IRVING, Texas--(BUSINESS WIRE)--McKesson Corporation (NYSE:MCK) today reported results for the second quarter ended September 30, 2020.

“The dedication and execution of our teams continue to deliver outstanding results, responding to the evolving needs of our customers,” said Brian Tyler, chief executive officer. “Our strong second-quarter earnings results reflect the breadth of McKesson’s differentiated portfolio and further improvement in volumes across the business. At the same time, we continue to invest into the business to support our long-term growth strategies. Based on our year-to-date performance, we are raising our guidance range for fiscal 2021 and now expect Adjusted Earnings per diluted share of $16.00 to $16.50. With our steadfast commitment to our communities and those in need, we will continue to play a critical role in the fight against the global COVID-19 pandemic.”

Second-quarter revenues were $60.8 billion, up 6% from a year ago, driven by growth in the U.S. Pharmaceutical segment, largely due to market growth and higher volumes from retail national account customers, partially offset by branded to generic conversions.

Second-quarter Earnings per diluted share of $3.54 included a GAAP-only pre- and post-tax goodwill impairment charge of $69 million recorded in connection with the segment realignment and a GAAP-only after-tax charge of $37 million for an estimated liability related to the New York State Opioid Stewardship Act. Second-quarter Adjusted Earnings per diluted share does not include these charges.

Second-quarter Adjusted Earnings per diluted share was $4.80 compared to $3.60 a year ago, an increase of 33%, driven by a lower share count, a lower tax rate and growth in the Medical-Surgical Solutions segment, partially offset by the lapping of the prior year contribution from the company's now separated investment in Change Healthcare LLC ("Change Healthcare"). Second-quarter Adjusted Earnings per diluted share also includes pre-tax net gains of approximately $49 million, or $0.22 per diluted share, associated with McKesson Ventures’ equity investments.

For the first six months of the fiscal year, McKesson returned $388 million of cash to shareholders via $248 million of common stock repurchases and $140 million of dividend payments. During the first six months of the fiscal year, McKesson used cash from operations of $41 million, and invested $265 million internally, resulting in negative Free Cash Flow of $306 million.

U.S. Pharmaceutical Segment

• Second-quarter revenues were $48.1 billion, up 5%, driven by market growth and higher volumes from retail national account customers, partially offset by branded to generic conversions.
• Second-quarter Segment Operating Profit was $623 million and operating margin was 1.30%, and included a GAAP-only pre-tax charge of $50 million for an estimated liability related to the New York State Opioid Stewardship Act. Adjusted Segment Operating Profit was $658 million, up 3% from a year ago, driven by growth in specialty, partially offset by higher operating expenses in support of the company’s strategic growth initiatives. Adjusted operating margin was 1.37%, down 3 basis points.

International Segment

• Second-quarter revenues were $9.5 billion, up 2% on a reported basis and down 1% on an FX-Adjusted basis, primarily driven by lower volumes in the Canadian pharmaceutical distribution business due to the exit of an unprofitable customer at the onset of fiscal 2021, partially offset by higher volumes in the European business.
• Second-quarter Segment Operating Loss was ($45) million and operating margin was (0.47%), driven by a GAAP-only goodwill impairment charge of $69 million recorded in connection with the segment realignment that commenced in the second quarter of fiscal 2021. Adjusted Segment Operating Profit was $116 million, up 20%. On an FX-Adjusted basis, Adjusted Segment Operating Profit was $115 million, up 19%, driven by lower operating expenses in the European business. Adjusted operating margin was 1.22%, up 18 basis points. On an FX-Adjusted basis, adjusted operating margin was 1.24%, up 20 basis points.

Medical-Surgical Solutions Segment

• Second-quarter revenues were $2.5 billion, up 23%, driven by demand for COVID-19 tests and personal protective equipment in the Primary Care and Extended Care businesses.
• Second-quarter Segment Operating Profit was $187 million and operating margin was 7.38%. Adjusted Segment Operating Profit was $210 million, up 27%, driven by demand for COVID-19 tests and organic growth in the segment. Adjusted operating margin was 8.29%, up 22 basis points.

Prescription Technology Solutions Segment

• Second-quarter revenues were $668 million, up 7%, driven by new brand support programs, partially offset by the impact of lower prescription volume trends.
• Second-quarter Segment Operating Profit was $88 million and operating margin was 13.17%. Adjusted Segment Operating Profit was $104 million, down 10%, driven by higher operating expenses in support of the company’s strategic growth initiatives. Adjusted operating margin was 15.57%, down from 18.37% in the prior year.

Other remaining businesses

• As a result of the segment realignment effective in the second quarter of fiscal 2021, Other reflects equity earnings and charges for retrospective periods for the company's previous investment in Change Healthcare, which was separated from the company during the fourth quarter of 2020. Operating loss for the second quarter of fiscal 2020 included GAAP-only pre-tax charges of approximately $1.4 billion, primarily related to an impairment in connection with this planned exit.

Company Updates

• On August 14, 2020, McKesson announced the expansion of its existing partnership with the Centers for Disease Control to support the U.S. government’s Operation Warp Speed team as a centralized distributor of future COVID-19 vaccines and ancillary supplies needed to administer vaccinations. McKesson will leverage the strength of its experience, expertise, and commitment to health care delivery and access to make a difference in the fight against the COVID-19 pandemic.
• Linda Mantia joined McKesson's Board of Directors as a new independent director effective October 19, 2020.
• On November 1, 2020, McKesson completed the contribution of its German wholesale business to a joint venture with Walgreens Boots Alliance (WBA). WBA holds a 70% controlling equity interest in the joint venture and McKesson holds the remaining 30%.
• McKesson was named to the Diversity Best Practices (DBP) fourth annual Inclusion Index. McKesson was among the 98 organizations that earned a top score.

Fiscal 2021 Outlook

McKesson raised fiscal 2021 Adjusted Earnings per diluted share guidance to $16.00 to $16.50 from the previous range of $14.70 to $15.50 to reflect strong execution and earlier improvement in volumes relative to expectations through the first half of fiscal 2021. Fiscal 2021 guidance assumes approximately $0.15 to $0.20 of Adjusted Earnings per diluted share related to the kitting and storage of ancillary supplies for future COVID-19 vaccines.

Fiscal 2021 guidance assumes that a full recovery of pharmaceutical prescription volumes and patient visits is not likely to occur this fiscal year.

About McKesson Corporation

McKesson Corporation is a global leader in healthcare supply chain management solutions, retail pharmacy, community oncology and specialty care, and healthcare information solutions. McKesson partners with pharmaceutical manufacturers, providers, pharmacies, governments and other organizations in healthcare to help provide the right medicines, medical products and healthcare services to the right patients at the right time, safely and cost-effectively. United by our ICARE shared principles, our employees work every day to innovate and deliver opportunities that make our customers and partners more successful - all for the better health of patients. McKesson has been named a “Most Admired Company” in the healthcare wholesaler category by FORTUNE, a “Best Place to Work” by the Human Rights Campaign Foundation, and a top military-friendly company by Military Friendly. For more information, visit www.mckesson.com.