<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
January 27, 1999
(Date of Report)
January 25, 1999
(Date of earliest event reported)
McKESSON HBOC, INC.
(Exact name of registrant as specified in charter)
Delaware 1-13252 94-3207296
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
McKesson Plaza
One Post Street
San Francisco, CA 94104
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 983-8300
<PAGE>
Item 5. Other Events
- ---------------------
We are filing this Current Report on Form 8-K to make generally available
certain information regarding the Company.
On January 25, 1999, the Registrant reported its financial results for its third
fiscal quarter ended December 31, 1998. A copy of the press release announcing
those results is set forth in Exhibit 99.1 to this Current Report on Form 8-K
("Current Report") and is hereby incorporated by reference herein. For
purposes of satisfying the requirements of ASR 135 for the benefit of certain
former shareholders of IMNET Systems, Inc. which was acquired by HBO & Company
("HBO") in October 1998 in a transaction accounted for as a pooling of
interests, Registrant is filing herewith a one page schedule reflecting
certain consolidated financial information of HBO for the quarter ended
December 31, 1998. This schedule is set forth in Exhibit 99.2 to this Current
Report on Form 8-K, and is incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- ---------------------------------------------------------------------------
(c) Exhibits
99.1 Press Release issued by Registrant on January 25, 1999
99.2 Selected Financial Information of HBO & Company
<PAGE>
SIGNATURE
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 hereunto duly authorized.
McKESSON HBOC, INC.
(Registrant)
Date: January 27, 1999 By: /s/ Nancy A. Miller
-------------------------------
Name: Nancy A. Miller
Title: Senior Vice President and
Corporate Secretary
<PAGE>
EXHIBIT INDEX
Exhibit
No. Title
- ------- -----
99.1 Press Release issued by McKesson Corporation on January 25, 1999.
99.2 Selected Financial Information of HBO & Company
<PAGE>
EXHIBIT 99.1
(BW)(CA-MCKESSON)(MCK) McKesson Corporation Reports Record Third Quarter
Results With Net Income Up 41% and EPS Up 30% Before Special Charges
Business Editors
SAN FRANCISCO--(BUSINESS WIRE)--Jan. 25, 1999--
McKesson HBOC, Inc. Reports Proforma Combined Results with
Net Income Up 40% and Earnings Per Share Up 39%
McKesson HBOC, Inc. (NYSE:MCK) (McKessonHBOC) today reported that
McKesson Corporation had record revenues and results before special charges
for the third fiscal quarter ended December 31, 1998, with net income up 41
percent and earnings per share up 30 percent. Operating margins in
McKesson's U.S. healthcare supply management business continued to increase
on an expanding revenue base.
For the quarter ended December 31, 1998, McKesson Corporation had net
income before special charges of $59.4 million compared to $42.0 million in
the same quarter a year ago. McKesson's earnings per diluted share before
special charges were 56 cents compared to 43 cents in the quarter ended
December 31 a year ago. Revenues in the quarter increased 24 percent to
$5.8 billion, excluding sales to customers' warehouses of $2.2 billion.
Including special items, McKesson's net income was $42.2 million and
earnings per diluted share were 40 cents. Unless otherwise noted, all
financial results refer to continuing operations before special items.
Gains in Healthcare Supply Management Operating Profit Continue
Operating profit of McKesson's healthcare supply management business
increased 34 percent, to $130.3 million, as operating margins (EBIT) in
both McKesson's U.S. pharmaceutical and U.S. medical-surgical businesses
expanded, yielding an overall increase of 18 basis points. Non-recurring
pre-tax expenses of approximately $3.5 million associated with
implementation of new back-office technologies were also incurred in the
quarter.
U.S. pharmaceutical distribution and services revenues increased by 24
percent, excluding sales to customers' warehouses, driven by strong growth
in the retail chain and institutional sectors. McKesson's U.S.
pharmaceutical supply management revenues now consist of approximately 28
percent independents, 39 percent retail chains and 33 percent institutions.
Revenues for McKesson's medical/surgical supply management business
increased 36 percent in the quarter, to $630 million, including $48 million
in revenues from Red Line Healthcare, acquired in a purchase completed
mid-November 1998.
"Strong fundamentals continue to drive the growth of our healthcare
supply management business," said Mark A. Pulido, McKesson HBOC president
and chief executive officer. "Revenues increased as long-term contracts
with major customers further ramped up. Sales of higher margin automated
products and manufacturer marketing services as well as a continued focus
on leveraging our cost structure drove expansion in supply management
operating margins and operating profit.
"Continuing improvement in asset management and operating efficiencies
is further driving operating margin expansion in our supply management
business. EBITA for McKesson for the quarter was 2.33 percent of revenues,
up 23 basis points, and for the year, 2.31 percent, an increase of 23 basis
points. As
<PAGE>
a result of this operating margin improvement, McKesson's return on committed
capital reached 21.0 percent for the 12 months ended December 31, 1998, compared
to 19.6 for the 12 months ended December 31, 1997."
For the nine months ended December 31, 1998, McKesson had net income of
$163.2 million compared to $119.2 million for the nine months a year ago, an
increase of 37 percent. McKesson's earnings per diluted share were $1.57
compared to $1.23 cents for the first nine months a year ago, an increase of 28
percent. Revenues for the first nine months increased 19 percent to $16.0
billion, excluding sales to customers' warehouses of $4.8 billion.
Information Technology Revenues Grow, Operating Margin Expands
All discussion refers to re-stated results presented in the
accompanying proforma tables, which include the historical financial
results of acquisitions completed in the quarter. Operating profit (EBIT)
of McKessonHBOC's information technology business, formerly HBO & Company
(HBOC), increased 36 percent for the three months ended December 31, 1998,
to $142.0 million before special charges. Operating income as a percentage
of revenue was 30 percent in the quarter, an increase of almost 400 basis
points compared to the same period a year ago.
Revenues increased 19 percent to $469 million for the three months
ended December 31, 1998. The revenue mix was 32 percent software, 13
percent hardware and 55 percent services. "Sales of the Pathways 2000
product line and service revenues each were up strongly in the quarter, and
the information technology business ended the year with a record software
sales backlog of $270 million, up 69 percent from a year ago," said Albert
J. Bergonzi, president, Healthcare Information Technology Business. "The
sales funnel increased to more than $2 billion, also a record, with $340
million in the vendor of choice category, and $475 million in the best few
category."
Vendor of choice was up from $315 million one quarter ago and $234
million on December 31, 1997. Best few was up from $440 million one quarter
ago and $382 million on December 31, 1997.
"Revenue growth for the year is above target, up 25 percent year to
date," said Charles W. McCall, McKessonHBOC chairman. "During the December
quarter we continued to build on our strong base of recurring service and
outsourcing revenues as well as significantly increase our software
backlog. In 1998, the information technology business signed nine new
long-term outsourcing agreements, an increase of 30 percent in our customer
base. During the quarter ended December 31, 1998, we completed three
acquisitions that will enable the information technology business to
further expand our broad offering of products and services for our
customers. Access Health expands our demand management and utilization
management services with its customer base of 2,000 managed care
organizations, provider groups, employers, integrated delivery systems and
government programs serving more than 30 million members. US Servis adds to
our outsourcing capability for large physician practices and hospitals, and
brings a solid base of recurring revenues."
"The acquisition of business partner IMNET will allow a tighter
integration of document management and diagnostic imaging into the Pathways
2000(R) product family," McCall continued. "During the December quarter,
IMNET sales doubled to 24 units from the previous year's quarter,
illustrating the tremendous pull-through opportunities that our large
customer base provides as we bring acquisitions on board. At the same time,
we continued to focus on our overall cost structure, which increased our
operating margin from the same period a year ago and positions the
information technology business for accelerated profit growth in the
future."
McKessonHBOC Proforma Consolidated Results Exceed 35% EPS Growth Target
On January 12, 1999, McKesson Corporation and HBO & Company merged to
form McKesson HBOC, Inc. On a proforma-consolidated basis before special
items, McKessonHBOC had 53 cents earnings per diluted share for the quarter
ended December 31, 1998, an increase of 39 percent from the prior year's
proforma 38 cents earnings per diluted share. Net income before special
items was $150.6 million in the December 31, 1998 quarter compared to
$107.3 million in the same period a year ago, an increase of 40 percent.
Revenues were $6.2 billion, up 22 percent, excluding sales to customers'
warehouses of $2.2 billion.
"The McKessonHBOC proforma results affirm the strength of the combined
company, with earnings
<PAGE>
per share growth for the past three and nine months in excess of our 35 percent
target setting the stage for continued growth," said Pulido. "We anticipate 20+
percent internal revenue growth in both our healthcare supply management and
information technology businesses. Targeted growth is achievable by fully
capitalizing on opportunities to accelerate revenues through cross-selling,
leveraging customer relationships, enhancing existing products and creating new
products for providers, payors and manufacturers. This growth, together with an
increased proportion of higher margin products and services in the mix, our
continued focus on cost efficiencies and forecasted synergies of 16 cents per
share should enable McKessonHBOC to reach its goal of $3.00 earnings per diluted
share in fiscal 2000."
Financial Position
At December 31, 1998, McKessonHBOC's cash and marketable securities
totaled $761 million. Total debt at December 31, 1998, was $2.0 billion,
stockholders' equity was approximately $3.1 billion and the company's net
debt-to-capital ratio was approximately 27 percent.
On a proforma consolidated basis, at December 31, 1998, McKessonHBOC
average diluted shares in the quarter were approximately 290 million.
McKessonHBOC had approximately 277 million shares outstanding following the
January 12 merger of McKesson and HBOC.
"On a proforma basis, McKessonHBOC EBIT for the three months ended
December 31, 1998 increased to 4.32 percent of revenues, up 44 basis points
from the same period a year ago," said Richard H. Hawkins, senior vice
president and chief financial officer. "And proforma return on committed
capital exceeded our target of 35 percent."
Special Charges
For the three months ended December 31, 1998, McKesson recorded a total
of $17.2 million in after-tax charges associated with acquisitions. For the
three months ended December 31, 1998, HBOC recorded a total of $26.5
million in after-tax charges associated with acquisitions.
McKesson HBOC, Inc., a Fortune 100 corporation, is the world's largest
healthcare services company. McKessonHBOC provides pharmaceutical supply
management and information technologies across the entire continuum of
healthcare, including market-leading businesses in pharmaceutical and
medical-surgical distribution, information technology for healthcare
providers, services for payors and outsourcing. More information about
McKessonHBOC is available on the World Wide Web at: http://www.mckhboc.com.
Except for the historical information contained herein, the matters
discussed in this press release may constitute forward-looking statements
that involve risks and uncertainties that could cause actual results to
differ materially from those projected. These statements may be identified
by their use of forward-looking terminology such as "believes," "expects,"
"may," "should," "intends," "plans," "estimates," "anticipates" and similar
words. Risks and uncertainties include the speed of integration of acquired
businesses, impact of continued competitive pressures, success of strategic
initiatives, implementation of new technologies, continued industry
consolidation, changes in customer mix, changes in pharmaceutical
manufacturers' pricing and distribution policy, the changing U.S.
healthcare environment and other factors discussed from time to time in
reports filed by McKesson HBOC, Inc., with the Securities and Exchange
Commission. The company assumes no obligation to update information
contained in this press release.
(FINANCIAL TABLES ATTACHED)
McKesson news releases are available at no charge through McKesson's
NewsOnDemand fax service. To immediately receive an index of available
releases, call 1-800-344-6495 and press 2.
<PAGE>
Index to Financial Schedules
McKesson Corporation
I-1 Condensed Income Information
I-2 Results by Business Segment
I-3 Pro Forma Condensed Income Information (before special items)
I-4 Pro Forma Results by Business Segment (before special items)
McKessonHBOC Pro Forma Combined Results (all periods have been
restated to reflect the combination of McKesson Corporation and HBO &
Company and have been additionally restated to reflect all other 1998
acquisitions completed by McKesson Corporation and HBO & Company in
pooling transactions)
II-1 Pro Forma Results by Business Segment
II-2 Pro Forma Results by Business Segment (before special items)
II-3 Pro Forma Quarterly Results by Business Segment
(before special items)
<PAGE>
Schedule I-1
------------
McKESSON CORPORATION
CONDENSED INCOME INFORMATION
(unaudited)
(in millions except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended December 31
--------------------------------------
%
FY99 FY98 Chg.
-------- -------- ------
<S> <C> <C> <C>
Revenues
Excluding sales to
customers' warehouses $ 5,772.8 $ 4,670.8 23.6
Sales to customers'
warehouses 2,206.0 702.7 213.9
--------- ---------
Total 7,978.8 5,373.5 48.5
Costs and expenses
before special items 7,882.3 5,304.8 48.6
Special items (27.1)(1) --
---------- ---------
Income before taxes
on income 69.4 68.7
Income tax expense (25.7) (25.1)
Dividends on preferred
securities of
subsidiary trust (1.5) (1.6)
---------- -----------
Net income
Before special items 59.4 42.0 41.4
Special items (17.2)(1) --
---------- ----------
Total $ 42.2 $ 42.0
========== ==========
Earnings per common share
Diluted
Before special
items $ 0.56 $ 0.43 30.2
Special items (0.16) --
--------- ---------
Total $ 0.40 $ 0.43
========= =========
Basic
Before special
items $ 0.60 $ 0.45 33.3
Special items (0.17) --
---------- ----------
Total $ 0.43 $ 0.45
========== ==========
Shares on which
earnings per common
share were based
Diluted 109.1 101.8 7.2
Basic 98.6 91.6 7.6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended December 31
-------------------------------------------
%
FY99 FY98 Chg.
------- -------- -------
<S> <C> <C> <C>
Revenues
Excluding sales to
customers'
warehouses $ 15,984.3 $ 13,481.3 18.6
Sales to customers'
warehouses 4,806.9 2,014.8 138.6
---------- ----------
Total 20,791.2 15,496.1 34.2
Costs and expenses
before special items 20,525.1 15,297.9 34.2
Special items (107.2)(1) --
----------- ----------
Income before taxes
on income 158.9 198.2
Income tax expense (60.6) (74.3)
Dividends on preferred
securities of
subsidiary trust (4.6) (4.7)
---------- -----------
Net income
Before special items 163.2 119.2 36.9
Special items (69.5)(1) --
---------- -----------
Total $ 93.7 $ 119.2
========== ==========
Earnings per
common share
Diluted
Before special
items $ 1.57 $ 1.23 27.6
Special items (0.65) --
---------- ----------
Total $ 0.92 $ 1.23
========== ==========
Basic
Before special
items $ 1.69 $ 1.30 30.0
Special items (0.72) --
---------- ----------
Total $ 0.97 $ 1.30
========== ==========
Shares on which
earnings per common
share were based
Diluted 107.1 101.1 5.9
Basic 96.6 91.3 5.8
</TABLE>
(1) During the quarter ended December 31, 1998, the Company completed
the acquisition of Red Line HealthCare Corporation and Keystone
Bottling Company. During the nine months, the Company acquired
several companies including Hawk Medical Supply, Inc., Baker/APS,
Med Management LLC, J. Knipper and Company, water processing
businesses, and also completed the consolidation of distribution
centers, technologies and back office operations related to the
earlier acquisition of the FoxMeyer distribution business. The
special items charge reflects transactions costs, acquired
company employee benefit change of control provisions, asset
write-downs and restructuring, integration and system
installation costs associated with the acquisitions.
<PAGE>
Schedule I-2
------------
McKESSON CORPORATION
RESULTS BY BUSINESS SEGMENT
(unaudited)
(in millions)
<TABLE>
<CAPTION>
Quarter Ended December 31
---------------------------------------
FY99 FY98 % Chg.
------- ------ ------
<S> <C> <C> <C>
REVENUES
Health Care Supply
Management
Pharmaceutical
Distribution &
Services(1)
U.S. Health Care $ 4,572.5 $ 3,702.1 23.5
International 489.1 439.5 11.3
---------- ----------
Total Pharmaceutical
Distribution &
Services 5,061.6 4,141.6 22.2
Medical/Surgical
Distribution
& Services 630.2 461.7 36.5
---------- ---------
Total Health Care
Supply Management 5,691.8 4,603.3 23.6
Water Products 79.1 64.8 22.1
Corporate 1.9 2.7
---------- ----------
Total $ 5,772.8 $ 4,670.8 23.6
========== ==========
OPERATING PROFIT
Health Care Supply
Management
Before special items $ 130.3 $ 97.0 34.3
Special items (26.5)(2) --
----------- ----------
Total Health
Care Supply
Management 103.8 97.0
----------- -----------
Water Products
Before special items 11.3 10.0 13.0
Special items (0.6)(3) --
----------- ----------
Total Water Products 10.7 10.0
----------- ----------
Total Operating Profit 114.5 107.0
Interest -- net (31.7) (25.0)
Corporate and other (13.4) (13.3)
----------- ----------
Income before income taxes
Before special items 96.5 68.7 40.5
Special items (27.1) --
----------- -----------
Income before
income taxes $ 69.4 $ 68.7
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended December 31
--------------------------------------
FY99 FY98 % Chg.
------ ------ -------
<S> <C> <C> <C>
REVENUES
Health Care Supply
Management
Pharmaceutical
Distribution
& Services (1)
U.S. Health
Care $ 12,612.0 $ 10,683.0 18.1
International 1,483.7 1,204.2 23.2
---------- ----------
Total Pharmaceutical
Distribution &
Services 14,095.7 11,887.2 18.6
Medical/Surgical
Distribution
& Services 1,625.2 1,366.9 18.9
---------- ----------
Total Health Care
Supply Management 15,720.9 13,254.1 18.6
Water Products 256.0 217.5 17.7
Corporate 7.4 9.7
---------- ----------
Total $ 15,984.3 $ 13,481.3 18.6
========== ==========
OPERATING PROFIT
Health Care Supply
Management
Before special items $ 346.5 $ 264.4 31.1
Special items (105.1)(2) --
----------- ----------
Total Health
Care Supply
Management 241.4 264.4
----------- ----------
Water Products
Before special items 42.8 37.8 13.2
Special items (2.1)(3) --
----------- ----------
Total Water Products 40.7 37.8
----------- ----------
Total Operating Profit 282.1 302.2
Interest -- net (86.4) (70.3)
Corporate and other (36.8) (33.7)
----------- -----------
Income before income taxes
Before special items 266.1 198.2 34.3
Special items (107.2) --
----------- -----------
Income before
income taxes $ 158.9 $ 198.2
=========== ===========
</TABLE>
(1) Excluding sales to customers' warehouses of $2,206.0 million and
$702.7 million in the quarters ended December 31, 1998 and 1997,
respectively ($4,806.9 million and $2,014.8 million in the nine
months, respectively).
(2) During the quarter ended December 31, 1998, the Company completed
the acquisition of Red Line HealthCare Corporation. During the
nine months, the Company acquired several companies including
Hawk Medical Supply, Inc., Baker/APS, Med Management LLC, and J.
Knipper and Company, and also completed the consolidation of
distribution centers, technologies and back office operations
related to the earlier acquisition of the FoxMeyer distribution
business. The special items charge reflects transactions costs,
acquired company employee benefit change of control provisions,
asset write-downs and restructuring, integration and system
installation costs associated with the acquisitions.
(3) Reflects charges for transaction costs and restructuring and
integration costs associated with the acquisition of water
processing businesses.
<PAGE>
Schedule I-3
------------
McKESSON CORPORATION
PRO FORMA CONDENSED INCOME INFORMATION
Income Before Special Items
(unaudited)
(in millions except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended December 31
----------------------------------------
%
FY99 FY98 Chg.
--------- --------- -------
<S> <C> <C> <C>
Revenues
Excluding sales to
customers' warehouses $ 5,772.8 $ 4,670.8 23.6
Sales to customers'
warehouses 2,206.0 702.7 213.9
--------- ---------
Total 7,978.8 5,373.5 48.5
Costs and expenses 7,882.3 5,304.8 48.6
--------- ---------
Income before
income taxes 96.5 68.7 40.5
Income taxes (35.6) (25.1)
Dividends on
preferred
securities of
subsidiary trust (1.5) (1.6)
--------- ---------
Income before special
items $ 59.4 $ 42.0 41.4
========= =========
Earnings per
common share
Diluted $ 0.56 $ 0.43 30.2
Basic 0.60 0.45 33.3
Shares on which
earnings per common
share were based
Diluted 109.1 101.8 7.2
Basic 98.6 91.6 7.6
Nine Months Ended December 31
-----------------------------------------
%
FY99 FY98 Chg.
---------- ---------- -------
Revenues
Excluding sales to
customers' warehouses $ 15,984.3 $ 13,481.3 18.6
Sales to customers'
warehouses 4,806.9 2,014.8 138.6
---------- ----------
Total 20,791.2 15,496.1 34.2
Costs and expenses 20,525.1 15,297.9 34.2
---------- ----------
Income before
income taxes 266.1 198.2 34.3
Income taxes (98.3) (74.3)
Dividends on
preferred
securities of
subsidiary trust (4.6) (4.7)
---------- ----------
Income before special
items $ 163.2 $ 119.2 36.9
========== ==========
Earnings per
common share
Diluted $ 1.57 $ 1.23 27.6
Basic 1.69 1.30 30.0
Shares on which
earnings per common
share were based
Diluted 107.1 101.1 5.9
Basic 96.6 91.3 5.8
</TABLE>
<PAGE>
Schedule I-4
------------
McKESSON CORPORATION
PRO FORMA RESULTS BY BUSINESS SEGMENT
Income Before Special Items
(unaudited)
(in millions)
<TABLE>
<CAPTION>
Quarter Ended December 31
------------------------------------------
%
FY99 FY98 Chg.
--------- --------- -------
<S> <C> <C> <C>
REVENUES
Health Care Supply
Management
Pharmaceutical
Distribution
& Services(1)
U.S. Health Care $ 4,572.5 $ 3,702.1 23.5
International 489.1 439.5 11.3
Total Pharmaceutical--------- ---------
Distribution
& Services 5,061.6 4,141.6 22.2
Medical/Surgical
Distribution &
Services 630.2 461.7 36.5
--------- ---------
Total Health
Care Supply
Management 5,691.8 4,603.3 23.6
Water Products 79.1 64.8 22.1
Corporate 1.9 2.7
--------- ---------
Total $ 5,772.8 $ 4,670.8 23.6
========= =========
OPERATING PROFIT
Health Care
Supply Management $ 130.3 $ 97.0 34.3
Water Products 11.3 10.0 13.0
--------- ---------
Total 141.6 107.0 32.3
Interest -- net (31.7) (25.0)
Corporate and other (13.4) (13.3)
--------- ---------
Income before
income taxes 96.5 68.7 40.5
Income taxes (35.6) (25.1)
Dividends on preferred
securities of
subsidiary trust (1.5) (1.6)
--------- ---------
Income before special
items $ 59.4 $ 42.0 41.4
========= =========
STATISTICS ($ in millions)
Operating Profit as a
% of Revenues(1)
Health Care
Supply Management 2.29% 2.11% 18 bp
Water 14.29% 15.43% (114)
Earnings before interest
and income taxes $ 128.2 $ 93.7 36.8%
as a % of
revenues(1) 2.22% 2.01% 21 bp
Earnings before
interest, amortization
and income taxes $ 134.3 $ 98.1 36.9%
as a % of
revenues(1) 2.33% 2.10% 23 bp
Earnings before
interest, amortization,
depreciation and
income taxes $ 153.4 $ 116.0 32.2%
as a % of
revenues(1) 2.66% 2.48% 18 bp
Diluted earnings
per share $ 0.56 $ 0.43 30.2%
Return on committed
capital --
12 months ended 21.0% 19.6% 140 bp
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended December 31
-----------------------------------------
%
FY99 FY98 Chg.
---------- ----------- -------
<S> <C> <C> <C>
REVENUES
Health Care Supply
Management
Pharmaceutical
Distribution
& Services(1)
U.S. Health Care $ 12,612.0 $ 10,683.0 18.1
International 1,483.7 1,204.2 23.2
---------- ----------
Total Pharmaceutical
Distribution
& Services 14,095.7 11,887.2 18.6
Medical/Surgical
Distribution &
Services 1,625.2 1,366.9 18.9
---------- ----------
Total Health
Care Supply
Management 15,720.9 13,254.1 18.6
Water Products 256.0 217.5 17.7
Corporate 7.4 9.7
---------- ----------
Total $ 15,984.3 $ 13,481.3 18.6
========== ==========
OPERATING PROFIT
Health Care Supply
Management $ 346.5 $ 264.4 31.1
Water Products 42.8 37.8 13.2
---------- ----------
Total 389.3 302.2 28.8
Interest -- net (86.4) (70.3)
Corporate and other (36.8) (33.7)
---------- ----------
Income before
income taxes 266.1 198.2 34.3
Income taxes (98.3) (74.3)
Dividends on
preferred securities
of subsidiary trust (4.6) (4.7)
---------- ----------
Income before special
items $ 163.2 $ 119.2 36.9
========== ==========
STATISTICS ($ in millions)
Operating Profit as a %
of Revenues(1)
Health Care
Supply Management 2.20% 1.99% 21 bp
Water 16.72% 17.38% (66)
Earnings before interest
and income taxes $ 352.5 $ 268.5 31.3%
as a % of
revenues(1) 2.21% 1.99% 22 bp
Earnings before
interest,
amortization and
income taxes $ 368.8 $ 280.3 31.6%
as a % of
revenues(1) 2.31% 2.08% 23 bp
Earnings before
interest,
amortization,
depreciation and
income taxes $ 425.1 $ 332.6 27.8%
as a % of
revenues(1) 2.66% 2.47% 19 bp
Diluted earnings
per share $ 1.57 $ 1.23 27.6%
Return on committed
capital --
12 months ended 21.0% 19.6% 140 bp
</TABLE>
(1) Excluding sales to customers' warehouses of $2,206.0 million and
$702.7 million in the quarters ended December 31, 1998 and 1997,
respectively ($4,806.9 million and $2,014.8 million in the nine
months, respectively).
<PAGE>
Schedule II-1
-------------
McKESSON HBOC
PRO FORMA RESULTS BY BUSINESS SEGMENT
(unaudited)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended December 31
-------------------------------------
%
1998 1997 Chg.
------ ------ ------
<S> <C> <C> <C>
REVENUES
Health Care Supply Management
Pharmaceutical Distribution
& Services(1)
U.S. Health Care $ 4,572.5 $ 3,712.2 23.2
International 489.1 439.5 11.3
----------- ---------
Total Pharmaceutical
Distribution
& Services 5,061.6 4,151.7 21.9
Medical/Surgical
Distribution
& Services 630.2 481.2 31.0
----------- ---------
Total Health Care
Supply Management 5,691.8 4,632.9 22.9
----------- ---------
Health Care Information
Technology 468.8 394.0 19.0
Water Products 79.1 72.1 9.7
Corporate 8.9 9.9
----------- ---------
Total $ 6,248.6 $ 5,108.9 22.3
=========== =========
OPERATING PROFIT
Health Care Supply
Management
Before special items $ 130.3 $ 96.2 35.4
Special items (26.5) --
----------- ---------
Total Health Care
Supply Management 103.8 96.2
----------- ---------
Health Care Information
Technology
Before special items 142.0 104.3 36.1
Special items (37.8) (50.3)
----------- ---------
Total Health Care
Information
Technology 104.2 54.0
---------- ----------
Water Products
Before special items 11.3 10.8 4.6
Special items (0.6) --
---------- ----------
Total Water Products 10.7 10.8
---------- ----------
Total Operating Profit 218.7 161.0 35.8
Interest - net (24.8) (19.9)
Corporate and other (13.4) (13.3)
----------- ----------
Income before income taxes 180.5 127.8 41.2
Income taxes (72.1) (49.0)
Dividends on preferred
securities of
subsidiary trust (1.5) (1.6)
------------ ----------
Net income $ 106.9 $ 77.2 38.5
============ ==========
Earnings per common share
Diluted $ 0.37 $ 0.28 32.1
Basic 0.39 0.29 34.5
Shares on which earnings
per common
share were based
Diluted 289.7 284.2 1.9
Basic 275.2 267.3 3.0
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended December 31
----------------------------------
%
1998 1997 Chg.
------ ------ ------
<S> <C> <C> <C>
REVENUES
Health Care Supply Management
Pharmaceutical Distribution
& Services(1)
U.S. Health Care $ 12,624.1 $ 10,714.6 17.8
International 1,483.7 1,204.2 23.2
----------- -----------
Total Pharmaceutical
Distribution
& Services 14,107.8 11,918.8 18.4
Medical/Surgical
Distribution &
Services 1,640.8 1,386.6 18.3
----------- ----------
Total Health Care
Supply Management 15,748.6 13,305.4 18.4
Health Care Information
Technology 1,352.0 1,084.2 24.7
Water Products 267.2 240.9 10.9
Corporate 29.0 28.3
----------- -----------
Total $ 17,396.8 $ 14,658.8 18.7
=========== ===========
OPERATING PROFIT
Health Care Supply
Management
Before special items $ 346.9 $ 264.9 31.0
Special items (105.1) --
------------ -----------
Total Health Care
Supply Management 241.8 264.9
------------ -----------
Health Care Information
Technology
Before special items 393.2 268.4 46.5
Special items (51.3) (98.5)
------------ ------------
Total Health Care
Information Technology 341.9 169.9
------------ -----------
Water Products
Before special items 44.6 40.6 9.9
Special items (2.1) --
----------- -----------
Total Water Products 42.5 40.6
----------- -----------
Total Operating Profit 626.2 475.4 31.7
Interest - net (67.9) (57.3)
Corporate and other (36.8) (33.7)
----------- ------------
Income before income taxes 521.5 384.4 35.7
Income taxes (208.6) (146.1)
Dividends on preferred
securities of
subsidiary trust (4.6) (4.7)
------------ ----------
Net income $ 308.3 $ 233.6 32.0
============ ==========
Earnings per common share
Diluted $ 1.08 $ 0.85 27.1
Basic 1.12 0.88 27.3
Shares on which earnings
per common share
were based
Diluted 289.3 281.1 2.9
Basic 274.1 265.0 3.4
</TABLE>
(1) Excluding sales to customers' warehouses of $2,206.0 million and
$702.7 million in the quarters ended December 31, 1998 and 1997,
respectively ($4,806.9 million and $2,014.8 million in the nine
months, respectively).
All periods have been restated to reflect the combination of McKesson
Corporation and HBO & Company and have been additionally restated to
reflect all other 1998 acquisitions completed by McKesson Corporation
and HBO & Company in pooling transactions.
<PAGE>
Schedule II-2
-------------
McKESSON HBOC
PRO FORMA RESULTS BY BUSINESS SEGMENT
Income Before Special Items
(unaudited)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended December 31
------------------------------
%
1998 1997 Chg.
---------- ---------- -----
<S> <C> <C> <C>
REVENUES
Health Care Supply Management
Pharmaceutical Distribution &
Services (1)
U.S. Health Care $ 4,572.5 $ 3,712.2 23.2
International 489.1 439.5 11.3
---------- ----------
Total Pharmaceutical
Distribution & Services 5,061.6 4,151.7 21.9
Medical/Surgical Distribution &
Services 630.2 481.2 31.0
---------- ----------
Total Health Care Supply
Management 5,691.8 4,632.9 22.9
Health Care Information Technology 468.8 394.0 19.0
Water Products 79.1 72.1 9.7
Corporate 8.9 9.9
---------- ----------
Total $ 6,248.6 $ 5,108.9 22.3
========== ==========
OPERATING PROFIT
Health Care Supply Management $ 130.3 $ 96.2 35.4
Health Care Information Technology 142.0 104.3 36.1
Water Products 11.3 10.8 4.6
---------- ----------
Total 283.6 211.3 34.2
Interest - net (24.8) (19.9)
Corporate and other (13.4) (13.3)
---------- ----------
Income before income taxes 245.4 178.1 37.8
Income taxes (93.3) (69.2)
Dividends on preferred securities of
subsidiary trust (1.5) (1.6)
---------- ----------
Income before special items $ 150.6 $ 107.3 40.4
========== ==========
Earnings per common share
Diluted $ 0.53 $ 0.38 39.5
Basic 0.55 0.40 37.5
Shares on which earnings per common
share were based
Diluted 289.7 284.2 1.9
Basic 275.2 267.3 3.0
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended December 31
------------------------------
%
1998 1997 Chg.
---------- ---------- -----
<S> <C> <C> <C>
REVENUES
Health Care Supply Management
Pharmaceutical Distribution &
Services (1)
U.S. Health Care $12,624.1 $10,714.6 17.8
International 1,483.7 1,204.2 23.2
---------- ----------
Total Pharmaceutical
Distribution & Services 14,107.8 11,918.8 18.4
Medical/Surgical Distribution &
Services 1,640.8 1,386.6 18.3
---------- ----------
Total Health Care Supply
Management 15,748.6 13,305.4 18.4
Health Care Information Technology 1,352.0 1,084.2 24.7
Water Products 267.2 240.9 10.9
Corporate 29.0 28.3
---------- ----------
Total $17,396.8 $14,658.8 18.7
========== ==========
OPERATING PROFIT
Health Care Supply Management $ 346.9 $ 264.9 31.0
Health Care Information Technology 393.2 268.4 46.5
Water Products 44.6 40.6 9.9
---------- ----------
Total 784.7 573.9 36.7
Interest - net (67.9) (57.3)
Corporate and other (36.8) (33.7)
---------- ----------
Income before income taxes 680.0 482.9 40.8
Income taxes (263.1) (188.0)
Dividends on preferred securities of
subsidiary trust (4.6) (4.7)
---------- ----------
Income before special items $ 412.3 $ 290.2 42.1
========== ==========
Earnings per common share
Diluted $ 1.44 $ 1.05 37.1
Basic 1.50 1.10 36.4
Shares on which earnings per common
share were based
Diluted 289.3 281.1 2.9
Basic 274.1 265.0 3.4
</TABLE>
(1) Excluding sales to customers' warehouses of $2,206.0 million and
$702.7 million in the quarters ended December 31, 1998 and 1997,
respectively ($4,806.9 million and $2,014.8 million in the nine
months, respectively).
All periods have been restated to reflect the combination of McKesson
Corporation and HBO & Company and have been additionally restated to
reflect all other 1998 acquisitions completed by McKesson Corporation
and HBO & Company in pooling transactions.
<PAGE>
Schedule II-3
-------------
McKESSON HBOC
PRO FORMA QUARTERLY RESULTS BY BUSINESS SEGMENT
Income Before Special Items
(unaudited)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Fiscal 1998
---------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
REVENUES
Health Care Supply
Management
Pharmaceutical
Distribution &
Services
U.S. Health
Care(1) $ 3,450.7 $ 3,551.7 $ 3,712.2 $ 3,704.2 $14,418.8
International 377.8 386.9 439.5 435.0 1,639.2
--------- --------- --------- --------- ---------
Total 3,828.5 3,938.6 4,151.7 4,139.2 16,058.0
Medical/Surgical
Distribution
& Services 446.9 458.5 481.2 491.9 1,878.5
--------- --------- --------- --------- ---------
Total Health
Care Supply
Management 4,275.4 4,397.1 4,632.9 4,631.1 17,936.5
Health Care
Information
Technology 339.4 350.8 394.0 393.1 1,477.3
Water Products 79.9 88.9 72.1 72.7 313.6
Corporate 9.9 8.5 9.9 8.1 36.4
--------- --------- --------- --------- ---------
Total $ 4,704.6 $ 4,845.3 $ 5,108.9 $ 5,105.0 $19,763.8
========= ========= ========= ========= =========
OPERATING PROFIT
Health Care
Supply
Management $ 83.9 $ 84.8 $ 96.2 $ 118.5 $ 383.4
as a % of
revenues (1) 1.96% 1.93% 2.08% 2.56% 2.14%
Health Care
Information
Technology 82.0 82.1 104.3 102.9 371.3
as a % of
revenues 24.16% 23.40% 26.47% 26.18% 25.13%
Water Products 11.9 17.9 10.8 12.1 52.7
as a % of
revenues 14.89% 20.13% 14.98% 16.64% 16.80%
--------- --------- --------- -------- --------
Total 177.8 184.8 211.3 233.5 807.4
Interest - net (18.5) (18.9) (19.9) (20.8) (78.1)
Corporate and
other (8.9) (11.5) (13.3) (14.0) (47.7)
---------- --------- --------- --------- ---------
Income before
income taxes 150.4 154.4 178.1 198.7 681.6
Income taxes (58.5) (60.3) (69.2) (77.5) (265.5)
Dividends on
preferred
securities of
subsidiary
trust (1.6) (1.5) (1.6) (1.5) (6.2)
---------- --------- --------- --------- ----------
Income before
special items $ 90.3 $ 92.6 $ 107.3 $ 119.7 $ 409.9
========== ========= ========= ========= =========
Earnings per
common share
Diluted $ 0.33 $ 0.34 $ 0.38 $ 0.43 $ 1.48
Basic 0.35 0.35 0.40 0.44 1.54
Shares on which
earnings per
common share
were based
Diluted 277.9 281.2 284.2 284.9 282.1
Basic 262.8 265.0 267.3 269.6 266.2
(1) Excluding
sales to
customers'
warehouses
of: $ 632.8 $ 679.3 $ 702.7 $ 689.1 $ 2,703.9
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1999
-------------------------------
First Second Third
Quarter Quarter Quarter
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Health Care Supply
Management
Pharmaceutical
Distribution &
Services
U.S. Health
Care(1) $ 3,881.9 $ 4,169.7 $ 4,572.5
International 518.9 475.7 489.1
--------- --------- ---------
Total 4,400.8 4,645.4 5,061.6
Medical/Surgical
Distribution
& Services 491.2 519.4 630.2
---------- --------- ---------
Total Health
Care Supply
Management 4,892.0 5,164.8 5,691.8
Health Care
Information
Technology 431.4 451.8 468.8
Water Products 83.0 105.1 79.1
Corporate 10.9 9.2 8.9
--------- --------- ---------
Total $ 5,417.3 $ 5,730.9 $ 6,248.6
========= ========= =========
OPERATING PROFIT
Health Care
Supply
Management $ 108.3 $ 108.3 130.3
as a % of
revenues(1) 2.21% 2.10% 2.29%
Health Care
Information
Technology 123.0 128.2 42.0
as a % of
revenues 28.51% 28.38% 30.29%
Water Products 12.6 20.7 11.3
as a % of
revenues 15.18% 19.70% 14.29%
--------- --------- --------
Total 243.9 257.2 283.6
Interest - net (22.1) (21.0) (24.8)
Corporate and
other (12.7) (10.7) (13.4)
--------- --------- ---------
Income before
income taxes 209.1 225.5 245.4
Income taxes (81.1) (88.7) (93.3)
Dividends on
preferred
securities of
subsidiary
trust (1.6) (1.5) (1.5)
--------- --------- ---------
Income before special items $ 126.4 $ 135.3 $ 150.6
========= ========= =========
Earnings per
common share
Diluted $ 0.44 $ 0.47 $ 0.53
Basic 0.46 0.49 0.55
Shares on which
earnings per
common share
were based
Diluted 288.4 289.9 289.7
Basic 272.4 274.6 275.2
(1) Excluding
sales to
customers'
warehouses
of: $ 927.9 $ 1,673.0 $ 2,206.0
</TABLE>
All periods have been restated to reflect the combination of McKesson
Corporation and HBO & Company and have been additionally restated to
reflect all other 1998 acquisitions completed by McKesson Corporation
and HBO & Company in pooling transactions.
<PAGE>
EXHIBIT 99.2
------------
HBO & COMPANY
SELECTED FINANCIAL INFORMATION
(unaudited)
(in thousands)
Quarter Ended
December 31, 1998
-----------------
Revenue $ 468,835
Net Income (1) 64,739
(1) Includes nonrecurring charges of $26.5 million after-tax.
