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McKesson Corp. Chairman and CEO John Hammergren
Hammergren

McKesson posts strong 4Q, but income still down for fiscal 2014


By Rachel Landen
Posted: May 12, 2014 - 6:45 pm ET
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McKesson Corp. rebounded in the final three months of its fiscal 2014 from a third quarter profit nosedive, posting significantly stronger earnings for the fourth quarter. But despite the late-year comeback, the San Francisco-based company fell short of its prior year income results.

The pharmaceutical distributor and information technology firm reported fourth quarter earnings of $371 million, a 43% increase compared with the year-ago period of $259 million. The results followed last quarter's 79% drop in income as charges related to inventory adjustments, restructuring, and a transfer pricing dispute offset any operational gains for the period.

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Revenue for the just-finished quarter rose 25% to $38.1 billion from $30.5 billion in the same period the prior year.

“These results were driven primarily by outstanding performance in the distribution solutions segment and disciplined working capital management across the company,” Chairman and CEO John Hammergren said in a release.

For the quarter, its distribution solutions segment—which delivers pharmaceuticals to retail pharmacies, hospitals and health systems, as well as technology and equipment to other healthcare facilities—had operating profit of $605 million on $37.3 billion in segment revenue.

Management expects revenue to continue to grow for the distribution solutions segment as the effect of its February acquisition of German drug distributor Celesio continues to be felt in fiscal 2015. Celesio, as part of McKesson’s international pharmaceutical distribution and services, contributed $4.8 billion in revenue for the quarter.

In February, McKesson also announced that it will be supplying the 4,600 Rite Aid drugstores with generic drugs as part of a five-year distribution agreement with the Camp Hill, Pa.-based chain. Rite Aid purchases an estimated $1.5 billion to $2 billion worth of generic drugs each year, according to Ross Muken, senior managing director and partner with consultants International Strategy & Investment, New York.

McKesson net income for the year stood at $1.3 billion, down 5.6%, despite annual revenue rising 12.7% to $137.6 billion from $122.1 billion in the prior year.

Follow Rachel Landen on Twitter: @MHrlanden


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