McKesson 2008 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 2008 McKesson annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 119

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119

McKESSON CORPORATION
FINANCIAL REVIEW
27
Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition
GENERAL
Management’ s discussion and analysis of results of operations and financial condition, referred to as the
Financial Review, is intended to assist the reader in the understanding and assessment of significant changes and
trends related to the results of operations and financial position of the Company together with its subsidiaries. This
discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying
financial notes. The Company’ s fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all
references in this document to a particular year shall mean the Company’ s fiscal year.
In April 2007, we reconfigured our operating segments to better align product development and selling efforts
with the evolving needs of the healthcare market, resulting in the following operating segments: Distribution
Solutions and Technology Solutions. See Financial Note 21 to the accompanying consolidated financial statements,
“Segments of Business,” for a description of these segments. All periods presented have been reclassified to
conform to the April 2007 changes in our organization.
RESULTS OF OPERATIONS
Overview:
Years Ended March 31,
(In millions, except per share data) 2008 2007 2006
Revenues $ 101,703 $ 92,977 $ 86,983
Securities Litigation pre-tax credits (charge), net 5 6 (45)
Income from Continuing Operations Before Income
Taxes $ 1,457 $ 1,297 $ 1,171
Income Tax Provision (468) (329) (426)
Income from Continuing Operations 989 968 745
Discontinued Operations, net 1 (55) 6
Net Income $ 990 $ 913 $ 751
Diluted Earnings Per Share
Continuing Operations $ 3.32 $ 3.17 $ 2.36
Discontinued Operations - (0.18) 0.02
Total $ 3.32 $ 2.99 $ 2.38
Revenues increased 9% to $101.7 billion and 7% to $93.0 billion in 2008 and 2007. The increase in revenues
primarily reflects market growth rates in our Distribution Solutions segment, which accounted for 97% of our
consolidated revenues. Revenues for 2008 also benefited from our acquisitions of Oncology Therapeutics Network
(“OTN”) in October 2007 and Per-Se Technologies, Inc. (“Per-Se”) in January 2007. Revenues for 2007 also
benefited from our acquisition of D&K Healthcare Resources, Inc. (“D&K”) in August 2005.
Gross profit increased 16% to $5.0 billion in 2008 and 15% to $4.3 billion in 2007. As a percentage of
revenues, gross profit increased 27 basis points (“bp”) to 4.93% in 2008 and 32 bp to 4.66% in 2007. The increase
in our 2008 gross profit margin primarily reflects a greater proportion of higher margin Technology Solutions
products and an improvement in our Distribution Solutions’ segment margin. The increase in our 2007 gross profit
margin primarily reflects improvement in our U.S. pharmaceutical distribution business, including a decrease in our
receipt of antitrust class action lawsuits settlements. Our 2008, 2007 and 2006 gross profit includes the receipt of
$14 million, $10 million and $95 million of cash proceeds representing our share of settlements of antitrust class
action lawsuits.