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McKesson 4Q Profit Falls Following Write-down

The Associated Press

SAN FRANCISCO (AP) — Drug distributor McKesson Corp. on Monday posted an 8 percent drop in fiscal fourth-quarter profit after the company wrote down the value of an investment and reported flat sales which missed Wall Street's expectations.

McKesson said its profit decreased to $281 million, or $1.01 per share, from $307 million, or $1.05 per share, in the year-earlier period. The latest quarter includes a charge of $59 million, or 22 cents per share, to write down the value of its investment in Parata Systems LLC and a tax-related gain of $22 million, or 8 cents per share.

Revenue was about flat at $26.22 billion, as sales in both its distribution services business and technology services business were essentially unchanged year-over-year.

For the quarter ended March 31, analysts had expected $1.15 per share in profit and $27.3 billion in revenue, according to a Thomson Reuters survey.

In fiscal 2009, McKesson's profit fell 17 percent to $823 million, or $2.95 per share, including a hefty litigation charge, from $990 million, or $3.32 per share. Revenue grew 5 percent to $106.63 billion from $101.70 billion.

The company forecast a profit below Wall Street estimates for fiscal 2010, citing weaker technology revenue and pricing pressure. In aftermarket trading, its shares fell $1.61, or 4.1 percent, to $37.50 after closing the regular session up $1.18 at $39.11.

The drug distributor said it expects to earn between $3.90 and $4.05 per share for the year, down slightly from its adjusted profit of $4.07 per share reported for fiscal 2009.

Analysts are expecting $4.09 per share, on average.

Chairman and Chief Executive John Hammergren said technology revenue slowed as fiscal 2009 progressed, and drug distribution revenue also took a hit due to the economic slump. He said the company's U.S. business was experiencing profit margin pressure, and McKesson has become more conservative on capital spending in response to economic conditions.