McKesson 2011 Annual Report Download - page 37

Download and view the complete annual report

Please find page 37 of the 2011 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 130

  • 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
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
31
The customer mix of our U.S. pharmaceutical distribution revenues was as follows:
Years Ended March 31,
2011
2010
2009
Direct Sales
Independents
12%
12%
13%
Institutions
34
32
32
Retail Chains
33
32
26
Subtotal
79
76
71
Sales to retail customers’ warehouses
21
24
29
Total
100%
100%
100%
As previously described, a limited number of our large retail chain customers purchase products through both
our direct and warehouse distribution methods, the latter of which generally has a significantly lower gross profit
margin due to the low cost-to-serve model. When evaluating and pricing customer contracts, we do so based on our
assessment of total customer profitability. As a result, we do not evaluate our performance or allocate resources
based on sales to customers’ warehouses or gross profit associated with such sales.
Canadian pharmaceutical distribution and services revenues for 2011 increased compared to 2010 primarily due
to a change in the foreign currency exchange rate of 7%. On a constant currency basis, revenues increased 1% in
2011. Canadian revenues for 2011 increased due to market growth, offset by a government-imposed price reduction
for generic pharmaceuticals in certain provinces and brand to generic conversions. Canadian pharmaceutical
distribution and services revenues for 2010 increased compared to 2009 primarily due to market growth and a
favorable change in the foreign currency exchange rate of 3%. On a constant currency basis, revenues increased by
7% in 2010.
Medical-Surgical distribution and services revenues increased in 2011 compared to 2010 primarily due to
market growth, partially offset by the decrease in demand associated with the flu season. Medical-Surgical
distribution and services revenues increased in 2010 compared to 2009 reflecting an increase in demand related to
the flu season, acquisitions and increased volume from new and existing customers.
Technology Solutions revenues increased slightly in 2011 compared to 2010 primarily due to an increase in
maintenance revenues from new and existing customers, increased revenues associated with the sale and installation
of our software products and growth in our outsourcing services, partially offset by the sale of MAP in July 2010.
Technology Solutions revenues increased in 2010 compared to 2009 primarily due to higher services revenues
associated with increases in outsourcing revenues for claims processing and other services and software
maintenance reflecting the segment’s expanded customer base. These increases were partially offset by a shift to
products that have higher software revenue deferral rates and lower hardware sales.