAAP
financial results is provided in Schedules 2 and 3 of the financial
statement tables included with this release. 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 results per diluted share.
- FX-Adjusted (Non-GAAP): McKesson also presents its GAAP
financial results and adjusted results (Non-GAAP) on an FX-Adjusted
basis. To present our financial results on an FX-Adjusted basis, we
convert current year period results of our operations in foreign
countries, which are recorded in local currencies, into U.S.
dollars by applying the average foreign currency exchange rates of
the comparable prior year period. To present Adjusted Earnings per
Diluted Share on an FX-Adjusted basis, we estimate the impact of
foreign currency rate fluctuations on the Company’s noncontrolling
interests and adjusted income tax expense, which may vary from
quarter to quarter. The supplemental FX-Adjusted information of the
Company’s GAAP financial results and adjusted results (Non-GAAP) is
provided in Schedule 3 of the financial statement tables included
with this release.
- Free Cash Flow (Non-GAAP): We define free cash flow as
net cash provided by (used in) operating activities less payments
for property, plant and equipment and capitalized software
expenditures, as disclosed in our condensed consolidated statements
of cash flows. A reconciliation of McKesson’s GAAP financial
results to Free Cash Flow (Non-GAAP) is provided in Schedule 6 of
the financial statement tables included with this 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.
The Company internally uses both
GAAP and Non-GAAP financial measures in connection with its own
financial planning and reporting processes. Management utilizes
Non-GAAP financial measures when allocating resources, deploying
capital, as well as assessing business performance, and determining
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. We believe free cash flow is
important to management and useful to investors as a supplemental
measure as it indicates the cash flow available for working capital
needs, re-investment opportunities, strategic acquisitions,
dividend payments, or other strategic uses of cash. Nonetheless,
Non-GAAP adjusted results and related Non-GAAP 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201103005313/en/
Holly Weiss, 972-969-9174 (Investors) Holly.Weiss@McKesson.com
David Matthews, 214-952-0833 (Media)
David.Matthews@McKesson.com
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