Recommended
More Related Content
What's hot
What's hot (12)
Viewers also liked
Viewers also liked (20)
Similar to 2002 Raymond James Conference
Similar to 2002 Raymond James Conference (20)
More from finance2
More from finance2 (20)
Recently uploaded
Recently uploaded (20)
2002 Raymond James Conference
- 1. 2002 Raymond James Conference December 3, 2002
- 2. Bill Graber Senior Vice President and Chief Financial Officer
- 3. Safe Harbor Clause Some of the information in this presentation may constitute forward-looking statements which are subject to various uncertainties and could cause actual results to differ materially from those projected or implied. These uncertainties are described in the Company’s reports and exhibits filed with the Securities and Exchange Commission.
- 4. Agenda For Today’s Presentation Market and Strategy Overview Business Unit Review Summary
- 5. Largest Healthcare Services Company Medical- Medical- Pharmaceutical Information Pharmaceutical Information Surgical Surgical Solutions Solutions Solutions Solutions Solutions Solutions $46 billion in $2.7 billion in $1 billion in revenues revenues revenues US and Hospitals Most comprehensive Canadian HIT product line: Physician pharma software, services, offices distribution outsourcing Nursing homes Hospital and New clinical offering retail Long-term care includes decision automation facilities support, order entry and digital medical Pharmacy imaging outsourcing Health Solutions
- 6. McKesson Solutions Improve Quality and Reduce Cost Pharmaceutical and medical- Clinical, financial and surgical distribution to all sites resource management systems for hospital and Automated drug IDNs dispensing for retail and hospital pharmacies Physician portal Pharmacy outsourcing Solution for Medication Safety Specialty pharmaceutical distribution HIT outsourcing Services for payors, patients and manufacturers Unique Conversations with Customers At Higher Levels
- 7. Favorable Market Factors Drive McKesson Growth Aging population consumes more drugs, supplies More sophisticated population demands higher quality Employer and government focus on higher quality Costs and incentives drive increased use of generics Pharmacist and nurse shortage widens Costs and quality concerns lead to increased disease management Expanding pipeline of higher-tech drugs
- 8. Strong Q2 FY03 Results 2nd Quarter ($ in millions, except EPS) FY03 FY02 Revenues $10,282 $8,915 +15% Operating Profit Pharmaceutical Solutions $ 227 $ 179 +27% Medical-Surgical Solutions 2 24 - 92% Information Solutions 24 14 +79% Net Income $ 124 $ 96 +29% Diluted Earnings per Share $ 0.42 $ 0.32 +31% Note: Before special items and discontinued operations, not including sales to customers’ warehouses
- 9. Seven Quarters of Momentum FY01 FY02 FY03 Q1 Q4 Q1 Q2 Q3 Q4 Q2 Revenue 17% 16% 19% 20% 16% 19% 15% Y-O-Y 41% 41% 45% 58% 55% EPS 35% 31% Y-O-Y 18.0% 18.7% 19.4% 20.4% 22.0% 22.4% 22.9% ROCC All results exclude warehouse sales, special items and discontinued operations discontinued and include impact of FAS 142 in FY02
- 10. Agenda For Today’s Presentation Market and Strategy Overview Business Unit Review Summary
- 11. Business Metrics Drive Results Financial Success To achieve the best financial performance in the industry Employee Satisfaction Customer Satisfaction Metric-Driven Execution To provide an environment To have the most satisfied that attracts and retains customers in the industry outstanding talent Business Process Success To fulfill our commitments to our customers and to each other
- 12. Supply Businesses Across All Sites McKesson McKesson McKesson McKesson McKesson Health McKesson McKesson McKesson McKesson Health McKesson Medication Medication Pharmaceutical Automation Solutions Medical Surgical Pharmaceutical Automation Solutions Medical Surgical Management Management Distribution Retail Pharmacy Medical Pharmacy and Primary Care Management Medication Repackaging Hospital / Extended Care Software and Management Institutional Informatics Acute Care Services Services International Specialty Pharmaceutical Services End-to-End Continuum of Services Multiple Points of Leverage Comprehensive North American Distribution
- 13. Pharmaceutical Solutions: Strong Growth and Expanding Margins U.S. pharmaceutical distribution revenues up 17% Generic sales slow market growth but drive margin expansion Operating margin up 20 bp driven by generics, strong pricing and increased sales of related products and services McKesson Canada revenues up 14% with margin expansion
- 14. Pharmaceutical Solutions Margin Momentum 9 Consecutive Quarters of Y-O-Y Operating Margin Expansion 3.50% +55 bp in FY01 and FY02 3.25% Operating Margin % of Revenues +36 bp 3.00% 2.75% +70 bp +22 bp +20 bp 2.50% +20 bp +34 bp +29 bp 2.25% +24 bp +17 bp -13 bp 2.00% 1.75% 1.50% 1.25% 1.00% Q1 Q2 Q3 Q4 FY03 FY02 FY01
- 15. Pharmaceutical Solutions DC Productivity 1.40 ($Billions) 1.20 CAGR 37% Annual Revenue/DC 1.00 0.80 0.60 0.40 0.20 0.00 FY98 FY99 FY00 FY01 FY02 FY03 EST Note: Excludes Alaska and Hawaii
- 16. Pharmaceutical Solutions Operating Leverage 4.50% 4.12% Operating Expenses % of Revs 4.00% 3.67% 3.42% 3.50% 3.08% 2.91% 3.00% 2.50% 2.00% FY99 FY00 FY01 FY02 FY03 YTD
- 17. Balanced Profit Components in Pharmaceutical Solutions Inventory Profit Related products and services McKesson Canada Nadro Branded product sourcing Specialty Pharmaceuticals Price increases Automation Special programs Repackaging Collaborative agreements Disease Management Pharmacy Outsourcing Generic product sourcing Payor Services Zee Medical
- 18. Significant Generics Opportunity Branded pharmaceuticals going off patent $52B Should drive significant generic growth and margin expansion • McKesson OneStop program <$10B • 20,000 pharmacy outlets • Generic Rx GP$ and margin higher than that of branded Rx 1998-2000 2001-2006 (proj.) Source: IMS and analyst reports; internal McKesson analysis
- 19. Pharmaceutical Environment Remains Positive Market growth of 11-14% driven partially by rapid penetration of generics, which creates profit opportunities Republican majority increases probability of Medicare drug benefit through private sector Drug price increases continue to be strong Relationships with manufacturers are cooperative and collaborative
- 20. Medical-Surgical Solutions Strategic Value Strategic role delivering supply chain solutions Strategic presence in alternate site market Potential for shareholder value creation
- 21. McKesson Medical-Surgical: Not A Market Issue FY00 FY01 FY02 Q1FY03 Q2FY03 Gross Profit Margin 19.63 19.18 19.46 19.26 18.72 % Revenues Operating Profit Margin 4.22 3.40 3.49 2.84 0.28 % Revenues
- 22. McKesson Medical-Surgical: What We’re Doing Install experienced leadership with track record for successful turnaround and augment with resources Improve financial and operating processes Execute DC network consolidation Complete ERP system implementation Increase private brand sales Stabilize this year with margin improvement expected in FY04
- 23. Information Solutions Market Leadership Employee Financial Solution Employee Financial Solution Market Share Market Share Expertise Strength Portfolio Expertise Strength Portfolio $1 billion 60% of health Most comprehensive 6,300 revenues systems employees Best-of-class 15% of 82% of covered 1,250 R&D •Software revenue goes lives • PACS 850 customer to R&D •Services Largest / most support investment •Outsourcing profitable 500 clinicians •Consulting International HIT •Content business •Connectivity
- 24. Customer Needs Drive Demand for IT Solutions Processes IT Demand Clinical Needs Drivers Reduce variability Care Delivery Improve MD connectivity Reduce medical errors Revenue Cycle Needs Improve cash flow Core Billing & Reduce rework Process Claims Analyze financial performance Improvements Resource Management Needs Standardization of supplies Purchasing & Improve order management Supply Improve product movement
- 25. Information Solutions: Expanding Margin and Clinical Momentum Revenues up 16%, software up 20% Operating margin up 309 bp to 8.78% Software bookings up 43% Horizon Expert Orders GA on schedule by 12/31/02 20 Horizon Expert Orders sales to date 10 in implementation by fiscal year end
- 26. Information Solutions Operating Margin Momentum +309 bp 9.00% 6 consecutive quarters of Y-O-Y 8.50% Operating Margin expansion 8.00% +296 bp 7.50% 7.00% +855 bp 6.50% +534 bp 6.00% +502 bp 5.50% 5.00% +290 bp 4.50% 4.00% Q1 Q2 Q3 Q4 Q1 Q2 FY02 FY03
- 27. Information Solutions Positive Outlook Growing Demand for Clinical Products McKesson Positioned for Clinical Leadership Margin Expansion Strategies Improving revenue mix Leveraging existing infrastructure
- 28. Agenda For Today’s Presentation Market and Strategy Overview Business Unit Review Summary
- 29. FY00 to FY03 Achievements Highest revenue growth and largest operating margin expansion in pharmaceutical distribution industry over the past 2-1/2 years Largest increase in customer satisfaction, more new product introductions and largest operating margin expansion in healthcare information technology industry over past 3 years EPS growth above 30% for seven consecutive quarters despite erosion in medical-surgical segment operating margin
- 30. McKesson Differentiated Solutions Presbyterian Healthcare Spartanburg Health Systems Solaris Health Systems OTN Wal-Mart Together Rx Card
- 31. Goals for Delivering Sustained Financial Performance Industry-leading solutions and margin expansion in Pharmaceutical Solutions Clinical leadership, continued new product innovation and continued margin expansion in Information Solutions Financial turnaround and return to historical operating margins in Medical-Surgical Solutions Value Creation for Customers and Shareholders