McKesson Reports Fiscal 2016 Second-Quarter Results
Second-quarter Adjusted Earnings per diluted share was $3.31, up 19% compared to $2.79 a year ago. On a constant currency basis, Adjusted Earnings per diluted share increased 20% over the prior year. Second-quarter results include a pre-tax gain of $51 million, or 14 cents per diluted share, related to the sale of the ZEE Medical business within the Distribution Solutions segment. Second-quarter results also reflect lower than expected tax expense driven by a discrete tax benefit of $25 million, or 11 cents per diluted share.
For the first half of the fiscal year, McKesson generated cash from operations of $1.3 billion, and ended the quarter with cash and cash equivalents of $5.4 billion. During the first half of the fiscal year, McKesson repurchased nearly $500 million of its common stock, repaid $498 million in long-term debt, had internal capital spending of $274 million and paid $114 million in dividends.
At its recent meeting, McKesson’s Board of Directors authorized a new $2 billion share repurchase program.
“McKesson delivered solid results during the first six months of our fiscal year. In addition to the strong operating performance across our businesses in the second quarter, we repurchased approximately 2.5 million shares totaling nearly $500 million, announced the acquisition of the UK pharmacy operations of Sainsbury’s and the acquisition of the pharmaceutical distribution business of United Drug Group in Ireland. At its recent meeting, our Board of Directors also authorized a new $2 billion share repurchase program and we remain exceptionally well positioned to continue to execute our portfolio approach to capital deployment. We were also privileged to be selected by Albertsons as its pharmaceutical sourcing and distribution partner across all of its U.S. brands.
I am confident in the strength and scale of our global value proposition for our customers and our manufacturing partners, and I am excited about the opportunities across our diversified portfolio of businesses,” said John H. Hammergren, chairman and chief executive officer.
“We are updating our full-year outlook and now expect Adjusted Earnings per diluted share of $12.50 to $13.00 for the fiscal year ending March 31, 2016,” concluded Hammergren.
Distribution Solutions revenues were $48 billion for the quarter, up 11% on a reported basis and up 14% on a constant currency basis.
North America pharmaceutical distribution and services revenues were $40.6 billion for the quarter, up 16% on a reported basis and 17% on a constant currency basis. North America revenue growth primarily reflects market growth and our mix of business.
International pharmaceutical distribution and services revenues were $5.9 billion for the quarter, down 13% on a reported basis and up 2% on a constant currency basis.
Medical-Surgical distribution and services second-quarter revenues were up 3% for the quarter, driven by market growth.
In the second quarter, Distribution Solutions GAAP operating profit was $926 million and GAAP operating margin was 1.93%. Second-quarter adjusted operating profit was $1.1 billion, up 8% on a reported basis and up 11% on a constant currency basis, primarily driven by growth in our North America pharmaceutical distribution and services revenues and a pre-tax gain of $51 million from the sale of the ZEE Medical business. Adjusted operating margin for the Distribution Solutions segment was 2.39%.
Technology Solutions second-quarter revenues were $721 million, down 6% compared to the prior year, primarily driven by the completed sale of our nurse triage business in our first quarter and by the anticipated year-over-year decline in our hospital software business, partially offset by growth in our other technology businesses.
Technology Solutions GAAP operating profit was $146 million for the second quarter and GAAP operating margin was 20.25%. Adjusted operating profit was $157 million for the second quarter and adjusted operating margin was 21.78%.