<PAGE>
File No. 001-13252
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the plan year ended March 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____ to ____
A. Full title of the plan and address of the plan, if different
from that of the issuer named below:
McKesson HBOC, Inc. Profit-Sharing
Investment Plan
B. Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office:
McKesson HBOC, Inc.
McKesson Plaza
One Post Street
San Francisco, CA 94104
(415) 983-8300
<PAGE>
McKESSON HBOC, INC.
PROFIT-SHARING INVESTMENT PLAN
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS, SUPPLEMENTAL SCHEDULES AND EXHIBIT
TABLE OF CONTENTS
------------------------------------------------------------------------------
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS
ENDED MARCH 31, 2000 AND 1999:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-12
SUPPLEMENTAL SCHEDULES AS OF AND FOR THE YEAR
ENDED MARCH 31, 2000:
Schedule of Assets Held for Investment Purposes 13
Schedule of Reportable Transactions 14
EXHIBIT:
23.1 Independent Auditors' Consent
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
McKesson HBOC, Inc. Profit-Sharing Investment Plan:
We have audited the accompanying statements of net assets available for benefits
of the McKesson HBOC, Inc. Profit-Sharing Investment Plan (the "Plan"), as of
March 31, 2000 and 1999, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of March 31, 2000
and 1999, and the changes in net assets available for benefits for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
Table of Contents are presented for the purpose of additional analysis and not
a required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These schedules are the responsibility of the Plan's management. Such
schedules have been subjected to the auditing procedures applied in our audit of
the basic 2000 financial statements and, in our opinion, are fairly stated in
all material respects when considered in relation to the basic financial
statements taken as a whole.
/s/ Deloitte & Touche LLP
San Francisco, California
September 18, 2000
-1-
<PAGE>
McKESSON HBOC, INC.
PROFIT-SHARING INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
MARCH 31, 2000 AND 1999 (in 000's)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
2000
-----------------------------------------------------------------------------------------------------------------
Participant Non-Participant
Directed Directed Profit-
---------------------- ----------------------
Plan's Sharing
HBOC Share of Company Company Investment
Fund Master Stock Investment Plan
Group Trust Fund Fund Total
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 22,681 $ 979 $ 1 $ 23,661
Investments at fair market value:
Institutional commingled funds 294,514 157,281 451,795
Registered investment funds $186,417 186,417
McKesson HBOC, Inc. common stock:
Allocated stock 32,553 230,732 263,285
Unallocated stock 152,030 152,030
Participant loans 3,430 12,264 15,694
Money market 11,230 11,230
Investments at contract value:
Guaranteed investment contracts 2,801 70,713 73,514
-------- -------- --------- --------- ----------
Total investments 236,431 377,491 382,762 157,281 1,153,965
-------- -------- --------- --------- ----------
Receivables:
Contributions 2,855 1,081 3,936
Dividends 1,099 1,099
Interest 452 5 457
Interfund balances 995 (469) (526) -
Loan repayment receivable 130 130
Receivable from affiliated profit-sharing plans
-------- -------- --------- --------- ----------
Total receivables 2,855 2,658 635 (526) 5,622
-------- -------- --------- --------- ----------
Total assets 239,286 402,830 384,376 156,756 1,183,248
-------- -------- --------- --------- ----------
LIABILITIES:
Drafts payable 902 902
Asset management fees payable 276 276
Line of credit 8,000 8,000
ESOP promissory notes payable 91,923 91,923
Dividends payable 420 420
Accrued interest expense 3,084 3,084
Payable to affiliated profit-sharing plans 21 21
-------- -------- --------- --------- ----------
Total liabilities - 1,199 103,427 - 104,626
-------- -------- --------- --------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $239,286 $401,631 $280,949 $ 156,756 $1,078,622
======== ======== ========= ========= ==========
<CAPTION>
---------------------------------------------------------------------------------------------------------
1999
----------------------------------------------------
Participant Non-Participant
Directed Directed Profit-
--------------- -----------------------
Plan's Sharing
Share of Company Company Investment
Master Stock Investment Plan
Trust Fund Fund Total
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 10,013 $ 8,845 $ 6 $ 18,864
Investments at fair market value:
Institutional commingled funds 245,921 152,743 398,664
Registered investment funds
McKesson HBOC, Inc. common stock:
Allocated stock 822,297 822,297
Unallocated stock 455,145 455,145
Participant loans 13,216 13,216
Money market
Investments at contract value:
Guaranteed investment contracts 91,243 91,243
-------- ---------- --------- ----------
Total investments 350,380 1,277,442 152,743 1,780,565
-------- ---------- --------- ----------
Receivables:
Contributions 1,181 1,181
Dividends 1,164 1,164
Interest 477 477
Interfund balances 488 (688) 200
Loan repayment receivable 161 161
Receivable from affiliated profit-sharing plans 90 90
-------- ---------- --------- ----------
Total receivables 2,397 476 200 3,073
-------- ---------- --------- ----------
Total assets 362,790 1,286,763 152,949 1,802,502
-------- ---------- --------- ----------
LIABILITIES:
Drafts payable
Asset management fees payable 903 903
Line of credit 13,500 13,500
ESOP promissory notes payable 102,016 102,016
Dividends payable 943 943
Accrued interest expense 3,439 3,439
Payable to affiliated profit-sharing plans
-------- ---------- --------- ----------
Total liabilities 903 119,898 - 120,801
-------- ---------- --------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $361,887 $1,166,865 $ 152,949 $1,681,701
======== ========== ========= ==========
</TABLE>
See notes to financial Statements.
-2-
<PAGE>
McKESSON HBOC, INC.
PROFIT-SHARING INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED MARCH 31, 2000 AND 1999 (in 000's)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
2000
-------------------------------------------------------------------------
Participant Non-Participant
Directed Directed Profit-
------------------------------ ----------------------------
Plan's Sharing
HBOC Share of Company Company Investment
Fund Master Stock Investment Plan
Group Trust Fund Fund Total
<S> <C> <C> <C> <C> <C>
ADDITIONS:
Investment Income:
Net appreciation (depreciation) in fair value
of investments $ (40,209) $ 27,510 $ (864,368) $ 21,108 $ (855,959)
Dividends and interest 13,885 9,345 4,644 27,874
--------- --------- ---------- --------- ----------
Total investment income (26,324) 36,855 (859,724) 21,108 (828,085)
Contributions:
Participants 29,497 34,919 49 64,465
Employer 10,552 6,226 16,778
--------- --------- ---------- --------- ----------
Total additions 13,725 71,774 (853,449) 21,108 (746,842)
--------- --------- ---------- --------- ----------
DEDUCTIONS:
Benefits paid to participants 27,674 56,056 26,607 16,361 126,698
Interest expense 7,850 7,850
Administrative fees 72 1,792 109 1,973
--------- --------- ---------- --------- ----------
Total deductions 27,746 57,848 34,566 16,361 136,521
--------- --------- ---------- --------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS AVAILABLE FOR BENEFITS
BEFORE INTERFUND TRANSFERS (14,021) 13,926 (888,015) 4,747 (883,363)
INTERFUND TRANSFERS - (1,159) 2,099 (940) -
MERGER OF NET ASSETS AVAILABLE
FOR BENEFITS:
HBO & Company Profit Sharing and Savings Plan 253,307 253,307
RedLine HealthCare Corporation Investment
Savings Plan 26,919 26,919
CookCo, Inc. 401(k) Plan 58 58
General Medical Corporation Retirement
Security Plan
--------- --------- ---------- --------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS AVAILABLE FOR BENEFITS 239,286 39,744 (885,916) 3,807 (603,079)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning - 361,887 1,166,865 152,949 1,681,701
--------- --------- ---------- --------- ----------
Ending $ 239,286 $ 401,631 $ 280,949 $ 156,756 $1,078,622
========= ========= ========== ========= ==========
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
1999
-------------------------------------------------------------
Participant Non-Participant
Directed Directed Profit-
----------------- ----------------------------
Plan's Sharing
Share of Company Company Investment
Master Stock Investment Plan
Trust Fund Fund Total
<S> <C> <C> <C> <C>
ADDITIONS:
Investment Income:
Net appreciation (depreciation) in fair value
of investments $ 14,089 $ 148,653 $ 21,558 $ 184,300
Dividends and interest 8,191 9,072 1,289 18,552
------------- ----------- ---------- ----------
Total investment income 22,280 157,725 22,847 202,852
Contributions:
Participants 28,325 1,845 30,170
Employer 1,983 1,983
------------- ----------- ---------- ----------
Total additions 50,605 161,553 22,847 235,005
------------- ----------- ---------- ----------
DEDUCTIONS:
Benefits paid to participants 36,433 61,002 17,709 115,144
Interest expense 8,520 8,520
Administrative fees 408 1,190 278 1,876
------------- ----------- ---------- ----------
Total deductions 36,841 70,712 17,987 125,540
------------- ----------- ---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS AVAILABLE FOR BENEFITS
BEFORE INTERFUND TRANSFERS 13,764 90,841 4,860 109,465
INTERFUND TRANSFERS 20,357 93,884 (114,241) -
MERGER OF NET ASSETS AVAILABLE
FOR BENEFITS:
HBO & Company Profit Sharing and Savings Plan
RedLine HealthCare Corporation Investment
Savings Plan
CookCo, Inc. 401(k) Plan
General Medical Corporation Retirement
Security Plan 75,436 75,436
------------- ----------- ---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS AVAILABLE FOR BENEFITS 109,557 184,725 (109,381) 184,901
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning 252,330 982,140 262,330 1,496,800
------------- ----------- ---------- ----------
Ending $ 361,887 $ 1,166,865 $ 152,949 $1,681,701
============= =========== ========== ==========
</TABLE>
See notes to financial statements.
-3-
<PAGE>
McKESSON HBOC, INC.
PROFIT-SHARING INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2000 AND 1999
--------------------------------------------------------------------------------
1. PLAN DESCRIPTION
The following brief description of the McKesson HBOC, Inc. Profit-
Sharing Investment Plan (the "PSIP" or the "Plan"), formerly the
McKesson Corporation Profit-Sharing Investment Plan, is provided for
general information purposes only. Participants should refer to the Plan
document for more complete information. The PSIP is a defined
contribution plan covering all persons who have three months of service
and are regular or part-time employees, or are casual employees working
1,000 hours in a year, of McKesson HBOC, Inc. (the "Company" or
"McKesson HBOC") or a participating subsidiary, except those covered by
a collectively bargained pension plan. Certain administrative costs
incurred by the PSIP are paid by the Company. The Plan is comprised of
the following components:
A. Profit-Sharing Investment Plan
Merger of HBO & Company Profit Sharing and Savings Plan - During fiscal
year 1999, McKesson Corporation completed the acquisition of HBO &
Company, Inc. ("HBOC") to form McKesson HBOC, Inc. Effective April 1,
1999, the net assets available for benefits of the HBO & Company Profit
Sharing and Savings Plan (the "HBOC Plan") (totalling $253,307,000) were
merged into the PSIP. HBOC employees retained their existing investment
options and a matching percentage different from other McKesson HBOC
employees, and these employees' investments are included in the HBOC
Fund.
Transfers from Other Qualified Plans - Effective November 1, 1999, and
March 1, 2000, the assets available for benefits of the CookCo, Inc.
401(k) Plan (totalling $58,000) and the RedLine HealthCare Corporation
Investment Savings Plan (totalling $26,919,000), respectively, were
merged into the Plan. Effective January 4, 1999, net assets available
for benefits of the General Medical Corporation Retirement Security Plan
(totalling $75,436,000) were merged into the Plan.
Contributions - Participants may elect to make basic contributions
ranging from 1%-6% of compensation. Participants who make basic
contributions of 6% may elect to make supplemental contributions of up
to an additional 10% of compensation. A participant's pretax
contributions were limited to $10,500 and $10,000 per year for calendar
years 2000 and 1999, respectively, and total contributions are limited
to the lesser of $30,000 or 25% of taxable compensation per fiscal year.
Additional limits may apply to individuals classified as highly
compensated employees.
Effective the last day of each month throughout the fiscal year,
participants are credited with matching Company contributions based on a
percentage of their basic contributions. An additional annual matching
contribution may be granted at the discretion of the Company. For the
fiscal year 2000, the matching percentage was 50% of contributed amounts
up to the first 6% of contributions for all eligible employees of the
McKesson HBOC divisions and subsidiaries, except HBOC.
-4-
<PAGE>
For HBOC participants, the Company matched 75% of contributed amounts
up to the first 4% contributed. In fiscal 1999, the total matching
percentage was 100% of contributed amounts, up to 6% contributed,
which was allocated at year end.
Vesting - Participant contributions are 100% vested at all times. PSIP
employer matching contributions become vested annually in 20%
increments during the first five years of service.
Investment Options - Upon enrollment in the PSIP, a participant may
direct their contributions in 1% increments to any of the investments
offered to the participant's specific employee group within the Plan.
The following are descriptions from each fund's prospectus or fund
manager's reports:
Equity Income Fund represents shares of a registered investment
company that invests primarily in common stocks.
S&P 500 Index Fund represents shares of a registered investment
company that invests in stocks in the benchmark S&P 500 Index.
Stable Value Fund represents guaranteed investment contracts and
benefit responsive investment contracts.
Balanced Fund represents shares of a registered investment
company that invests 60% in State Street S&P 500 Index Fund and
40% in Lehman Aggregate Bond Index Fund.
Putnam International Equity Fund represents shares of a
registered investment company that invests in discounted stock in
targeted foreign countries.
Wellington Small Cap Fund represents shares of a registered
investment company that invests in stocks within the market
capitalization range of the Russell 2000 Index.
Fidelity Retirement Money Market Fund represents shares invested
in high-quality, U.S. dollar-denominated money market instruments
of U.S. and foreign issuers.
Fidelity Managed Income Portfolio represents shares invested in
high-quality fixed and variable rate guaranteed investment
contracts ("GICs"), bank investment contracts ("BICs") and
similar investments.
Fidelity Intermediate Bond Fund represents shares invested in
upper-medium grade fixed-income obligations, such as corporate
debt obligations issued or guaranteed by the U.S. Government; and
obligations of U.S. banks, including certificates of deposit and
bankers' acceptances.
Fidelity Asset Manager Fund represents shares invested in stocks,
bonds and short-term instruments.
Fidelity Growth and Income Fund represents shares invested in a
combination of equity securities, convertible securities, bonds,
futures and options.
-5-
<PAGE>
Fidelity Equity Income II Fund represents shares invested in
income producing equity securities, and shares invested in
domestic and foreign issuers.
Fidelity Magellan Fund represents shares invested in common
stocks and other securities and investments.
Fidelity Blue Chip Growth Fund invests primarily in common stocks
of well known and established domestic and foreign companies.
Fidelity International Growth and Income Fund invests primarily
in foreign securities with a focus on those that pay current
dividends and show potential for capital appreciation.
Templeton Foreign Fund represents shares invested primarily in
stocks and debt securities of companies and governments outside
of the United States.
Janus Balanced Fund represents shares invested in both equity and
debt securities, normally allocating 40% to 60% of assets to
each type of investment.
McKesson HBOC Stock Fund represents shares invested in Company
stock.
Loans - Participants may apply for a loan from the Plan. The total
amount owed to the Plan by an individual participant cannot exceed the
lowest of 50% of such participant's vested account balances,
$50,000 or the value of the participant's accounts attributable to
basic supplemental and rollover contributions. The loans bear interest
at the then current prime rate of interest plus 1%. Contractual
interest rates ranged from 8.75% to 9.83% in 2000 and from 8.75% to
9.5% in 1999. Loans may be repaid over a period not to exceed 5 years,
except for residential loans which must not exceed a term of 10 years.
Payment of Benefits - Participants have the right to withdraw the
value of their vested accounts from the PSIP at the time of
retirement, death, disability or termination of employment. In
general, benefit payments are made in a cash lump sum. However,
participants who became eligible to participate in the Plan prior to
April 1, 1999 have the option of receiving a lump sum payment or
purchasing an annuity contract. Employees may remain participants in
the Participant Directed Funds by electing to receive installment
payments or deferring withdrawal until a later date. Effective October
1, 1999, all dividends earned on Company stock are paid directly to
the participants.
B. Employee Stock Ownership Plans
General - The Company Stock Fund consists of the Employee Stock
Ownership provisions of the Plan ("ESOP"). In fiscal 2000 and 1999,
shares from ESOP I, II and III were used to fund all employer's
allocations for the year.
ESOP I(b) - In January 1985, the Company amended the Plan to add
a leveraged ESOP for the benefit of persons eligible to
participate in the PSIP. In July 1986, the PSIP purchased from
the Company 2,000,000 common shares for $30,250,000, financed by
a ten-year term loan from a bank, guaranteed by the Company.
Additionally, during fiscal 1996, in connection with a
reorganization of the Company, the ESOP purchased 1,087,754
additional shares. The Company extended the existing term of the
outstanding loan balance from its original maturity in fiscal
1997 to 2005.
ESOP II - In October 1987, the Company amended the Plan to
provide for the purchase of common shares by the ESOP. In
conjunction with this amendment, the PSIP purchased from the
Company 4,200,000 common shares in 1987 for $54,900,000, financed
by a fifteen-year term loan from the Company. Additionally,
during fiscal 1996, in connection with a reorganization of the
Company, the ESOP purchased 3,036,484 additional common shares.
ESOP III - In June 1989, the Company amended the Plan to add an
additional leveraged ESOP to provide for the PSIP-PLUS
allocation. Certain persons who are contributing at least 2% of
-6-
<PAGE>
their total compensation to the PSIP are eligible to participate
in PSIP-PLUS. In June 1989, the Plan purchased from the Company
2,849,003 shares of McKesson Corporation Series B ESOP
Convertible Preferred Stock ($43.875 stated value) for
$125,000,000, financed by a twenty-year term loan from the
Company. During fiscal 1995, in connection with a reorganization
of McKesson Corporation, all shares of Series B ESOP Convertible
Preferred Stock held by the Plan were converted into 5,440,914
shares of Company common stock. The ESOP purchased 6,259,080
additional common shares in fiscal 1996.
Retirement Share Plan Allocation - Effective January 1, 1997, the
Company provides for a Retirement Share Plan Allocation. The
Retirement Share Plan Allocation, at the Company's election, may be in
cash or shares of Company common stock. The Retirement Share Plan
Allocation formula allocates to each eligible participant a percentage
of the participant's compensation. Such percentage for each eligible
participant will depend on the participant's combined age and years of
service, or Retirement Share Plan "points" as defined in the plan
document, as of March 31. Employees hired after December 31, 1999, are
not eligible for the Retirement Share Plan.
Contributions and Participants' Accounts - Dividends on unallocated
ESOP I and II common shares plus the Company's cash contributions to
the ESOP are used to pay the obligations under the ESOP I and II
loans. For the ESOP III loan, dividends on all common shares
(allocated to PSIP-PLUS and unallocated) plus the Company's cash
contributions to the ESOP III are used to pay the obligations under
the loan. Under the terms of the loan agreements, the Company is
required to make cash contributions to each ESOP to the extent that
the dividends are not sufficient to service the debt. The cash
contributions amounted to $13,230,825 and $1,982,925 for the years
ended March 31, 2000 and 1999, respectively. The Company allocates
shares to participants' accounts on the basis of compensation and
basic contributions for the plan year. The common stock of the
PSIP-PLUS is allocated to eligible participants' accounts on a per
capita basis each year for a period of twenty years through fiscal
2010. Employees hired after December 31, 1999, are not eligible for
the PSIP-PLUS.
Vesting - Employees hired after December 31, 1996 become vested in all
PSIP allocations after five years of employment. Employees hired on or
before December 31, 1996 become vested in PSIP matching contributions
and PSIP-PLUS after three years of employment. Generally, 100% vesting
is provided for retirement, disability, death, termination of the
Plan, or a substantial reduction in work force initiated by the
Company. A rehired employee who has met certain levels of service
prior to termination may be entitled to have forfeited interests in
the PSIP reinstated. Each plan year, forfeited interests are used to
reinstate previously forfeited amounts of rehired employees, and other
Plan expenses as appropriate.
Effective April 1, 1999, the Company amended the vesting policy to
become a graded scale. Under this amendment, employees are vested
annually in 20% increments of the employer contribution during the
first five years of service.
Payment of Benefits - Distributions are made only upon participant
retirement, death (in which case, payment shall be made to the
participants' beneficiary or, if none, his or her legal
representatives), or other termination of employment with the Company.
-7-
<PAGE>
Distributions are made in cash or, if a participant elects, in the
form of Company common shares plus cash for any fractional share.
Investments - The cost basis of the McKesson HBOC, Inc. common stock
at March 31, 2000 and 1999 was $395,525,625 (18,226,776 shares) and
$420,049,182 (19,355,177 shares), respectively.
The following ESOP information regarding the McKesson HBOC, Inc.
common shares held is as of March 31, 2000:
<TABLE>
<CAPTION>
Number of Fair Value
Shares of Shares
<S> <C> <C>
Unallocated 10,987,221 $230,731,641
Allocated 7,239,555 152,030,655
---------- ------------
Total 18,226,776 $382,762,296
========== ============
</TABLE>
C. Company Investment Fund
General - Prior to May 29, 1998, the Company Investment Fund was
invested primarily in a diversified portfolio of debt and equity
securities. In May 1998, the fund was changed to offer only two fund
choices, the S&P 500 Index II Fund and the Lehman Aggregate Bond Index
Fund. Participants with balances in the liquidated funds were
required to transfer their investments to either of the two remaining
funds or Company stock. The Company Investment Fund no longer allows
for contributions to these funds.
Vesting - Participants become vested in the Company Investment Fund in
the same manner as they become vested in the ESOP. Each plan year,
forfeited interests are used to reinstate previously forfeited amounts
of rehired employees, and other Plan expenses as appropriate.
Payment of Benefits - Distributions from the Company Investment Fund
are made only upon participant retirement, death (in which case,
payment shall be made to the participant's beneficiary, or, if none,
his or her legal representatives), or other termination of employment
with the Company. Distributions may be made in cash or Company stock.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the Plan are prepared
under the accrual method of accounting, except that distributions to
participants are recorded when paid.
Cash Equivalents - The Company considers all highly liquid debt instruments
purchased with remaining maturities of less than three months to be cash
equivalents.
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
-8-
<PAGE>
Investment Valuation and Income Recognition - Investments are stated at
fair value which is based on independent valuations or publicly quoted
market prices, except for investments in the Stable Value Fund which are
stated at contract value (or cost), plus accrued interest. Shares of
registered investment companies are valued at quoted market prices which
represent the net asset value of shares held by the Plan at year-end.
McKesson HBOC, Inc. common shares are valued at quoted market prices on
March 31, 2000 and March 31, 1999.
Purchases and sales of securities are recorded on a trade-date basis.
Realized gains and losses from security transactions are reported on the
average cost method. Interest income is recorded on the accrual basis.
Dividends are recorded on the declaration date.
New Accounting Pronouncement - For the plan year ended March 31, 2000, the
Plan adopted Statement of Position 99-3, "Accounting for and Reporting of
Certain Defined Contribution Plan Investments and Other Disclosure Matters"
issued by the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants. As a result, the Plan's
financial statements do not include by-fund disclosures. The prior year
financial statements have been reclassified to conform to the new
presentation.
Reclassification - Certain amounts in the 1999 Statement of Net Assets
Available for Benefits have been reclassified to conform with the 2000
presentation.
3. McKESSON HBOC, INC. PROFIT-SHARING MASTER TRUST
The McKesson HBOC, Inc. Profit-Sharing Master Trust (the "Master Trust")
includes the following funds: Equity Income Fund, S&P 500 Index Fund,
Stable Value Fund, Balanced Fund, Putnam International Equity Fund, and
the Wellington Small Cap Fund. The Master Trust maintains separate
accounts for each participating plan in each fund invested. The assets of
the Master Trust are held by Chase Manhattan Bank, N.A. Global Securities
Services ("The Trustee"). Short-term investments included in the Master
Trust earn interest at a current short-term market rate. At March 31, 2000
and 1999, the Plan's ownership interest in the Master Trust overall was
93.93% and 98.40%, respectively. The Master Trust assets consisted of the
following at March 31, 2000 and 1999 (in thousands):
-9-
<PAGE>
<TABLE>
<CAPTION>
Plan's Plan's
Ownership Ownership
2000 % 1999 %
<S> <C> <C> <C> <C>
Equity Income Fund:
Cash and cash equivalents $ 5,370 $ 10,145
Investments in stock 101,910 91,416
Accrued income 44
Interfund balances (18,829) (1,074)
Contribution receivable 1,230 1,433
Trade payables (1,181) (903)
-------- --------
Total Equity Income Fund 88,544 91.55% 101,017 97.85%
S&P 500 Index Fund:
Commingled funds 152,062 121,224
Interfund balances 17,132 1,041
-------- --------
Total S&P 500 Index Fund 169,194 95.34% 122,265 99.23%
Stable Value Fund:
Cash and cash equivalents 17,292 5,113
Investment contracts 80,101 88,854
Accrued income 408 477
Interfund balances 790 208
-------- --------
Total Stable Value Fund 98,591 90.48% 94,652 97.12%
Balanced Fund:
Commingled funds 24,557 18,966
Interfund balances (44) 431
-------- --------
Total Balanced Fund 24,513 98.32% 19,397 100.00%
Putnam International Equity Fund:
Commingled funds 14,520 7,042
Interfund balances 980 37
-------- --------
Total Putnam International Equity Fund 15,500 98.15% 7,079 100.00%
Wellington Small Cap Fund:
Commingled funds 18,001 10,312
Interfund balances 968 (154)
-------- --------
Total Wellington Small Cap Fund 18,969 97.49% 10,158 99.41%
Participant Loans 12,264 100.00% 13,216 100.00%
-------- --------
Total Master Trust Assets $427,575 93.93% $367,784 98.40%
======== ========
</TABLE>
The Stable Value Fund contains benefit-responsive guaranteed investment
contracts with several insurance companies carried at contract value plus
accrued interest totaling $43,868,479 and $47,681,687 at March 31, 2000 and
1999, respectively. The guaranteed rates range from 6.08% to 8.38% and the
contracts mature at various dates through September 2004. The Stable Value Fund
also includes synthetic investment contracts which are benefit-responsive and
are carried at contract value plus accrued interest totaling $39,177,808 and
$41,649,241 at March 31, 2000 and 1999, respectively. Contract crediting rates
ranged from 5.16% to 7.01% at March 31, 2000. There are no reserves against
contract value for credit risk of the contract issuer or otherwise. Certain of
the contracts contain limitations on contract value guarantees for liquidation
other than to pay benefits. The contracts mature at various dates through April
2004. The Plan's investment guidelines require these contracts to be with
companies rated AA- or better, with no more than $20 million or 25% of the pool
invested with one issuer.
-10-
<PAGE>
4. INVESTMENTS
The recorded values of individual investments that represent 5% or more of
the Plan's net assets at March 31, 2000 and 1999 were as follows (in
thousands):
2000 1999
Equity Income Fund $ 94,429 $ 89,382
S&P 500 Index Fund 144,180 120,279
Stable Value Fund 70,713 91,243
S&P 500 Index II Fund 131,419 121,885
Fidelity Magellan Fund 65,006 -
McKesson HBOC, Inc. common stock 415,315 1,277,442
5. ESOP PROMISSORY NOTES PAYABLE
The ESOP I(b) promissory note supporting the July 1986 stock purchase is
payable to Wells Fargo Bank in increasing annual installments (ranging from
2% to 3% of original principal) over an 18-year term beginning in fiscal
1987 through fiscal 2005 (Note 1,B). The interest rate is the London
Interbank Offered Rate ("LIBOR") plus .4%, with an option to the Plan to
fix the LIBOR rate for a period ranging from 1 month to 1 year. On March
31, 2000, the interest rate was 6.56%, and the outstanding balance was
$4,190,142 ($4,878,125 at March 31, 1999). The note is guaranteed by the
Company, without recourse to the participants' accounts, and is
collateralized by 734,138 unallocated shares of McKesson HBOC, Inc. common
stock remaining from 3,087,754 shares.
The ESOP II promissory note is payable to the Company in increasing annual
installments (ranging from 4% to 11% of original principal) over a fifteen-
year term beginning in fiscal 1988 through fiscal 2003. The interest rate
is 77.5% of the prime rate or 89.08% of LIBOR, with an option to the
borrower to fix the LIBOR rate for a period ranging from 1 month to 1 year.
On March 31, 2000, the interest rate was 5.46%, and the outstanding balance
was $16,491,960 ($21,202,380 at March 31, 1999). This note is
collateralized by 3,191,263 unallocated shares of McKesson HBOC, Inc.
common stock remaining from 7,236,484 shares.
The ESOP promissory note supporting the ESOP III purchase is payable to the
Company in increasing annual installments (ranging from 3% to 8% of
original principal) plus interest at 8.6% over a twenty-year term beginning
in fiscal 1990 through fiscal 2010. On March 31, 2000, the outstanding
balance of the note was $71,240,925 ($75,935,878 at March 31, 1999). This
note is collateralized by 6,423,925 unallocated shares of McKesson HBOC,
Inc. common stock remaining from 11,699,994 shares.
Future minimum principal payments required on the ESOP notes are as follows
(in thousands):
2001 $10,925
2002 11,823
2003 12,802
2004 7,465
2005 8,102
Thereafter 40,806
-------
Total $91,923
=======
-11-
<PAGE>
6. LINE OF CREDIT
In 1998, the Plan obtained a $35 million line of credit with ABN AMRO Bank
N.V. in order to refinance a portion of the principal payable under the
ESOP loans. The line of credit was obtained in order to reduce the number
of shares necessary to fund the employee benefits. The Plan released only
the shares required to fund the annual ESOP benefits. The interest rate is
the LIBOR rate multiplied by the applicable LIBOR adjustment. The loans
mature on June 1, 2009. At March 31, 2000 and 1999, interest rates ranged
from 5.26% to 5.46% and 4.4% to 4.98% on the outstanding balances of
$8,000,000 and $13,500,000, respectively. The loans are collateralized by
637,895 and 1,346,219 shares of unallocated McKesson HBOC, Inc. common
stock at March 31, 2000 and 1999.
The Internal Revenue Service ("IRS") has indicated it is currently unable
to issue a ruling in regard to the refinancing agreement. If the IRS does
not approve the refinancing, the Plan will release the shares and allocate
them to participants as originally scheduled.
7. TAX STATUS
The IRS has determined and informed the Company by letter dated October
27, 1998, that the Plan is qualified and the trust established under the
Plan is tax-exempt, under the appropriate sections of the Internal Revenue
Code. The Plan has been restated (effective April 1, 1999) since receiving
the determination letter. However, the Plan administrator believes that
the Plan is currently designed and being operated in compliance with the
applicable requirements of the Code. Therefore, the Plan administrator
believes that the Plan was qualified and the related trust was tax-exempt
as of the financial statement date.
8. PLAN TERMINATION
The Company's Board of Directors reserves the right to terminate the Plan.
If termination should occur, all participants will immediately vest and
each would receive a distribution equal to his or her vested account
balance, and the unallocated common stock would be liquidated to repay the
ESOP promissory notes payable. If the stock liquidation was insufficient
to satisfy the notes payable, the Company would fund the difference.
9. PENDING LITIGATION
On November 24, 1999, an action entitled Chang v. McKesson HBOC, Inc. et
al. (No. C-00-20030 RMW) was filed in the U.S. District Court, Northern
District of California. The action is purportedly brought on behalf of the
Plan and its participants against the Company, the Plan fiduciaries and
Chase Manhattan Bank as trustee of the Plan. The complaint alleges
violations of the Employee Retirement Income Security Act of 1974 arising
out of the decline in the stock price of McKesson HBOC, Inc. which
followed the Company's announcement on April 28, 1999 regarding accounting
improprieties at HBOC. Plan management does not believe it is feasible to
predict or determine the outcome or resolution of these proceedings, or to
estimate the potential impact to the Plan with respect to these
proceedings.
******
-12-
<PAGE>
McKESSON HBOC, INC.
PROFIT-SHARING INVESTMENT PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
MARCH 31, 2000 (in 000's)
--------------------------------------------------------------------------------
Investment Units Fair Value
Fidelity Retirement Money Market Fund 11,230 $ 11,230
Fidelity Managed Income Portfolio Fund 2,801 2,801
Fidelity Intermediate Bond Fund 423 4,126
Fidelity Asset Manager Fund 433 8,245
Fidelity Growth & Income Fund 1,119 52,939
Fidelity Equity Income II Fund 427 11,549
Fidelity Magellan Fund 454 65,006
Fidelity Blue Chip Growth Fund 503 32,018
Fidelity International Growth & Income Fund 98 2,981
Templeton Foreign Fund 284 3,012
Janus Balanced Fund 270 6,541
McKesson HBOC, Inc. Common Stock 19,777 415,315
S&P 500 Index Fund II 519 131,419
Lehman Aggregate Bond Index Fund 2,067 25,862
HBOC Fund Group Participant Loans - 3,430
Plan's Share of Master Trust - 377,491
----------
Total $1,153,965
==========
-13-
<PAGE>
McKESSON HBOC, INC.
PROFIT-SHARING INVESTMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED MARCH 31, 2000
-----------------------------------------------------------------------
None noted.
-14-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan administrator has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
McKesson HBOC, Inc. Profit-Sharing
Investment Plan
By: /s/ William A. Armstrong
------------------------
William A. Armstrong
DATE: September 27, 2000
