- The management advised that the facility was increased from $700 million to $1 billion.
- At June 30, 2008, $325 million of the facility was utilized.
- The company reported a first quarter tax rate of 34.4%.
- The full year guidance assumes a tax rate of 33% before considering the tax reserve release expected in the second quarter.
- The company reported that first quarter results included $28 million in pre-tax share-based compensation expense.
- In the first quarter last year, the pre-tax expense was $19 million.
- The inventories were $9.3 billion on June 30, 2008.
- This represents an increase of 16% versus the same period last year.
- The day sales and inventory of 33 days was two days higher than a year ago.
The company held the annual Pharmacy Strategies Conference for independent retail customers.
- At the conference, the management outlined the vision for independent pharmacy as a health and wellness destination.
- The management also demonstrated the McKesson Technology and Solutions work hand-in-hand.
- The conference served as a showcase for McKesson full compliment of solution for independent pharmacies.
Segment Results:
Distribution Solutions:
- The revenues increased 9% in the first quarter.
- The U.S. pharmaceutical direct distribution and services revenues grew 16% for the quarter reflecting customer growth and the OTN acquisition.
- The quarterly warehouse sales dipped 8% primarily due to a decrease in volume purchases from a large customer beginning in January 2008.
- The Canadian revenues increased 27% during the quarter due to new and expanded distribution agreements, a favorable currency impact of 10% and two additional sales days.
- The Medical-Surgical distribution revenues firmed 6% in the quarter to $627 million.
- The first quarter segment gross profit of $934 million improved 14% compared with the first quarter last year.
- The increase in gross profit during the quarter was mainly due to the impact of agreements with branded pharmaceutical manufacturers and an improved mix of higher-margin products and services, including sales of OneStop generics, which rose 20% during the quarter.
- The first quarter last year included the benefit of two anti-trust settlements totaling $14 million.
- The operating expenses increased 13% in the quarter to $562 million.
- The increase was due to the growth in the businesses and the acquisitions of OTN and McQueary Brothers.
- The management reported a segment operating profit of $384 million.
- This represents an increase of 13% for the quarter.
- The operating margin rate was 1.48% compared with 1.43% in the same quarter in 2008.
Technology Solutions:
- The quarterly revenues firmed 2% due to increased services revenues reflecting the segment’s expanded customer base.
- The segment operating profit was $66 million during the quarter, a decrease from $100 million in the same period last year.
- The management reported Q1 operating margin rate of 8.87% versus 13.7% for the first quarter last year.
- In last year’s quarter, the revenues and operating profit included the recognition of $21 million of previously deferred disease management revenue.
- The software and software systems revenue of $138 million during the quarter were unchanged from the year ago due to the strong sales of physician software in the previous year quarter.
- The gross R&D spending was $99 million, an increase of 4% from last year. Of this mount, 14% was capitalized versus 21% a year ago.
- The operating expenses rose 5% to $270 million during the quarter.
- The higher expenses were driven by business growth, higher net R&D expense and additional FAS 123R charges at $5 million over the prior year.
McKesson’s Health Mart franchise reportedly grew 50% during fiscal 2008.
- The Health Mart customers are loyal to McKesson especially with their generic compliance.
- Compared with the independent segment, the Health Mart stores have a 10% better utilization of the OneStop generics.
- During the quarter, OneStop Generics sales growth was 20%.
Fiscal Year 2009 Guidance:
- Based on the company’s positive momentum and the projected tax reserve release, the management has raised the previous outlook.
- The company is now anticipated to earn between $4 and $4.15 per share from continuing operations for the full year.
- Full year capital and software expenditures remain unchanged in the $350 million to $400 million range.
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