SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-9626
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McKESSON CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE 94-3040479
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Post Street, San Francisco, California 94104
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(Address of principal executive offices) (Zip Code)
(415) 983-8300
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1994
- -------------------------- ----------------------------
Common stock, $2 par value 40,715,908 shares
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
==============================
Pages
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Item
- ----
1. Financial Statements
Consolidated Balance Sheets
June 30, 1994 and March 31, 1994 3 - 4
Statements of Consolidated Income
Three months ended June 30, 1994 and 1993 5 - 6
Statements of Consolidated Cash Flows
Three months ended June 30, 1994 and 1993 7 - 8
Financial Notes 9 - 11
2. Managements' Discussion and Analysis of
Financial Condition and Results of Operations
Financial Review 12 - 16
PART II. OTHER INFORMATION
===========================
Item
- ----
6. Exhibits and Reports on Form 8-K 17
Index to Exhibits 19
PART I. FINANCIAL INFORMATION
==============================
McKESSON CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, March 31,
1994 1994
---------- ----------
(in millions)
ASSETS
- ------
Current Assets
Cash and short-term investments $ 179.8 $ 89.0
Receivables 767.5 744.4
Inventories 1,016.3 993.5
Prepaid expenses 55.0 46.6
------- -------
Total 2,018.6 1,873.5
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Property, Plant and Equipment
Land 43.4 43.4
Buildings, machinery and equipment 758.1 744.7
------- -------
Total 801.5 788.1
Accumulated depreciation (403.7) (391.5)
------- -------
Net 397.8 396.6
Goodwill and other intangibles 278.2 281.4
Other assets 256.4 283.5
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Total $ 2,951.0 $ 2,835.0
======= =======
(Continued)
- 3 -
McKESSON CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, March 31,
1994 1994
---------- ----------
(in millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Drafts payable $ 237.4 $ 205.1
Accounts payable - trade 963.1 925.4
Short-term borrowings 71.6 57.2
Current portion of long-term debt 19.6 18.5
Salaries and wages 36.5 38.4
Taxes 41.8 28.1
Interest and dividends 29.4 28.5
Other 117.1 127.0
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Total 1,516.5 1,428.2
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Postretirement Obligations and
Other Noncurrent Liabilities 217.1 214.8
------- -------
Long-Term Debt 464.2 462.3
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Minority Interest in Subsidiary 52.6 51.1
------- -------
Stockholders' Equity
Preferred stocks 124.6 125.3
Common stock 89.2 89.2
Other capital 165.6 164.9
Retained earnings 627.7 610.3
Accumulated translation adjustment (23.6) (22.3)
ESOP notes and guarantee (163.3) (165.1)
Treasury shares, at cost (119.6) (123.7)
------- -------
Net 700.6 678.6
------- -------
Total $ 2,951.0 $ 2,835.0
======= =======
See Financial Notes.
(Concluded)
- 4 -
McKESSON CORPORATION and SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(unaudited)
Three Months Ended
June 30
-------------------------
1994 1993
---------- ----------
(in millions -
except per share amounts)
REVENUES $ 3,235.2 $ 2,931.7
COSTS AND EXPENSES
Cost of sales 2,960.7 2,665.0
Selling, distribution
and administration 214.3 213.4
Interest 11.1 11.0
------- -------
Total 3,186.1 2,889.4
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SPECIAL ITEMS
Gain on sale and donation
of subsidiary stock - 55.1
Donation to McKesson Foundation - (4.3)
Termination of swap arrangements - (13.4)
------- -------
- 37.4
------- -------
INCOME BEFORE TAXES ON INCOME 49.1 79.7
Taxes on income (19.9) (29.6)
------- -------
INCOME BEFORE MINORITY INTEREST 29.2 50.1
Minority interest in net
income of subsidiary (2.8) (1.5)
------- -------
INCOME AFTER TAXES
Continuing operations 26.4 48.6
Discontinued operations 9.6 6.7
Extraordinary item - debt extinguishment - (4.2)
Cumulative effect
of accounting change - (16.7)
------- -------
NET INCOME $ 36.0 $ 34.4
======= =======
(Continued)
- 5 -
McKESSON CORPORATION and SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(unaudited)
Three Months Ended
June 30
-------------------------
1994 1993
---------- ----------
(in millions -
except per share amounts)
PER COMMON SHARE
Fully diluted earnings
Continuing operations $ .57 $ 1.10
Discontinued operations .22 .15
Extraordinary item - (.10)
Cumulative effect
of accounting change - (.38)
------- -------
Total $ .79 $ .77
======= =======
Primary earnings
Continuing operations $ .60 $ 1.16
Discontinued operations .23 .16
Extraordinary item - (.10)
Cumulative effect
of accounting change - (.41)
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Total $ .83 $ .81
======= =======
Dividends $ .42 $ .40
======= =======
SHARES ON WHICH EARNINGS PER
COMMON SHARE WERE BASED
Fully diluted 44.7 43.7
Primary 41.5 40.5
See Financial Notes.
(Concluded)
- 6 -
McKESSON CORPORATION and SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(unaudited)
Three Months Ended
June 30
-------------------------
1994 1993
---------- ----------
(in millions)
Operating Activities
Income after taxes from
continuing operations $ 26.4 $ 48.6
Adjustments to reconcile to net
cash provided by operating activities
Depreciation 14.5 13.8
Amortization 2.9 2.9
Provision for bad debts 3.5 1.4
Deferred taxes on income (0.3) (0.8)
Gain on sale of subsidiary stock - (52.0)
Other (0.7) 0.1
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Total 46.3 14.0
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Effects of changes in
Receivables (26.6) 20.1
Inventories (22.7) (144.9)
Accounts and drafts payable 69.9 122.9
Other (5.6) 28.3
------- -------
Total 15.0 26.4
------- -------
Net cash provided by
continuing operations 61.3 40.4
Discontinued operations 42.9 28.2
------- -------
Net cash provided by
operating activities 104.2 68.6
------- -------
(Continued)
- 7 -
McKESSON CORPORATION and SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(unaudited)
Three Months Ended
June 30
-------------------------
1994 1993
---------- ----------
(in millions)
Investing Activities
Property acquisitions $ (16.7) $ (16.5)
Properties sold 1.0 0.7
Proceeds from sale of subsidiary stock - 78.7
Acquisitions of businesses, less cash and
short-term investments acquired - (50.6)
Investing activities
- discontinued operations (5.3) (39.2)
Other 3.8 12.2
------- -------
Net cash used by investing activities (17.2) (14.7)
------- -------
Financing Activities
Proceeds from issuance of debt 42.5 1.8
Repayment of debt (24.9) (67.1)
Capital stock transactions
Treasury stock acquired - (31.5)
Issuances 3.2 5.3
ESOP notes and guarantee 1.8 1.7
Dividends paid (19.7) (18.9)
Financing activities
- discontinued operations 0.9 0.4
------- -------
Net cash provided (used)
by financing activities 3.8 (108.3)
------- -------
Net Increase (Decrease) in Cash and
Short-Term Investments 90.8 (54.4)
Cash and Short-Term Investments
at beginning of period 89.0 111.5
------- -------
Cash and Short-Term Investments
at end of period $ 179.8 $ 57.1
======= =======
See Financial Notes.
(Concluded)
- 8 -
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL NOTES
1. Proposed Sale of the PCS Business
---------------------------------
On July 10, 1994, McKesson Corporation ("McKesson" or "the
Company") entered into an Agreement and Plan of Merger providing
for the acquisition by Eli Lilly and Company ("Eli Lilly") of
McKesson's pharmaceutical benefits management business (the "PCS
Business"), which is primarily operated by PCS Health Systems, Inc.
and Clinical Pharmaceuticals, Inc., both of which are wholly-owned
subsidiaries of McKesson, for approximately $4 billion.
As required by the Merger Agreement, on July 15, 1994 ECO
Acquisition Corporation, a subsidiary of Eli Lilly (the
"Purchaser"), commenced a cash tender offer to purchase from
McKesson shareholders all outstanding shares of McKesson common
stock (the "Shares") at a price of $76.00 net per Share (the
"Offer"). The Offer is conditioned upon, among other things,
satisfaction of the condition that there be validly tendered and
not withdrawn, prior to the expiration of the Offer, a number of
Shares that represent at least a majority of the total voting power
of McKesson. Following the purchase of Shares under the Offer and
satisfaction of certain other conditions, McKesson and the
Purchaser will merge (the "Merger") and each Share not purchased in
the Offer (other than Shares held by Eli Lilly and certain other
related entities) will be converted into the right to receive
$76.00 in cash or such higher price per Share as may be offered
pursuant to the Offer, without interest.
In addition, prior to the consummation of the Offer, McKesson
will (i) transfer all of the assets and liabilities of McKesson
other than those related to the PCS Business to SP Ventures, Inc.,
a newly-formed wholly-owned subsidiary of McKesson ("New McKesson")
and (ii) declare a dividend (conditioned upon consummation of the
Offer) of one share of common stock of New McKesson for each Share
held of record as of such date (collectively, the "Spin-Off").
After giving effect to the Spin-Off and the consummation of the
Offer, the current business of McKesson (other than its PCS
Business) will be continued through New McKesson. The net result
of the proposed transaction is that each existing McKesson
shareholder will receive a cash payment of $76 per Share
(representing the proceeds from the sale of the PCS Business)
together with one common share of New McKesson for each share held
as of the record date for the Spin-Off (representing their
continuing interest in the retained businesses).
Approximately $600 million, subject to certain adjustments, of
the $4 billion will be contributed by Eli Lilly to the capital of
McKesson, which will transfer such amount to New McKesson to meet
certain tax and transaction costs and for the general corporate
purposes of New McKesson, including the funding of investments in
new and current businesses. Management believes that consummation
- 9 -
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL NOTES
of the proposed transaction will result in an estimated gain on
sale of the PCS Business of approximately $500 million, after
taxes, transaction costs and other expenses.
For financial statement purposes, New McKesson will be the
continuing entity and New McKesson will retain the name McKesson
Corporation. The accompanying unaudited consolidated financial
statements present the PCS Business as a discontinued operation.
2. Interim Financial Statements
----------------------------
In the opinion of the Company, these unaudited consolidated
financial statements include all adjustments necessary to a fair
presentation of its financial position as of June 30, 1994, and the
results of its operations and its cash flows for the three months
then ended. Such adjustments were of a normal recurring nature.
The results of operations for the three months ended June 30,
1994 and 1993 are not necessarily indicative of the results for the
full years.
It is suggested that these interim financial statements be
read in conjunction with the annual audited financial statements,
accounting policies and financial notes thereto included in the
Company's 1994 consolidated financial information which has
previously been filed with the Commission in a Report on Form 8-K
dated July 29, 1994.
3. Special Items
-------------
Special items in the prior year of $37.4 million ($24.5
million after-tax, $0.56 per fully diluted share) included a gain
of $55.1 million from the sale of 5,175,000 shares and the donation
of 250,000 shares of the Company's majority-owned Armor All
Products Corporation subsidiary. The shares donated to the
McKesson Foundation had a market value of $4.3 million. Also
included in special items was a loss of $13.4 million resulting
from the termination of interest rate swap arrangements. These
interest rate swap arrangements had been designated, through March
31, 1993, as a hedge of the Company's short-term variable interest
domestic borrowings. As a result of the May 12, 1993 sale of Armor
All shares and other factors, the interest rate swap arrangements
were no longer considered effective as a hedge against the
variable-rate borrowings as the Company, at that time, no longer
expected to borrow domestically on a short-term basis in fiscal
1994.
- 10 -
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL NOTES
4. Extraordinary Loss
------------------
An extraordinary loss of $4.2 million was recognized in the
prior year on the early retirement of $50 million of 8 5/8% debt.
5. Accounting Change
-----------------
As of April 1, 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". The
cumulative effect of adopting the new standard resulted in a charge
to net income of $16.7 million, net of a $10.4 million tax benefit
($0.38 per fully diluted share).
- 11 -
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL REVIEW
(unaudited)
Operating Results
- -----------------
The operating results of the Company by business segment are
as follows:
Three Months Ended June 30
------------------------------
1994 1993 % Change
-------- -------- --------
(in millions)
REVENUES
Health Care Services(1) $ 3,115.6 $ 2,824.3 10.3
Water Products 61.2 58.7 4.3
Armor All 56.6 47.7 18.7
Corporate 1.8 1.0
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Total $ 3,235.2 $ 2,931.7 10.4
======= =======
OPERATING PROFIT
Health Care Services $ 48.5 $ 45.1 7.5
Water Products 8.0 7.5 6.7
Armor All 10.8 9.1 18.7
------- -------
Total 67.3 61.7 9.1
Interest - net(2) (10.3) (10.5)
Corporate and other (7.9) (8.9)
Special items - 37.4
------- -------
Income before taxes $ 49.1 $ 79.7 (38.4)
======= =======
(1) Health Care Services Revenues includes:
Sales to customers'
warehouses $ 727.6 $ 641.0
International revenues 334.7 336.3
(2) Interest expense is shown net of corporate interest income.
- 12 -
McKESSON CORPORATION AND SUBSIDIARIES
FINANCIAL REVIEW
Proposed Sale of the PCS Business
- ---------------------------------
On July 10, 1994, McKesson Corporation ("McKesson" or "the
Company") entered into an Agreement and Plan of Merger providing
for the acquisition by Eli Lilly and Company ("Eli Lilly") of
McKesson's pharmaceutical benefits management business (the "PCS
Business"), which is primarily operated by PCS Health Systems, Inc.
and Clinical Pharmaceuticals, Inc., both of which are wholly-owned
subsidiaries of McKesson, for approximately $4 billion.
As required by the Merger Agreement, on July 15, 1994 ECO
Acquisition Corporation, a subsidiary of Eli Lilly (the
"Purchaser"), commenced a cash tender offer to purchase from
McKesson shareholders all outstanding shares of McKesson common
stock (the "Shares") at a price of $76.00 net per Share (the
"Offer"). The Offer is conditioned upon, among other things,
satisfaction of the condition that there be validly tendered and
not withdrawn, prior to the expiration of the Offer, a number of
Shares that represent at least a majority of the total voting power
of McKesson. Following the purchase of Shares under the Offer and
satisfaction of certain other conditions, McKesson and the
Purchaser will merge (the "Merger") and each Share not purchased in
the Offer (other than Shares held by Eli Lilly and certain other
related entities) will be converted into the right to receive
$76.00 in cash or such higher price per Share as may be offered
pursuant to the Offer, without interest.
In addition, prior to the consummation of the Offer, McKesson
will (i) transfer all of the assets and liabilities of McKesson
other than those related to the PCS Business to SP Ventures, Inc.,
a newly-formed wholly-owned subsidiary of McKesson ("New McKesson")
and (ii) declare a dividend (conditioned upon consummation of the
Offer) of one share of common stock of New McKesson for each Share
held of record as of such date (collectively, the "Spin-Off").
After giving effect to the Spin-Off and the consummation of the
Offer, the current business of McKesson (other than its PCS
Business) will be continued through New McKesson. The net result
of the proposed transaction is that each existing McKesson
shareholder will receive a cash payment of $76 per Share
(representing the proceeds from the sale of the PCS Business)
together with one common share of New McKesson for each share held
as of the record date of the Spin-Off (representing their
continuing interest in the retained businesses).
Approximately $600 million, subject to certain adjustments, of
the $4 billion will be contributed by Eli Lilly to the capital of
McKesson, which will transfer such amount to New McKesson to meet
certain tax and transaction costs and for the general corporate
purposes of New McKesson, including the funding of investments in
new and current businesses. Management believes that consummation
- 13 -
McKESSON CORPORATION AND SUBSIDIARIES
FINANCIAL REVIEW
of the proposed transaction will result in an estimated gain on
sale of the PCS Business of approximately $500 million, after
taxes, transaction costs and other expenses.
For financial statement purposes, New McKesson will be the
continuing entity and New McKesson will retain the name McKesson
Corporation. The accompanying unaudited consolidated financial
statements present the PCS Business as a discontinued operation.
Overview of Results
- -------------------
Revenues in the first quarter increased 10% to $3.24 billion,
and net income was up 5% to $36 million.
First quarter net income included earnings from the
discontinued operations of $9.6 million. Prior year results
included an after-tax gain of $24.5 million for special items, $6.7
million in earnings from the discontinued operations, an
extraordinary loss of $4.2 million after-tax on the early
retirement of $50 million of 8-5/8% debt and a $16.7 million
after-tax charge for the cumulative effect of adopting Statement of
Financial Accounting Standards (SFAS) No. 112 "Employers'
Accounting for Postemployment Benefits."
The prior year's special items of $37.4 million ($24.5 million
after-tax, $0.56 per fully diluted share) in continuing operations
included a pre-tax gain of $55.1 million on the sale and donation
of Armor All stock, partially offset by a contribution to the
McKesson Foundation of $4.3 million and a loss on the termination
of interest rate swap arrangements of $13.4 million.
Segment Results
- ---------------
HEALTH CARE SERVICES
The Health Care Services segment includes the results of the
Company's U.S. pharmaceutical and health care products distribution
businesses and its international pharmaceutical operations
(including Canada, Mexico and Central America). The segment
accounted for approximately 96% of consolidated revenues and 72% of
total operating profits in the quarter.
Sales of the U.S. distribution services businesses, excluding
- 14 -
McKESSON CORPORATION AND SUBSIDIARIES
FINANCIAL REVIEW
sales to customers' warehouses, increased 11% in the quarter,
reflecting real volume growth. The increase in volume came largely
from lower-margin business with chain stores and increased sales to
Valu-Rite pharmacies. The Valu-Rite program was expanded during
fiscal 1994 to provide more profit-improvement opportunities for
customers, including the establishment of a pharmacy provider
network and the implementation of expanded generic drug and private
label programs.
Operating profits for the U.S. businesses increased in the
quarter, reflecting improved results in the Company's Millbrook
Distribution unit and moderate improvement in the U.S.
pharmaceutical distribution business. Millbrook is a distributor
of health care products and general merchandise to supermarkets and
mass merchandisers.
Revenues for the international pharmaceutical operations were
flat in the quarter. Growth in sales continues to be slowed by the
decline in tobacco sales in Canada. Operating profits of the
international pharmaceutical operations increased in the quarter.
WATER PRODUCTS
Water Products revenues were up 4% in the quarter and
operating profits increased 7%. Operating profits continue to
benefit from cost reductions, an increase in the direct-delivery
customer base and growth in the sales of packaged water to
supermarkets and other retail outlets.
ARMOR ALL
Armor All revenues increased 19% in the quarter reflecting
strong new product sales offset, in part, by lower protectant
product sales. Protectant product sales benefitted in the prior
year quarter from heavy promotional buying by retailers. The 19%
increase in operating profits is due to the growth in sales.
PCS BUSINESS
The results of the PCS Business are included in discontinued
operations. Sales in the quarter increased to $52 million, a 38%
increase over the prior year's quarter. Operating profit increased
33% to $15.3 million.
- 15 -
McKESSON CORPORATION AND SUBSIDIARIES
FINANCIAL REVIEW
Liquidity and Capital Resources
- -------------------------------
Cash and short-term investments increased $91 million in the
first quarter. This change was due in part to payables levels in
the Health Care Services distribution operations returning to more
normal levels in the quarter and to cash generated from the PCS
Business discontinued operations. In fiscal 1994 the working
capital investment in the Health Care Services U.S. distribution
business increased due to higher inventory and lower trade payables
levels. This situation resulted from management's decision earlier
in fiscal 1994 to temporarily increase inventories. Inventories
were partially reduced during the latter part of fiscal 1994
resulting in lower inventory purchases during the fourth quarter,
and therefore, lower related payables levels at March 31, 1994,
than would otherwise have been required. Payables returned to more
normal levels in the first quarter of fiscal 1995.
PCS' working capital requirements fluctuate daily due to the
timing of cash collections and disbursements within PCS' fourteen
day billing cycle. The cash generated from discontinued operations
is primarily due to June 30 corresponding to a higher cash point in
the PCS billing cycle than March 31 and is significantly greater
than the average operating cash generation of PCS.
The Company's debt-to-capital ratio was 44.2% at June 30,
1994, unchanged from March 31, 1994.
The effective tax rate, computed before the effect of special
items in the prior year, increased in the quarter to 40.5% from
39.5%, reflecting the enactment in the second quarter of last year
of the Omnibus Budget Reconciliation Act of 1993, which increased
the federal corporate income tax rate from 34% to 35%.
- 16 -
PART II. OTHER INFORMATION
===========================
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) Exhibits
(4) Amendment dated as of July 10, 1994 between the
Registrant and First Chicago Trust Company of New
York, as Rights Agent, to the Rights Agreement
dated as of May 7, 1986, as amended and restated.
(11) Computation of Earnings per Common Share
(27) Voluntary Schedule
(b) Reports on Form 8-K
1. Form 8-K dated July 19, 1994
Item 5. Other Events
The Registrant announced it had entered into an
Agreement and Plan of Merger dated as of July 10,
1994 by and among the Registrant, Eli Lilly and
Company ("Parent") and ECO Acquisition Corporation,
a wholly-owned subsidiary of Parent, as well as
certain other agreements which provide for a
corporate restructuring pursuant to which it will
sell to Parent its pharmaceutical benefits
management business, which is primarily operated by
PCS Health Systems, Inc. and Clinical
Pharmaceuticals, Inc., two subsidiaries of the
Registrant for $4 billion in cash.
Item 7. Financial Statements, Pro Forma
Information and Exhibits
2. Form 8-K dated July 29, 1994
Item 5. Other Events
Attached as exhibits to this current Report on Form
8-K were certain financial statements, schedules
and other information of the Registrant which have
been restated to reflect the pending transaction
described in the Form 8-K Report filed by the
Registrant on July 19, 1994.
Item 7. Financial Statements, Pro Forma
Information and Exhibits
- 17 -
SIGNATURE
S I G N A T U R E
- - - - - - - - -
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
McKESSON CORPORATION
(Registrant)
Dated: August 12, 1994 By /s/ Garret A. Scholz
----------------------------
Garret A. Scholz
Vice President Finance
By /s/ Richard H. Hawkins
----------------------------
Richard H. Hawkins
Vice President & Controller
- 18 -
INDEX TO EXHIBITS
Exhibit
Number
- ---------
(4) Amendment dated as of July 10, 1994 between the
Registrant and First Chicago Trust Company of New
York, as Rights Agent, to the Rights Agreement
dated as of May 7, 1986, as amended and restated.
(11) Computation of Earnings per Common Share
(27) Voluntary Schedule
- 19 -
Exhibit (4)
AMENDMENT TO RIGHTS AGREEMENT
-----------------------------
AMENDMENT dated as of July 10, 1994, between
McKesson Corporation, a Delaware corporation (the
"Company"), and First Chicago Trust Company of New
York, as Rights Agent (the "Agent"), to the Rights
Agreement, dated as of May 7, 1986, between the Company
and Morgan Shareholder Services Trust Corporation
(presently First Chicago Trust Corporation of New
York), as amended and restated (the "Rights
Agreement").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company has entered into an
Agreement and Plan of Merger (the "Merger Agreement"),
dated as of July 10, 1994, by and among the Company,
Eli Lilly and Company, an Indiana corporation
("Parent"), and ECO Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent
(the "Purchaser"), pursuant to which the Company has
agreed to amend the Rights Agreement as necessary (i)
to prevent the Merger Agreement or the consummation of
any of the transactions contemplated thereby,
including, without limitation, the publication or other
announcement of the tender offer contemplated therein
and the consummation of the tender offer and merger
contemplated therein, from resulting in the
distribution of separate rights certificates or the
occurrence of a Distribution Date (as defined in the
Rights Agreement) or from being deemed to be a
Triggering Event (as defined in the Rights Agreement)
or a Section 13 Event (as defined in the Rights
Agreement), and (ii) to provide that neither Parent nor
Purchaser shall be deemed to be an Acquiring Person (as
defined in the Rights Agreement) or be declared an
Adverse Person (as defined in the Rights Agreement) by
reason of the transactions expressly provided for in
the Merger Agreement; and
WHEREAS, the Board of Directors of the
Company has determined that the Merger Agreement and
transactions contemplated thereby are in the best
interests of the stockholders of the Company; and
WHEREAS, as provided in Section 26 of the
Rights Agreement, the interests of the holders of
Rights thereunder are deemed to be coincident with the
interests of the Company stockholders; and
WHEREAS the Board of Directors of the Company
has resolved to approve and adopt the Amendment to the
Rights Agreement contemplated hereby.
NOW, THEREFORE, in consideration of the
premises and mutual agreements herein set forth, the
parties hereby agree as follows:
1. The Rights Agreement shall be amended by
inserting the following sentence immediately after the
first sentence of Section 3(a):
"Notwithstanding the foregoing, neither the
execution and delivery of the Agreement and
Plan of Merger, dated as of July 10, 1994
(the "Merger Agreement," which term shall
include any amendments heretofore or here-
after made thereto), by and among the
Company, Eli Lilly and Company, an Indiana
corporation ("Parent"), and ECO Acquisition
Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent (the
"Purchaser"), nor the consummation of any
of the transactions contemplated thereby or
by the Distribution Agreement (as defined
therein), including, without limitation,
the publication or other announcement of
the Offer (as defined therein) and the
consummation of the Offer and the Merger
(as defined therein), shall result in the
distribution of separate rights certif-
icates or the occurrence of a Distribution
Date pursuant to Section 3 hereof, or be
deemed to be a Triggering Event or a
Section 13 Event, and, neither Parent nor
the Purchaser shall be deemed to be an
Acquiring Person or be declared an Adverse
Person by reason of the transactions
expressly provided for in the Merger
Agreement. Accordingly, as provided in
Section 13(d) hereof, upon consummation of
the Merger, all Rights hereunder shall
expire."
2. This Amendment shall be effective as of the
date and time first above stated and, except as set
forth herein, the Rights Agreement shall remain in full
force and effect and shall be otherwise unaffected
hereby.
3. On or after the date hereof, each reference
in the Rights Agreement (including the Exhibits
thereto) to "this Agreement", "hereunder", "herein" or
words of like import shall mean and be a reference to
the Rights Agreement as amended hereby.
4. This Amendment may be executed in counter-
parts and each of such counterparts shall for all
purposes be deemed to be an original and both such
counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be duly executed and attested,
all as of the day and year first above written.
Attest: McKESSON CORPORATION
By ____________________ By _____________________
Name: Name:
Title: Title:
Attest: FIRST CHICAGO TRUST
COMPANY OF NEW YORK
By ____________________ By _____________________
Name: Name:
Title: Title:
Exhibit (11)
McKESSON CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(unaudited)
(in millions except per share amounts)
Three Months
Ended June 30
---------------
1994 1993
------ ------
FULLY DILUTED EARNINGS PER SHARE
Income after taxes before extraordinary item
and cumulative effect of accounting change $ 26.4 $ 48.6
Contribution adjustment - Series B ESOP
convertible preferred stock(1) (0.9) (0.9)
----- -----
25.5 47.7
Discontinued operations 9.6 6.7
Extraordinary item - (4.2)
Cumulative effect of accounting change - (16.7)
----- -----
Total $ 35.1 $ 33.5
===== =====
Fully diluted shares
Common shares outstanding(2) 41.5 40.5
Convertible securities - dilutive 3.2 3.2
----- -----
Total 44.7 43.7
===== =====
Fully diluted earnings per share
Continuing operations $ .57 $ 1.10
Discontinued operations .22 .15
Extraordinary item - (.10)
Cumulative effect of accounting change - (.38)
----- -----
Total $ .79 $ .77
===== =====
PRIMARY EARNINGS PER SHARE
Income after taxes before extraordinary item
and cumulative effect of accounting change $ 26.4 $ 48.6
Dividend requirements - preferred stocks(1) (1.8) (1.8)
----- -----
24.6 46.8
Discontinued operations 9.6 6.7
Extraordinary item - (4.2)
Cumulative effect of accounting change - (16.7)
----- -----
Total $ 34.2 $ 32.6
===== =====
Primary shares
Common shares outstanding(2) 41.5 40.5
===== =====
Primary earnings per share
Continuing operations $ .60 $ 1.16
Discontinued operations .23 .16
Extraordinary item - (.10)
Cumulative effect of accounting change - (.41)
----- -----
Total $ .83 $ .81
===== =====
(1) Net of certain tax benefits.
(2) Common shares outstanding have been computed by adding the
monthly averages (beginning of the month plus end of the
month divided by 2), dividing the aggregate by 3 and adjusting
this total for dilutive stock options using the treasury stock
method based on the greater of the common share price at the
end of the period or the average common share price during the
period (fully diluted) and on the average common share price
during the period (primary).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
DATA STATED IN MILLION Exhibit (27)
<CAPTION>
McKESSON CORPORATION
VOLUNTARY SCHEDULE - CERTAIN FINANCIAL INFORMATION
JUNE 30, 1994
First First
Quarter Quarter
REGULATION NUMBER STATEMENT CAPTION 1994 1993
- ----------------- ---------------------------------------- --------- ---------
<S> <C> <C> <C>
5-02(1) Cash and cash items $ 179.8 $ 57.1
5-02(2) Marketable securities
5-02(3)(a)(1) Accounts receivable - trade
5-02(3)(b)(1) Notes receivable trade
5-02(4) Allowance for doubtful accounts
5-02(5) Unearned income
5-02(6)(a)(1) Finished goods
5-02(9) Total current assets 2,018.6 1,829.8
5-02(18) Total assets 2,951.0 2,733.2
5-02(21) Total current liabilities 1,516.5 1,559.1
5-02(22) Bonds mortgages & similar debt
5-02(23) Indebtedness to related parties
5-02(24) Other liabilities
5-02(28) Preferred stock - mandatory redemption
5-02(29) Preferred stock-no mandatory redemption
5-02(30) Common stock 89.2 89.2
5-02(31)(a)(1) Additional paid in capital 165.6 163.5
5-02(31)(a)(2) Additional capital other
5-02(31)(1)(3)(i) Retained earnings - appropriated
5-02(31)(1)(3)(ii) Retained earnings - unappropriated 627.7 563.8
5-03(b)(1)(a) Net sales tangible products
5-03(b)(1)(b) Operating revenues utilities & others
5-03(b)(1)(c) Income from rentals
5-03(b)(1)(d) Revenues from services
5-03(b)(1)(e) Other revenues
5-03(b)(2)(a) Cost of tangible goods sold
5-03(b)(2)(b) Operating expenses utilities and others
5-03(b)(2)(c) Cost of income from rentals
5-03(b)(2)(d) Cost of services
5-03(b)(2)(e) Cost of other revenues
5-03(b)(8) Interest & amortization of debt discount
5-03(b)(10) Income before taxes and other items 49.1 79.7
5-03(b)(11) Income tax expense 19.9 29.6
5-03(b)(14) Income/loss from continuing operations 26.4 48.6
5-03(b)(15) Discontinued operations 9.6 6.7
5-03(b)(17) Extraordinary items - (4.2)
5-03(b)(18) Cumulative effect-chngs in acctg. prin. - (16.7)
5-03(b)(19) Net income or loss 36.0 34.4
</TABLE>
