McKesson Corporation (NYSE:MCK) today reported that revenues for the second quarter ended September 30, 2013 were $33 billion, up 11% compared to $29.8 billion a year ago. On the basis of U.S. generally accepted accounting principles ("GAAP"), second-quarter earnings per diluted share was $1.74 compared to $1.67 a year ago.
Second-quarter Adjusted Earnings per diluted share from continuing operations was $2.27, up 19% compared to $1.91 a year ago.
For the first half of the fiscal year, McKesson generated cash from operations of $813 million, and ended the quarter with cash and cash equivalents of $3 billion. During the first half of the fiscal year, McKesson paid $99 million in dividends, had internal capital spending of $197 million, and spent $116 million on acquisitions.
"McKesson delivered another quarter of strong operating performance," said John H. Hammergren, chairman and chief executive officer. "I am pleased with the excellent performance across all of our businesses for the first half of our fiscal year. Based on our performance to date and our expectations for the fiscal year, we are updating our previous outlook and now expect Adjusted Earnings per diluted share of $8.40 to $8.70 for the fiscal year ending March 31, 2014."
Distribution Solutions revenues were up 11% in the second quarter, driven mainly by strong growth in U.S. pharmaceutical direct distribution and services revenues due to market growth, our mix of business and one additional sales day.
Canadian revenues, on a constant currency basis, increased 14% for the second quarter primarily due to market growth and new customer wins. Including an unfavorable currency impact of 5%, Canadian revenues increased 9% for the second quarter.
Medical-Surgical distribution and services revenues were up 68% for the second quarter driven primarily by the acquisition of PSS World Medical and market growth.
In the second quarter, Distribution Solutions GAAP operating profit was $685 million and GAAP operating margin was 2.13%. Second-quarter adjusted operating profit was $827 million and the adjusted operating margin was 2.57%.
Technology Solutions revenues were up 8% in the second quarter compared to the prior year driven primarily by acquisitions completed in the prior year. GAAP operating profit was $113 million for the second quarter and GAAP operating margin was 14.39%. Adjusted operating profit was $132 million for the second quarter and adjusted operating margin was 16.82%.
Fiscal Year 2014 Outlook
McKesson expects Adjusted Earnings per diluted share from continuing operations between $8.40 and $8.70 for the fiscal year ending March 31, 2014, which excludes the following GAAP items:
Amortization of acquisition-related intangible assets of 76 cents per diluted share.
Acquisition expenses and related adjustments of 23 cents per diluted share.
Litigation reserve adjustments of approximately 18 cents per diluted share.
LIFO inventory-related charges of 37 to 43 cents per diluted share.
McKesson separately reports financial results on the basis of Adjusted Earnings. Adjusted Earnings is a non-GAAP financial measure defined as GAAP income from continuing operations, excluding amortization of acquisition-related intangible assets, acquisition expenses and related adjustments, certain litigation reserve adjustments, and Last-In-First-Out ("LIFO") inventory-related adjustments. A reconciliation of McKesson's financial results determined in accordance with GAAP to Adjusted Earnings is provided in Schedules 2, 3 and 4 of the financial statement tables included with this release.