McKesson 2013 Annual Report Download - page 36

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30
McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
The customer mix of revenues from our U.S. Pharmaceutical Distribution business was as follows:
Years Ended March 31,
2013 2012 2011
Direct Sales
Retail Chains 33 % 34 % 33 %
Institutions 37 34 34
Independents 11 11 12
Subtotal 81 79 79
Sales to retail customers' warehouses 19 21 21
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 decreased 3% in 2013 compared to 2012. Excluding an
unfavorable foreign currency exchange rate fluctuation of 1%, revenues decreased primarily due to five less sales days,
government-imposed price reduction for generic pharmaceuticals in certain provinces and changes in our customer mix.
These decreases were partially offset by market growth and an increase in revenues associated with our March 2012
acquisition of the assets of Drug Trading Company Limited, the independent banner business of the Katz Group Canada Inc.
(“Katz Group”), and Medicine Shoppe Canada Inc., the franchise business of the Katz Group (collectively, “Katz Assets”).
Canadian pharmaceutical distribution and services revenues increased 5% in 2012 compared to 2011. Excluding a favorable
foreign currency exchange rate fluctuation of 2% during 2012, revenues increased primarily due to market growth, five
additional sales days and a small acquisition in the second quarter of 2011, partially offset by government-imposed price
reduction for generic pharmaceuticals in certain provinces.
Medical-Surgical distribution and services revenues increased in 2013 compared to 2012 primarily due to market growth,
new customers and our February 22, 2013 acquisition of PSS World Medical, Inc. (“PSS World Medical”). These increases
were partially offset by five less sales days. Medical-Surgical distribution and services revenues increased in 2012 compared
to 2011 primarily due to market growth, new customers and five additional sales days.
Technology Solutions revenues increased in 2013 compared to 2012 primarily due to acquisitions, higher volume of
claims processing and an increase in maintenance revenues from new and existing customers, partially offset by revenue
deferral on certain products in our international business. Technology Solutions revenues increased in 2012 compared to 2011
primarily due to higher revenues for claims processing, increased revenues associated with the sale and installation of our
software products, an increase in maintenance revenues from new and existing customers and a number of small acquisitions
made during 2012.