McKesson Corp. (NYSE:MCK)

The analysis of the annual financial data reveals several notable trends in the composition and valuation of intangible assets and goodwill over the six-year period ending March 31, 2016.

Customer Lists

The value of customer lists showed a significant upward trajectory from 2011 to 2014, increasing from $1,057 million to $3,384 million. However, after peaking in 2014, this asset category declined notably in the subsequent two years, falling to $2,683 million in 2015 and further to $2,652 million in 2016.

Service Agreements

Service agreements increased steadily from $723 million in 2011 to $1,022 million in 2012, then slightly decreased and stabilized around the high $900 million range between 2013 and 2016.

Pharmacy Licenses

Pharmacy licenses data is only available starting in 2014 at $1,219 million, followed by a considerable drop to $874 million in 2015 and a slight further decrease to $857 million in 2016, indicating a decline after initial recognition.

Trademarks and Trade Names

This category demonstrated consistent growth from $76 million in 2011 to $371 million by 2014, followed by a mild contraction to $315 million in 2015 and a marginal decrease to $314 million in 2016, suggesting stabilization at a level higher than early years.

Technology

The technology intangible asset increased from $204 million in 2011 to $271 million in 2013 but then declined gradually to $195 million by 2016, reflecting some amortization or impairments over the latter years.

Other Intangible Assets

Other intangible assets remained relatively stable, rising from $76 million in 2011 to $165 million in 2014, and then holding nearly constant around $162-$163 million through 2015 and 2016.

Intangible Assets, Gross Carrying Amount

This aggregate value nearly tripled from $2,136 million in 2011 to a peak of $6,353 million in 2014, before decreasing to $5,204 million in 2015 and slightly lower to $5,140 million in 2016. The sharp peak in 2014 suggests significant acquisitions or revaluations followed by partial disposals or amortization impacts.

Accumulated Amortization

Accumulated amortization consistently increased in absolute value, moving from -$680 million in 2011 to -$2,119 million in 2016, reflecting systematic expense recognition over time against intangible assets.

Intangible Assets, Net Carrying Amount

The net carrying amount of intangible assets rose substantially from $1,456 million in 2011 to a high of $5,022 million in 2014, before declining notably to $3,441 million in 2015 and further to $3,021 million in 2016, aligning with the trends in gross amounts and accumulated amortization.

Goodwill

Goodwill showed a strong upward trend throughout the period, increasing from $4,364 million in 2011 to a peak of $9,927 million in 2014. After 2014, goodwill slightly decreased but remained relatively stable around $9,800 million by 2016, indicating limited impairment or write-downs following major acquisitions.

Goodwill and Intangible Assets, Net

The combined net value of goodwill and intangible assets rose markedly from $5,820 million in 2011 to a peak of $14,949 million in 2014. Subsequently, it declined to $13,258 million in 2015 and further to $12,807 million in 2016, reflecting the decreases observed in net intangible assets and a modest reduction in goodwill.

Overall, the data indicates significant growth and expansion activities until 2014, followed by a period of consolidation and modest asset impairment or amortization in the subsequent two years. The peak in 2014 across multiple intangible asset categories and goodwill suggests major acquisition activity, after which the company recognized amortization expenses and slight asset value reductions, leading to lower net intangible asset values but a relatively stable goodwill balance in later years.

Total Assets

The reported total assets show a consistent upward trend from 30,886 million US dollars in 2011 to 56,563 million US dollars in 2016. This represents an approximate 83% increase over the six-year period. The adjusted total assets follow a similar pattern, rising from 26,522 million US dollars in 2011 to 46,777 million US dollars in 2016. Although the adjusted values are consistently lower than the reported figures, the growth trajectory remains strong, indicating expanding asset base after excluding goodwill.

Stockholders’ Equity

The reported stockholders’ equity demonstrates mild fluctuations, beginning at 7,220 million US dollars in 2011, dipping to 6,831 million in 2012, and then generally increasing to reach 8,924 million in 2016. This reflects an irregular but overall positive trend, with a 23.6% increase from the initial to final year. In contrast, the adjusted stockholders’ equity shows a significant decline, starting at 2,856 million US dollars in 2011 and reaching negative territory from 2014 onwards, ending at -862 million US dollars in 2016. This declining trend highlights the material impact of goodwill adjustments, suggesting that goodwill constitutes a large proportion of equity, and its removal exposes negative net tangible equity in recent years.

Net Income Attributable to McKesson Corporation

The reported net income experienced fluctuations but generally rose over the period, starting from 1,202 million US dollars in 2011, peaking slightly at 1,476 million in 2015, and then sharply increasing to 2,258 million in 2016. The adjusted net income closely mirrors the reported values, with a minor difference in 2013 (1,374 million adjusted vs. 1,338 million reported). Overall, the net income trend is positive, reflecting improving profitability with a particularly strong increase in the final year reported.

Net Profit Margin

The reported net profit margin shows a generally stable trend from 2011 to 2016, ranging from 1.07% to 1.18%, with a slight dip around 2014 and 2015 before improving in 2016. The adjusted net profit margin follows a similar pattern, indicating consistency between reported and goodwill adjusted profitability.

Total Asset Turnover

Reported total asset turnover exhibits moderate fluctuation over the period, starting at 3.63 in 2011, peaking slightly in 2012 at 3.71, then declining notably in 2014 to 2.66 before recovering to 3.37 in 2016. Adjusted total asset turnover rates are consistently higher than reported figures, maintaining a similar trend but reflecting greater efficiency, particularly noticeable in the higher turnovers before 2014 and partial recovery afterward.

Financial Leverage

Reported financial leverage steadily increases from 4.28 in 2011 to a high of 6.73 in 2015, followed by a slight reduction to 6.34 in 2016, indicating increasing use of debt or equity to finance assets over time with some moderation near the end of the period. Adjusted financial leverage displays extreme variation, with a marked surge from 9.29 in 2011 to an exceptionally high 42.68 in 2013. Data is missing for subsequent years, limiting further analysis of adjusted leverage trends after 2013.

Return on Equity (ROE)

The reported ROE generally increased from 16.65% in 2011 to 25.3% in 2016, despite a dip in the middle years, particularly in 2014. This suggests improved profitability and effective equity utilization over time. In contrast, adjusted ROE values are significantly higher and show dramatic volatility: from 42.09% in 2011, sharply rising to 206.62% in 2013 before missing data in the following years, indicating that goodwill adjustments have a profound impact on equity returns in certain periods.

Return on Assets (ROA)

Reported ROA demonstrates a decline from 3.89% in 2011 to a low of 2.44% in 2014, followed by recovery to 3.99% in 2016. Adjusted ROA follows a similar trajectory but remains consistently higher across the observed periods, reaching 4.83% in 2016. This reflects enhanced asset profitability when goodwill adjustments are considered, with a clear dip mid-period and subsequent improvement.

Net Income Trends

The reported net income attributable to the company demonstrated some fluctuations over the six-year period. Starting at $1,202 million in 2011, it increased to $1,403 million in 2012. There was a slight decline in 2013 to $1,338 million, followed by a further decrease in 2014 to $1,263 million. The net income rebounded in 2015 to $1,476 million and experienced a significant surge in 2016, reaching $2,258 million. The adjusted net income figures closely mirrored the reported figures with minor differences in 2013.

Net Profit Margin Analysis

The reported net profit margin showed variability throughout the period. It started at 1.07% in 2011, peaked at 1.14% in 2012, and then dipped slightly to 1.09% in 2013. In 2014 and 2015, the margin declined more noticeably to 0.92% and 0.82%, respectively, indicating a compression in profitability. In 2016, there was a sharp increase to 1.18%, exceeding prior levels. The adjusted net profit margin followed the same pattern, with a slight upward adjustment in 2013.

General Observations

The data indicates a period of relative stability in net income and profit margins initially, followed by a mid-period decline and a strong recovery by the end of the timeline. The close alignment between reported and adjusted figures suggests limited impact from goodwill adjustments or other accounting adjustments on net income and profitability.

The financial data reveals several notable trends over the six-year period ending March 31, 2016. Total assets, both reported and goodwill adjusted, exhibit a consistent upward trajectory. Reported total assets increased from US$30,886 million in 2011 to US$56,563 million in 2016, representing nearly an 83% growth. Similarly, adjusted total assets rose from US$26,522 million to US$46,777 million in the same timeframe, marking a significant expansion of approximately 76%.

In terms of asset utilization, total asset turnover ratios demonstrate a more nuanced pattern. The reported total asset turnover starts at 3.63 in 2011, peaks slightly at 3.71 in 2012, then declines steadily to a low of 2.66 in 2014 before recovering somewhat to 3.37 by 2016. This decline followed by partial recovery suggests that the company’s efficiency in generating revenue from its total assets diminished notably until 2014, after which improvements were achieved.

When considering adjusted total asset turnover, which excludes the impact of goodwill, a similar pattern emerges but with consistently higher ratios. Adjusted turnover begins at 4.23 in 2011, reaching a peak of 4.37 in 2012, then declining to 3.29 in 2014. Subsequently, it increases to 4.08 by 2016. The higher values throughout indicate that the core operational assets generate more sales relative to total asset value when goodwill is excluded, highlighting the impact of intangible assets on overall turnover efficiency.

Overall, the data indicates significant growth in asset base alongside a temporary decline in asset turnover efficiency around 2014. The recovery in turnover ratios post-2014, although not reaching earlier peak levels fully, suggests management’s efforts to improve asset utilization. The consistent gap between reported and adjusted ratios underscores the influence of goodwill and intangible assets on reported figures, with adjusted metrics providing a clearer view of underlying operational efficiency.

The financial data reveals notable trends in assets, equity, and leverage over the six-year period ending in March 2016. Both reported total assets and adjusted total assets exhibit a consistent upward trajectory, reflecting growth in the company's asset base. Reported total assets increased from US$30,886 million in 2011 to US$56,563 million in 2016, more than an 80% rise. Adjusted total assets, which exclude goodwill, similarly rose from US$26,522 million to US$46,777 million, indicating underlying asset expansion apart from intangible asset adjustments.

Reported stockholders’ equity shows some variability but overall a moderate increase, growing from US$7,220 million in 2011 to US$8,924 million in 2016. However, adjusted stockholders’ equity, which removes goodwill effects, demonstrates a declining and even negative trend after 2013. It dropped from US$2,856 million in 2011 to a negative US$862 million in 2016, indicating that goodwill adjustments significantly reduce equity value and suggest potential impairment or overvaluation of intangible assets in later years.

Reported financial leverage, defined as the ratio of total assets to equity, increased consistently from 4.28 in 2011 to a peak of 6.73 in 2015 before slightly decreasing to 6.34 in 2016. This rising leverage indicates the company increasingly financed its growth through debt or liabilities relative to equity. The adjusted financial leverage presents a more dramatic picture; starting at 9.29 in 2011 and rising sharply to 42.68 in 2013, with data missing thereafter. The spike reflects the diminishing adjusted equity base, consequently inflating the leverage ratio when goodwill is excluded.

Overall, while asset growth is evident and equity is stable on a reported basis, the adjustments for goodwill exposure reveal a weakening equity position and heightened financial risk as indicated by elevated adjusted leverage. This suggests that intangible asset valuations materially affect the company’s financial structure and risk profile during this period.

The reported net income attributable to McKesson Corporation demonstrates a generally upward trajectory over the six-year period. Beginning at 1,202 million US dollars in 2011, it climbed steadily to 1,403 million in 2012 before experiencing a slight decline in 2013 and 2014, with values of 1,338 million and 1,263 million respectively. However, the trend reversed thereafter, with substantial growth reaching 1,476 million in 2015 and culminating at 2,258 million in 2016. The adjusted net income figures closely follow this pattern, indicating minimal differences between reported and adjusted earnings for the periods available.

Reported total stockholders’ equity exhibits moderate fluctuations across the years. Initially at 7,220 million US dollars in 2011, equity decreased by 2012 to 6,831 million, then increased to 7,070 million in 2013. It rose further to 8,522 million in 2014, followed by a minor decline in 2015 to 8,001 million, and an increase again to 8,924 million in 2016. Conversely, the adjusted total stockholders’ equity shows a dramatically different pattern. Starting at 2,856 million in 2011, it plummeted sharply to 1,799 million in 2012, and then to only 665 million in 2013. The adjusted equity becomes negative from 2014 onwards, at -1,405 million in 2014, -1,816 million in 2015, and slightly improves to -862 million in 2016. This suggests significant goodwill or intangible assets adjustments affecting shareholders’ equity negatively during those years.

Reported return on equity (ROE) remains positive throughout the period, albeit with some variability. It begins at 16.65% in 2011, peaks at 20.54% in 2012, decreases progressively to 14.82% in 2014, then rises again to 18.45% in 2015, and achieves the highest value of 25.3% in 2016. The adjusted ROE figures, available only for the initial three years, are markedly higher than the reported values. They start at 42.09% in 2011, increase sharply to 77.99% in 2012, and surge further to an exceptionally high 206.62% in 2013, reflecting the substantial reduction in adjusted equity during that timeframe. The absence of adjusted ROE for later years may be associated with the negative adjusted equity values, which complicate meaningful ratio calculations.

Overall, the reported data reflects steady growth in profitability and equity with generally healthy returns, while the adjusted figures reveal considerable impairment of equity, likely related to goodwill write-downs or similar accounting adjustments. This discrepancy between reported and adjusted figures underscores the significance of intangible assets in the company's capital structure and their impact on financial ratios.

The financial data over the six-year period indicates several notable trends and shifts in the company's performance and asset utilization.

Net Income

Reported net income attributable to the corporation generally increased from 2011 to 2016, rising from $1,202 million to $2,258 million. There was a slight dip in 2014, but afterwards, a strong recovery and growth occurred, culminating in the highest recorded net income in 2016. The adjusted net income values mirror this trend almost exactly, indicating minor reconciliation differences or adjustments did not significantly affect overall profitability figures.

Total Assets

Reported total assets showed a consistent upward trend from $30,886 million in 2011 to $56,563 million in 2016. A substantial jump occurred between 2013 and 2014, reflecting possible acquisitions, capital investments, or asset revaluations. The adjusted total assets, which exclude goodwill, also increased steadily but at slightly lower levels, rising from $26,522 million to $46,777 million. This indicates that goodwill represents a significant and growing portion of total assets over the period.

Return on Assets (ROA)

Reported ROA fluctuated during the period, starting at 3.89% in 2011, peaking in 2012 at 4.24%, then declining through 2014 to a low of 2.44%, before recovering to 3.99% by 2016. Adjusted ROA (excluding goodwill effects) followed a similar pattern but consistently stayed higher than reported ROA, ranging from 4.53% to 5.00% in the earlier years and showing a trough of 3.02% in 2014 before moving back up to 4.83% in 2016. This suggests that when excluding goodwill, asset efficiency and profitability were stronger, and that the large increase in goodwill during the middle years exerted a dilutive effect on reported ROA numbers.

Overall, the company exhibited steady profitability growth and asset expansion during the examined years. While reported figures are influenced by goodwill additions, the adjusted metrics demonstrate healthier underlying asset returns and income growth. The dip around fiscal year 2014 is noticeable and appears tied to significant changes in the asset base, possibly related to acquisitions or restructuring, followed by strong recovery and improvement in subsequent years.