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McKesson(MCK) - 2024 Q2 - Quarterly Report
MCKMcKesson(MCK)2023-11-01 16:00
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Revenue and Profit - Revenues for the three months ended September 30, 2023, increased to 77.215billion,upfrom77.215 billion, up from 70.157 billion in the same period last year[8] - Net income for the three months ended September 30, 2023, was 703million,comparedto703 million, compared to 967 million in the same period last year[8] - Diluted earnings per share from continuing operations for the three months ended September 30, 2023, were 4.92,downfrom4.92, down from 6.46 in the same period last year[6] - Comprehensive income attributable to McKesson Corporation for the six months ended September 30, 2023, was 1.640billion,comparedto1.640 billion, compared to 2.114 billion in the same period last year[10] - Net income for the six months ended September 30, 2023, was 1.7billion,comparedto1.7 billion, compared to 1.776 billion in the same period in 2022[25] - Income from continuing operations for the three months ended September 30, 2023 was 703million,and703 million, and 1.7 billion for the six months ended September 30, 2023[66] - Diluted earnings per common share from continuing operations were 4.92forthethreemonthsendedSeptember30,2023,and4.92 for the three months ended September 30, 2023, and 11.95 for the six months ended September 30, 2023[68] - Total revenues for the six months ended September 30, 2023, were 151.698billion,comparedto151.698 billion, compared to 137.311 billion in the same period in 2022[155] - Revenues increased by 10% to 77.215billionforthethreemonthsendedSeptember30,2023,comparedtotheprioryear[184]−Grossprofitdecreasedby177.215 billion for the three months ended September 30, 2023, compared to the prior year[184] - Gross profit decreased by 1% to 3.069 billion for the three months ended September 30, 2023, compared to the prior year[184] - Total operating expenses increased by 7% to 2.118billionforthethreemonthsendedSeptember30,2023,comparedtotheprioryear[184]−Dilutedearningspercommonsharefromcontinuingoperationsdecreasedto2.118 billion for the three months ended September 30, 2023, compared to the prior year[184] - Diluted earnings per common share from continuing operations decreased to 4.92 for the three months ended September 30, 2023, from 6.46intheprioryear[184]CashFlowandLiquidity−Cashandcashequivalentsdecreasedto6.46 in the prior year[184] Cash Flow and Liquidity - Cash and cash equivalents decreased to 2.524 billion as of September 30, 2023, from 4.678billionasofMarch31,2023[12]−NetcashusedininvestingactivitiesforthesixmonthsendedSeptember30,2023,was4.678 billion as of March 31, 2023[12] - Net cash used in investing activities for the six months ended September 30, 2023, was 315 million, compared to net cash provided by investing activities of 116millioninthesameperiodlastyear[24]−Netcashusedinoperatingactivitieswas116 million in the same period last year[24] - Net cash used in operating activities was 87 million for the six months ended September 30, 2023, compared to net cash provided by operating activities of 166millioninthesameperiodin2022[25]−Cash,cashequivalents,andrestrictedcashdecreasedby166 million in the same period in 2022[25] - Cash, cash equivalents, and restricted cash decreased by 2.155 billion for the six months ended September 30, 2023, compared to a decrease of 977millioninthesameperiodin2022[25]−Thecompanymaintainsa977 million in the same period in 2022[25] - The company maintains a 4.0 billion commercial paper program, with 2.0billionborrowedandrepaidduringthesixmonthsendedSeptember30,2023[82]−Thecompanyhasa2.0 billion borrowed and repaid during the six months ended September 30, 2023[82] - The company has a 4.0 billion five-year senior unsecured credit facility (2022 Credit Facility) with no borrowings outstanding as of September 30, 2023[81] - The fair value of money market funds decreased to 645millioninSeptember2023from645 million in September 2023 from 1.4 billion in March 2023[109] Stock Repurchases and Dividends - McKesson Corporation repurchased 1.513billionworthofcommonstockduringthesixmonthsendedSeptember30,2023[19]−McKessonCorporationdeclaredcashdividendsof1.513 billion worth of common stock during the six months ended September 30, 2023[19] - McKesson Corporation declared cash dividends of 1.16 per common share during the six months ended September 30, 2023[19] - The company repurchased 1.505billionworthofcommonstockduringthesixmonthsendedSeptember30,2023[25]−Thecompanypaid1.505 billion worth of common stock during the six months ended September 30, 2023[25] - The company paid 149 million in dividends during the six months ended September 30, 2023[25] - The company repurchased 2.0 million shares of common stock for 840millionduringthethreemonthsendedSeptember30,2023,atanaveragepricepershareof840 million during the three months ended September 30, 2023, at an average price per share of 422.39[139] - The company repurchased 1.8 million shares of common stock for 673millionduringthethreemonthsendedJune30,2023,atanaveragepricepershareof673 million during the three months ended June 30, 2023, at an average price per share of 379.14[139] - The company's total remaining authorization for repurchases of common stock at September 30, 2023, was 8.1billion[141]−Thecompany′squarterlydividendwasraisedfrom8.1 billion[141] - The company's quarterly dividend was raised from 0.54 to 0.62pershareofcommonstockinJuly2023[136]−Thecompanyincurredexcisetaxesof0.62 per share of common stock in July 2023[136] - The company incurred excise taxes of 8 million and 12millionforthethreeandsixmonthsendedSeptember30,2023,respectively,relatedtosharerepurchases[139]AcquisitionsandDivestitures−ThecompanycompletedtheacquisitionofRxSavingsSolutions,LLCfor12 million for the three and six months ended September 30, 2023, respectively, related to share repurchases[139] Acquisitions and Divestitures - The company completed the acquisition of Rx Savings Solutions, LLC for 600 million in cash and up to 275millionincontingentconsideration[34]−Thecompanyrecordedaliabilityforcontingentconsiderationatitsfairvalueof275 million in contingent consideration[34] - The company recorded a liability for contingent consideration at its fair value of 92 million as of the acquisition date for Rx Savings Solutions, LLC[35] - The company completed the formation of SCRI Oncology, LLC with HCA Healthcare, Inc., owning a 51% controlling interest and paying 166millioninnetcash[41]−ThecompanydivesteditsEuropeanbusinesses,recordinggainsof166 million in net cash[41] - The company divested its European businesses, recording gains of 23 million and 35millionforthethreeandsixmonthsendedSeptember30,2022,respectively[46]−ThecompanysolditsUKretailanddistributionbusinessesfor£110million(approximately35 million for the three and six months ended September 30, 2022, respectively[46] - The company sold its UK retail and distribution businesses for £110 million (approximately 144 million) and divested net assets of 615million[47]−ThecompanycompletedthedivestituresoftheU.K.disposalgroupinApril2022andtheE.U.disposalgroupinOctober2022[153]RestructuringandImpairment−Restructuring,impairment,andrelatedcharges,netwere615 million[47] - The company completed the divestitures of the U.K. disposal group in April 2022 and the E.U. disposal group in October 2022[153] Restructuring and Impairment - Restructuring, impairment, and related charges, net were 28 million for the three months ended September 30, 2023, and 80millionforthesixmonthsendedSeptember30,2023[51]−Thecompanyanticipatestotalrestructuringchargesofapproximately80 million for the six months ended September 30, 2023[51] - The company anticipates total restructuring charges of approximately 125 million, with 99millionrecordedthroughSeptember30,2023[52]−Corporateexpenses,net,includedrestructuringchargesof99 million recorded through September 30, 2023[52] - Corporate expenses, net, included restructuring charges of 46 million for the six months ended September 30, 2023[156] - Restructuring, impairment, and related charges were 28millionforthethreemonthsendedSeptember30,2023,comparedto28 million for the three months ended September 30, 2023, compared to 30 million in the same period in 2022[194] - The company anticipates total restructuring charges of approximately 125million,with125 million, with 99 million recorded through September 30, 2023[196] Taxes - Income tax expense for the three months ended September 30, 2023 was 213million,withareportedincometaxrateof23.3213 million, with a reported income tax rate of 23.3%[61] - The company recognized a net discrete tax benefit of 147 million during the six months ended September 30, 2023 due to intellectual property repatriation[64] - As of September 30, 2023, the company had 1.4billionofunrecognizedtaxbenefits,with1.4 billion of unrecognized tax benefits, with 1.3 billion potentially reducing income tax expense if recognized[65] - The IRS proposed adjustments to taxable income for fiscal 2018 and 2019, potentially increasing federal income tax liability by 600millionto600 million to 700 million[67] - Income tax expense was 213millionforthethreemonthsendedSeptember30,2023,comparedto213 million for the three months ended September 30, 2023, compared to 271 million in the same period in 2022, with a reported tax rate of 23.3%[200] - The company recorded a net discrete tax benefit of 147millioninthesixmonthsendedSeptember30,2023,primarilyrelatedtotherepatriationofintellectualproperty[201]DebtandFinancialInstruments−Totallong−termdebtwas147 million in the six months ended September 30, 2023, primarily related to the repatriation of intellectual property[201] Debt and Financial Instruments - Total long-term debt was 5.6 billion as of September 30, 2023, with 49millionclassifiedascurrentportion[75]−Thecompanyissued49 million classified as current portion[75] - The company issued 400 million of 4.90% Notes due July 15, 2028 and 600millionof5.10600 million of 5.10% Notes due July 15, 2033 in June 2023[76] - The company repurchased 271 million principal amount of 3.80% Notes due March 15, 2024 at 98.75% of principal plus accrued interest, totaling 268million[78]−Thecompanyusescross−currencyswapstohedge268 million[78] - The company uses cross-currency swaps to hedge 1.5 billion CAD of net investments against foreign currency exchange rate fluctuations[91][96] - The company has 1.1billionEURand£450millionGBPofcross−currencyswapsdesignatedasfairvaluehedgesforforeigncurrencynotes[92]−Thecompanyrecognizeda1.1 billion EUR and £450 million GBP of cross-currency swaps designated as fair value hedges for foreign currency notes[92] - The company recognized a 9 million gain on debt extinguishments for the six months ended September 30, 2023[80] - Cross-currency swaps designated as net investment hedges increased to 27millioninQ32023from27 million in Q3 2023 from 21 million in Q3 2022[99] - Fixed interest rate swaps designated as cash flow hedges had a notional amount of 450millioninfiscal2023and450 million in fiscal 2023 and 50 million in Q1 fiscal 2024[103] - Long-term debt carrying value was 5.584billioninSeptember2023,withafairvalueof5.584 billion in September 2023, with a fair value of 5.268 billion[112] Litigation and Settlements - The company paid 1.5billiontoSettlingGovernmentalEntitiesasofSeptember2023undertheopioidsettlementagreement[125]−Futurepaymentsundertheopioidsettlementagreementcouldreachupto1.5 billion to Settling Governmental Entities as of September 2023 under the opioid settlement agreement[125] - Future payments under the opioid settlement agreement could reach up to 6.3 billion through 2038[125] - The company paid 61milliontoAlabamaasofSeptember2023,withadditionalpaymentsof61 million to Alabama as of September 2023, with additional payments of 113 million expected through 2031[125] - West Virginia subdivisions received 38millionasofSeptember2023,withadditionalpaymentsof38 million as of September 2023, with additional payments of 114 million expected through 2033[125] - Total litigation liabilities decreased to 6.644billioninSeptember2023from6.644 billion in September 2023 from 7.173 billion in March 2023[124] - The company has paid approximately 84milliontoNativeAmericantribesforopioid−relatedclaimsasofSeptember30,2023,withanadditional84 million to Native American tribes for opioid-related claims as of September 30, 2023, with an additional 112 million to be paid through 2027[127] - A minimum of 85% of the total settlement payments must be used by the settling Native American tribes to remediate the opioid epidemic[127] - The company made payments totaling 529millionassociatedwithopioid−relatedclaimsduringthesixmonthsendedSeptember30,2023[128]−Thecompany′sestimatedaccruedliabilityforopioid−relatedclaimsofU.S.governmentalentities,includingNativeAmericantribes,wasrecordedin"Otheraccruedliabilities"intheCondensedConsolidatedBalanceSheets[127]−Thecompanyreceived529 million associated with opioid-related claims during the six months ended September 30, 2023[128] - The company's estimated accrued liability for opioid-related claims of U.S. governmental entities, including Native American tribes, was recorded in "Other accrued liabilities" in the Condensed Consolidated Balance Sheets[127] - The company received 79 million and 197millionforthethreeandsixmonthsendedSeptember30,2023,respectively,relatedtoantitrustlegalsettlements[172]−Thecompanymadepaymentstotaling197 million for the three and six months ended September 30, 2023, respectively, related to antitrust legal settlements[172] - The company made payments totaling 529 million associated with various settlement agreements for opioid-related claims during the six months ended September 30, 2023[178] Segment Performance - U.S. Pharmaceutical segment revenues increased to 136.926billionforthesixmonthsendedSeptember30,2023,upfrom136.926 billion for the six months ended September 30, 2023, up from 117.006 billion in 2022[155] - International segment revenues decreased to 6.943billionforthesixmonthsendedSeptember30,2023,downfrom6.943 billion for the six months ended September 30, 2023, down from 12.786 billion in 2022, primarily due to divestitures[155] - RxTS segment operating profit increased to 469millionforthesixmonthsendedSeptember30,2023,upfrom469 million for the six months ended September 30, 2023, up from 264 million in 2022, driven by fair value adjustment gains[156] - The U.S. Pharmaceutical segment's operating profit included a 210millionprovisionforbaddebtsrelatedtoRiteAid′sbankruptcy[156]−TheInternationalsegment′soperatinglossforthesixmonthsendedSeptember30,2022,includedchargesof210 million provision for bad debts related to Rite Aid's bankruptcy[156] - The International segment's operating loss for the six months ended September 30, 2022, included charges of 237 million related to the E.U. disposal group[156] Bad Debts and Provisions - The company recognized a provision for bad debts of 210millionrelatedtoRiteAid′sbankruptcyinOctober2023[157]−Thecompanyanticipatesrecognizinganadditionalprovisionforbaddebtsof210 million related to Rite Aid's bankruptcy in October 2023[157] - The company anticipates recognizing an additional provision for bad debts of 511 million in the third quarter of fiscal 2024 due to Rite Aid's bankruptcy[158] - The company recognized a provision for bad debts of 210millionrelatedtothebankruptcyofRiteAidCorporation[179]−Thecompanyexpectstorecognizeaprovisionforbaddebtsof210 million related to the bankruptcy of Rite Aid Corporation[179] - The company expects to recognize a provision for bad debts of 511 million in the third quarter of fiscal 2024 for trade accounts receivable from Rite Aid[180] - Selling, distribution, general, and administrative expenses (SDG&A) increased by 7% to 2,092millionforthethreemonthsendedSeptember30,2023,includinga2,092 million for the three months ended September 30, 2023, including a 210 million provision for bad debts related to Rite Aid's bankruptcy[192] Other Financial Metrics - Total assets as of September 30, 2023, were 66.091billion,upfrom66.091 billion, up from 62.320 billion as of March 31, 2023[12] - Total liabilities increased to 66.091billionasofSeptember30,2023,from66.091 billion as of September 30, 2023, from 62.320 billion as of March 31, 2023[12] - Goodwill balance as of September 30, 2023 was 9.934billion,withnoimpairmentindicatedinfiscal2024and2023testing[71]−Intangibleassetsamortizationexpensewas9.934 billion, with no impairment indicated in fiscal 2024 and 2023 testing[71] - Intangible assets amortization expense was 62 million for the three months ended September 30, 2023, up from 57millioninthesameperiodin2022[72]−Thecompany′saccumulatedothercomprehensivelossbalancewas57 million in the same period in 2022[72] - The company's accumulated other comprehensive loss balance was (887) million as of September 30, 2023[143] - Investments in U.S. growth stage healthcare companies had a carrying value of 222millioninSeptember2023,downfrom222 million in September 2023, down from 237 million in March 2023[111] - Other income, net decreased primarily due to a 142milliongainrecognizedinJuly2022relatedtotheexitofanequitysecuritiesinvestment[198]−Interestexpenseincreasedduetohigherinterestratesondebtandderivativeportfolios,partiallyoffsetbya142 million gain recognized in July 2022 related to the exit of an equity securities investment[198] - Interest expense increased due to higher interest rates on debt and derivative portfolios, partially offset by a 9 million gain on debt extinguishment in the first quarter of fiscal 2024[199] - Loss from discontinued operations, net of tax, was $6 million for the three months ended September 30, 2022, with no discontinued operations following the divestiture of the E.U. disposal group in October 2022[202] - Net income attributable to noncontrolling interests includes results from third-party equity interests in ClarusONE Sourcing Services LLP, Vantage Oncology Holdings, LLC, and SCRI Oncology, LLC[203]