OREANDA-NEWS. November 06, 2012. McKesson Corporation (NYSE: MCK) reported that revenues for the second quarter ended September 30, 2012 were USD 29.9 billion, down 1% compared to USD 30.2 billion a year ago.  On the basis of U.S. generally accepted accounting principles (“GAAP”), second-quarter earnings per diluted share was USD 1.67 compared to USD 1.18 a year ago, reported the press-centre of McKesson. 

Second-quarter GAAP results included a pre-tax charge of USD 44 million, recorded in the Distribution Solutions segment, to increase an existing litigation reserve for claims against McKesson relating to First DataBank’s published drug reimbursement benchmarks, commonly referred to as Average Whole Prices (“AWP”).

Second-quarter Adjusted Earnings per diluted share was USD 1.92, up 18% compared to USD 1.63 a year ago. 

For the first half of the fiscal year, McKesson generated cash from operations of USD 459 million, and ended the quarter with cash and cash equivalents of USD 2.8 billion.  During the first half of the fiscal year, the company paid USD 100 million in dividends, had internal capital spending of USD 167 million and spent USD 251 million on acquisitions. 

“McKesson delivered another quarter of solid operating performance,” said John H. Hammergren, chairman and chief executive officer.  “I am pleased with our accomplishments during the first half of our fiscal year.  Based on our performance to date, we are updating our previous outlook for the fiscal year and now expect Adjusted Earnings per diluted share of USD 7.15 to USD 7.35 for the fiscal year ending March 31, 2013.”

Distribution Solutions revenues were down 1% in the second quarter, driven mainly by a 1% decline in U.S. pharmaceutical distribution revenues, reflecting brand-to-generic conversions and one fewer sales day.   

Canadian revenues, on a constant currency basis, decreased 3% for the second quarter.  Including the unfavorable currency impact of 2%, Canadian revenues decreased 5% for the second quarter.

Medical-Surgical distribution and services revenues were flat for the quarter, due to the impact of five fewer sales days.

In the second quarter, Distribution Solutions GAAP operating profit was USD 621 million and GAAP operating margin was 2.14%.  Second-quarter adjusted operating profit was USD 699 million and the adjusted operating margin was 2.41%. 

Technology Solutions revenues were flat for the second quarter.  GAAP operating profit was USD 97 million for the second quarter and GAAP operating margin was 11.77%.  Adjusted operating profit was USD 114 million for the second quarter and adjusted operating margin was 13.83%.

Fiscal Year 2013 Outlook
McKesson expects Adjusted Earnings per diluted share of USD 7.15 to USD 7.35 for the fiscal year ending March 31, 2013, which excludes the following GAAP items:

Amortization of acquisition-related intangible assets of approximately 54 cents per diluted share in Fiscal 2013.

Acquisition expenses and related adjustments expected to add approximately 18 cents per diluted share, including the impact of the USD 81 million pre-tax gain on business combination related to the acquisition of the remaining 50% ownership in McKesson’s corporate headquarters building completed during the first quarter.

Litigation reserve adjustments of approximately 15 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, and certain litigation reserve 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; implementation delay, malfunction, failure or breach of internal information systems; 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 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 8:30 AM ET.  The dial-in number for individuals wishing to participate on the call is 719-234-7317.  Erin Lampert, 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 and the pass code is 6474406.  A webcast of the conference call will also be available live and archived on the company’s Investor Relations website at www.mckesson.com/investors.

Shareholders are encouraged to review SEC filings and more information about McKesson, which are located on the company’s website.