<PAGE>
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 September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 1-13252
McKESSON CORPORATION
- ------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 94-3207296
- ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Post Street, San Francisco, California 94104
- ------------------------------------------------------------------
(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 September 30, 1997
- ---------------------------- ---------------------------------
Common stock, $.01 par value 46,193,596 shares
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
==============================
Item Page
- ---- ----
1. Financial Statements
Consolidated Balance Sheets
September 30, 1997 and March 31, 1997 3 - 4
Statements of Consolidated Income
Three and Six month periods ended
September 30, 1997 and 1996 5 - 6
Statements of Consolidated Cash Flows
Six month periods ended
September 30, 1997 and 1996 7 - 8
Financial Notes 9 - 12
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Review 13 - 15
PART II. OTHER INFORMATION
===========================
1. Legal Proceedings 16
6. Exhibits and Reports on Form 8-K 16
Exhibit Index 18
<PAGE>
PART I. FINANCIAL INFORMATION
==============================
McKESSON CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, March 31,
1997 1997
-------- --------
(in millions)
ASSETS
- ------
Current Assets
Cash and cash equivalents $ 79.3 $ 124.8
Marketable securities available
for sale (Note 4) 97.0 105.0
Receivables 1,332.8 1,224.5
Inventories 2,214.9 2,259.5
Prepaid expenses 53.4 47.3
------- -------
Total 3,777.4 3,761.1
------- -------
Property, Plant and Equipment
Land 37.8 38.0
Buildings, machinery and equipment 773.0 741.3
------- -------
Total 810.8 779.3
Accumulated depreciation (425.1) (405.7)
------- -------
Net 385.7 373.6
Goodwill and other intangibles 750.2 736.2
Other assets 322.2 301.9
------- -------
Total Assets $5,235.5 $5,172.8
======= =======
(Continued)
- 3 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, March 31,
1997 1997
-------- --------
(in millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Drafts payable $ 252.0 $ 210.7
Accounts payable - trade 1,614.6 1,854.7
Short-term borrowings 342.3 100.0
Current portion of long-term debt 57.1 60.3
Salaries and wages 35.8 52.9
Taxes 102.8 80.0
Interest and dividends 24.0 21.3
Other 227.6 257.3
------- -------
Total 2,656.2 2,637.2
------- -------
Postretirement Obligations and
Other Noncurrent Liabilities 246.6 255.1
------- -------
Long-Term Debt (Note 4) 806.1 824.9
------- -------
McKesson-obligated mandatorily redeemable
convertible preferred securities of
subsidiary grantor trust whose sole
assets are junior subordinated debentures
of McKesson (Note 5) 195.1 194.8
------- -------
Stockholders' Equity
Common stock (200.0 shares authorized,
46.4 issued as of September 30 and
March 31, 1997; par value of $0.01) 0.4 0.4
Additional paid-in capital 413.9 408.2
Other capital (30.3) (19.2)
Retained earnings 1,117.9 1,062.6
Accumulated translation adjustment (44.6) (44.6)
ESOP notes and guarantee (115.7) (118.3)
Treasury shares, at cost (10.1) (28.3)
------- -------
Net 1,331.5 1,260.8
------- -------
Total Liabilities and
Stockholders' Equity $5,235.5 $5,172.8
======= =======
See Financial Notes.
(Concluded)
- 4 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(unaudited)
Three Months Ended Six Months Ended
September 30 September 30
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
(in millions - except per share amounts)
REVENUES $4,467.8 $2,730.9 $8,810.5 $5,401.5
------- ------- ------- -------
COSTS AND EXPENSES
Cost of sales 4,100.1 2,499.9 8,078.0 4,938.6
Selling, distribution
and administration 276.4 179.0 554.9 356.5
Purchased in-process
technology (Note 2) - - - 48.2
Interest 25.0 10.2 48.1 21.1
------- ------- ------- -------
Total 4,401.5 2,689.1 8,681.0 5,364.4
------- ------- ------- -------
INCOME BEFORE INCOME TAX
EXPENSE AND DIVIDENDS ON
PREFERRED SECURITIES OF
SUBSIDIARY TRUST 66.3 41.8 129.5 37.1
INCOME TAX EXPENSE (25.2) (16.0) (49.2) (32.7)
DIVIDENDS ON PREFERRED
SECURITIES OF
SUBSIDIARY TRUST (1.5) - (3.1) -
------- ------- ------- -------
INCOME AFTER TAXES
Continuing operations 39.6 25.8 77.2 4.4
Discontinued operations - 2.3 - 5.6
------- ------- ------- -------
NET INCOME $ 39.6 $ 28.1 $ 77.2 $ 10.0
======= ======= ======= =======
EARNINGS PER COMMON SHARE
Fully diluted earnings
Continuing operations $ 0.80 $ 0.59 $ 1.58 $ 0.10
Discontinued operations - 0.05 - 0.12
------- ------- ------- -------
Total $ 0.80 $ 0.64 $ 1.58 $ 0.22
======= ======= ======= =======
Primary earnings
Continuing operations $ 0.82 $ 0.59 $ 1.61 $ 0.10
Discontinued operations - 0.05 - 0.12
------- ------- ------- -------
Total $ 0.82 $ 0.64 $ 1.61 $ 0.22
======= ======= ======= =======
Dividends $ 0.25 $ 0.25 $ 0.50 $ 0.50
======= ======= ======= =======
SHARES ON WHICH EARNINGS
PER COMMON SHARE WERE BASED
Fully diluted 50.9 43.8 50.8 44.6
Primary 48.0 43.8 47.8 44.6
(Continued)
- 5 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(unaudited)
Three Months Ended Six Months Ended
September 30 September 30
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
(in millions - except per share amounts)
PRO FORMA ADJUSTED TO REFLECT
DECLARED STOCK SPLIT (Note 8)
EARNINGS PER COMMON SHARE
Fully diluted earnings
Continuing operations $ 0.40 $ 0.29 $ 0.79 $ 0.05
Discontinued operations - 0.03 - 0.06
------- ------- ------- -------
Total $ 0.40 $ 0.32 $ 0.79 $ 0.11
======= ======= ======= =======
Primary earnings
Continuing operations $ 0.41 $ 0.29 $ 0.81 $ 0.05
Discontinued operations - 0.03 - 0.06
------- ------- ------- -------
Total $ 0.41 $ 0.32 $ 0.81 $ 0.11
======= ======= ======= =======
Dividends $ 0.125 $ 0.125 $ 0.25 $ 0.25
======= ======= ======= =======
SHARES ON WHICH EARNINGS
PER COMMON SHARE WERE BASED
Fully diluted 101.8 87.6 101.6 89.3
Primary 96.1 87.6 95.7 89.2
See Financial Notes.
(Concluded)
- 6 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(unaudited)
Six Months Ended
September 30
---------------------
1997 1996
-------- --------
(in millions)
Operating Activities
Income from continuing operations $ 77.2 $ 4.4
Adjustments to reconcile to net cash
used by operating activities
Depreciation 34.4 31.3
Amortization 7.4 4.9
Provision for bad debts 4.7 3.6
Deferred taxes on income 5.8 2.0
Loss on disposal of assets 0.4 -
Other non-cash items (Note 2) (1.8) 45.9
------- -------
Total 128.1 92.1
------- -------
Effects of changes in
Receivables (89.4) (256.3)
Inventories 56.2 35.1
Accounts and drafts payable (183.4) 74.1
Taxes 37.7 17.1
Other (88.6) (27.5)
------- -------
Total (267.5) (157.5)
------- -------
Net cash used by continuing operations (139.4) (65.4)
------- -------
Discontinued operations (2.0) 9.0
------- -------
Net cash used by operating activities (141.4) (56.4)
------- -------
Investing Activities
Purchases of marketable securities (1.3) (0.2)
Maturities of marketable securities 11.5 141.8
Property acquisitions (48.3) (41.4)
Properties sold 3.2 1.3
Acquisitions of businesses,
less cash and short-term
investments acquired (49.3) (61.4)
Investing activities of
discontinued operations - (0.9)
Other (16.4) (23.9)
------- -------
Net cash provided (used) by
investing activities (100.6) 15.3
------- -------
(Continued)
- 7 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(unaudited)
Six Months Ended
September 30
---------------------
1997 1996
-------- --------
(in millions)
Financing Activities
Proceeds from issuance of debt $ 242.1 $ 95.4
Repayment of debt (22.8) (24.5)
Dividends paid on preferred
securities of subsidiary trust (5.3) -
Capital stock transactions
Stock repurchases - (145.2)
Issuances 2.9 6.6
ESOP notes and guarantee 2.5 2.4
Dividends paid (22.9) (21.2)
Financing activities of
discontinued operations - 0.1
------- -------
Net cash provided (used)
by financing activities 196.5 (86.4)
------- -------
Net Decrease in Cash and
Cash Equivalents (45.5) (127.5)
Cash and Cash Equivalents at
beginning of period 124.8 260.8
------- -------
Cash and Cash Equivalents
at end of period $ 79.3 $ 133.3
======= =======
See Financial Notes.
(Concluded)
- 8 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL NOTES
1. 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 September 30, 1997 and
the results of its operations and its cash flows for the six months
ended September 30, 1997 and 1996. Except for the $48.2 million
charge in the first quarter of fiscal 1997 described in Note 2,
such adjustments were of a normal recurring nature.
The results of operations for the six months ended September
30, 1997 and 1996 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 1997 Annual Report to Stockholders which has previously
been filed with the Securities and Exchange Commission.
2. Fiscal 1997 Acquisitions
- ----------------------------
In April 1996, the Company acquired McKesson Automated
Healthcare, Inc. ("AHI"), a provider of automated pharmaceutical
dispensing equipment for use by health care institutions. In the
first quarter of fiscal 1997, a $48.2 million charge was recorded
to write off the portion of the purchase price of AHI allocated to
technology for which technological feasibility had not been
established as of the acquisition date and for which there were no
alternate uses.
In November 1996, the Company acquired FoxMeyer Corporation's
healthcare distribution business ("FoxMeyer"), pursuant to an
expedited auction process.
In February 1997, the Company acquired General Medical Inc.
("General Medical"), a multi-market distributor of medical-surgical
supplies to acute-care, physician-care, and extended-care markets.
The acquisitions were accounted for under the purchase method.
The revenues and operating results of AHI, FoxMeyer and General
Medical are included in the consolidated financial statements from
their respective dates of acquisition.
3. Discontinued Operations
- ---------------------------
Earnings from discontinued operations for the three and six
months ended September 30, 1996, consist of the Company's interest
in the operations of Armor All Products Corporation and Millbrook
Distribution Services, Inc., which were sold in December 1996 and
March 1997, respectively.
- 9 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL NOTES
4. Marketable Securities
- -------------------------
The September 30, 1997 marketable securities balance includes
$86.6 million held in trust as exchange property for the Company's
$144.6 million, 4.5% exchangeable subordinated debentures which
remain outstanding.
5. Convertible Preferred Securities
- ------------------------------------
In February 1997, a wholly owned subsidiary trust of the
Company issued 4 million shares of preferred securities to the
public and 123,720 common securities to the Company, which are
convertible at the holder's option into shares of McKesson common
stock. The proceeds of such issuances were invested by the trust
in $206,186,000 aggregate principal amount of the Company's 5%
Convertible Junior Subordinated Debentures due 2027 (the
"Debentures"). The Debentures represent the sole assets of the
trust. The Debentures mature on June 1, 2027, bear interest at the
rate of 5%, payable quarterly, and are redeemable by the Company
beginning in March 2000 at 103.5% of the principal amount thereof.
Holders of the preferred securities are entitled to cumulative
cash distributions at an annual rate of 5% of the liquidation
amount of $50 per preferred security. Each preferred security is
convertible at the rate of .6709 shares of McKesson common stock,
subject to adjustment in certain circumstances. The preferred
securities will be redeemed upon repayment of the Debentures and
are callable by the Company at 103.5% of the liquidation amount
beginning in March 2000.
The Debentures and related trust investment in the Debentures
have been eliminated, and the preferred securities reflected as
outstanding, in the accompanying consolidated financial statements.
6. New Accounting Pronouncements
- ---------------------------------
The Company is required to adopt Statement of Financial
Accounting Standards ("SFAS") 128, "Earnings per Share" in the
third quarter of fiscal 1998. Earlier application is not
permitted.
SFAS 128 replaces current EPS reporting requirements and
requires a dual presentation of basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing net income available
to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock.
- 10 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL NOTES
Pro forma amounts for basic and diluted EPS, assuming SFAS 128
had been in effect, are as follows:
Three Months Ended Six Months Ended
September 30 September 30
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
($ in millions)
Net Income Per Share
Basic $0.87 $0.66 $1.69 $0.23
Diluted 0.82 0.64 1.60 0.22
Adjusted to reflect declared
stock split (Note 8)
Basic 0.44 0.33 0.85 0.12
Diluted 0.41 0.32 0.80 0.11
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 130 "Reporting Comprehensive Income," which requires that
an enterprise report, by major components and as a single total,
the change in its net assets during the period from nonowner
sources; and SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and
interim reporting standards for an enterprise's operating segments
and related disclosures about its products, services, geographic
areas, and major customers. Adoption of these statements will not
impact the Company's consolidated financial position, results of
operations or cash flows, and any effect will be limited to the
form and content of its disclosures. Both statements are effective
for the Company's fiscal year 1999, with earlier application
permitted.
7. Proposed AmeriSource Acquisition
- ------------------------------------
On September 23, 1997, the Company and AmeriSource Health
Corporation ("AmeriSource") announced the execution of a definitive
merger agreement providing for the Company to acquire AmeriSource.
AmeriSource is the third-largest prime vendor to the
institutional/managed care market and the fourth-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 0.71 shares of McKesson common stock for each
share of AmeriSource common stock. The Company will issue
approximately 17.4 million new shares of common stock in the merger
(34.8 million shares as adjusted to reflect the declared stock
split, see Note 8), and will assume the long-term debt of
AmeriSource, which was approximately $532.3 million at June 30,
1997. The merger of the two companies has been structured as a
tax-free transaction and will be accounted for as a pooling of
interests. The combined company will operate under the McKesson
name and will be headquartered in San Francisco.
Subject to regulatory approval and the approval of
shareholders of both companies, the transaction is expected to be
completed in early 1998. There can be no assurance that the merger
will be completed, or that it will be completed as contemplated.
- 11 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL NOTES
8. Subsequent Event
- --------------------
On October 29, 1997, the Company's board of directors declared
a 2 for 1 split of the Company's common stock. The split will be
effective January 2, 1998 for shareholders of record on December 1,
1997. Pro forma earnings per share amounts giving effect to this
split have been presented in the accompanying Statements of
Consolidated Income.
- 12 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL REVIEW
Segment Results
- ---------------
The revenues and operating profits of the Company by business
segment are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
------------------------- --------------------------
% %
1997 1996 Chg. 1997 1996 Chg.
-------- -------- ---- -------- -------- ----
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Health Care Services
U.S. Health Care
Pharmaceutical Distribution & Servervices $3,539.8 $2,272.4 55.8 $6,980.9 $4,491.9 55.4
Medical/Surgical Distribution & Services 458.3 - 905.2 -
------- ------- ------- -------
Total U.S. Health Care 3,998.1 2,272.4 75.9 7,886.1 4,491.9 75.6
International 386.9 375.0 3.2 764.7 751.8 1.7
------- ------- ------- -------
Total Health Care Services 4,385.0 2,647.4 65.6 8,650.8 5,243.7 65.0
Water Products 80.4 77.6 3.6 152.7 148.0 3.2
Corporate 2.4 5.9 7.0 9.8
------- ------- ------- -------
Total $4,467.8 $2,730.9 63.6 $8,810.5 $5,401.5 63.1
======= ======= ======= =======
OPERATING PROFIT
Health Care Services $ 84.6 $ 45.3 86.8 $ 167.4 $ 48.6(F1)
Water Products 16.7 14.4 16.0 27.8 24.0 15.8
------- ------- ------- -------
Total 101.3 59.7 69.7 195.2 72.6
Interest - net(F2) (23.5) (7.5) (45.3) (15.2)
Corporate and other (11.5) (10.4) (20.4) (20.3)
------- ------- ------- -------
Income before taxes $ 66.3 $ 41.8 58.6 $ 129.5 $ 37.1 249.1
======= ======= ======= =======
(F1) Includes a $48.2 million write-off for in-process technology
related to the April 1996 acquisition of McKesson Automated
Healthcare, Inc.
(F2) Interest expense is shown net of corporate interest income.
</TABLE>
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<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL REVIEW
OVERVIEW OF RESULTS
- -------------------
Net income for the second quarter increased to $39.6 million,
$0.80 per fully-diluted share, from $28.1 million, $0.64 per share
in the prior year. For the six month period, net income increased
to $77.2 million, $1.58 per share, from $10.0 million, $0.22 per
share for the comparable period in the prior year. Results for the
prior year six month period include a $48.2 million charge to write
off in-process technology related to the April 1996 acquisition of
McKesson Automated Healthcare, Inc. The prior year results also
included income from the discontinued Armor All and Service
Merchandising segments of $2.3 million, $0.05 per share, in the
second quarter and $5.6 million, $0.12 per share, for the six month
period of fiscal 1997.
The effective income tax rate applicable to continuing
operations for the six months ended September 30, 1997 was lower
than the effective tax rate for the comparable period ended
September 30, 1996 primarily due to the write-off in the prior
year's first quarter of in-process technology, which had no
associated tax benefit.
Health Care Services
- --------------------
The Health Care Services segment includes the operations of
the Company's U.S. pharmaceutical and health care products
distribution and services businesses, its medical/surgical
distribution and services businesses and its international
pharmaceutical operations (Canada and Mexico). This segment
accounted for 98% of consolidated revenues for the three and the
six month periods ended September 30, 1997.
Segment revenues increased by 66% and 65% for the three and
six month periods, respectively, from the comparable periods in the
prior year, reflecting revenue from the fiscal 1997 acquisitions,
18% internal growth rate in the U.S. Health Care pharmaceutical
distribution and services businesses in both the quarter and six
month period, and a moderate increase in international revenues.
Operating profit increased by 87% and 73% for the second
quarter and the six month period, respectively, excluding the
effect of the $48.2 million charge noted above. The increases in
operating profit reflect the contribution from the fiscal 1997
acquisitions and improved operating profit margins in the U.S.
Health Care pharmaceutical distribution and services businesses.
The improved operating profit margins are primarily due to
operating efficiencies from internal initiatives and continuing
distribution center consolidations. International operating
profits declined modestly for both the second quarter and the six
month periods due to the phased transition of a Canadian customer
to self-warehousing and lower margins on the replacement business.
- 14 -
<PAGE>
McKESSON CORPORATION and SUBSIDIARIES
FINANCIAL REVIEW
Water Products
- --------------
Segment revenues increased by 4% and 3% for the second quarter
and the six month period, respectively, from the comparable periods
in the prior year. Prior year revenues include sales of $4.8
million for the second quarter and $9.3 million for the six months
associated with the Aqua-Vend business that was sold in March 1997.
Operating profit increased by 16% for both the second quarter and
the six month period. This improvement reflects strong sales
growth and improved profitability in the grocery products business
and the continued benefit from a customer retention program in the
direct-delivery business.
Interest, Net
- -------------
Interest expense, net of interest income, increased to $23.5
million in the second quarter and $45.3 million for the six month
period, compared to $7.5 million and $15.2 million, respectively,
in the prior year. The increase was primarily a result of the debt
issued to finance acquisitions in the second half of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and marketable securities available for sale were $176.3
million at September 30, 1997 and $229.8 million at March 31, 1997.
The September 30, 1997 marketable securities balance included $86.6
million from the sale of the Armor All shares which is currently
restricted and held in trust as exchange property in connection
with the Company's outstanding exchangeable debentures. Cash and
marketable securities available for sale decreased by $53.5 million
and total debt increased by $220.3 million during the six months
ended September 30, 1997.
These changes reflect, in part, the decrease in trade payables
as a result of the timing of inventory purchases during the
quarter, increased accounts receivable balances resulting from
higher sales volume and several small acquisitions in the core
Health Care Services segment that were made in the six months ended
September 30, 1997.
Stockholders' equity was $1,331.5 million at September 30,
1997, and the net debt-to-capital ratio was 40% compared with 34%
on March 31, 1997. The net debt-to-capital ratio for both periods
was computed by reducing the outstanding debt amount by the cash
and marketable securities at the end of the period.
For the six month period, fully diluted shares increased to
50.8 million from 44.6 million in the prior year due primarily to
the issuance of 2.8 million common shares in connection with the
acquisition of General Medical in February 1997 and the 2.7 million
common shares underlying the trust convertible preferred securities
issued in the same month.
- 15 -
<PAGE>
PART II. OTHER INFORMATION
===========================
Item 1. Legal Proceedings
- --------------------------
The information set forth in the Company's Form 8-K filed on
September 6, 1997 is hereby incorporated by reference.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
(11) Computation of Earnings per Common Share
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed the following reports on Form 8-K
during the three months ended September 30, 1997:
1. Form 8-K
Date of Report: August 15, 1997
Date Filed: September 6, 1997
Item 5. Other Events
---------------------
The Registrant reported that in connection with a
class action filed by retail pharmacies against the
Company and numerous other defendants, alleging in
essence, a conspiracy to fix the prices of brand
name pharmaceuticals sold to plaintiffs at
artificially high, discriminatory, and
non-competitive levels, in violation of the Sherman
Act, the United States Court of Appeals for the
Seventh Circuit reversed a lower court's decision
granting the motion for summary judgment filed by
the Company and other Drug wholesaler defendants.
2. Form 8-K
Date of Report: September 22, 1997
Date Filed: September 24, 1997
Item 5. Other Events
---------------------
The Registrant reported the Company and AmeriSource
Health Corporation announced the execution of a
definitive merger agreement providing for the
Company to acquire AmeriSource.
- 16 -
<PAGE>
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: November 7, 1997 By /s/ Richard H. Hawkins
------------------------------
Richard H. Hawkins
Vice President and
Chief Financial Officer
By /s/ Heidi E. Yodowitz
------------------------------
Heidi E. Yodowitz
Controller
- 17 -
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- ---------------------------------------------------
(11) Computation of Earnings per Common Share
(27) Financial Data Schedule
- 18 -
<PAGE>
Exhibit (11)
McKESSON CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(unaudited)
(in millions except per share amounts)
Three Months Six Months
Ended Ended
September 30 September 30
-------------- --------------
1997 1996 1997 1996
------ ------ ------ ------
FULLY DILUTED EARNINGS PER SHARE
Income after taxes from
continuing operations $ 39.6 $ 25.8 $ 77.2 $ 4.4
Dividends on preferred securities
of subsidiary trust 1.5 - 3.1 -
Income from discontinued operations - 2.3 - 5.6
----- ----- ----- -----
Total $ 41.1 $ 28.1 $ 80.3 $ 10.0
===== ===== ===== =====
Fully diluted shares
Common shares outstanding (1) 48.2 43.8 48.1 44.6
Convertible preferred securities
- dilutive 2.7 - 2.7 -
----- ----- ----- -----
Total 50.9 43.8 50.8 44.6
===== ===== ===== =====
Fully diluted earnings per share
Continuing operations $ 0.80 $ 0.59 $ 1.58 $ 0.10
Discontinued operations - 0.05 - 0.12
----- ----- ----- -----
Total $ 0.80 $ 0.64 $ 1.58 $ 0.22
===== ===== ===== =====
PRIMARY EARNINGS PER SHARE
Income after taxes
Continuing operations $ 39.6 $ 25.8 $ 77.2 $ 4.4
Discontinued operations - 2.3 - 5.6
----- ----- ----- -----
Total $ 39.6 $ 28.1 $ 77.2 $ 10.0
===== ===== ===== =====
Primary shares
Common shares outstanding (1) 48.0 43.8 47.8 44.6
===== ===== ===== =====
Primary earnings per share
Continuing operations $ 0.82 $ 0.59 $ 1.61 $ 0.10
Discontinued operations - 0.05 - 0.12
----- ----- ----- -----
Total $ 0.82 $ 0.64 $ 1.61 $ 0.22
===== ===== ===== =====
(Continued)
<PAGE>
Exhibit (11)
McKESSON CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(unaudited)
(in millions except per share amounts)
Three Months Six Months
Ended Ended
September 30 September 30
-------------- --------------
1997 1996 1997 1996
------ ------ ------ ------
PRO FORMA ADJUSTED TO REFLECT
DECLARED STOCK SPLIT (2)
Fully diluted shares
Common shares outstanding (1) 96.4 87.6 96.2 89.3
Convertible preferred securities
- dilutive 5.4 - 5.4 -
----- ----- ----- -----
Total 101.8 87.6 101.6 89.3
===== ===== ===== =====
Fully diluted earnings per share
Continuing operations $ 0.40 $ 0.29 $ 0.79 $ 0.05
Discontinued operations - 0.03 - 0.06
----- ----- ----- -----
Total $ 0.40 $ 0.32 $ 0.79 $ 0.11
===== ===== ===== =====
PRIMARY EARNINGS PER SHARE
Primary shares
Common shares outstanding (1) 96.1 87.6 95.7 89.2
===== ===== ===== =====
Primary earnings per share
Continuing operations $ 0.41 $ 0.29 $ 0.81 $ 0.05
Discontinued operations - 0.03 - 0.06
----- ----- ----- -----
Total $ 0.41 $ 0.32 $ 0.81 $ 0.11
===== ===== ===== =====
(1) 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 or 6, as
appropriate, 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).
(2) On October 29, 1997 the Company's board of directors declared
a 2 for 1 split of the Company's common stock effective
January 2, 1998 to shareholders of record on December 1, 1997.
(Concluded)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000927653
<NAME> MCKESSON
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 79,300
<SECURITIES> 97,000
<RECEIVABLES> 1,398,000
<ALLOWANCES> 65,200
<INVENTORY> 2,214,900
<CURRENT-ASSETS> 3,777,400
<PP&E> 810,800
<DEPRECIATION> 425,100
<TOTAL-ASSETS> 5,235,500
<CURRENT-LIABILITIES> 2,656,200
<BONDS> 806,100
0
0
<COMMON> 400
<OTHER-SE> 1,331,100
<TOTAL-LIABILITY-AND-EQUITY> 5,235,500
<SALES> 8,810,500
<TOTAL-REVENUES> 8,810,500
<CGS> 8,078,000
<TOTAL-COSTS> 8,681,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,700
<INTEREST-EXPENSE> 48,100
<INCOME-PRETAX> 129,500
<INCOME-TAX> 49,200
<INCOME-CONTINUING> 77,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,200
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.58
</TABLE>
