<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
COMMISSION REGISTRANT, STATE OF INCORPORATION IRS EMPLOYER
FILE NUMBER ADDRESS AND TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- ---------------------------------- ------------------
<S> <C> <C>
33-27835-01 AmeriSource Health Corporation 23-2546940
(a Delaware Corporation)
(formerly AmeriSource Distribution
Corporation)
P.O. Box 959, Valley Forge,
Pennsylvania 19482
(610) 296-4480
</TABLE>
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 [_]
The number of shares of common stock of AmeriSource Health Corporation
outstanding as of December 31, 1997 was: Class A--20,950,445, Class B--
2,750,783; Class C--164,495.
<PAGE>
INDEX
AMERISOURCE HEALTH CORPORATION
<TABLE>
<C> <S>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets--December 31, 1997 and September 30, 1997
Consolidated statements of operations--Three months ended December
31, 1997 and December 31, 1996
Consolidated statements of cash flows--Three months ended December
31, 1997 and December 31, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. AMERISOURCE HEALTH CORPORATION FINANCIAL STATEMENTS (UNAUDITED)
AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 57,122 $ 60,045
Restricted cash.................................... 8,909 8,886
Accounts receivable less allowance for doubtful
accounts: 12/97--$25,029, 9/97--$22,562........... 560,217 533,319
Merchandise inventories............................ 1,034,110 1,017,782
Prepaid expenses and other......................... 4,380 4,622
---------- ----------
Total current assets............................. 1,664,738 1,624,654
Property and equipment, at cost...................... 116,186 114,979
Less accumulated depreciation...................... 49,969 47,517
---------- ----------
66,217 67,462
Other assets, less accumulated amortization:
12/97--$6,684; 9/97--$6,110......................... 49,141 52,924
---------- ----------
$1,780,096 $1,745,040
========== ==========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................... $ 865,170 $1,036,462
Accrued expenses and other......................... 36,355 43,798
Accrued income taxes............................... 16,039 9,433
Deferred income taxes.............................. 41,403 40,406
---------- ----------
Total current liabilities........................ 958,967 1,130,099
Long-Term Debt:
Revolving credit facility.......................... 445,531 280,768
Receivables securitization financing............... 326,421 299,913
Other debt......................................... 9,053 9,138
---------- ----------
781,005 589,819
Other Liabilities.................................... 10,564 10,811
Stockholders' Equity
Common Stock, $.01 par value:
Class A (Voting and convertible):
50,000,000 shares authorized;
issued 12/97--21,301,528 shares;
9/97--17,540,629 shares.......................... 213 175
Class B (Non-voting and convertible):
15,000,000 shares authorized;
issued 12/97--5,770,783 shares;
9/97--9,440,370 shares........................... 58 94
Class C (Non-voting and convertible):
2,000,000 shares authorized;
issued 12/97--164,495 shares;
9/97--166,495 shares............................. 2 2
Capital in excess of par value..................... 234,952 234,188
Retained earnings (deficit)........................ (199,445) (213,928)
Cost of common stock in treasury................... (6,220) (6,220)
---------- ----------
29,560 14,311
---------- ----------
$1,780,096 $1,745,040
========== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues................................................. $2,254,560 $1,746,935
Cost of goods sold....................................... 2,148,954 1,660,783
---------- ----------
Gross profit............................................. 105,606 86,152
Selling and administrative expenses...................... 65,765 54,661
Depreciation............................................. 3,155 2,406
Amortization............................................. 282 95
---------- ----------
Operating income....................................... 36,404 28,990
Interest expense......................................... 12,662 9,295
---------- ----------
Income before taxes...................................... 23,742 19,695
Taxes on income.......................................... 9,259 7,878
---------- ----------
Net income............................................. $ 14,483 $ 11,817
========== ==========
Net income per share..................................... $ .61 $ .50
========== ==========
Net income per share--assuming dilution.................. $ .60 $ .49
========== ==========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31
--------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 14,483 $ 11,817
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation........................................... 3,155 2,406
Amortization........................................... 711 662
Provision for losses on accounts receivable............ 3,066 2,090
Gain on disposal of property and equipment............. (131) (124)
Deferred income taxes.................................. 997 2,344
Changes in operating assets and liabilities:
Restricted cash....................................... (23) (2,179)
Accounts receivable................................... (27,609) (82,024)
Merchandise inventories............................... (16,282) (112,765)
Prepaid expenses...................................... 245 (351)
Accounts payable, accrued expenses and income taxes... (172,023) (25,568)
Miscellaneous.......................................... 77 (36)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES................ (193,334) (203,728)
INVESTING ACTIVITIES
Capital expenditures.................................... (2,552) (2,852)
Proceeds from sales of property and equipment........... 1,291 1,510
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES................ (1,261) (1,342)
FINANCING ACTIVITIES
Long-term debt borrowings............................... 774,312 484,473
Long-term debt repayments............................... (583,105) (306,246)
Exercise of stock options............................... 465 --
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............ 191,672 178,227
--------- ---------
Decrease in cash and cash equivalents.................... (2,923) (26,843)
Cash and cash equivalents at beginning of period......... 60,045 65,575
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............... $ 57,122 $ 38,732
========= =========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying financial statements present the consolidated financial
position, results of operations and cash flows of AmeriSource Health
Corporation and its wholly-owned subsidiaries (the "Company") as of the dates
and for the periods indicated. All material intercompany accounts and
transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary to present
fairly the financial position as of December 31, 1997, the results of
operations for the three months ended December 31, 1997 and 1996 and the cash
flows for the three months ended December 31, 1997 and 1996 have been
included. Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted
accounting principles, but which are not required for interim reporting
purposes, have been omitted. The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1997.
NOTE 2--LEGAL MATTERS AND CONTINGENCIES
In the ordinary course of its business, the Company becomes involved in
lawsuits, administrative proceedings and governmental investigations,
including antitrust, environmental, product liability and regulatory agency
and other matters. In some of these proceedings, plaintiffs may seek to
recover large and sometimes unspecified amounts and the matters may remain
unresolved for several years. On the basis of information furnished by counsel
and others, the Company does not believe that these matters, individually or
in the aggregate, will have a material adverse effect on its business or
financial condition.
The Company is subject to contingencies pursuant to environmental laws and
regulations at one of its former distribution centers that may require the
Company to take remediation efforts. In fiscal 1994, the Company accrued $4.1
million to cover future consulting, legal, and remediation and ongoing
monitoring costs. The accrued liability, which is reflected in other long-term
liabilities on the accompanying consolidated balance sheet ($3.8 million at
December 31, 1997), is based on an engineering analysis prepared by outside
consultants and represents an estimate of the extent of contamination and
choice of remedy, existing technology and presently enacted laws and
regulations. However, changes in remediation standards, improvements in
cleanup technology and discovery of additional information concerning the site
could affect the estimated liability in the future. The Company is
investigating the possibility of asserting claims against responsible parties
for recovery of these costs. Whether or not any recovery may be forthcoming is
unknown at this time, although the Company intends to vigorously enforce its
rights and remedies.
In November 1993, the Company was named a defendant, along with six other
wholesale distributors and twenty-four pharmaceutical manufacturers, in a
series of purported class action antitrust lawsuits brought by retail
pharmacies, alleging violations of various antitrust laws stemming from the
use of chargeback agreements. In addition, The Company and four other
wholesale distributors were added as defendants in a series of related
antitrust lawsuits brought by independent pharmacies who have opted out of the
class cases and chain drug stores. The Company also is a defendant in parallel
suits filed in state courts in Minnesota, Alabama, and Mississippi. The
Federal class actions were originally filed in the United States District
Court for the Southern District of New York, and have been transferred along
with the individual and chain drug store cases to the United States District
Court for the Northern District of Illinois. Plaintiffs seek injunctive
relief, treble damages, attorneys' fees and costs. In October 1994, the
Company entered into a Judgement Sharing Agreement with the other wholesaler
and pharmaceutical manufacturer defendants. Under the Judgement Sharing
Agreement; (a) the manufacturer defendants agreed to reimburse the wholesaler
defendants for litigation costs incurred, up to an
7
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AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
aggregate of $9 million; and (b) if a judgement is entered into against both
manufacturers and wholesalers, the total exposure for joint several liability
of the Company is limited to the lesser of 1% of such judgement or $1 million.
In addition, the Company has released any claims which it might have had
against the manufacturers for the claims presented by the Plaintiffs in these
lawsuits. The Judgement Sharing Agreement covers the federal court litigation
as well as the cases which have been filed in various state courts.
On April 4, 1996, the District Court granted the Company's motion for
summary in the class case. Plaintiffs subsequently appealed the Company's
grant of summary judgement to the United States Court of Appeals for the
Seventh Circuit. On August 15, 1997, the Court of Appeals reversed the
District Court's order granting summary judgement in favor of the Company and
the other wholesalers. The Court of Appeals also denied the Company's petition
for rehearing. The Company and the other wholesalers filed a petition for a
writ of certiorari to the United States Supreme Court. The Company believes it
has meritorious defenses to the claims asserted in these lawsuits and intends
to vigorously defend itself in all of these cases.
NOTE 3--EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants,
and convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
Earnings per share is computed on the basis of its weighted average number
of shares outstanding during the periods presented (23,856,067 and 23,672,636
for the three months ended December 31, 1997 and December 31, 1996,
respectively). Earnings per share--assuming dilution is computed on the basis
of the weighted average number of shares outstanding during the period plus
the dilutive effect of stock options (367,514 and 327,145 for the three months
ended December 31, 1997 and December 31, 1996, respectively).
NOTE 4--PROPOSED MCKESSON CORPORATION MERGER
On September 22, 1997, the Company and McKesson Corporation ("McKesson")
signed a definitive merger agreement providing for the Company to merge with
McKesson. McKesson is the largest distributor of pharmaceuticals and related
health care products and value-added services in the United States. Under the
terms of the agreement, stockholders of AmeriSource will receive a fixed
exchange ratio of 1.42 shares of McKesson common stock for each share of
AmeriSource common stock. McKesson will issue approximately 33.8 million new
shares of common stock in the merger. The merger of the two companies has been
structured as a tax-free transaction and will be accounted for as a pooling of
interests. The combined company will operate under the McKesson name and will
be headquartered in San Francisco, CA. Under certain circumstances, in the
event that the merger agreement is terminated, as a result of the Company
entering in to a competing transaction, McKesson would be entitled to a
termination fee of $65 million from the Company. Merger related costs incurred
prior to consummation of the merger are being deferred and will be expensed
upon consummation.
Subject to regulatory approval and the approval of shareholders of both
companies, the transaction is expected to be completed in early 1998. There
can be no assurance that the merger will be completed, or that it will be
completed as contemplated.
Concurrently with the execution of the merger agreement, the Company and
McKesson entered into the AmeriSource Stock Option Agreement ("Option
Agreement"). Pursuant to the Option Agreement, AmeriSource has granted
McKesson an irrevocable option to purchase up to 3,418,601 shares of
AmeriSource common stock at an exercise price of $70.87 per share, under
certain circumstances in which the merger agreement is terminated. The Option
Agreement may have the effect of discouraging persons who may be interested in
acquiring an interest in, or otherwise effecting a business combination with
AmeriSource, from considering or proposing such a transaction.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Revenues for the fiscal quarter ended December 31, 1997 increased 29% to
$2.3 billion from $1.7 billion in the first quarter of fiscal 1997. The year-
to-year revenue gains reflect increases across all customer groups and all
geographic regions. The acquisition of Walker Drug Company, L.L.C. ("Walker
Drug Company") in March 1997, contributed 11% of the 29% increase in revenues
for the quarter. During the quarter ended December 31, 1997, sales to
hospitals and managed care facilities increased 16%, sales to independent drug
store customers increased 28%, and sales to the chain drug store customer
group increased 65%, as compared with the prior year quarter. The chain growth
was a result of a new service agreement with a grocery chain in the northeast
which had previously self-warehoused as well as significant increases with
existing national chains due to the continued growth from acquisitions by
those chains. The chain growth is expected to slow in future quarters as the
national chains continue to incorporate their new acquisitions into their own
self-warehousing systems. Future revenues may also be impacted by the
continuing consolidation of customers and price competition in the industry.
During the quarter ended December 31, 1997 sales to hospitals and managed care
facilities accounted for 44% of total revenues, while sales to independent
drug stores accounted for 33% and sales to chain drug stores accounted for 23%
of total.
Gross profit of $105.6 million in the first fiscal quarter of 1998 increased
by 23% over fiscal 1997 due to the increase in revenues. As a percentage of
revenues, the gross profit in the first quarter of fiscal 1998 was 4.68% as
compared to 4.93% in the prior year period. The majority of the decline in
gross profit percentage was due to the above average revenue growth in the
chain segment at gross margins below the Company average. Gross profit may
continue to be impacted by price competition, changes in customer and product
mix, and distribution center performance.
The Company commenced cost reduction plans in the third quarter of fiscal
1997 to consolidate three of its pharmaceutical distribution facilities into
other existing facilities and to restructure its sales force. The cost
reduction initiatives resulted in a $6.4 million charge to selling and
administrative expense in the third fiscal quarter of 1997 and were
substantially completed by December 31, 1997. Write-downs of $3.9 million of
assets included buildings, warehouse and computer equipment, and other assets
to be disposed of related to the facility closings. Severance charges of $1.8
million were recorded for the termination of 240 sales and warehouse
employees. Approximately 180 of these employees were terminated by December
31, 1997. Additionally, $0.7 million of costs related to lease terminations
were recorded.
Operating expenses increased by $12.0 million or 21% in the first quarter of
fiscal 1998 compared with the prior year period, and as a percentage of
revenues, were 3.07% in fiscal 1998 and 3.27% in fiscal 1997. The increase in
expenses was due to increased delivery and warehouse expense associated with
the revenue increase, including the acquisition of Walker Drug Company. The
decrease as a percentage of revenue in fiscal 1998 is primarily due to
increased production economies as a result of the additional sales volume in
new and existing facilities and benefits resulting from cost reduction
initiatives discussed above.
Operating income of $36.4 million in the quarter ended December 31, 1997
increased by 26% from the prior year period. The Company's operating margin
declined slightly to 1.61% in fiscal 1998 from 1.66% in fiscal 1997. The
decline is due to the decrease in gross profit percentage discussed above,
offset in part by reduced operating expenses as a percentage of revenues.
Interest expense of $12.7 million in the first quarter of fiscal 1998
represents an increase of 36% compared to the prior year period. The increase
over the prior year was primarily due to increased borrowings to fund the 29%
revenue increase and the purchase of Walker Drug Company in March 1997.
Average borrowings during the quarter ended December 31, 1997 were $719
million as compared to average borrowings of $536 million in the prior fiscal
year.
The income tax provision for the quarter ended December 31, 1997 was
computed based on an estimate of the full year effective tax rate.
9
<PAGE>
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants,
and convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earning per share
amounts for all periods have been reported, and where necessary, restated to
conform to the Statement No. 128 requirements.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended December 31, 1997, the Company's operating
activities used $193.4 million in cash due to increases in merchandise
inventories of $16.3 million and accounts receivable of $27.6 million and
decreases in accounts payable and accrued expenses of $172.0 million. Accounts
payable decreased primarily due to the payment of extended term invoices in
the quarter related to the Company's expansion of its Thorofare, NJ
distribution facility. Operating cash uses during the fiscal year ended
September 30, 1997 included $11.5 million in interest payments and $1.6
million in income tax payments.
Capital expenditures for the quarter ended December 31, 1997 were $2.6
million and relate principally to investments in warehouse automation,
warehouse improvements, and information technology. Similar expenditures of
approximately $17 million are expected to occur later in fiscal 1998.
Cash provided by financing activities during fiscal 1998 represents
borrowings under the Company's revolving credit facility and its Receivables
Program primarily to fund its working capital requirements. At December 31,
1997, borrowings under the Company's $500 million revolving credit facility
were $445.5 million (at an average interest rate of 7.3%) and borrowings under
the $375 million Receivables Program were $326.4 million (at an average
interest rate of 6.5%). In November 1997, the Company entered into a short-
term supplemental $100 million revolving credit agreement with the same terms
as its Credit Agreement. This agreement expires March 31, 1998 and is intended
to fund seasonal inventory purchases.
An increase in interest rates would adversely affect the Company's operating
results and the cash flow available after debt service to fund operations and
expansion and, if permitted to do so under its revolving credit facility, to
pay dividends on its capital stock. The Company enters into interest rate
protection agreements to hedge the exposure to increasing interest rates with
respect to its long-term debt agreements. The Company provides protection to
meet actual exposure and does not speculate in derivatives. The Company is
required by its Credit Agreement to maintain interest rate cap protection on a
minimum of $112.5 million through January 1999 and has interest rate cap
agreements expiring in May 1999, which provide protection on $115 million of
its long-term borrowings.
The Company's operating results have generated sufficient cash flow which,
together with borrowings under its debt agreements and credit terms from
suppliers, have provided sufficient capital resources to finance working
capital and cash operating requirements, fund capital expenditures, and
interest currently payable on outstanding debt. The Company's primary ongoing
cash requirements will be to fund payment of interest on indebtedness, finance
working capital, and fund capital expenditures and routine growth and
expansion through new business opportunities. Future cash flows from
operations and borrowings are expected to be sufficient to fund the Company's
ongoing cash requirements.
The Company is subject to certain contingencies pursuant to environmental
laws and regulations at one of its former distribution centers that may
require remediation efforts. In fiscal 1994, the Company accrued a liability
of $4.1 million to cover future consulting, legal and remediation, and ongoing
monitoring costs. The accrued liability ($3.8 million at December 31, 1997),
which is reflected in other long-term liabilities on the accompanying
consolidated balance sheet, is based on an estimate of the extent of
contamination and choice of remedy, existing technology, and presently enacted
laws and regulations, however, changes in remediation standards, improvements
in cleanup technology, and discovery of additional information concerning the
site could affect the estimated liability in the future. The Company is
investigating the possibility of asserting claims
10
<PAGE>
against responsible parties for recovery of these costs. Whether or not any
recovery may be forthcoming is unknown at this time.
The Company has conducted a review of its computer systems to identify and
address all necessary code changes, testing, and implementation procedures
necessary to make its systems year 2000 compliant. The Company believes that
with modifications to existing software, and converting to new software, the
year 2000 problem will not pose significant operational problems for the
Company's computer systems as so modified and converted. The Company expects
to be compliant by the end of fiscal 1998. Amounts expensed for year 2000
projects have not been and are not expected to be significant to the Company's
results of operations.
On September 22, 1997, the Company and McKesson Corporation ("McKesson")
signed a definitive merger agreement providing for the Company to merge with
McKesson. McKesson is the largest distributor of pharmaceuticals and related
health care products and value-added services in the United States. Under the
terms of the agreement, stockholders of AmeriSource will receive a fixed
exchange ratio of 1.42 shares of McKesson common stock for each share of
AmeriSource common stock. McKesson will issue approximately 33.8 million new
shares of common stock in the merger. The merger of the two companies has been
structured as a tax-free transaction and will be accounted for as a pooling of
interests. The combined company will operate under the McKesson name and will
be headquartered in San Francisco, CA. Under certain circumstances, in the
event that the merger agreement is terminated, as a result of the Company's
entering into a competing transaction, McKesson would be entitled to a
termination fee of $65 million from the Company
Subject to regulatory approval and the approval of the shareholders of both
companies, the transaction is expected to be completed in early 1998. There
can be no assurance that the merger will be completed, or that it will be
completed as contemplated.
Concurrently with the execution of the merger agreement, the Company and
McKesson entered into the AmeriSource Stock Option Agreement ("Option
Agreement"). Pursuant to the Option Agreement, AmeriSource has granted
McKesson an irrevocable option to purchase up to 3,418,601 shares of
AmeriSource common stock at an exercise price of $70.87 per share, under
certain circumstances in which the merger agreement is terminated. The Option
Agreement may have the effect of discouraging persons who may be interested in
acquiring an interest in, or otherwise effecting a business combination with
AmeriSource, from considering or proposing such a transaction.
Certain information in this Management's Discussion and Analysis of
Financial Condition and Results of Operations contains forward-looking
statements as such term is defined in Section 27A of the Securities Act and
Section 21E of the Exchange Act. Certain factors such as changes in interest
rates, competitive pressures, customer and product mix, inventory investment
buying opportunities, regulatory changes, and capital markets could cause
actual results to differ materially from those in forward-looking statements.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended December 31, 1997.
12
<PAGE>
SIGNATURES
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.
Amerisource Health Corporation
/s/ Kurt J. Hilzinger
_____________________________________
KURT J. HILZINGER SENIOR VICE
PRESIDENT, AND CHIEF FINANCIAL
OFFICER (PRINCIPAL FINANCIAL
OFFICER)
/s/ Michael D. DiCandilo
_____________________________________
MICHAEL D. DICANDILO VICE
PRESIDENT, CONTROLLER (PRINCIPAL
ACCOUNTING OFFICER)
Date: February 5, 1998
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 57122
<SECURITIES> 0
<RECEIVABLES> 560217
<ALLOWANCES> 25029
<INVENTORY> 1034110
<CURRENT-ASSETS> 1664738
<PP&E> 116186
<DEPRECIATION> 49969
<TOTAL-ASSETS> 1780096
<CURRENT-LIABILITIES> 958967
<BONDS> 781005
0
0
<COMMON> 273
<OTHER-SE> 29287
<TOTAL-LIABILITY-AND-EQUITY> 1780096
<SALES> 2254560
<TOTAL-REVENUES> 2254560
<CGS> 2148954
<TOTAL-COSTS> 2148954
<OTHER-EXPENSES> 69202
<LOSS-PROVISION> 3066
<INTEREST-EXPENSE> 12662
<INCOME-PRETAX> 23742
<INCOME-TAX> 9259
<INCOME-CONTINUING> 14483
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14483
<EPS-PRIMARY> .61
<EPS-DILUTED> .60
</TABLE>
