The company reported that revenues for the fourth quarter ended March 31, 2009 were $26.2 billion compared to $26.2 billion a year ago.

Fourth-quarter earnings per diluted share was $1.01 compared to $1.05 per diluted share a year ago. Last year’s earnings included one cent per diluted share from discontinued operations.

Fourth-quarter earnings were impacted by a non-cash, pre-tax impairment charge of $63 million ($60 million after-tax), or approximately 22 cents per diluted share. The charge, which is recorded within the Distribution Solutions segment, is primarily related to our 39% equity investment in Parata Systems, LLC.

“Our results in the fourth quarter capped off another solid full-year financial performance. Throughout the year, we demonstrated strong execution in the face of the challenging economy,” said John H. Hammergren, chairman and chief executive officer.

“This quarter, we implemented additional cost control actions across the company in response to the economic environment. With these actions, operating expenses were flat for the quarter, and we are pleased with the resulting earnings growth for the quarter and for the year,” said Hammergren.

In Fiscal 2009, McKesson continued to execute a balanced capital deployment strategy to create additional shareholder value. For the year, the company generated cash from operations of $1.4 billion, completed $358 million of acquisitions, repurchased $484 million of its common stock, paid $116 million in dividends, and made $392 million in internal investments and capitalized software. The company ended the year with a cash balance of $2.1 billion and a gross debt-to-capital ratio of 28.9%, up from 22.7% in the prior year as a result of issuing $700 million of long-term debt in February 2009.

“In the fourth quarter, we resumed share repurchases, although we did so in a measured way that reflects the more challenging economic and financial market climate. Nonetheless, the continued strength of our balance sheet gives us the flexibility to maintain our portfolio approach to capital deployment,” Hammergren commented.

The fourth quarter results included eight cents per diluted share from a tax reserve release of $22 million.

Segment Results

Distribution Solutions revenues were flat for the fourth quarter and up 5% for the year. US pharmaceutical direct distribution and services revenues grew 4% for the quarter, primarily reflecting customer growth. U.S. pharmaceutical direct distribution and services revenues grew 11% for the year, primarily reflecting customer growth and the Oncology Therapeutics Network acquisition. Warehouse revenues were down 4% for the quarter and 7% for the year due to decreased purchases by several customers.

On a constant currency basis, Canadian revenues grew 3% for the quarter due to market growth rates and new and expanded distribution agreements. Including the unfavorable currency impact of 20%, Canadian revenues decreased 17% for the quarter. For the full year, Canadian revenues grew 10% on a constant currency basis. Including the unfavorable currency impact of 9%, Canadian revenues grew 1% for the full year.

Medical-Surgical distribution and services revenues were up 4% in the fourth quarter and 6% for the full year. During the fourth quarter, the rate of growth in sales to physician offices slowed as a result of the current economic environment.

In the fourth quarter, Distribution Solutions gross profit of $1.1 billion was up 2% compared to the fourth quarter a year ago. Full-year gross profit of $4.0 billion was up 10% from a year ago. The increases in gross profit for the quarter and year primarily resulted from an increased mix of higher-margin products and services, including sales of OneStop Generics, which were up 26% in the quarter, and stronger branded price inflation.

In the fourth quarter, operating profit was $422 million and the operating profit margin was 1.66%. For the full year, operating profit of $1.2 billion was negatively impacted by the AWP litigation charge. Excluding the AWP litigation charge, operating profit of $1.7 billion was up 11% for the year and the operating margin was 1.59% compared to 1.50% a year ago.

“Distribution Solutions executed extremely well throughout Fiscal 2009, particularly the U.S. pharmaceutical distribution business where margin improvements were attributable to several factors, including above-market growth for our OneStop Generics program and solid levels of compensation from our agreements with branded pharmaceutical manufacturers,” said Hammergren.

In Technology Solutions, revenues were flat for the quarter and up 3% for the full year. Services revenues grew 3% in the fourth quarter and 4% for the full year, reflecting the steady nature of our offering. Software and software systems revenues decreased 7% for the quarter and 3% for the full year, reflecting delays in software purchasing by hospital and physician office customers due to the current economic climate.

Operating expenses were down 3% for the quarter and 2% for the year due to aggressive cost containment actions.

Technology Solutions operating profit in the fourth quarter was $106 million, up 2% compared to the fourth quarter a year ago, and for the full year was $334 million, up 5%.

“Technology Solutions’ solid base of stable and recurring revenues helped mitigate the effects of the slowing economy. Additionally, we implemented cost containment measures in mid-Fiscal 2009 and, as a result, operating margin was stable for the year,” said Hammergren.

Fiscal Year 2010 Outlook

“As we look ahead to Fiscal 2010, we expect many of the trends that have driven our success over the past few years to continue,” said Hammergren. “In Distribution Solutions, generics will be a strong driver for our business, and we have excellent relationships with branded pharmaceutical manufacturers. We also have a diverse product offering in Technology Solutions, much of which does not require large capital investments by customers.”

“However, as we progressed through Fiscal 2009, we began to see other trends in our business, including continued delays in technology purchasing and a modest impact on revenues in portions of our distribution business as a result of the slowing economy. We have also experienced pressure on sell side margins in our U.S. pharmaceutical business. Additionally, the financial market and economic environment have caused us to deploy capital at a slower pace than we have over the past few years, and to adopt a more conservative approach to our capital structure,” Hammergren said.

“Based on these trends, for the fiscal year ending March 31, 2010, McKesson expects to earn between $3.90 and $4.05 per diluted share,” Hammergren concluded.