McKesson 2005 Annual Report Download - page 27

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
profit margins in our Pharmaceutical Solutions segment, and improved operating profit in our Medical-Surgical Solutions and Provider
Technologies segments.
Net income (loss) was ($156.7) million, $646.5 million and $555.4 million in 2005, 2004 and 2003. Diluted earnings (loss) per share was
($0.53), $2.19 and $1.88 in 2005, 2004 and 2003. Excluding the Securities Litigation charge, net income and net income per diluted share for
2005 would have been $653.3 million and $2.19. In addition to those factors discussed above, net income (loss) reflects an increase in our
reported income tax rate to 35% in 2005 and a decrease in our reported income tax rate to 29% in 2004. Fluctuations in our reported income tax
rates primarily reflect changes within state and foreign income tax rates resulting from the Company’s business mix as well as favorable tax
settlements and adjustments.
Revenues:
Revenues increased 16% in 2005 and 22% in 2004. The growth in revenues was primarily driven by the Pharmaceutical Solutions segment,
which accounted for more than 90% of revenues. Revenues were not materially impacted by business acquisitions.
The customer mix of our U.S. pharmaceutical distribution revenues was as follows:
Increases in U.S. Healthcare pharmaceutical distribution and services revenues for 2005, excluding sales to customers’ warehouses,
primarily reflect market growth rates, new institutional customers as well as growth from existing institutional customers, which includes mail-
order businesses. In the first quarter of 2005, we implemented a new pharmaceutical distribution contract with the Department of Veterans
Affairs, which significantly contributed to the segment’s total increase in revenues. Increases in these revenues for 2004 also reflect market
growth rates as well as new independent pharmacy, mail order and institutional customers in our pharmaceutical distribution business. Market
growth rates reflect growing drug utilization and price increases, which are offset in part by the increased use of lower priced generics.
U.S. Healthcare sales to customers’ warehouses increased primarily as a result of greater volume to, and expanded agreements with,
existing customers. Sales to customers’ warehouses include the AdvancePCS business acquired by our customer, Caremark, which began in the
second quarter of 2005. Sales to customers’ warehouses represent
27
Years Ended March 31,
(In millions) 2005 2004 2003
Pharmaceutical Solutions
U.S. Healthcare direct distribution & services $47,006.9 $39,412.1 $34,802.9
U.S. Healthcare sales to customers’ warehouses 24,100.2 21,622.1 14,832.9
Subtotal 71,107.1 61,034.2 49,635.8
Canada distribution & services 5,211.0 4,458.9 3,423.0
Total Pharmaceutical Solutions 76,318.1 65,493.1 53,058.8
Medical-Surgical Solutions 2,894.7 2,810.5 2,842.9
Provider Technologies
Services 936.2 868.3 829.4
Software and software systems 245.6 218.2 288.7
Hardware 120.0 116.0 101.0
Total Provider Technologies 1,301.8 1,202.5 1,219.1
Total Revenues $80,514.6 $69,506.1 $57,120.8
2005 2004 2003
Direct Sales
Independents 12% 13% 14%
Retail Chains 20 22 26
Institutions 34 29 29
Subtotal 66 64 69
Sales to customers’ warehouses 34 36 31
Total 100% 100%100%