Analysis of Reportable Segments
McKesson Corp. operates in 2 segments: Distribution Solutions and Technology Solutions.
Segment Profit Margin
McKesson Corp., profit margin by reportable segment
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Distribution Solutions | 1.89% | 1.73% | 1.83% | 1.85% | 1.86% | 1.74% |
| Technology Solutions | 17.99% | 14.27% | 12.16% | 8.73% | 11.00% | 9.42% |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
The analysis of segment profit margins reveals two distinct financial profiles between the Distribution Solutions and Technology Solutions business units from 2011 to 2016. While the Distribution Solutions segment maintains a consistent, low-margin profile, the Technology Solutions segment demonstrates significant margin expansion and higher overall profitability.
- Distribution Solutions Profitability
- This segment exhibits a high degree of stability with minimal volatility. Profit margins remained within a narrow range, fluctuating between a low of 1.73% in 2015 and a high of 1.89% in 2016. The lack of significant variance suggests a mature business model characterized by high volume and tight margins, typical of large-scale distribution operations.
- Technology Solutions Profitability
- In contrast, this segment shows a strong upward trajectory in profitability. Starting at 9.42% in 2011, the margin experienced a brief decline to 8.73% in 2013 before entering a period of accelerated growth. By March 31, 2016, the profit margin reached 17.99%, nearly doubling the 2011 figure. This trend indicates successful scaling, increased operational efficiency, or a shift toward higher-value service offerings.
- Comparative Segment Performance
- The divergence between the two segments widened considerably over the six-year period. The margin gap, which was approximately 7.68 percentage points in 2011, expanded to 16.10 percentage points by 2016. This highlights a growing reliance on the Technology Solutions segment for higher-margin contributions to the overall corporate profit pool.
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Segment Profit Margin: Distribution Solutions
McKesson Corp.; Distribution Solutions; segment profit margin calculation
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating profit | 3,553) | 3,047) | 2,461) | 2,197) | 2,219) | 1,897) |
| Revenues | 187,999) | 175,976) | 134,426) | 119,054) | 119,424) | 108,889) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 1.89% | 1.73% | 1.83% | 1.85% | 1.86% | 1.74% |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
1 2016 Calculation
Segment profit margin = 100 × Operating profit ÷ Revenues
= 100 × 3,553 ÷ 187,999 = 1.89%
The Distribution Solutions segment demonstrated consistent expansion in both top-line revenue and operating profit between March 31, 2011, and March 31, 2016. While total revenues and operating profits increased substantially over this six-year period, the segment profit margin remained remarkably stable, reflecting a high-volume, low-margin operational model.
- Revenue and Operating Profit Trends
- Revenues grew from US$ 108,889 million in 2011 to US$ 187,999 million in 2016. This growth trajectory was most pronounced between 2014 and 2015, during which revenues increased from US$ 134,426 million to US$ 175,976 million. Operating profit followed a similar upward trajectory, rising from US$ 1,897 million to US$ 3,553 million over the analyzed period, indicating that the segment successfully converted increased sales volume into higher absolute earnings.
- Segment Profit Margin Stability
- The segment profit margin exhibited minimal volatility, fluctuating within a narrow corridor between 1.73% and 1.89%. The margin peaked at 1.89% in 2016, following a period of slight compression that reached a low of 1.73% in 2015. This stability suggests that costs of goods sold and operating expenses scaled almost linearly with revenue growth, preventing significant margin expansion despite the massive increase in scale.
- Correlation Between Scale and Profitability
- The data indicates a strong correlation between revenue growth and operating profit growth, while the profit margin remained largely static. The slight dip in margin during the period of most rapid revenue growth (2014–2015) may suggest temporary pressures associated with scaling operations or changes in product mix. However, the recovery to 1.89% in 2016 suggests a return to operational efficiency and the ability to maintain pricing discipline amidst expanding volumes.
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Segment Profit Margin: Technology Solutions
McKesson Corp.; Technology Solutions; segment profit margin calculation
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating profit | 519) | 438) | 387) | 297) | 364) | 301) |
| Revenues | 2,885) | 3,069) | 3,183) | 3,401) | 3,310) | 3,195) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 17.99% | 14.27% | 12.16% | 8.73% | 11.00% | 9.42% |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
1 2016 Calculation
Segment profit margin = 100 × Operating profit ÷ Revenues
= 100 × 519 ÷ 2,885 = 17.99%
The Technology Solutions segment demonstrates a significant divergence between revenue trends and profitability over the six-year period ending March 31, 2016. While total revenues peaked in 2013 and entered a period of steady decline thereafter, operating profit and segment profit margins exhibited substantial growth, indicating a successful shift toward higher-value operations or enhanced cost management efficiency.
- Revenue Performance
- Revenues grew from 3,195 million USD in 2011 to a peak of 3,401 million USD in 2013. However, a consistent downward trend followed, with revenues decreasing for three consecutive years to reach 2,885 million USD by March 31, 2016. This represents a total revenue contraction of approximately 15.3% from the 2013 peak.
- Operating Profit Growth
- Despite the decline in top-line revenue after 2013, operating profit showed strong resilience and growth. After a temporary dip to 297 million USD in 2013, operating profit climbed steadily each year, reaching 519 million USD in 2016. This reflects an increase in operating profit of approximately 72% compared to the 2011 baseline.
- Segment Profit Margin Expansion
- The segment profit margin expanded significantly from 9.42% in 2011 to 17.99% in 2016. While a volatility point occurred in 2013 where the margin dropped to 8.73%, the subsequent trajectory was aggressively positive. The margin nearly doubled between 2013 and 2016, moving from 8.73% to 17.99%, which underscores a fundamental improvement in the profitability of the remaining revenue streams.
The overall financial trajectory indicates that the segment prioritized margin expansion over revenue volume. The ability to increase operating profit to its highest level in 2016 while recording its lowest revenue of the period suggests a strategic transition toward a more lean and profitable business model.
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Segment Return on Assets (Segment ROA)
McKesson Corp., ROA by reportable segment
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Distribution Solutions | 7.55% | 6.93% | 5.76% | 8.05% | 8.75% | 8.25% |
| Technology Solutions | 16.89% | 13.35% | 11.64% | 7.76% | 10.18% | 8.59% |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
An evaluation of segment return on assets reveals divergent performance trajectories between the Distribution Solutions and Technology Solutions segments from 2011 to 2016.
- Distribution Solutions
- This segment exhibited volatility in its asset efficiency. After peaking at 8.75% in 2012, the return on assets declined significantly to a low of 5.76% in 2014. A subsequent recovery trend is observed from 2015 through 2016, with the ratio rising to 7.55%, although it failed to return to the levels seen at the start of the period.
- Technology Solutions
- A robust growth pattern is evident in this segment. Despite a fluctuation in 2013 where the ratio dipped to 7.76%, the segment achieved consistent and accelerated growth from 2014 onward. The return on assets increased from 11.64% in 2014 to 16.89% by March 31, 2016, indicating a substantial improvement in the profitability of its asset base.
- Comparative Segment Analysis
- At the beginning of the analyzed period, both segments maintained similar returns on assets, with 8.25% for Distribution Solutions and 8.59% for Technology Solutions. By 2016, a significant performance gap emerged, as the Technology Solutions segment's ROA more than doubled that of the Distribution Solutions segment, reflecting a shift in relative asset productivity.
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Segment ROA: Distribution Solutions
McKesson Corp.; Distribution Solutions; segment ROA calculation
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating profit | 3,553) | 3,047) | 2,461) | 2,197) | 2,219) | 1,897) |
| Segment assets | 47,088) | 43,982) | 42,758) | 27,307) | 25,374) | 22,983) |
| Segment Profitability Ratio | ||||||
| Segment ROA1 | 7.55% | 6.93% | 5.76% | 8.05% | 8.75% | 8.25% |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
1 2016 Calculation
Segment ROA = 100 × Operating profit ÷ Segment assets
= 100 × 3,553 ÷ 47,088 = 7.55%
The Distribution Solutions segment exhibited consistent growth in absolute profitability and asset accumulation between 2011 and 2016, although the efficiency of asset utilization experienced significant volatility during this period.
- Operating Profit Trends
- Operating profit demonstrated a sustained upward trajectory, increasing from 1,897 million USD in 2011 to 3,553 million USD in 2016. Aside from a marginal decline between 2012 and 2013, the segment maintained a strong growth profile, nearly doubling its operating earnings over the six-year interval.
- Segment Asset Expansion
- The asset base grew steadily from 22,983 million USD in 2011 to 27,307 million USD in 2013. A substantial increase occurred in 2014, where assets jumped to 42,758 million USD, representing a growth of approximately 56% in a single fiscal year. This expansion continued through 2016, reaching a peak of 47,088 million USD.
- Return on Assets (ROA) Analysis
- The Segment ROA peaked at 8.75% in 2012 before entering a period of decline. A sharp contraction is observed in 2014, where the ROA fell to its lowest point of 5.76%. This decline correlates directly with the rapid expansion of the asset base, which outpaced the growth of operating profit in that period. Following the 2014 trough, a recovery trend is evident, with the ROA improving to 6.93% in 2015 and 7.55% in 2016, indicating an improvement in the productivity of the expanded asset base.
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Segment ROA: Technology Solutions
McKesson Corp.; Technology Solutions; segment ROA calculation
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating profit | 519) | 438) | 387) | 297) | 364) | 301) |
| Segment assets | 3,072) | 3,281) | 3,324) | 3,829) | 3,575) | 3,504) |
| Segment Profitability Ratio | ||||||
| Segment ROA1 | 16.89% | 13.35% | 11.64% | 7.76% | 10.18% | 8.59% |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
1 2016 Calculation
Segment ROA = 100 × Operating profit ÷ Segment assets
= 100 × 519 ÷ 3,072 = 16.89%
The Technology Solutions segment demonstrated a significant improvement in operational efficiency and profitability between 2011 and 2016. While the initial years showed some volatility, the latter half of the period is characterized by expanding profitability and a strategic optimization of the asset base.
- Operating Profit Trends
- Operating profit exhibited an overall upward trajectory, increasing from 301 million in 2011 to 519 million by 2016. A brief contraction was observed in 2013, where profit declined to 297 million, but this was followed by three consecutive years of strong growth, peaking in 2016.
- Asset Base Evolution
- The segment's asset base peaked in 2013 at 3,829 million. Subsequent to this peak, a steady decline was recorded, with assets reducing to 3,072 million by 2016. This suggests a trend toward leaner operations or a reduction in capital intensity within the segment.
- Return on Assets (ROA) Performance
- Segment ROA improved substantially over the period, rising from 8.59% in 2011 to 16.89% in 2016. The most pronounced acceleration occurred after 2013, when the ROA climbed from a low of 7.76% to 16.89%. This expansion was driven by the dual effect of increasing operating profits coupled with a diminishing asset base, indicating a marked increase in the productivity of the segment's deployed capital.
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Segment Asset Turnover
McKesson Corp., asset turnover by reportable segment
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Distribution Solutions | 3.99 | 4.00 | 3.14 | 4.36 | 4.71 | 4.74 |
| Technology Solutions | 0.94 | 0.94 | 0.96 | 0.89 | 0.93 | 0.91 |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
The asset turnover ratios across the reportable segments demonstrate divergent operational efficiencies and volatility profiles between the fiscal years 2011 and 2016.
- Distribution Solutions
- A general downward trend in asset utilization efficiency is observed, with the ratio declining from a peak of 4.74 in 2011 to a low of 3.14 in 2014. Following this decline, a partial recovery occurred in 2015, where the ratio rose to 4.00 and subsequently stabilized at 3.99 in 2016. The overall performance indicates a significant fluctuation in how effectively assets were used to generate revenue, particularly during the 2014 period.
- Technology Solutions
- This segment exhibited remarkable stability over the six-year period. The asset turnover ratio remained consistently low, fluctuating within a narrow corridor between 0.89 and 0.96. The values ended the period at 0.94 in 2016, suggesting a highly predictable and steady relationship between the segment's asset base and its revenue output.
Comparative analysis reveals that the Distribution Solutions segment operates with a substantially higher asset turnover than the Technology Solutions segment, though it is subject to greater variance. While Distribution Solutions experienced a notable dip and subsequent stabilization, Technology Solutions maintained a flat trajectory throughout the observed timeframe.
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Segment Asset Turnover: Distribution Solutions
McKesson Corp.; Distribution Solutions; segment asset turnover calculation
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenues | 187,999) | 175,976) | 134,426) | 119,054) | 119,424) | 108,889) |
| Segment assets | 47,088) | 43,982) | 42,758) | 27,307) | 25,374) | 22,983) |
| Segment Activity Ratio | ||||||
| Segment asset turnover1 | 3.99 | 4.00 | 3.14 | 4.36 | 4.71 | 4.74 |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
1 2016 Calculation
Segment asset turnover = Revenues ÷ Segment assets
= 187,999 ÷ 47,088 = 3.99
The Distribution Solutions segment experienced consistent revenue growth and a significant expansion of its asset base between 2011 and 2016. Revenues increased from 108,889 million to 187,999 million over the period, with a particularly sharp acceleration occurring between 2014 and 2015.
- Revenue Trends
- A steady upward trajectory in revenues is observed, with the most substantial year-over-year increase occurring in 2015, where revenues rose from 134,426 million to 175,976 million. This growth indicates a significant expansion in the segment's scale of operations.
- Asset Base Expansion
- Segment assets grew from 22,983 million in 2011 to 47,088 million in 2016. A notable surge in assets occurred in 2014, with the value increasing from 27,307 million to 42,758 million, suggesting a major capital investment or acquisition during that fiscal year.
- Asset Turnover Performance
- The segment asset turnover ratio declined from a peak of 4.74 in 2011 to a low of 3.14 in 2014. This deterioration in efficiency coincided with the rapid expansion of the asset base in 2014, which outpaced revenue growth. A partial recovery was observed in 2015, with the ratio rising to 4.00 due to the surge in revenues, before stabilizing at 3.99 in 2016.
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Segment Asset Turnover: Technology Solutions
McKesson Corp.; Technology Solutions; segment asset turnover calculation
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenues | 2,885) | 3,069) | 3,183) | 3,401) | 3,310) | 3,195) |
| Segment assets | 3,072) | 3,281) | 3,324) | 3,829) | 3,575) | 3,504) |
| Segment Activity Ratio | ||||||
| Segment asset turnover1 | 0.94 | 0.94 | 0.96 | 0.89 | 0.93 | 0.91 |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
1 2016 Calculation
Segment asset turnover = Revenues ÷ Segment assets
= 2,885 ÷ 3,072 = 0.94
The Technology Solutions segment experienced a period of initial growth followed by a consistent contraction in both scale and resource utilization between fiscal years 2011 and 2016. While absolute figures for revenue and assets declined in the latter half of the period, the efficiency of asset usage remained relatively stable.
- Revenue Trends
- Revenues grew from US$ 3,195 million in 2011 to a peak of US$ 3,401 million in 2013. Subsequently, a downward trend emerged, with revenues declining for three consecutive years to reach US$ 2,885 million by March 31, 2016. This represents a total decrease of approximately 15.3% from the 2013 peak.
- Segment Asset Base
- The asset base mirrored the revenue trajectory, increasing from US$ 3,504 million in 2011 to a high of US$ 3,829 million in 2013. Following this peak, assets were reduced significantly to US$ 3,072 million by 2016. The simultaneous reduction in both revenues and assets suggests a strategic scaling down or reorganization of the segment's operational footprint.
- Segment Asset Turnover Efficiency
- The asset turnover ratio remained consistent throughout the analyzed period, fluctuating within a narrow range between 0.89 and 0.96. Despite the decline in absolute revenue, the ratio improved from 0.89 in 2013 to a peak of 0.96 in 2014, eventually stabilizing at 0.94 in 2015 and 2016. This indicates that the reduction in the asset base was proportional to the decline in revenues, thereby maintaining a steady level of operational efficiency.
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Segment Capital Expenditures to Depreciation
McKesson Corp., capital expenditures to depreciation by reportable segment
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Distribution Solutions | 0.46 | 0.40 | 0.40 | 0.62 | 0.78 | 0.72 |
| Technology Solutions | 0.14 | 0.17 | 0.31 | 0.20 | 0.11 | 0.12 |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
The analysis of capital expenditures relative to depreciation across reportable segments indicates a general trend of reduced capital reinvestment compared to asset amortization throughout the observed period. Both segments consistently maintained ratios below 1.0, suggesting that capital spending did not exceed the depreciation of existing assets.
- Distribution Solutions
- This segment exhibited a general downward trajectory in its investment ratio. After peaking at 0.78 in 2012, the ratio declined steadily to 0.40 by 2014. This period represents a significant reduction in the intensity of capital expenditures relative to depreciation. The ratio remained stable at 0.40 in 2015 before experiencing a slight recovery to 0.46 in 2016. The overall pattern suggests a transition from a higher growth or expansionary phase toward a more conservative maintenance-based capital allocation strategy.
- Technology Solutions
- The investment ratio for this segment remained substantially lower than that of Distribution Solutions, characterized by higher volatility. Following a period of stability between 0.11 and 0.12 in 2011 and 2012, the ratio increased significantly, reaching a peak of 0.31 in 2014. This spike indicates a temporary increase in capital investment relative to asset depreciation. However, this trend reversed quickly, with the ratio falling to 0.17 in 2015 and further to 0.14 in 2016, returning near baseline levels.
Comparatively, the Distribution Solutions segment consistently allocated a higher proportion of its depreciation back into capital expenditures than the Technology Solutions segment. While Distribution Solutions saw a long-term decline in its ratio, Technology Solutions experienced a mid-period surge followed by a return to low investment levels.
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Segment Capital Expenditures to Depreciation: Distribution Solutions
McKesson Corp.; Distribution Solutions; segment capital expenditures to depreciation calculation
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Expenditures for long-lived assets | 306) | 301) | 180) | 163) | 175) | 162) |
| Depreciation and amortization | 669) | 750) | 448) | 265) | 225) | 225) |
| Segment Financial Ratio | ||||||
| Segment capital expenditures to depreciation1 | 0.46 | 0.40 | 0.40 | 0.62 | 0.78 | 0.72 |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
1 2016 Calculation
Segment capital expenditures to depreciation = Expenditures for long-lived assets ÷ Depreciation and amortization
= 306 ÷ 669 = 0.46
The financial trajectory of the Distribution Solutions segment indicates a transition in capital management between 2011 and 2016. While investment in long-lived assets increased in absolute terms, the growth in depreciation and amortization expenses significantly outpaced these expenditures, resulting in a diminishing replacement ratio.
- Expenditures for Long-Lived Assets
- Capital spending remained relatively stable from 2011 through 2014, with values fluctuating between US$162 million and US$180 million. A substantial increase occurred in 2015, with expenditures rising to US$301 million, a level that was maintained into 2016 at US$306 million.
- Depreciation and Amortization
- Depreciation expenses were constant at US$225 million during the 2011-2012 period before beginning a steep ascent. A significant jump was observed in 2014 to US$448 million, peaking in 2015 at US$750 million, and ending the period at US$669 million in 2016.
- Segment Capital Expenditures to Depreciation Ratio
- The ratio exhibited a general downward trend over the observed period. After peaking at 0.78 in 2012, the ratio declined to 0.40 by 2014 and 2015, before slightly recovering to 0.46 in 2016. Throughout the entire duration, the ratio remained consistently below 1.0, indicating that the segment's reinvestment in long-lived assets was lower than the consumption of its existing asset base through depreciation.
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Segment Capital Expenditures to Depreciation: Technology Solutions
McKesson Corp.; Technology Solutions; segment capital expenditures to depreciation calculation
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Expenditures for long-lived assets | 15) | 27) | 42) | 42) | 22) | 26) |
| Depreciation and amortization | 107) | 156) | 136) | 206) | 209) | 209) |
| Segment Financial Ratio | ||||||
| Segment capital expenditures to depreciation1 | 0.14 | 0.17 | 0.31 | 0.20 | 0.11 | 0.12 |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
1 2016 Calculation
Segment capital expenditures to depreciation = Expenditures for long-lived assets ÷ Depreciation and amortization
= 15 ÷ 107 = 0.14
The Technology Solutions segment demonstrates a consistent pattern of under-investment relative to asset depreciation between 2011 and 2016. Throughout this period, capital expenditures for long-lived assets remained substantially lower than depreciation and amortization charges, indicating that the segment did not fully replace its depreciating capital base.
- Capital Expenditure Trends
- Expenditures for long-lived assets remained relatively stable between 2011 and 2012, followed by a significant increase to 42 million US$ in both 2013 and 2014. This upward movement was followed by a sharp contraction, with spending falling to 27 million US$ in 2015 and reaching a period low of 15 million US$ by March 31, 2016.
- Depreciation and Amortization Trajectory
- A general downward trend in depreciation and amortization is observed. After remaining steady at 209 million US$ in 2011 and 2012, the figure decreased markedly to 136 million US$ in 2014, experienced a slight recovery to 156 million US$ in 2015, and ultimately dropped to 107 million US$ in 2016.
- Segment Capital Expenditures to Depreciation Ratio
- The ratio reflects a period of volatility with a peak in 2014. Starting at 0.12 in 2011, the ratio rose to a high of 0.31 in 2014, driven by the simultaneous increase in capital expenditures and a decrease in depreciation. Following this peak, the ratio declined to 0.14 by 2016, mirroring the overall reduction in asset investment.
The overall financial trajectory suggests a strategic shift toward reduced capital intensity within the Technology Solutions segment. The sustained gap between depreciation and capital expenditures indicates a systemic reduction in the scale of the segment's long-lived asset base over the six-year period.
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Revenues
McKesson Corp., revenues by reportable segment
US$ in millions
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Distribution Solutions | 187,999) | 175,976) | 134,426) | 119,054) | 119,424) | 108,889) |
| Technology Solutions | 2,885) | 3,069) | 3,183) | 3,401) | 3,310) | 3,195) |
| Total | 190,884) | 179,045) | 137,609) | 122,455) | 122,734) | 112,084) |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
Total revenues exhibit a significant upward trajectory over the analyzed six-year period, increasing from 112,084 million in 2011 to 190,884 million by 2016. This growth was characterized by a period of steady expansion, followed by a period of accelerated growth between 2014 and 2016, where total revenue increased by approximately 38.7%.
- Distribution Solutions Performance
- The Distribution Solutions segment serves as the primary driver of total revenue growth. Revenues in this segment rose from 108,889 million in 2011 to 187,999 million in 2016. A notable acceleration occurred between 2014 and 2015, where revenues jumped from 134,426 million to 175,976 million, representing a year-over-year increase of approximately 31%. This segment consistently demonstrates a strong growth pattern, with only a marginal stagnation observed between 2012 and 2013.
- Technology Solutions Performance
- The Technology Solutions segment followed a divergent trajectory compared to the broader organization. After a modest increase from 3,195 million in 2011 to a peak of 3,401 million in 2013, the segment entered a period of gradual contraction. Revenues declined steadily from 2013 through 2016, ending at 2,885 million. This represents a total decrease of approximately 15.2% from its 2013 peak.
- Revenue Composition and Concentration
- There is an observable increase in revenue concentration within the Distribution Solutions segment. In 2011, Distribution Solutions accounted for approximately 97.1% of total revenue. By 2016, this concentration increased to approximately 98.5%. The simultaneous growth of the distribution business and the contraction of the technology business have led to a higher reliance on a single reportable segment for total top-line performance.
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Operating profit
McKesson Corp., operating profit by reportable segment
US$ in millions
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Distribution Solutions | 3,553) | 3,047) | 2,461) | 2,197) | 2,219) | 1,897) |
| Technology Solutions | 519) | 438) | 387) | 297) | 364) | 301) |
| Total | 4,072) | 3,485) | 2,848) | 2,494) | 2,583) | 2,198) |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
The total operating profit exhibits a consistent upward trajectory over the five-year period ending March 31, 2016. Total profit increased from US$ 2,198 million in 2011 to US$ 4,072 million in 2016, representing a cumulative growth of approximately 85.3%.
- Distribution Solutions Performance
- This segment serves as the primary driver of overall profitability, showing an increase from US$ 1,897 million in 2011 to US$ 3,553 million in 2016. Aside from a marginal decline between 2012 and 2013, the segment demonstrated strong and accelerating growth, particularly between 2014 and 2016.
- Technology Solutions Performance
- The Technology Solutions segment grew from US$ 301 million in 2011 to US$ 519 million in 2016. A notable contraction occurred in 2013, where profit fell to US$ 297 million from US$ 364 million the previous year, before recovering and expanding steadily through 2016.
- Segment Contribution and Profit Mix
- Distribution Solutions maintained a dominant share of the total operating profit throughout the analyzed period. In 2011, this segment accounted for approximately 86.3% of total profit, and by 2016, it accounted for approximately 87.3%, indicating a slight increase in the company's reliance on the distribution business for its operating income.
- Year-over-Year Trends
- The only period of overall profit contraction occurred between March 31, 2012, and March 31, 2013, where total operating profit decreased from US$ 2,583 million to US$ 2,494 million. This decline was attributed to simultaneous decreases in both the Distribution and Technology segments. Following 2013, the company experienced uninterrupted annual growth in all reporting areas.
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Depreciation and amortization
McKesson Corp., depreciation and amortization by reportable segment
US$ in millions
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Distribution Solutions | 669) | 750) | 448) | 265) | 225) | 225) |
| Technology Solutions | 107) | 156) | 136) | 206) | 209) | 209) |
| Corporate | 109) | 111) | 120) | 120) | 117) | 62) |
| Total | 885) | 1,017) | 704) | 591) | 551) | 496) |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
Total depreciation and amortization expenses exhibited a net upward trajectory between 2011 and 2016, peaking in 2015 before experiencing a contraction in the final year. The aggregate expense rose from 496 million USD in 2011 to a high of 1,017 million USD in 2015, ultimately settling at 885 million USD by March 31, 2016.
- Distribution Solutions Segment
- This segment drove the primary growth in overall expenses. After remaining stagnant at 225 million USD from 2011 to 2012, expenses accelerated sharply, reaching 750 million USD by 2015. A subsequent decrease to 669 million USD was recorded in 2016, though the segment remained the largest contributor to the total depreciation and amortization profile.
- Technology Solutions Segment
- A consistent downward trend is observed in this segment over the analyzed period. Following a period of relative stability between 2011 and 2013, expenses declined significantly from 206 million USD in 2013 to 107 million USD in 2016, representing a reduction of nearly 50% from its peak levels.
- Corporate Expenses
- Corporate-level depreciation and amortization saw a sharp increase between 2011 and 2012, rising from 62 million USD to 117 million USD. For the remainder of the period, these expenses remained relatively stable, fluctuating within a narrow corridor between 109 million USD and 120 million USD.
- Aggregate Compositional Shift
- The composition of depreciation and amortization shifted significantly over the five-year period. In 2011, the Distribution and Technology segments contributed nearly equal amounts to the total. By 2016, the Distribution Solutions segment became the dominant driver of these costs, while the relative impact of the Technology Solutions segment diminished substantially.
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Expenditures for long-lived assets
McKesson Corp., expenditures for long-lived assets by reportable segment
US$ in millions
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Distribution Solutions | 306) | 301) | 180) | 163) | 175) | 162) |
| Technology Solutions | 15) | 27) | 42) | 42) | 22) | 26) |
| Corporate | 167) | 48) | 52) | 41) | 28) | 45) |
| Total | 488) | 376) | 274) | 246) | 225) | 233) |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
Total expenditures for long-lived assets exhibited a significant upward trajectory over the six-year period, increasing from 233 million US dollars in 2011 to 488 million US dollars in 2016. The growth remained relatively moderate between 2011 and 2014, followed by a period of accelerated capital allocation in 2015 and 2016.
- Distribution Solutions Investment Trends
- This segment served as the primary driver of capital expenditure throughout the period. Between 2011 and 2014, spending was relatively stable, fluctuating between 162 million and 180 million US dollars. A substantial increase occurred in 2015, where expenditures rose to 301 million US dollars, remaining at a similar level of 306 million US dollars in 2016. This shift indicates a significant expansion of long-lived assets dedicated to distribution operations starting in 2015.
- Technology Solutions Expenditure Patterns
- Investments in Technology Solutions demonstrated volatility with an overall declining trend toward the end of the period. After starting at 26 million US dollars in 2011, expenditures peaked at 42 million US dollars in 2013 and 2014. Subsequently, a downward trend was observed, with spending falling to 27 million US dollars in 2015 and reaching a period low of 15 million US dollars in 2016.
- Corporate Asset Expenditures
- Corporate expenditures remained relatively consistent, ranging from 28 million to 52 million US dollars between 2011 and 2015. However, 2016 saw a sharp increase to 167 million US dollars. This spike represents the most significant single-year percentage increase for any segment in the final year of the analysis, contributing heavily to the total expenditure growth for that period.
- Aggregate Capital Allocation Analysis
- The overall expenditure profile shifted from a diversified distribution of investment across segments to a more concentrated focus on Distribution Solutions and Corporate assets. While the total expenditure more than doubled from 2011 to 2016, the contribution from Technology Solutions diminished, suggesting a reallocation of capital priorities toward core distribution and corporate infrastructure.
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Segment assets
McKesson Corp., segment assets by reportable segment
US$ in millions
| Mar 31, 2016 | Mar 31, 2015 | Mar 31, 2014 | Mar 31, 2013 | Mar 31, 2012 | Mar 31, 2011 | |
|---|---|---|---|---|---|---|
| Distribution Solutions | 47,088) | 43,982) | 42,758) | 27,307) | 25,374) | 22,983) |
| Technology Solutions | 3,072) | 3,281) | 3,324) | 3,829) | 3,575) | 3,504) |
| Total | 50,160) | 47,263) | 46,082) | 31,136) | 28,949) | 26,487) |
Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).
Total reportable segment assets experienced substantial growth between March 31, 2011, and March 31, 2016, increasing from 26,487 million USD to 50,160 million USD. This overall expansion is characterized by a divergent trajectory between the two primary business segments, with total growth driven almost exclusively by the Distribution Solutions arm.
- Distribution Solutions Asset Trends
- Assets within the Distribution Solutions segment demonstrated consistent upward momentum, growing from 22,983 million USD in 2011 to 47,088 million USD in 2016. A notable acceleration is observed between March 31, 2013, and March 31, 2014, during which assets surged from 27,307 million USD to 42,758 million USD, representing a single-year increase of approximately 56.6%.
- Technology Solutions Asset Trends
- The Technology Solutions segment exhibited a period of modest growth followed by a steady decline. Assets peaked on March 31, 2013, at 3,829 million USD. From that point forward, a contraction trend is observed, with assets decreasing annually to reach 3,072 million USD by March 31, 2016.
- Segment Composition and Asset Concentration
- There was a significant shift in the internal allocation of assets toward the Distribution Solutions segment over the six-year period. In 2011, Distribution Solutions represented approximately 86.8% of the total reportable segment assets. By March 31, 2016, this concentration increased to approximately 93.9%, indicating a strategic shift or organic expansion that marginalized the relative asset weight of the Technology Solutions segment.
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