McKesson Corporation · NYSE:MCK
McKesson — Investor Day (June 2014)
115 slides from McKesson's investor day presentation, Jun 25, 2014
Slide 1: McKesson Corporation 2014 Investor Day
McKesson Corporation 2014 Investor Day June 25, 2014
Slide 2: 2014 Investor Day Agenda
2014 Investor Day Agenda • Erin Lampert - Senior Vice President, Investor Relations • John Hammergren - Chairman and Chief Executive Officer • Paul Julian - Executive Vice President, MDS Group President • Mark Walchirk - President, U.S. Pharmaceutical • Stanton McComb - President, McKesson Medical-S
Slide 3: Forward-Looking Statements
Forward-Looking Statements Some of the information in this presentation is not historical in nature and may constitute forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the
Slide 4: Welcome
Welcome John Hammergren Chairman and Chief Executive Officer
Slide 5: McKesson
MSKESSON
Slide 6: Industry In Transformation
Industry In Transformation Pool of Healthcare Convergence Consumers is & Growing Consolidation By 2020, healthcare will account for nearly Demographic Trends • 10K baby boomers turn 65 every day2 1/5 of the total U.S. • People 65+ years cost 3x more than 25-44 years3 economic output1 • Chronic condi
Slide 7: Impact Of Value-Based Reimbursement
Impact Of Value-Based Reimbursement 70% of providers are expected to enter into value-based arrangements by 2020 1 Moves risk from High deductible plans payers to providers have grown by 40% & consumers annually since 20052 Value-based purchasing worries providers (Healthcare Finance News May 20. 20
Slide 8: Unparalleled Growth: FY07-FY14
Unparalleled Growth: FY07-FY14 5% CAGR 17% CAGR Total Revenues Adjusted EPS $23B Added to Market Cap Reflects non-GAAP information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company’s website under the “Investors” t
Slide 9: McKesson Distribution Solutions
McKesson Distribution Solutions Paul Julian Executive Vice President, Group President
Slide 10: Profiles Of McKesson Distribution Solutions
Profiles Of McKesson Distribution Solutions $134B in Revenues and $3.2B in Adjusted Op Profit in FY14 North America Pharmaceutical Distribution & Services International Pharmaceutical Distribution & Services U.S. Pharmaceutical Specialty Health • Distribution • Retail Pharmacy • Distribution • Speci
Slide 11: FY14 Milestones
FY14 Milestones Delivered Strong Results Across Distribution Solutions U.S. Pharmaceutical Canada • Generated record operating cash flow • Achieved 15% profit growth in a difficult regulatory • Expanded Health Mart from 3,095 to 3,281 stores environment • Grew McKesson OneStop Generics 17% year-over
Slide 12: Operational Excellence
Operational Excellence McKesson is at the Forefront of Distribution Excellence U.S. Pharmaceutical Canada • Order Accuracy 99.98% • Order Accuracy 99.95% • Inventory Accuracy 99.99% • Warehouse picking errors of 0.046% • Six Sigma process improvement generated over • Six Sigma process improvement ge
Slide 13: Global Sourcing Excellence
Global Sourcing Excellence Creating Purchasing Power and Operational Efficiencies to Add Value for our Stakeholders NorthStar / Cypress Sivem acquisition collaboration in Canada 2002 2007 2012 2014 NorthStar Sivem program launch launched / PSS acquisition
Slide 14: Global Sourcing – Our Approach
Global Sourcing – Our Approach McKesson’s Differentiated Sourcing Model Drives Value Across the Enterprise Consolidation and Scale Opportunity Identification • Extensive experience in consolidation of enterprise-wide sourcing • Proven governance model at scale • Experienced leadership Consolidation
Slide 15: McKesson: A Valuable Partner To Manufacturers
McKesson: A Valuable Partner To Manufacturers Pharmaceutical Manufacturers • Global scale • Highly efficient distribution platform • Direct relationships Reach Medical Surgical Supplies • U.S. market leadership in non-acute setting • Extensive direct sales force Supply Breadth of Chain Manufacturer
Slide 16: Celesio Update
MCKESSON Celesio Update
Slide 17: Celesio Profile
Celesio Profile McKesson & Celesio: A Global Leader in Healthcare Services Business Profile Operating Countries • Founded in 1835 and operating in 14 European countries and Brazil UK Sweden • 39,000 employees1 France Italy • Key Operations: Germany Belgium • Wholesale Brazil Denmark • Retail Norway
Slide 18: Celesio Markets
Celesio Markets Growth Forecast Across Selected Celesio Markets CY 2014-2017 European healthcare spend CAGR1 5.7% 4.7% 4.7% 2.9% 3.4% 3.2% Celesio weighted average 2.9% 2.4% UK France Norway Sweden Italy Germany USA Economist Intelligence Unit country reports, Sept 20131
Slide 19: Celesio Markets
Celesio Markets Demographic Trends Similar to North America; Rate of Generic Dispensing Varies Widely Across Europe Population > 60 years old1 2012 Current generic dispensing rate2 2050 Percent 19% 87% USA 27% 68% 23% 65% UK 61% 30% 25% Sweden 31% 27% 24% Germany 37% 24% France 31% USA UK Sweden Ger
Slide 20: Celesio Timeline And Next Steps
Celesio Timeline And Next Steps Important Milestones Over the Coming Months July 15 Celesio Annual Late First Half FY15 General Meeting Operating Control July 16 Fiscal 2015 Q3 Marc Owen Assumes Role Begin Execution of of Chairman of the Celesio Synergy Plan Management Board
Slide 21: Celesio Coordination Office
Celesio Coordination Office Jointly-Staffed Coordination Office Engaged in Planning Across Key Functions • Realize $275M to $325M in combined synergies by the fourth year following achieving operating control • Offer strong value proposition to manufacturers in a global marketplace with in-depth and
Slide 22: Celesio Observations
Celesio Observations Significant Similarities Across Our Businesses and Strong Shared Values
Slide 23: Distribution Solutions Summary
Distribution Solutions Summary
Slide 24: Distribution Solutions Summary
Distribution Solutions Summary • Track record of strong financial performance across the segment • Operational excellence is at the core of everything we do • Differentiated approach to working with manufacturing partners on a global scale • Proven ability to successfully deliver on value of acquisi
Slide 25: Experienced Management Team
Experienced Management Team Paul C. Julian Executive Vice President, Group President McKesson Corporation (18 years) North America Pharmaceutical International Distribution & Medical Surgical Global Sourcing Distribution & Services Services Distribution & Services Brian Tyler Marc Owen Stanton McCom
Slide 26: U.S. Pharmaceutical
U.S. Pharmaceutical Mark Walchirk President, U.S. Pharmaceutical
Slide 27: Pharmaceutical Industry Landscape
Pharmaceutical Industry Landscape Low Single-Digit Growth in the Near Future Sales ($ Billions) % Change 450 10% Upward Trends 400 8% • Aging population/ 350 prescription demand 6% 300 • Specialty growth 250 4% • Manufacturer support • Drug pipeline improvement 200 2% 150 0% Downward Pressures 100 -
Slide 28: U.S. Pharmaceutical Market Overview
U.S. Pharmaceutical Market Overview ($ Billions) ($ Billions) $112 $245 $241 $237 $69 $225 $55 $32 2008 2012 2014 2018 2008 2012 2014 2018 Brand Sales Generic Sales Note: This information is an estimate derived from the use of information under license from the following IMS Health information servi
Slide 29: Brand Sales at Risk
Generics Launch Opportunity 40 ($ Billions) 35.2 35 $79.5B 30 Brand Sales at Risk 25 21.5 19.2 19.5 20 18.4 18.0 16.5 15 12.2 10.6 9.4 10 5 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Note: IMS National Sales Perspectives, November 2013; sales in year prior to expiry for 2009-2012; MAT Nov 2
Slide 30: Distribution Center Network Optimization
Distribution Center Network Optimization Results In Continued Operational Excellence Efficient Productivity Quality Supply Chain • 1.2 million lines per • Industry-leading order- • National Re- night across the accuracy and service Distribution Center network levels • Ability to rapidly deploy • 99.
Slide 31: U.S. Pharmaceutical Has A Broad Value Proposition
U.S. Pharmaceutical Has A Broad Value Proposition Independent & Small Chain National Chain Pharmacy Pharmacy • Re-Distribution Center • Health Mart Franchise • Central Fill • OneStop Generics • OneStop Generics • Managed Care Contracting • Six Sigma • Pharmacy & Point-of-Sale Systems • Clinical Serv
Slide 32: McKesson: A Valuable Partner To Manufacturers
McKesson: A Valuable Partner To Manufacturers Pharma/Biotech Company Needs Scale Services We control significant We offer more than a transactional relationship; we purchasing volume which effectively and efficiently market products to the end continues to grow pharmacist or patient Reach High Effic
Slide 33: McKesson: A Valuable Generics Channel Partner With Global Scale
McKesson: A Valuable Generics Channel Partner With Global Scale Industry Landscape McKesson • Manufacturer consolidation • Highly efficient distribution network • Large purchasing groups • One of the largest purchasers of • Drug shortages generics • FDA backlog OneStop Generics • Regulatory uncertai
Slide 34: McKesson: A Valuable Partner To Independent Pharmacy
McKesson: A Valuable Partner To Independent Pharmacy Health Mart Store Count • Marketing support drives awareness 3,281 & more traffic to the pharmacy 2,941 2,615 • Clinical support drives improvement and PBM recognition of performance 1,851 • Operations support frees up time to focus on driving bus
Slide 35: Our Operational Excellence Is Driven By Our People, Infrastructure And Investments
Our Operational Excellence Is Driven By Our People, Infrastructure And Investments
Slide 36: McKesson Medical-Surgical
McKesson Medical-Surgical Stanton McComb President, McKesson Medical-Surgical
Slide 37: Medical-Surgical Market Overview
Medical-Surgical Market Overview Medical-Surgical Revenue ($ Billions) Market Trends 6.0 • Net favorable demographic trends 5.0 • Consolidation of customers 4.0 and distributors 3.0 • Markets remain highly fragmented 2.0 • Extended care markets remain attractive 1.0 • Consumerism and new delivery mo
Slide 38: Medical-Surgical Has A Broad Value Proposition
Medical-Surgical Has A Broad #1 Market Share Value Proposition Physician Offices Home Care • Medical Supplies & Equipment • Medical Supplies & Equipment • In-Office Rx & Vaccines • Direct-to-Patient Services • In-Office Lab • McKesson Brand Products • McKesson Brand Products • Respiratory • HIT Solu
Slide 39: McKesson Case Study: Home Care
McKesson Case Study: Home Care Nurse visits home / does assessment Nurse completes order Better Health For: and patient receives Orders supplies via McKesson supplies via our Patient Mobile Manager HCSM • The Patient & Care Giver Home Delivery service • The Home Care Nurse • The Home Care Agency • T
Slide 40: Low Cost Platform Scales To Non-Acute Setting
Low Cost Platform Scales To Non-Acute Setting Customer and Value Grow our understanding of our customers Provide differentiated value Reach Continue to develop strong customer relations Demonstrate value to manufacturers Foundation Realize efficiencies from single operating platform People
Slide 41: McKesson's PSS Integration Plan
McKesson’s PSS Integration Plan Combine Sales Force of More Meet and Exceed Than 1,400 Reps Synergy Expectations Successfully Merge Create One Back Office Functions Team Optimize Distribution Execute on Supplier and Sourcing Opportunities Network
Slide 42: Met Or Exceeded All Of Our Year 1 Integration Priorities
Met Or Exceeded All Of Our Year 1 Integration Priorities... With More Work To Be Done Year 1 Accomplishments Year 2 and 3 Focus • Combined leadership teams • Continue optimization of distribution • Retained sales force of more than network 1,400 field sales reps • Move to single integrated • Elimina
Slide 43: We Are Creating An Unrivaled Platform For Sustained Growth
We Are Creating An Unrivaled Platform For Sustained Growth Sales Distribution Sourcing Channel Network Expertise Leadership • >1,400 field sales reps • National distribution • National brand vendors • Serving >200,000 network • Leading private-brand customers • Flexible transportation offering • Com
Slide 44: McKesson Specialty Health
McKesson Specialty Health Marc Owen President, McKesson Specialty Health
Slide 45: Specialty Market Overview
Specialty Market Overview Steady Growth Expected in Specialty1 • Specialty distributors are well positioned for growth2 • Aging population driving new cancer cases • Biological products driving sustained growth3 FY15 FY16 FY17 FY18 Note: Total specialty market does not necessarily reflect McKesson S
Slide 46: McKesson Specialty Health Has A Broad Value Proposition
McKesson Specialty Health Has A Broad Value Proposition Physician Manufacturer Payer • Distribution and contracting • Efficacy and safety • Value-based reimbursement • Robust practice management • Market intelligence • Evidence-based pathways services • Integrated technology platform • 3PL and manag
Slide 47: McKesson Specialty Coverage
McKesson Specialty Coverage The US Oncology Network: Radiation Locations The US Oncology Network: Practice Locations Onmark Select Program: Practice Locations Scale Technology Platform Breadth of Services • Serve 3,000+ physicians and more than • >2,100 physicians using Lynx Mobile • ~90 radiation o
Slide 48: Positioned To Serve Manufacturer Needs
Positioned To Serve Manufacturer Needs Pre-Launch Launch and Post Launch • Extensive clinical trial network • Reimbursement and access services • Involved in trials for 48 FDA-approved • 3PL and managed distribution cancer drugs, nearly one-third of all FDA-approved cancer therapies to date • Unique
Slide 49: Positioned To Lead Payment Shifts
Positioned To Lead Payment Shifts Traditional Contracting Quality-Based Performance Environment Environment • Leverage market position • Package and market a comprehensive, high quality patient experience • Fee-for-service focus • Improve payer/provider financial incentives • Optimize drug margins a
Slide 50: Positioned To Deliver Advanced Technologies
Positioned To Deliver Advanced Technologies Patient Engagement: My Care Plus Health Information Hospital Initiative Ancillary Integration: Care Delivery: iKnowMed/ iKnowMed/ Med Fusion Clear Value Plus Physician Network Distribution Development Financial Drug Stability: Distribution: TotalView Lynx
Slide 51: McKesson Specialty Health
McKesson Specialty Health Broad expertise Technology platform to drive enhanced value in all aspects for physicians, payers of cancer care and pharmaceutical delivery manufacturers Deep Expanding presence Physician in other Engagement specialties
Slide 52: McKesson Canada
McKesson Canada Nick Loporcaro President, McKesson Canada
Slide 53: Canadian Pharmacy Rx Purchases By Market Segment
Canadian Pharmacy Rx Purchases By Market Segment Canadian Pharmacy Rx Purchases $22.9 Billion CAD 11.6% Hospital 88.4% Retail Source: IMS Brogan, Canadian Drug Store and Hospital Purchases Moving Annual Total to March 2014
Slide 54: Generics Consist Of >60% Of Total Prescriptions
Generics Consist Of >60% Of Total Prescriptions Canadian Retail Pharmacy Rx Market Share: Brand versus Generic 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 Rx Market Share - Brand 56.1% 54.9% 51.7% 48.2% 45.4% 42.7% 40.0% 37.2% 34.3% Rx Market Share - G
Slide 55: Improved Visibility In Generic Pricing
Improved Visibility In Generic Pricing $ Generic Drug Pricing Brand vs. Generic Shift Bx Gx
Slide 56: McKesson Canada Has A Broad Value Proposition
Mckesson Canada Has A #1 Market Share Broad Value Proposition Government Retail Manufacturer & Institution • 7,100 retail pharmacies • 93 Integrated Health • 800 pharmaceutical Networks & 1,350 partners • Out-patient automation hospitals • Distribution services • Web-based order • In-patient automat
Slide 57: Focusing On Our Core Competencies
Focusing On Our Core Competencies Drive volume Increase controlled and margin in Grow Specialty volume and retail distribution margin participation business • Optimize supply chain • Evolve capabilities & • Acquire new banners & assets to support specialty establish banner • North American & global
Slide 58: Delivering Excellence Through Network Optimization
Delivering Excellence And Driving Operational Performance Through Network Optimization 16 Distribution Centers 7 Specialty Pharmacies 13 Offices British 85 Infusion Clinics Columbia Alberta Newfoundland Manitoba and Labrador Quebec Ontario New Brunswick Nova Scotia
Slide 59: Global Sourcing And Sivem Banner Programs
Global Sourcing And Sivem Banner Programs Generic Rx Increased Collaboration Launched National With NorthStar Expansion Phased Approach
Slide 60: Offering Comprehensive Specialty Capabilities
Offering Comprehensive Specialty Capabilities Specialty Pharmacies & Distribution >70,000 85+ Infusion Infusions Annually Clinics Manufacturer Programs • Reimbursement assistance • Last stage clinical trial • Patient adherence
Slide 61: Helping Independent Banner Members Grow And Thrive
Helping Independent Banner Members Grow And Thrive National footprint Exclusive brands to convert consumers >1,700 stores in all 10 provinces and 2 territories >100 SKUs >700 SKUs Programs to foster lasting relationships + + More More More Private Medicine Shoppe Canada Scripts OTC Sales Label Sales
Slide 62: Leveraging Our Health Care Ecosystem
Leveraging Our Health Care Ecosystem Drive volume and margin in Manufacturers distribution Grow business Specialty Pharmaceutical Distribution Retail Hospitals Specialty Banners Increase controlled Patients volume and retail margin participation Private Payers
Slide 63: McKesson
MSKESSON
Slide 64: McKesson Technology Solutions
McKesson Technology Solutions Pat Blake Executive Vice President, Group President
Slide 65: Agenda
Agenda Technology Solutions Overview Industry Trends Our Portfolio Execution And Innovation Summary
Slide 66: Technology Solutions Overview
Technology Solutions Overview
Slide 67: Comprehensive Solutions Across The Healthcare Continuum
Comprehensive Solutions Across The Healthcare Continuum $3.2B in revenues and $467M in adjusted operating profit Payers Physicians Technology Solutions Manufacturers Hospitals and Health Systems Retail Pharmacies Consumers Reflects non-GAAP information calculated on an Adjusted Earnings basis. A rec
Slide 68: Experienced Management Team
Experienced Management Team Pat Blake Executive Vice President, Group President McKesson Corporation (18 years) Analytics & Connectivity Payer & Financial Physician Services Health System Solutions Solutions Solutions Jeff Felton Emad Rizk, MD Patrick Leonard Jim Pesce Erkan Akyuz President Presiden
Slide 69: Industry Trends
MCKESSON Industry Trends
Slide 70: Industry Trends And Customer Imperatives
Industry Trends And Customer Imperatives Industry Trends Customer Imperatives • Declining reimbursement • Effectively run core operations and utilization • Optimize performance • Unprecedented and quality vertical and horizontal consolidation • Drive quality and operational • Regulatory demands effi
Slide 71: Our Approach: Better Health 2020
Our Approach: Better Health 2020TM Blocking and Continuous Tackling Improvement Unification Transformation Manage Core Optimize Connect for Quality Support Value- Operations Performance & Operational Based Care & Quality Efficiency • Efficiently and • Move from volume- effectively manage • Make deci
Slide 72: Our Portfolio
MCKESSON Our Portfolio
Slide 73: Solutions That Span The Healthcare Sector
Solutions That Span The Healthcare Sector # 1 Health Plan Payment Management Physician #1 #1 #1 # 2 Capacity Provider Revenue Cycle and Revenue Cycle Outsourcing 2 In U.S. #1 Pharmacy Network # Workforce Physician Analytics PACS 2 1 Services Payer & Financial Solutions Analytics & Connectivity Solut
Slide 74: Execution And Innovation
MCKESSON Execution And Innovation
Slide 75: Execution For Today, Innovation For Tomorrow
Execution For Today, Innovation For Tomorrow Blocking and Continuous Tackling Improvement Unification Transformation Manage Core Optimize Connect for Quality Support Value- Operations Performance & Operational Based Care • 100% of Top US Health & Quality Efficiency • 75+ customers Plans undertaking
Slide 76: Manage Core Operations
Manage Core Operations A Large Midwest Heath System with Large Regional >1,300 Affiliate Health Plan Blocking and Physicians Provider Network Tackling Management Supply Chain Solutions • Enrollment and credentialing time Savings: slashed by 90% Manage Core >$2M in contract price • Reliable provider
Slide 77: Optimize Performance & Quality
Optimize Performance & Quality A Large Northeast A Large Integrated Academic Health Delivery System in NJ Continuous System Health Analytics Improvement Financial Analytics • 14% reduction in overall heart failure • Recouped $3M in underpayments readmission rate through contract modeling Optimize •
Slide 78: Connect For Quality & Operational Efficiency
Connect For Quality & Operational Efficiency Statewide Network of Multi-State Faith- Providers Serving Based Health System 6 Million Patients Financial Connectivity Unification Health Information • 4% increase in net patient Exchange revenue 1,600 Connected physicians • 26% improvement in Connect fo
Slide 79: Support Value-Based Care
Support Value-Based Care Regional Blues Plan Health System with with 6,000+ Over 1.3M Lives in Physician Partners Risk-based Risk Manager Contracts Transformation • 6% reduction in readmissions Population & Risk Analytics • 19% improvement in breast Support Value- cancer screening • 5.4% reduction i
Slide 80: Summary
MCKESSON Summary
Slide 81: Healthcare Technology Aligned With Customer Priorities
Healthcare Technology Aligned With Customer Priorities Unique McKesson Value Proposition Payers Physicians Technology 360o Perspective Solutions Expertise working with payers, Manufacturers Hospitals and Health Systems hospitals, physicians, pharmacies Scaled leadership positions Comprehensive portf
Slide 82: Financial Update
Financial Update James Beer Executive Vice President, Chief Financial Officer
Slide 83: Agenda
Agenda Drivers Of Value Creation Segment Financial Review • Distribution Solutions • Technology Solutions Financial Flexibility And Capital Deployment Track Record Of Financial Performance
Slide 84: McKesson Drives Sustained Value Creation
McKesson Drives Sustained Value Creation Attractive healthcare markets • Public policy agenda supports greater access and improved efficiency • Demographics drive long-term demand in North America and globally Well-positioned businesses with margin expansion opportunities • Market leading positions
Slide 85: Distribution Solutions: Broad Value Proposition
Distribution Solutions Broad Value Proposition with Evolving Mix of Higher Margin Products and Services
Slide 86: Distribution Solutions: Organic Revenue Growth, Bolstered By Acquisitions
Distribution Solutions: Organic Revenue Growth, Bolstered By Acquisitions… ($ Billions) $134 $138 $98 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Slide 87: Driving Sustained Adjusted Operating Profit Growth
…Driving Sustained Adjusted Operating Profit Growth ($ Billions) $3.2 $3.2 $1.5 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Reflects non-GAAP information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company’s website under the
Slide 88: Major Levers For Operating Profit Expansion
Major Levers For Operating Profit Expansion Procurement Manufacturer at Scale Economics Operating Private Label Sourcing Expense Leverage Continued ability to drive steady profit growth Deep Customer M&A Synergies Relationships Operational Excellence
Slide 89: Distribution Solutions FY15 Outlook
Distribution Solutions FY15 Outlook Distribution Solutions North American Revenue growth will increase Distribution and Services significantly driven by the acquisition of Celesio To deliver mid single-digit revenue growth versus Fiscal 2014 International Pharmaceutical Medical Surgical Distribution
Slide 90: Celesio To Drive Value Creation
Celesio To Drive Value Creation • Expected accretion to Adjusted Earnings per share of $1.00 to $1.20 in the Accretion first twelve months starting February 2014, assuming 100% ownership • April 2014 ownership is 76% • Anticipated annual synergies between $275 million and $325 million realized Syner
Slide 91: Celesio: The Path To Operational Control
Celesio: The Path To Operational Control Q4 FY2014 Q1 FY2015 Q2 FY2015 • Achieved ownership of >75% • Independent valuation • Annual General Meeting of diluted shares results released • Domination agreement • Consolidated the financial registered results of Celesio • Operational control expected • D
Slide 92: Distribution Solutions Financial Drivers
Distribution Solutions Financial Drivers • Differentiated global sourcing expertise • Scaled leadership positions across a broad portfolio of products and services • Operational excellence • Contribution from value creating acquisitions • Growth in gross profit from both generic and branded drugs •
Slide 93: Operating Margin Expansion Has Been Consistent Over The Long Term
Operating Margin Expansion Has Been Consistent Over The Long Term Q4 FY05 earnings release: Issued initial operating Achieved full-year Achieved full-year margin target adjusted operating adjusted operating of 150 – 200 bps margin of 194 bps margin of 239 bps FY05 FY07 FY10 FY11 FY14 FY15 Achieved f
Slide 94: Technology Solutions: Diversified Portfolio
Technology Solutions Diversified Portfolio with Solid Long-Term Fundamentals
Slide 95: McKesson Technology Solutions
McKesson Technology Solutions FY14 Adjusted Operating Profit Contribution Analytics & Connectivity Solutions 87% 13% Technology Payer & Financial Solutions Distribution Solutions Solutions Physician Services Health System Solutions Reflects non-GAAP information calculated on an Adjusted Earnings bas
Slide 96: McKesson Technology Solutions: Sources of Operating Profit
McKesson Technology Solutions Sources of Operating Profit >60% Consistent and predictable transaction and subscription-based revenue streams have grown to drive a majority of segment operating profits Transaction and Subscription-based Reflects Technology Solutions Adjusted Operating Profit for FY14
Slide 97: Technology Solutions Financial Drivers
Technology Solutions Financial Drivers • Increasing demand for technology driven by industry dynamics and government requirements • Scaled leadership positions across broad portfolio – Our connectivity and payer solutions are positioned to drive steady long-term growth – Horizon hospital software an
Slide 98: Strong Cash Flow and a Portfolio Approach to Capital Allocation
Financial Flexibility And Capital Deployment Strong Cash Flow and a Portfolio Approach to Capital Allocation Lead to Value Creation
Slide 99: Our Operating Cash Flows Have Steadily Increased
Our Operating Cash Flows Have Steadily Increased OCF ($ Billions) 7 Year Moving Average $3.0 $2.5 $119 $119 $2.0 $104 $106 $109 $1.5 $1.0 $0.5 FY08* FY09 FY10 FY11 FY12 FY13 FY14 *FY08 excludes $962 million Securities Litigation payment.
Slide 100: Portfolio Approach To Capital Deployment
We Remain Committed To Our Historical Portfolio Approach To Capital Deployment… FY08 - FY14 ($ Billions) Dividends $1.1 Internal Capital Spending $2.6 $7.8 $25 Billion of Capital Share Deployed from FY08 – FY14 Repurchases $13.7 Acquisitions
Slide 101: Committed To Maintaining Investment Grade Ratings As We Delever
…And We Remain Committed To Maintaining Investment Grade Ratings As We Delever Investment Grade Ratings Reaffirmed After February 2014 Financing Gross Debt Position up $6.7B Planning Ahead for Short- to since FY12 Medium-Term Debt 1 $10.7 ($Billions) Repayments $4.01 $4.91 • FY15: $ 0.2B 2 • FY16: $
Slide 102: Capital Deployment As We Delever
Capital Deployment As We Delever Contemplated In Our Outlook • Retaining investment grade ratings • Leveraging expected cash flow from operations and opening cash position • March 31, 2014 cash and cash equivalents: $4.2B, of which approximately $2.4B was offshore • FY 2015 planned operating cash fl
Slide 103: Steady Track Record of Strong Results
How Does It All Add Up? Steady Track Record of Strong Results
Slide 104: We Have A Track Record Of Steady Revenue Growth
We Have A Track Record Of Steady Revenue Growth… ($ Billions) $138 $122 $122 $108 $112 $101 $106 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Slide 105: Higher Adjusted EPS Growth
…That We Have Leveraged Into Higher Adjusted EPS Growth FY15 Guidance: $10.40 - $10.80 $8.35 $6.28 $6.38 $4.65 $5.13 $4.23 $3.41 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Reflects non-GAAP information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to th
Slide 106: Drivers Of FY15 Earnings And Cash Flow
Drivers Of FY15 Earnings And Cash Flow • Furthering our global scale and sourcing capabilities with Celesio • Benefiting from generic and branded drug manufacturer economics • Realizing an increased level of generic drug launches • Expanding our relationship with Rite-Aid • Executing on PSS synergie
Slide 107: In Business For Better Health
In Business For Better Health
Slide 108: McKesson
MSKESSON
Slide 109: We Expect Fiscal 2015 Adjusted Earnings Per Diluted Share Of $10.40 - $10.80
We Expect Fiscal 2015 Adjusted Earnings Per Diluted Share Of $10.40 - $10.80 • Distribution Solutions revenue growth will increase significantly driven by the acquisition of Celesio - North America pharmaceutical distribution and services and Medical Surgical distribution and services will deliver m
Slide 110: Reconciliation of GAAP Operating Results to Adjusted Earnings, FY2014
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH FISCAL 2014 (unaudited) (in millions, except per share data) Year Ended March 31, 2014 Amortization Acquisition of Acquisition- Expenses and Litigation Adjusted As Reported Related Related Reserve LIFO-R
Slide 111: Reconciliation of GAAP Operating Results to Adjusted Earnings, FY2012
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH FISCAL 2014 (unaudited) (in millions, except per share data) Year Ended March 31, 2012 Amortization Acquisition of Acquisition- Expenses and Litigation Adjusted As Reported Related Related Reserve LIFO-R
Slide 112: Reconciliation of GAAP Operating Results to Adjusted Earnings, FY2010
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH FISCAL 2014 (unaudited) (in millions, except per share data) Year Ended March 31, 2010 Amortization Acquisition of Acquisition- Expenses and Litigation Adjusted As Reported Related Related Reserve LIFO-R
Slide 113: Reconciliation of GAAP Operating Results to Adjusted Earnings, FY2008
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH FISCAL 2014 (unaudited) (in millions, except per share data) Year Ended March 31, 2008 Amortization Acquisition of Acquisition- Expenses and Litigation Adjusted As Reported Related Related Reserve LIFO-R
Slide 114: Reconciliation of GAAP Segment Financial Results, FY2010-FY2014
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH FISCAL 2014 (unaudited) (in millions) Year Ended March 31, 2014 Year Ended March 31, 2013 Year Ended March 31, 2012 Year Ended March 31, 2011 Year Ended March 31, 2010 Corporate Corporate Corpora
Slide 115: Reconciliation of GAAP Segment Financial Results, FY2007-FY2009
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) FOR FISCAL 2007 THROUGH FISCAL 2014 (unaudited) (in millions) Year Ended March 31, 2009 Year Ended March 31, 2008 Year Ended March 31, 2007 Corporate Corporate Corporate Distribution Technology & Interest Distribution T