McKesson 2006 Annual Report Download - page 30

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McKESSON CORPORATION
Income (loss) from continuing operations before income taxes was $1,158 million, ($245) million and $906 million in 2006, 2005 and 2004,
reflecting the above noted factors. 2006 income before income taxes from continuing operations also benefited from increases in interest
income due to our favorable cash balances as well as a decrease in interest expense.
On an operating segment basis, results for 2006 reflect revenue growth and an increase in gross profit margin in our Pharmaceutical
Solutions segment, which includes the receipt of a larger amount of antitrust settlements, and improved operating profit in our Provider
Technologies segment. These increases were partially offset by a decline in operating profit in our Medical-Surgical Solutions segment. Results
for 2005 primarily reflect revenue growth and a decline in gross profit margin in our Pharmaceutical Solutions segment as well as a decrease in
operating profit in our Provider Technologies segment.
Our reported income tax rates were 36.4%, 34.7% and 29.0% in 2006, 2005 and 2004. Increases in our reported income tax rates primarily
reflect a lower proportion of income attributed to foreign countries that have lower income tax rates. In addition, income tax benefit for 2005
includes an $85 million reserve for future resolution of uncertain tax matters related to our Securities Litigation and income tax expense for
2004 includes $23 million of tax benefits relating to favorable settlements and adjustments.
Net income (loss) was $751 million, ($157) million and $647 million in 2006, 2005 and 2004 and diluted earnings (loss) per share was
$2.38, ($0.53) and $2.19. Excluding the Securities Litigation charges, net income and net income per diluted share for 2006 would have been
$781 million and $2.48, and for 2005, $653 million and $2.19. In addition to the factors discussed above, net income for 2006 also reflects a
$13 million after-tax gain, or $0.04 per diluted share, relating to the disposal of a wholly-owned subsidiary.
Revenues:
Revenues increased 10% to $88.1 billion in 2006 and 16% to $80.1 billion in 2005. The growth in revenues was primarily driven by our
Pharmaceutical Solutions segment, which accounted for 95% of revenues.
The customer mix of our U.S. pharmaceutical distribution revenues was as follows:
26
Years Ended March 31,
(In millions) 2006 2005 2004
Pharmaceutical Solutions
U.S. Healthcare direct distribution & services $52,037 $46,957 $39,362
U.S. Healthcare sales to customers’ warehouses 25,462 23,755 21,376
Subtotal 77,499 70,712 60,738
Canada distribution & services 5,910 5,211 4,459
Total Pharmaceutical Solutions 83,409 75,923 65,197
Medical-Surgical Solutions 3,099 2,895 2,811
Provider Technologies
Services 1,069 936 868
Software and software systems 322 246 218
Hardware 151 120 116
Total Provider Technologies 1,542 1,302 1,202
Total Revenues $88,050 $80,120 $69,210
2006 2005 2004
Direct Sales
Independents 12% 12% 13%
Retail Chains 22 20 22
Institutions 32 34 30
Subtotal 66 66 65
Sales to customers’ warehouses 34 34 35
Total 100% 100%100%