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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
30
Canadian pharmaceutical distribution and services revenues for 2009 increased slightly primarily reflecting new
and expanded business and market growth rates, which were almost fully offset by unfavorable foreign exchange
rates and the loss of a customer. Revenues for 2008 increased primarily reflecting market growth rates, favorable
foreign exchange rates and new and expanded business, partially offset by six fewer days of sales compared to 2007.
Canadian revenues in 2009 were negatively impacted by 9% unfavorable foreign exchange rates and in 2008 and
2007, benefited from 12% and 5% favorable foreign exchange rates.
Medical-Surgical distribution and services revenues increased over the last two years primarily reflecting
market growth rates and acquisitions. In addition, revenues in 2008 were impacted by the discontinuance of the
distribution of a product line and by one less week of sales compared to 2007. Revenues associated with this
product line are now recorded by our U.S. pharmaceutical distribution business.
Technology Solutions revenues increased in 2009 primarily due to increased services revenues reflecting the
segment’s expanded customer base and outsourcing revenues. These increases were partially offset by unfavorable
foreign exchange rates and a decrease in software revenues, particularly in the hospital and physician office
customer segments. Technology Solutions’ revenues increased in 2008 primarily reflecting the acquisition of Per-
Se, a leading provider of financial and administrative healthcare solutions for hospitals, physicians and retail
pharmacies, increased services revenues, the segment’s expanded customer base and clinical software
implementations.
Gross Profit:
Years Ended March 31,
(Dollars in millions) 2009 2008 2007
Gross Profit
Distribution Solutions $ 3,955 $ 3,586 $ 3,252
Technology Solutions 1,423 1,423 1,080
Total $ 5,378 $ 5,009 $ 4,332
Gross Profit Margin
Distribution Solutions 3.82% 3.63% 3.58%
Technology Solutions 46.44 47.69 48.24
Total 5.04 4.93 4.66
Gross profit increased 7% to $5.4 billion in 2009 and 16% to $5.0 billion in 2008. As a percentage of revenues,
gross profit increased 11 bp in 2009 and 27 bp in 2008. Gross profit margin increased in 2009 primarily due to
margin improvements in our Distribution Solutions segment, partially offset by a decline in our Technology
Solutions segment reflecting a change in product mix and the recognition of $21 million of disease management
deferred revenues in 2008 for which associated expenses were previously recognized as incurred. Gross profit
margin increased in 2008 primarily reflecting a greater proportion of higher margin Technology Solutions products,
the recognition of $21 million of disease management deferred revenues and an improvement in our Distribution
Solutions segment’s margin.
In 2009, our Distribution Solutions segment’s gross profit margin increased compared to 2008. Gross profit
margin was impacted by the benefit of increased sales of generic drugs with higher margins, higher buy side margins
and an increase associated with a lower proportion of revenues within the segment attributed to sales to customers’
warehouses, which generally have lower gross profit margins relative to other revenues within the segment. These
increases were partially offset by a modest decline in sell margin during the latter part of the year and last-in, first-
out (“LIFO”) net inventory credits ($8 million LIFO net expense in 2009 compared with a $14 million LIFO net
credit in 2008).