McKesson 2015 Annual Report Download - page 42

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Distribution Solutions
North America pharmaceutical distribution and services revenues increased over the last two years primarily
due to market growth and our mix of business. Market growth reflects growing drug utilization, which includes
newly launched drugs and price increases. In particular, our 2015 revenues benefited from newly launched drugs
for the treatment of Hepatitis C. These increases were partially offset by price deflation associated with brand to
generic drug conversions.
International pharmaceutical distribution and services revenues were $26.4 billion and $4.5 billion in 2015
and 2014, representing revenues from Celesio, which was acquired in February 2014.
Medical-Surgical distribution and services revenues increased over the last two years primarily due to
market growth. Additionally, revenues increased in 2014 as a result of our February 2013 acquisition of PSSI.
Technology Solutions
Technology Solutions revenues decreased in 2015 compared to 2014 primarily due to a decline in software
products and services revenues, the planned elimination of a product line and lower revenues from the workforce
business within our International Technology business, which we will transition to another service provider
during the first quarter of 2016. These decreases were partially offset by higher volume in our transaction
processing businesses.
Technology Solutions revenues increased in 2014 compared to 2013 primarily due to small business
acquisitions and higher volumes in our transaction processing businesses, partially offset by a decrease in
software products and services revenues.
Gross Profit:
Years Ended March 31, Change
(Dollars in millions) 2015 2014 2013 2015 2014
Gross Profit
Distribution Solutions (1) $ 9,937 $ 6,745 $ 5,435 47% 24%
Technology Solutions 1,474 1,607 1,446 (8) 11
Total $11,411 $ 8,352 $ 6,881 37% 21%
Gross Profit Margin
Distribution Solutions 5.65% 5.03% 4.57% 62bp 46bp
Technology Solutions 48.03 48.26 45.90 (23) 236
Total 6.37 6.08 5.63 29 45
bp—basis points
(1) Gross profit for our Distribution Solutions segment for 2015, 2014 and 2013 includes LIFO-related
inventory charges of $337 million, $311 million and $13 million.
Consolidated gross profit and gross profit margin increased in 2015 and 2014 primarily due to an increase in
our Distribution Solutions segment.
37