EXHIBIT 99.3
Contact: Larry Kurtz
Vice President, Corporate Communications
415-983-8418
McKESSON HBOC, INC. REPORTS THIRD QUARTER RESULTS
SAN FRANCISCO, January 25, 2000 - McKesson HBOC, Inc., (NYSE:MCK) (McKessonHBOC)
today reported net income and earnings per diluted share, including special
items, of $166.8 million and 58 cents in its third quarter ended December 31,
1999, compared to net income and earnings per diluted share, including special
items, of $50.7 million and 18 cents in the third quarter a year ago.
Subsequent to the quarter's end, McKessonHBOC announced an agreement to sell its
Water Products business, the results of which are being reported as discontinued
operations.
McKessonHBOC's revenues from continuing operations increased 24 percent in
the third quarter, to $7.5 billion, excluding $2.3 billion of sales to
customers' warehouses, driven by a 30 percent increase in its U.S.
pharmaceutical distribution revenues. Including sales to customers' warehouses,
McKessonHBOC's revenues in the quarter were $9.9 billion, up 19 percent.
For the quarter, including special items that increased income by $100.1
million, McKessonHBOC had income from continuing operations of $160.6 million
and earnings per diluted share of 56 cents, compared to income from continuing
operations of $45.1 million and earnings per diluted share of 16 cents in the
third quarter a year ago. The third quarter a year ago included a $41.0 million
charge for special items. The $100.1 million of special items in the current
quarter consists predominantly of a net gain from the exchange and sale of
certain Healthcare Information Technology Business (ITB) equity assets, offset,
in part, by charges in the company's Healthcare Supply Management Business and
ITB segments.
Primarily as a result of lower ITB operating profit, for the third quarter,
before special charges, McKessonHBOC had operating profit from continuing
operations of $158.7 million compared to $177.4 million before special charges
in the third quarter a year ago. Income from continuing operations and earnings
per diluted share, before special items, was $60.5 million of 21 cents in the
third quarter, compared to income from continuing operations and earnings per
diluted share, before special items, of $86.1 million and of 30 cents in the
third quarter a year ago. Unless otherwise noted, all subsequent financial
discussions exclude special items.
"Our Healthcare Supply Management Business sustained above-market revenue
growth again this quarter," said John H. Hammergren and David L. Mahoney, co-
presidents and co-chief executive officers. "This continued growth results from
the market's acceptance of our solutions designed to deliver measurable value to
our customers and provides the base for sales of higher-margin products and
services such as our pharmacy automation offering."
"We are committed to implementing initiatives that are designed to position
the company for future growth and improved margins. As a major step, the
agreement to sell our non-core Water Products business will, upon consummation
of the transaction, complete our transition to a focused healthcare company,
strengthen the balance sheet and provide greater financial flexibility.
However, we do not currently expect a
meaningful rebound in software sales until late in the 2000 calendar year, which
along with ongoing expenses necessary to enhance our ITB product and service
offering and relationships with customers will negatively affect the operating
margin of the company in fiscal 2001."
Healthcare Supply Management Operating Profit Up on Strong Revenue Growth
Operating profit of McKessonHBOC's Healthcare Supply Management segment
increased five percent in the quarter, to $137.3 million, on a 27 percent
increase in revenues. U.S. pharmaceutical distribution revenues were up 30
percent, to $5.9 billion, medical-surgical distribution revenues were up 12
percent, to $705 million, and international revenues were up 25 percent, to $611
million.
The Healthcare Supply Management operating profit margin decreased to 1.89
percent in the quarter, primarily due to receivable-related charges, continued
competitive pressures that affected both new and renewed pharmaceutical
distribution agreements, and a shift in McKessonHBOC's pharmaceutical
distribution mix to faster-growing customer segments. The receivable-related
charges, including a pharmaceutical distribution customer bankruptcy that
occurred after the quarter's close, decreased third-quarter operating margin 17
basis points. Without these changes, supply management operating profit would
have increased 15 percent. As previously reported, new and renewed agreements
signed in the current year, while designed to deliver profitability consistent
with the company's long-term financial targets, have less favorable terms than
previous agreements due to the effect of competition as well as implementation
expenses during the start-up phase, and therefore have the effect in the near
term of dampening profit margins. Additionally, in the third quarter, $24.6
million in special charges were recorded in the Supply Management business,
primarily for losses associated with a prior-year system implementation.
Healthcare Information Technology Revenue Declines
Overall revenues of the ITB segment were $293 million in the third quarter,
a decrease of 23 percent versus the prior year. Software revenues were $54
million, a decrease of 33 percent. Service and outsourcing revenues were $218
million in the third quarter, down 12 percent, driven by reduced implementation
services on the lower level of software sales in previous quarters. Hardware
revenues were $22 million in the third quarter, down 59 percent, reflecting the
lower level of software sales and lower unit prices. On a sequential basis, ITB
revenues of $293 million in the third quarter were down six percent compared to
the second quarter, with software revenues of $54 million up 13 percent.
ITB operating profit was $26.3 million in the third quarter, down 44
percent versus the prior year. ITB operating margin was nine percent in the
quarter, down from 12 percent in the third quarter a year ago, resulting from
the lower sales of software and services, and increased expenses to enhance
customer support.
In the third quarter, ITB recorded additional accounts receivable and
customer reserves of $69 million, associated with a revised estimate of the
impact of resolving customer satisfaction issues relating to certain product
installations. Following the completion of an assessment of the entire ITB
product portfolio in the fourth quarter of fiscal 2000, McKessonHBOC expects to
streamline its product offering to eliminate
redundancies, focus on current and anticipated customer needs and implement
advanced technologies. As a result, the company expects to record additional
charges associated with impaired assets and related expenses in the fourth
quarter.
"During the past six months, we've built a solid management team in our
information technology business," said Hammergren and Mahoney. "Our goal has
been to re-establish confidence and trust among our customers so that we are
well positioned to create demand for our solutions, and we are making
significant progress. While we expect to see some benefit in the next fiscal
year, we believe the full impact of these efforts will be seen in ITB's
financial results in fiscal year 2002."
During the third quarter and continuing into early in the fourth quarter,
McKessonHBOC began selling shares in certain ITB equity investments to help fund
the company's e-health initiatives. ITB results for the third quarter include
net gains totaling $256 million, primarily from the exchange and sale of these
investments.
New e-Health Segment
During the third quarter, McKessonHBOC began reporting revenues and
operating profit of its new e-health business segment, following its November
1999 purchase of Abaton.com, a provider of Internet-based clinical products and
services to physicians. For the quarter, revenues of the e-health business were
$0.2 million, with an operating loss of $4.9 million. In addition, this segment
recorded a $1.5 million charge in the third quarter for the purchase of in-
process technology.
"With the acquisition of Abaton, we made a meaningful addition to our
strong business-to-business e-commerce platform," said Hammergren and Mahoney.
"Marrying Abaton's leading-edge solutions for physician connectivity to our
robust EDI transaction platform and physician practice management solutions
allows us to immediately compete as a leader in the e-health space. The Web-
based claims processing for physicians that will result from our agreement with
Claimsnet.com further reinforces our capability to capture the physician's
desktop through new offerings that add real value."
Financial Position and Additional Special Charges
At December 31, 1999, McKessonHBOC's cash and marketable securities totaled
approximately $400 million. Total debt at December 31, 1999, was $1.4 billion,
stockholders'equity was $3.2 billion and the company's net debt-to-capital ratio
was 22 percent, down from 33 percent at September 30, 1999. The improvement in
the net debt-to-capital ratio reflects third quarter cash flow from operations
and a gain on the exchange of certain marketable securities.
Net interest expense increased to $27.1 million in the third quarter from
$23.9 million in the third quarter a year ago, reflecting increased average
working capital to support strong Supply Management revenue growth. Corporate
expenses increased to $29.3 million in the third quarter from $13.6 million in
the third quarter a year ago, primarily because of costs associated with the
sale of receivables to support the growth of the Supply Management business and
certain employee benefits, the latter expense being higher in order to maintain
the level of benefits being provided to employees despite the currently lower
stock price. The special items for the third quarter include charges totaling
$3.1 million for accounting and legal fees and other costs incurred in
connection with the company's earlier restatement of prior-year financial
statements and acquisition-related costs.
Return on committed capital for the twelve months ended December 31, 1999,
was 22 percent and return on equity for the same period was 12 percent. At
December 31, 1999, the company had 281.7 million common shares outstanding.
Discontinued Operations
On January 11, 2000, McKessonHBOC announced it had signed an agreement to
sell its Water Products business for $1.1 billion. Following the completion of
this transaction, which is expected to close in the fourth quarter, the company
will receive approximately $700 million in after tax proceeds.
For the third quarter, the Water Products business, now reported as a
discontinued operation, contributed two cents to earnings per diluted share
compared to two cents in the third quarter a year ago.
Financial Results for the First Nine Months of Fiscal Year 2000
For the nine months ended December 31, 1999, McKessonHBOC had revenues of
$20.8 billion, an increase of 23 percent, excluding sales to customers'
warehouses of $6.6 billion. McKessonHBOC's pharmaceutical distribution and
services revenues were $17.8 billion, up 26 percent, its medical-surgical
distribution revenues were $2.0 billion, up 24 percent and its ITB revenues were
$922 million, down 19 percent compared to the prior year.
Including special items, for the nine months, McKessonHBOC had net income
of $296.3 million and earnings per diluted share of $1.04, compared to net
income of $146.1 million and earnings per diluted share of 52 cents for the nine
months a year ago. Including special items, for the nine months, McKessonHBOC
had income from continuing operations of $272.9 million and earnings per diluted
share of 96 cents, compared to income from continuing operations of $122.7
million and earnings per diluted share of 44 cents for the nine months a year
ago. Excluding special items, for the nine months, McKessonHBOC had income from
continuing operations of $203.7 million and earnings per diluted share of 72
cents, compared to income from continuing operations of $219.3 million and
earnings per diluted share of 77 cents for the nine months a year ago.
McKesson HBOC, Inc., a Fortune 60 corporation, is the world's largest
supply management and healthcare information technology company. McKessonHBOC
provides supply management and information technologies across the entire
continuum of healthcare, including market-leading businesses in pharmaceutical
and medical-surgical distribution, automation, information technology and
outsourcing services for healthcare providers healthcare providers and payors.
More information about McKessonHBOC is available on our World Wide Website at:
www.mckhboc.com.
Except for the historical information contained herein, the matters
discussed in this press release may constitute forward-looking statements that
are made pursuant to the Safe Harbor provisions of the Securities Litigation
Reform Act of 1995 and 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 resolution or outcome of pending litigation and government investigations
relating to the Company's previously announced financial restatement; the
Company's ability to recognize revenues in subsequent periods that had initially
been improperly recorded in prior periods; the Company's ability to successfully
integrate and operate acquired businesses and the risks associated with such
businesses, including the merger that created McKessonHBOC; the changing U.S.
healthcare environment, including potential changes in private and governmental
reimbursement for healthcare services, the method by which such services are
delivered, legislation or regulations governing such services or mandated
benefits, or changes in manufacturer' pricing or distribution policies;
substantial defaults in payment or a material reduction in purchases of our
products by large customers; the ability of the Company's Healthcare Information
Technology business to retain existing customers and to attract new customers in
light of rapid technological advances, slowing of demand for software products
because of Year 2000 concerns and challenges in integrating the Company's
software products; the effect of the events relating to, or arising out of, the
Company's restatement of financial results on the Company's ability to manage
its businesses and to attract and retain employees and management; the Company's
ability and the ability of the Company's vendors and customers to complete the
necessary actions to achieve a Year 2000 conversion for computer systems and
applications; 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 release.
Schedule I-1
McKESSON HBOC, INC.
CONDENSED INCOME INFORMATION (1)
(unaudited)
(in millions except per share amounts)
Quarter Ended December 31 Nine Months Ended December 31
------------------------------------- ---------------------------------------
% %
FY00 FY99 Chg. FY00 FY99 Chg.
------------ --------- ----- ------------ ----------- -----
Revenues
Excluding sales to customers' warehouses $ 7,544.7 $ 6,081.5 24.1 % $ 20,781.8 $ 16,913.1 22.9 %
Sales to customers' warehouses 2,346.2 2,206.0 6.4 6,647.3 4,806.9 38.3
------------ --------- ------------ -----------
Total 9,890.9 8,287.5 19.3 27,429.1 21,720.0 26.3
Costs and expenses before special items 9,788.6 8,147.6 20.1 27,090.2 21,358.5 26.8
Special items 158.3 (2) (60.3) (3) 108.1 (2) (146.5)(3)
------------ --------- ------------ -----------
Income before taxes on income 260.6 79.6 447.0 215.0
Income tax expense (98.5) (33.0) (169.5) (87.7)
Dividends on preferred securities of
subsidiary trust (1.5) (1.5) (4.6) (4.6)
------------ --------- ------------ -----------
Net income
Continuing operations
Before special items 60.5 86.1 (29.7) 203.7 219.3 (7.1)
Special items 100.1 (2) (41.0) (3) 69.2 (2) (96.6)(3)
------------ --------- ------------ -----------
Total from continuing operations 160.6 45.1 272.9 122.7
Discontinued operations 6.2 5.6 23.4 23.4
------------ --------- ------------ -----------
Total $ 166.8 $ 50.7 $ 296.3 $ 146.1
============ ========= ============ ===========
Earnings per common share
Diluted
Continuing operations
Before special items $ 0.21 $ 0.30 (30.0) $ 0.72 $ 0.77 (6.5)
Special items 0.35 (2) (0.14) (3) 0.24 (2) (0.33)(3)
------------ --------- ------------ -----------
Total from continuing operations 0.56 0.16 0.96 0.44
Discontinued operations 0.02 0.02 0.08 0.08
------------ --------- ------------ -----------
Total $ 0.58 $ 0.18 $ 1.04 $ 0.52
============ ========= ============ ===========
Basic
Continuing operations
Before special items $ 0.21 $ 0.31 (32.3) $ 0.72 $ 0.80 (10.0)
Special items 0.36 (2) (0.15) (3) 0.25 (2) (0.35)(3)
------------ --------- ------------ -----------
Total from continuing operations 0.57 0.16 0.97 0.45
Discontinued operations 0.02 0.02 0.08 0.08
------------ --------- ------------ -----------
Total $ 0.59 $ 0.18 $ 1.05 $ 0.53
============ ========= ============ ===========
Shares on which earnings per common
share were based
Diluted 288.8 289.7 (0.3) 289.8 289.3 0.2
Basic 281.4 275.2 2.3 281.1 274.1 2.6
(1) All periods have been restated to classify the Water Products business as
a discontinued operation. On January 11, 2000, the Company announced it
had signed a definitive agreement to sell its Water Products business to
Groupe DANONE for $1.1 billion in cash.
(2) The quarter and nine months ended December 31, 1999 include charges for
receivable reserves and asset impairments in the Health Care Supply
Management segment totaling $30.3 million related primarily to a prior
year implementation of a contract system, partially offset by a $5.7
million reduction in prior year restructuring reserves. In addition, the
quarter and nine months include net gains totaling $256.0 million
primarily from the sale of Health Care Information Technology segment's
equity investments and from a gain on the exchange of the Company's WebMD
shares for Healtheon/WebMD shares that was recognized upon the completion
of the merger of the two companies in the quarter. These gains are
offset, in part, by a charge of $68.5 million for a change in estimate of
the segment's requirements for accounts receivable and customer reserves.
Also includes a charge of $1.5 million in the quarter in the e-Health
segment for the write-off of purchased in-process technology related to
the Company's November 1999 acquisition of Abaton.com. In addition,
Corporate and other includes charges totaling $2.4 million in the quarter
and $17.4 million in the nine months, respectively, for accounting and
legal fees and other costs incurred in connection with the Company's
earlier restatement of prior years' financial results and $0.7 million in
the quarter and $3.6 million in the nine months in acquisition-related
costs. Additionally, the nine months ended December 31, 1999 include
charges of $32.3 million for severance and other costs associated with
former employees.
(3) Includes charges associated with acquisitions in the Health Care Supply
Management and Health Care Information Technology segments of $26.5
million and $33.8 million, respectively, in the quarter and $105.1
million and $41.4 million, respectively, in the nine months ended
December 31, 1998. These charges include transaction costs, employee
benefit change in control provisions, employee severance, restructuring,
integration and system installation costs associated with acquisition-
related activities. The nine months ended December 31, 1998 also includes
charges for the terminated merger with AmeriSource Corporation.
Schedule I-2
McKESSON HBOC, INC.
RESULTS BY BUSINESS SEGMENT (1)
(unaudited)
(in millions)
Quarter Ended December 31
-------------------------------------------------------
FY00 FY99 % Chg.
------------ ------------ -----------
REVENUES
Health Care Supply Management
Pharmaceutical Distribution & Services (2)
U.S. Health Care $ 5,932.7 $ 4,572.5 29.7 %
International 610.6 489.1 24.8
------------ ------------
Total Pharmaceutical Distribution & Services 6,543.3 5,061.6 29.3
Medical/Surgical Distribution & Services 704.6 630.2 11.8
------------ ------------
Total Health Care Supply Management 7,247.9 5,691.8 27.3
------------ ------------
Health Care Information Technology
Software 53.6 79.9 (32.9)
Services 217.7 248.7 (12.5)
Hardware 21.5 52.2 (58.8)
------------ ------------
Total Health Care Information Technology 292.8 380.8 (23.1)
e-Health 0.2 -
Corporate 3.8 8.9
------------ ------------
Total $ 7,544.7 $ 6,081.5 24.1
============ ============
OPERATING PROFIT
Health Care Supply Management
Before special items $ 137.3 $ 130.3 5.4
Special items (24.6) (3) (26.5) (7)
------------ ------------
Total Health Care Supply Management 112.7 103.8
------------ ------------
Health Care Information Technology
Before special items 26.3 47.1 (44.2)
Special items 187.5 (4) (33.8) (8)
------------ ------------
Total Health Care Information Technology 213.8 13.3
------------ ------------
e-Health
Before special items (4.9) -
Special items (1.5) (5) -
------------ ------------
Total e-Health (6.4) -
------------ ------------
Total Operating Profit 320.1 117.1
Interest - net (27.1) (23.9)
Corporate and other
Before special items (29.3) (13.6)
Special items (3.1) (6) -
------------ ------------
Total Corporate and other (32.4) (13.6)
------------ ------------
Income from continuing operations before income taxes
Before special items 102.3 139.9 (26.9)
Special items 158.3 (3)-(6) (60.3) (7),(8)
------------ ------------
Income from continuing operations before
income taxes $ 260.6 $ 79.6
============ ============
Nine Months Ended December 31
-------------------------------------------------------
FY00 FY99 % Chg.
------------- ------------ -------------
REVENUES
Health Care Supply Management
Pharmaceutical Distribution & Services (2)
U.S. Health Care $ 16,104.1 $ 12,624.1 27.6 %
International 1,713.8 1,483.7 15.5
------------- ------------
Total Pharmaceutical Distribution & Services 17,817.9 14,107.8 26.3
Medical/Surgical Distribution & Services 2,032.3 1,640.8 23.9
------------- ------------
Total Health Care Supply Management 19,850.2 15,748.6 26.0
------------- ------------
Health Care Information Technology
Software 153.4 238.5 (35.7)
Services 699.3 728.9 (4.1)
Hardware 69.2 168.1 (58.8)
------------- ------------
Total Health Care Information Technology 921.9 1,135.5 (18.8)
e-Health 0.2 -
Corporate 9.5 29.0
------------- ------------
Total $ 20,781.8 $ 16,913.1 22.9
============= ============
OPERATING PROFIT
Health Care Supply Management
Before special items $ 389.7 $ 346.9 12.3
Special items (24.6) (3) (105.1) (7)
------------- ------------
Total Health Care Supply Management 365.1 241.8
------------- ------------
Health Care Information Technology
Before special items 112.3 115.3 (2.6)
Special items 187.5 (4) (41.4) (8)
------------- ------------
Total Health Care Information Technology 299.8 73.9
------------- ------------
e-Health
Before special items (4.9) -
Special items (1.5) (5) -
------------- ------------
Total e-Health (6.4) -
------------- ------------
Total Operating Profit 658.5 315.7
Interest - net (81.5) (63.8)
Corporate and other
Before special items (76.7) (36.9)
Special items (53.3) (6) -
------------- ------------
Total Corporate and other (130.0) (36.9)
------------- ------------
Income from continuing operations before income taxes
Before special items 338.9 361.5 (6.3)
Special items 108.1 (3)-(6) (146.5)(7),(8)
------------- ------------
Income from continuing operations before
income taxes $ 447.0 $ 215.0
============= ============
(1) All periods have been restated to classify the Water Products business as
a discontinued operation. On January 11, 2000, the Company announced it
had signed a definitive agreement to sell its Water Products business to
Groupe DANONE for $1.1 billion in cash.
(2) Excludes sales to customers' warehouses of $2,346.2 million and $2,206.0
million in the quarters and $6,647.3 million and $4,806.9 million in the
nine months ended December 31, 1999, and 1998, respectively.
(3) Includes $30.3 million in charges for receivable reserves and asset
impairments related primarily to a prior year implementation of a
contract system, partially offset by a $5.7 million reduction in prior
year restructuring reserves.
(4) Includes net gains totaling $256.0 million primarily on the sale of
equity investments and a gain on the exchange of the Company's WebMD
shares for Healtheon/WebMD shares that was recognized upon the completion
of the merger of the two companies in the quarter ended December 31,
1999. The gains are offset, in part, by a charge of $68.5 million for a
change in estimate of reserve requirements for accounts receivable and
customer reserves.
(5) Represents the write-off of purchased in-process technology associated
with the November 1999 acquisition of Abaton.com.
(6) Includes accounting and legal fees and other costs totaling $2.4 million
and $17.4 million incurred in the quarter and nine months ended December
31, 1999, in connection with the Company's earlier restatement of prior
years' financial results. Also includes $0.7 million and $3.6 million
incurred in the quarter and nine months ended December 31, 1999 in
acquisition-related costs. In addition, the nine months ended December
31, 1999 includes $32.3 million in severance and other costs associated
with former employees.
(7) Reflects charges associated with acquisitions including transaction
costs, employee benefit change of control provisions and restructuring,
integration and system installation costs associated with acquisition-
related activities. The nine months ended December, 1999 also includes
charges for the terminated merger with AmeriSource Corporation.
(8) Reflects charges associated with acquisitions including transaction
costs, employee severance and asset impairments.
Schedule II-1
McKESSON HBOC, INC.
PRO FORMA CONDENSED INCOME INFORMATION
Income From Continuing Operations Before Special Items (1)
(unaudited)
(in millions except per share amounts)
Quarter Ended December 31 Nine Months Ended December 31
-------------------------------------- ----------------------------------
% %
FY00 FY99 Chg. FY00 FY99 Chg.
------- -------- ------ --------- ---------- ------
Revenues
Excluding sales to customers' warehouses $ 7,544.7 $ 6,081.5 24.1 % $20,781.8 $ 16,913.1 22.9 %
Sales to customers' warehouses 2,346.2 2,206.0 6.4 6,647.3 4,806.9 38.3
---------- ---------- --------- ---------
Total 9,890.9 8,287.5 19.3 27,429.1 21,720.0 26.3
Costs and expenses 9,788.6 8,147.6 20.1 27,090.2 21,358.5 26.8
---------- ---------- --------- ---------
Income before income taxes 102.3 139.9 (26.9) 338.9 361.5 (6.3)
Income taxes (40.3) (52.3) (130.6) (137.6)
Dividends on preferred securities of
subsidiary trust (1.5) (1.5) (4.6) (4.6)
---------- ---------- --------- ---------
Income before special items $ 60.5 $ 86.1 (29.7) $ 203.7 $ 219.3 (7.1)
========== ========== ========= ==========
Earnings per common share
Diluted $ 0.21 $ 0.30 (30.0) $ 0.72 $ 0.77 (6.5)
Basic 0.21 0.31 (32.3) 0.72 0.80 (10.0)
Shares on which earnings per common
share were based
Diluted 288.8 289.7 (0.3) 289.8 289.3 0.2
Basic 281.4 275.2 2.3 281.1 274.1 2.6
(1) All periods have been restated to classify the Water Products business as a
discontinued operation. On January 11, 2000, the Company announced it had
signed a definitive agreement to sell its Water Products business to Groupe
DANONE for $1.1 billion in cash.
8
Schedule II-2
McKESSON HBOC, INC.
PRO FORMA RESULTS BY BUSINESS SEGMENT
Income From Continuing Operations Before Special Items (1)
(unaudited)
(in millions)
Quarter Ended December 31 Nine Months Ended December 31
----------------------------- -----------------------------
% %
FY00 FY99 Chg. FY00 FY99 Chg.
--------- --------- ------ ------- ------- -------
REVENUES
Health Care Supply Management
Pharmaceutical Distribution & Services (2)
U.S. Health Care $ 5,932.7 $ 4,572.5 29.7 % $16,104.1 $12,624.1 27.6 %
International 610.6 489.1 24.8 1,713.8 1,483.7 15.5
--------- --------- --------- ---------
Total Pharmaceutical Distribution & Services 6,543.3 5,061.6 29.3 17,817.9 14,107.8 26.3
Medical/Surgical Distribution & Services 704.6 630.2 11.8 2,032.3 1,640.8 23.9
--------- --------- --------- ---------
Total Health Care Supply Management 7,247.9 5,691.8 27.3 19,850.2 15,748.6 26.0
Health Care Information Technology
Software 53.6 79.9 (32.9) 153.4 238.5 (35.7)
Services 217.7 248.7 (12.5) 699.3 728.9 (4.1)
Hardware 21.5 52.2 (58.8) 69.2 168.1 (58.8)
--------- --------- --------- ---------
Total Health Care Information Technology 292.8 380.8 (23.1) 921.9 1,135.5 (18.8)
e-Health 0.2 - 0.2 -
Corporate 3.8 8.9 9.5 29.0
--------- --------- --------- ---------
Total $ 7,544.7 $ 6,081.5 24.1 $20,781.8 $16,913.1 22.9
========= ========= ========= =========
OPERATING PROFIT
Health Care Supply Management $ 137.3 $ 130.3 5.4 $ 389.7 $ 346.9 12.3
Health Care Information Technology 26.3 47.1 (44.2) 112.3 115.3 (2.6)
e-Health (4.9) - (4.9) -
-------- --------- --------- --------
Total 158.7 177.4 (10.5) 497.1 462.2 7.6
Interest - net (27.1) (23.9) (81.5) (63.8)
Corporate and other (29.3) (13.6) (76.7) (36.9)
-------- --------- --------- --------
Income before income taxes 102.3 139.9 (26.9) 338.9 361.5 (6.3)
Income taxes (40.3) (52.3) (130.6) (137.6)
Dividends on preferred securities of
subsidiary trust (1.5) (1.5) (4.6) (4.6)
-------- --------- --------- --------
Income from continuing operations before
special items $ 60.5 $ 86.1 (29.7) $ 203.7 $ 219.3 (7.1)
======== ========= ========= ========
STATISTICS ($ in millions)
Operating Profit as a % of revenues (2)
Health Care Supply Management 1.89% 2.29% (40) bp 1.96% 2.20% (24) bp
Health Care Information Technology 8.98% 12.37% (339) 12.18% 10.15% 203
e-Health N.M N.M N.M N.M
Earnings before interest and income taxes $129.4 $163.8 (21.0)% $420.4 $425.3 (1.2)%
as a % of revenues (2) 1.72% 2.69% (97) bp 2.02% 2.51% (49) bp
Diluted earnings per share $0.21 $0.30 (30.0)% $ 0.72 $0.77 (6.5)%
Return on committed capital - 12 months ended 22.0% 25.1%
Return on equity - 12 months ended 12.2% 13.0%
(1) All periods have been restated to classify the Water Products business as a
discontinued operation. On January 11, 2000, the Company announced it had
signed a definitive agreement to sell its Water Products business to Groupe
DANONE for $1.1 billion in cash.
(2) Excludes sales to customers' warehouses of $2,346.2 million and $2,206.0
million in the quarters and $6,647.3 million and $4,806.9 million in the
nine months ended December 31, 1999, and 1998, respectively.
9
Schedule III
McKESSON HBOC., INC.
PRO FORMA QUARTERLY RESULTS BY BUSINESS SEGMENT (1)
Income From Continuing Operations Before Special Items
(unaudited)
(in millions, except per share amounts)
Fiscal 1999
--------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
----------- ----------- ----------- ----------- ------------
REVENUES
Health Care Supply Management
Pharmaceutical Distribution & Services
U.S. Health Care (2) $ 3,881.9 $ 4,169.7 $ 4,572.5 $ 4,775.1 $ 17,399.2
International 518.9 475.7 489.1 469.3 1,953.0
----------- ----------- ----------- ----------- ------------
Total 4,400.8 4,645.4 5,061.6 5,244.4 19,352.2
Medical/Surgical Distribution & Services 491.2 519.4 630.2 651.4 2,292.2
----------- ----------- ----------- ----------- ------------
Total Health Care Supply Management 4,892.0 5,164.8 5,691.8 5,895.8 21,644.4
----------- ----------- ----------- ----------- ------------
Health Care Information Technology
Software 76.3 82.3 79.9 106.5 345.0
Services 234.7 245.5 248.7 255.5 984.4
Hardware 58.5 57.4 52.2 40.6 208.7
----------- ----------- ----------- ----------- ------------
Total Health Care Information Technology 369.5 385.2 380.8 402.6 1,538.1
----------- ----------- ----------- ----------- ------------
e-Health -- -- -- -- --
Corporate 10.9 9.2 8.9 3.9 32.9
----------- ----------- ----------- ----------- ------------
Total $ 5,272.4 $ 5,559.2 $ 6,081.5 $ 6,302.3 $ 23,215.4
=========== =========== =========== =========== ============
OPERATING PROFIT
Health Care Supply Management $ 108.3 $ 108.3 130.3 $ 175.0 $ 521.9
as a % of revenues (2) 2.21% 2.10% 2.29% 2.97% 2.41%
Health Care Information Technology 45.7 22.5 47.1 68.7 184.0
as a % of revenues 12.37% 5.84% 12.37% 17.06% 11.96%
e-Health -- -- -- -- --
as a % of revenues -- -- -- -- --
----------- ----------- ----------- ----------- ------------
Total 154.0 130.8 177.4 243.7 705.9
Interest - net (20.3) (19.6) (23.9) (26.6) (90.4)
Corporate and other (12.8) (10.5) (13.6) (14.5) (51.4)
----------- ----------- ----------- ----------- ------------
Income before income taxes 120.9 100.7 139.9 202.6 564.1
Income taxes (46.2) (39.1) (52.3) (73.8) (211.4)
Dividends on preferred securities of
subsidiary trust (1.6) (1.5) (1.5) (1.6) (6.2)
----------- ----------- ----------- ----------- ------------
Income before special items $ 73.1 $ 60.1 $ 86.1 $ 127.2 $ 346.5
=========== =========== =========== =========== ============
Earnings per common share
Diluted $ 0.26 $ 0.21 $ 0.30 $ 0.45 $ 1.22
Basic 0.27 0.22 0.31 0.46 1.26
Shares on which earnings per common
share were based
Diluted 288.4 289.9 289.7 291.4 289.8
Basic 272.4 274.6 275.2 278.8 275.2
(1) All periods have been restated to classify the Water Products business as
a discontinued operation. On January 11, 2000, the Company announced it
had signed a definitive agreement to sell its Water Products business to
Groupe DANONE for $1.1 billion in cash.
(2) Excludes sales to customers' warehouses of: $ 927.9 $ 1,673.0 $ 2,206.0 $ 2,006.4 $ 6,813.3
Fiscal 2000
---------------------------------------
First Second Third
Quarter Quarter Quarter
----------- ----------- -----------
REVENUES
Health Care Supply Management
Pharmaceutical Distribution & Services
U.S. Health Care (2) $ 4,907.4 $ 5,264.0 $ 5,932.7
International 555.5 547.7 610.6
----------- ----------- -----------
Total 5,462.9 5,811.7 6,543.3
Medical/Surgical Distribution & Services 655.1 672.6 704.6
----------- ----------- -----------
Total Health Care Supply Management 6,118.0 6,484.3 7,247.9
----------- ----------- -----------
Health Care Information Technology
Software 52.5 47.3 53.6
Services 244.6 237.0 217.7
Hardware 20.3 27.4 21.5
----------- ----------- -----------
Total Health Care Information Technology 317.4 311.7 292.8
----------- ----------- -----------
e-Health -- -- 0.2
Corporate 2.8 2.9 3.8
----------- ----------- -----------
Total $ 6,438.2 $ 6,798.9 $ 7,544.7
=========== =========== ===========
OPERATING PROFIT
Health Care Supply Management $ 125.4 $ 127.0 $ 137.3
as a % of revenues (2) 2.05% 1.96% 1.89%
Health Care Information Technology 56.1 29.9 26.3
as a % of revenues 17.67% 9.59% 8.98%
e-Health -- -- (4.9)
as a % of revenues -- -- N.M.
----------- ----------- -----------
Total 181.5 156.9 158.7
Interest - net (29.5) (24.9) (27.1)
Corporate and other (21.2) (26.2) (29.3)
----------- ----------- -----------
Income before income taxes 130.8 105.8 102.3
Income taxes (50.0) (40.3) (40.3)
Dividends on preferred securities of
subsidiary trust (1.6) (1.5) (1.5)
----------- ----------- -----------
Income before special items $ 79.2 $ 64.0 $ 60.5
=========== =========== ===========
Earnings per common share
Diluted $ 0.28 $ 0.23 $ 0.21
Basic 0.28 0.23 0.21
Shares on which earnings per common
share were based
Diluted 290.2 289.4 288.8
Basic 280.6 281.1 281.4
(1) All periods have been restated to classify the Water Products business as
a discontinued operation. On January 11, 2000, the Company announced it
had signed a definitive agreement to sell its Water Products business to
Groupe DANONE for $1.1 billion in cash.
(2) Excludes sales to customers' warehouses of: $ 2,160.6 $ 2,140.5 $ 2,346.2
10