McKesson shifts into black in Q3

McKesson has reported that revenues for the 2010 third quarter, which ended Dec. 31, 2009, were $28.3 billion compared with $27.1 billion a year ago. The company also posted a net income of $326 million in this quarter, compared with a net loss of $20 million in the third quarter of 2009.

Also, the San Francisco-based company noted that last year’s results included the impact of a pre-tax charge of $493 million for the Average Wholesale Price litigation.

In the third quarter, the distribution solutions revenues were up 4 percent, McKesson said. U.S. pharmaceutical distribution revenues were up 2 percent for the quarter, primarily reflecting market growth, which was partially offset by the loss of certain customers in the late fiscal year of 2009. In addition, the company continued to see a shift of revenues to direct store delivery from sales to customers’ warehouses.

The gross profit of distribution solutions was $1.1 million compared to $988 million in the third quarter a year ago. Distribution solutions gross profit margin in the third quarter was higher compared to the third quarter a year ago, primarily due to the impact of the H1N1 flu virus, which McKesson said helped drive an improved mix of higher margin revenues stemming from increased flu-related demand across the company's distribution businesses. The benefits were partially offset by lower sell margin in its U.S. pharmaceutical business and the timing of compensation from branded pharmaceutical manufacturers.

For its technology solutions unit, revenues were up 3 percent for the quarter. Services revenues grew 6 percent, software revenues were down 2 percent and hardware revenues were down 32 percent.

Technology solutions operating profit in the third quarter was $81 million, down 11 percent from $91 million a year ago. The operating margin was primarily reflective of a decrease in gross profit margin due to a higher software deferral rate and additional amortization related to McKesson’s Horizon Enterprise Revenue Management solution, which became generally available in the second quarter of the 2010 fiscal year.

“McKesson demonstrated solid execution in the third quarter. Our results were driven by our performance in distribution solutions, including a strong contribution from the incremental demand we are experiencing across our businesses from the impact of the flu season,” said John H. Hammergren, McKesson’s chairman and CEO. “We are well positioned to benefit from the increased focus on clinical solutions that has been created by the stimulus funding provided by the federal government.”



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