McKesson Posts Fiscal 2010 2Q Results

McKesson Corp. has reported that revenues for the second quarter ended September 30, were $27.1 billion compared to $26.6 billion a year ago.

In a release on October 27, the Company noted that second quarter earnings per diluted share was $1.11 compared to $1.17 per diluted share a year ago. For the second quarter, earnings per diluted share included the positive impact of a $12 million after-tax adjustment to the litigation reserves, or four cents per diluted share. Prior year earnings were positively impacted by 27 cents per diluted share from a tax reserve release of $76 million and five cents per diluted share from the disposition of a business.

"McKesson delivered solid results in the second quarter, with strong execution in both Distribution Solutions and Technology Solutions driving earnings growth," said John H. Hammergren, chairman and chief executive officer.

The company said that it remains committed to a balanced capital deployment strategy designed to create additional shareholder value. During the first half of the fiscal year, McKesson repurchased $299 million of common stock, leaving $531 million on the current share repurchase authorization. For the first half, McKesson had cash flow from operations of $1.5 billion and ended the quarter with cash of $3.2 billion.

"Based on the momentum from our first half results, and the incremental demand we are experiencing across our businesses from the impact of the flu season, we are raising our previous outlook and now expect that McKesson should earn between $4.45 and $4.60 per diluted share, excluding an adjustment to litigation reserves, for the fiscal year ending March 31, 2010," Hammergren said.

"We came into Fiscal 2010 with some challenging trends to overcome," Hammergren said. "Revenues in our distribution business were impacted by the loss of two customer buying groups. In our U.S. pharmaceutical business, we knew that the sell side margin would be down as a result of events that we experienced last year. I'm pleased with the actions our teams have taken to mitigate these challenges. We have controlled costs and looked for new opportunities to increase our business. We have also focused on finding ways to strengthen and expand our relationships with existing customers, as we did when the CDC selected us to distribute the H1N1 flu vaccine."

McKesson is partnering with the Centers for Disease Control and Prevention (CDC) to distribute the H1N1 flu vaccine and ancillary medical surgical supplies to as many as 150,000 sites across the country, making this one of the largest public health initiatives in the CDC's history. While shipments of the vaccine and supplies began in early October under authorization of the CDC, we are still finalizing the necessary modification to our existing agreement with the CDC to encompass this distribution program.

"I am proud of the tremendous effort across McKesson and particularly from Specialty Care Solutions, Medical-Surgical Distribution, and U.S. Pharmaceutical Distribution to support the CDC with its H1N1-preparedness effort," Hammergren said. "In just eight weeks, we created a special distribution network, which is now staffed and dedicated to this important public health initiative. I am pleased that McKesson was selected to work with the CDC on this effort."

"I am pleased with the substantial growth in Technology Solutions' operating profit in the second quarter, which resulted from ongoing expense management initiatives and improving operating performance across the business," Hammergren said. "Our portfolio of products and services is unmatched in the industry, with solutions for hospitals, payors, pharmacies and physicians. When these solutions are combined with our RelayHealth business, we create a powerful value proposition by promoting connectivity, transparency, and care coordination."

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