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 McKESSON HBOC, INC. PROFIT-SHARING INVESTMENT PLAN FINANCIAL STATEMENTS, SUPPLEMENTAL SCHEDULES AND EXHIBIT TABLE OF CONTENTS - ------------------------------------------------------------------------------ Page 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 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- McKESSON HBOC, INC. PROFIT-SHARING INVESTMENT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS MARCH 31, 2000 AND 1999 (in 000's) - ----------------------------------------------------------------------------------------------------------------- 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 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 ======== ======== ========= ========= ========== - --------------------------------------------------------------------------------------------------------- 1999 ---------------------------------------------------- Participant Non-Participant Directed Directed Profit- --------------- ----------------------- Plan's Sharing Share of Company Company Investment Master Stock Investment Plan Trust Fund Fund Total 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 ======== ========== ========= ========== See notes to financial Statements. -2- 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) - ------------------------------------------------------------------------------------------------------------------------------- 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 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 ========= ========= ========== ========= ========== - ------------------------------------------------------------------------------------------------------------------------------- 1999 ------------------------------------------------------------- Participant Non-Participant Directed Directed Profit- ----------------- ---------------------------- Plan's Sharing Share of Company Company Investment Master Stock Investment Plan Trust Fund Fund Total 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 ============= =========== ========== ========== See notes to financial statements. -3- 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- 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- 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- 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- 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: Number of Fair Value Shares of Shares Unallocated 10,987,221 $230,731,641 Allocated 7,239,555 152,030,655 ---------- ------------ Total 18,226,776 $382,762,296 ========== ============ 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- 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- Plan's Plan's Ownership Ownership 2000 % 1999 % 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% ======== ======== 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- 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- 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- 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- McKESSON HBOC, INC. PROFIT-SHARING INVESTMENT PLAN SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED MARCH 31, 2000 - ----------------------------------------------------------------------- None noted. -14- 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