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McKesson's 4Q plunges
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April 26, 2000: 12:29 p.m. ET
Drug distributor's profit slides on lower software, supply management sales
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NEW YORK (CNNfn) - McKesson HBOC Inc., the largest U.S. pharmaceutical distributor, reported a 52 percent plunge in fiscal fourth-quarter earnings Wednesday, falling well short of Wall Street's expectations, as the company struggled with its information technology and supply management units.
Shares of the San Francisco-based company slid 1-1/16, or 6 percent, to 17-7/8, after the results were released. The stock hit a 52-week low of 17-1/4 at one point during the session, compared with a year long high of 69-1/4.
McKesson (MCK: Research, Estimates) - which has been plagued by an accounting scandal at its newly acquired software unit last year that forced it to restate earnings and led to the ouster of several top executives -- earned $61.4 million, or 22 cents per diluted share, excluding one-time items, for the January through March period, down from $127.1 million, or 45 cents, in the year-earlier quarter.
Analysts polled by earnings research firm First Call Corp. were expecting earnings of 29 cents per share.
 Including all one-time charges, but excluding discontinued operations, McKesson posted a net loss of $88.2 million, or 31 cents per share, compared with a loss of $62.1 million, or 22 cents per share, a year earlier.
One-time charges totaled $235.6 million before taxes, mostly associated with reorganizing the company's troubled information technology unit. Last year, the company launched a probe of improperly recorded sales at the division - which was acquired through McKesson's 1998 merger with health care software maker HBO & Co. The probe forced two downward revisions of the company's financial results.
Fourth-quarter revenue increased 12 percent to $9.31 billion from $8.31 billion. The information technology unit saw a 29 decline, amid a steep decline in software sales. McKesson said last month it planned to discontinue or phase out non-strategic or overlapping product offerings within the unit, hoping to boost sales and earnings.
The company's supply management revenue fell 16 percent during the quarter even as U.S. pharmaceutical distribution sales rose 20 percent to $5.7 billion. Much of that unit's trouble was blamed on "abnormally strong buying" of U.S. pharmaceutical and surgical products during the last two weeks of 1999 due to Y2K fears.
Company officials called fiscal 2000 "a transition year," saying it is trying to get back on track following last year's well-publicized problems and industry-wide weakness.
"While continuing market uncertainties, such as timing and magnitude of a recovery in health care software sales, make it difficult to predict overall financial results in the near term, we believe we have taken the steps necessary to deliver continued strong revenue growth and renewed operating margin improvement," the company's co-CEOs, John H. Hammergren and David Mahoney, said in a statement.
For the full year, McKesson earned $265 million, or 94 cents per share, excluding one-time items, compared with $346.4 million, or $1.22 per share, for the 1999 fiscal year. Revenue jumped 22.3 percent to $36.7 billion. 
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McKesson HBOC
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