McKesson 2011 Annual Report Download - page 3

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McKesson generated revenues of $112.1 billion and
exceeded expectations for both earnings and cash
flow. Earnings per diluted share from continuing
operations (EPS) was $4.86,*** and cash from
operations was $2.3 billion. We ended the year with
cash and equivalents of $3.6 billion. Our strong cash
flow creates additional opportunities for the company
to create value for our customers, suppliers and
stockholders. Our results in fiscal 2011 extend our
track record of growing EPS, which we have increased
at a 13.9% compound annual growth rate since
fiscal 2007.
Healthcare is an indispensable industry, with
spending projected to reach $4.3 trillion, or
approximately 20.3% of gross domestic product,
by 2018, according to the Centers for Medicare
and Medicaid Services. Nevertheless, all segments
of healthcare face a wide array of business, care
and connectivity challenges, creating significant
opportunities for McKesson to partner with its
customers in deeper and broader ways. Our fiscal
2011 performance reflects the clarity with which
we see the industry, the soundness of the strategy
we have developed to serve it, and our success
in working with our customers to build healthier
organizations that deliver better, more cost-effective
care. We are uniquely positioned to help improve the
business and clinical performance of all sectors of
the healthcare system, leading to better results for
our customers, better health for patients and better
returns to our stockholders.
We expect a combination of internal and external
factors to drive our ongoing success, ranging from
positive demographic trends and a robust market
for generic medications, to our diversified solution
portfolio and financial strength. In the remainder of
Dear Fellow Stockholders,
I am pleased to report that McKesson delivered another strong
performance in fiscal 2011, marked by outstanding execution
in Distribution Solutions, continued success in expanding our
relationships with customers and suppliers, and near record levels
of capital deployment, including the $2.1 billion acquisition of US
Oncology, our largest acquisition in a decade.
this letter, I will provide more detail on these factors
and explain why they create new opportunities to
extend the company’s lead in healthcare services
and continue our track record of strong revenue and
earnings growth.
Expanded Healthcare Needs of an
Aging Population
According to the Centers for Disease Control and
Prevention (CDC), the global population of people 65
years and older continues to grow, driving increased
demand for healthcare services and pharmaceuticals.
In the United States, this demographic segment is
expected to climb from 35 million people in 2000,
or 12% of the population, to 72 million people in
2030, or 20% of the population. According to the
CDC, healthcare costs for people over 65 are three
to five times more than for those younger than 65.
The rise in serious and chronic conditions, along
with advances in medical technologies, procedures
and pharmaceuticals, fuels the need for the kind of
improved, coordinated and streamlined healthcare
system McKesson supports in partnership with
customers in every sector.
Push for Access and Efficiency through
Healthcare Reform
Today’s public policy agenda supports greater access
to healthcare and improved efficiency, contributing to
the imperative for a more cost-effective, connected
and automated healthcare system. Providers,
physicians, payers and pharmacies are focused
on achieving operational improvements, meeting
regulatory requirements, and preparing for the
clinical, financial and administrative complexities
associated with evolving integrated care models.
These trends create additional demand for our
solutions and expertise in both our distribution and
***Diluted earnings per share from continuing operations excludes adjustments for litigation charges (credits) net (“EPS”). For supplemental financial data and corresponding reconciliation to U.S.
generally accepted accounting principles (“GAAP”), see Appendix A to this 2011 Annual Report. Non-GAAP measures should be viewed in addition to, and not as an alternative for, financial results
prepared in accordance with GAAP.