SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-13252
MCKESSON CORPORATION
A DELAWARE CORPORATION
I.R.S. EMPLOYER NUMBER 94-3207296
MCKESSON PLAZA, ONE POST STREET, SAN FRANCISCO, CA 94104
TELEPHONE - AREA CODE (415) 983-8300
Securities registered pursuant to Section 12(b) of the Act:
(NAME OF EACH EXCHANGE
(TITLE OF EACH CLASS) ON WHICH REGISTERED)
Common Stock, $.01 par value New York Stock Exchange
Pacific Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Exchange, Inc.
Securities registered pursuant to Section 12 (g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of voting stock held by nonaffiliates of the Registrant
at June 1, 1998: $5,606,443,190
Number of shares of common stock outstanding at June 1, 1998: 94,929,952
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended March 31, 1998 are incorporated by reference into Parts I, II and IV of
this report. Portions of the Registrant's Proxy Statement for its Annual
Meeting of Stockholders to be held on July 29, 1998 are incorporated by
reference into Part III of this report.
TABLE OF CONTENTS
ITEM PAGE
- ---- -----
PART I
1. Business................................................................. 1
2. Properties............................................................... 7
3. Legal Proceedings........................................................ 7
4. Submission of Matters to a Vote of Security Holders...................... 10
Executive Officers of the Registrant..................................... 11
PART II
5. Market for the Registrant's Common Stock and Related Stockholder Matters 13
6. Selected Financial Data................................................. 13
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 13
7A. Quantitative and Qualitative Disclosures About Market Risk.............. 13
8. Financial Statements and Supplementary Data............................. 13
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................................ 13
PART III
10. Directors and Executive Officers of the Registrant....................... 14
11. Executive Compensation................................................... 14
12. Security Ownership of Certain Beneficial Owners and Management........... 14
13. Certain Relationships and Related Transactions........................... 14
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............ 15
Signatures.................................................................. 17
PART I
ITEM 1 . BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
McKesson Corporation ("McKesson", the "Company" or the "Registrant") is the
leading health care supply management company in North America. The Company
also develops and manages marketing programs for pharmaceutical manufacturers
and, through McKesson Water Products Company ("Water Products"), processes and
markets pure drinking water.
The Company's objective is to be the world leader in health care supply
across the entire supply chain, from manufacturer to patient. In pursuit of
this goal, the Company has completed a number of acquisitions in its health care
business. Since late 1995, the Company has acquired General Medical Inc. (now
"McKesson General Medical" or "MGM"), the nation's leading distributor of
medical and surgical supplies to the total acute care, physician care and
extended care market, the pharmaceutical distribution business of FoxMeyer
Corporation ("FoxMeyer"), Automated Healthcare, Inc. (now "McKesson Automated
Healthcare, Inc." or "MAH"), a manufacturer of automated pharmaceutical
dispensing equipment for hospitals, and Ogden BioServices Corporation (now
"McKesson BioServices Corporation"), a provider of support services to
government and commercial organizations engaged in pharmaceutical research and
development. In addition, on September 23, 1997, the Company announced an
agreement to acquire AmeriSource Health Corporation ("AmeriSource"), a leading
distributor of pharmaceutical and related health care products and services.
However, the Federal Trade Commission ("FTC") has filed a complaint in the
United States District Court for a preliminary injunction to enjoin the
transaction.
RECENT ACQUISITIONS AND DISPOSITIONS
McKesson has undertaken several initiatives in recent years to further focus the
Company on its core health care business:
. In September 1997, the Company signed a definitive merger agreement
providing for the Company to acquire AmeriSource.
. In August 1997, the Company's Canadian health care distribution
business, Medis Health and Pharmaceutical Services Inc. ("Medis"),
announced an agreement to transition the retail customers of Drug Trading
Company, Limited to Medis.
. In March 1997, the Company disposed of Millbrook Distribution Services
Inc. ("Millbrook"), a non-health care business, for an amount on an after-
tax basis which approximated Millbrook's book value.
. In March 1997, the Company sold its Aqua-Vend vended water business, a
unit of Water Products.
. In February 1997, the Company acquired MGM for approximately $775
million.
. In December 1996, the Company disposed of its 55% equity interest in
Armor All Products Corporation ("Armor All"), a non-health care business.
. In November 1996, the Company acquired FoxMeyer out of bankruptcy for
approximately $598 million.
1
. In April 1996, the Company acquired MAH for approximately $65 million.
. In December 1995, the Company acquired McKesson BioServices
Corporation, for approximately $20 million .
Developments which could be considered significant to individual segments
of the business are described under (c)(1) "Narrative Description of Business"
on pages 2 through 5 of this report.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information for the three years ended March 31, 1998 included in
Financial Note 15, "Segments of Business", on pages 49 and 50 of the 1998
Consolidated Financial Statements which is included as Exhibit 13 to this Form
10-K Report, is incorporated herein by reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS
(1) DESCRIPTION OF SEGMENTS OF BUSINESS
The Company conducts its operations through two operating business segments
which generated annual sales in fiscal 1998 of $20.9 billion, approximately
98.6% in the Health Care Services segment and approximately 1.4% in the Water
Products segment.
HEALTH CARE SERVICES
PRODUCTS & MARKETS
Through its Health Care Services segment, the Company is the leading
distributor of ethical and proprietary drugs and health and beauty care products
in North America. The Company is the market leader in its core U.S.
pharmaceutical distribution businesses. U.S. Health Care Services operations
also include Healthcare Delivery Systems, Inc. ("HDS") and McKesson BioServices
Corporation, through which the Company provides marketing and other support
services to pharmaceutical manufacturers; MAH, a business that specializes in
the manufacture and sale of automated pharmaceutical dispensing systems for
hospitals; Zee Medical, Inc., a distributor of first-aid products and safety and
supplies to industrial and commercial customers; and MGM, the nation's third
largest distributor of medical-surgical supplies to hospitals (acute care) and
the leading supplier of medical-surgical supplies to the full-range of
alternate-site health care facilities, including physicians and clinics (primary
care), long-term care and home-care sites (extended care). International
operations include Medis, a wholly-owned subsidiary and the largest
pharmaceutical distributor in Canada; and the Company's 22.7% equity interest in
Nadro, S.A. de C.V., a leading pharmaceutical distributor in Mexico.
2
The Company's domestic pharmaceutical and medical-surgical distribution
operations supply pharmaceuticals, health and beauty care products, and medical
and surgical products to independent and chain pharmacies, hospitals, alternate-
site health care facilities, food stores and mass merchandisers in all 50
states. Using the names Economost(R) and Econolink(R) and a number of related
service marks, the Company has promoted electronic order entry systems and a
wide range of computerized merchandising and asset management services for
pharmaceutical retailers and hospitals. The Company also supplies computer-
based practice management systems to pharmaceutical retailers. The Company
believes that its financial strength, purchasing leverage, nationwide network of
distribution centers, and advanced logistics and information technologies
provide competitive advantages to its pharmaceutical distribution operations.
Health Care Services serves three primary customer segments: retail
chains, retail independent pharmacies and institutional providers (including
hospitals, health care facilities and pharmacy service operators) which
represented approximately 34%, 33% and 33% respectively, of U.S. Health Care
Services revenues in the fourth quarter of fiscal 1998.
Health Care Services has been organized into three groups to address the
specific needs of the Company's key market segments and the pharmaceutical
manufacturers: McKesson Health Systems Group, McKesson Pharmaceutical Services
and International Group, and McKesson Customer Operations Group.
McKesson Health Systems Group. McKesson Health Systems Group includes McKesson
Health Systems, MGM, MAH and Medpath. These four business units provide
distribution services for pharmaceuticals, medical and surgical products,
automation technologies, and related logistics and management information
systems support to the institutional market, which includes hospitals,
alternate-site providers, and integrated health networks. The McKesson Health
Systems unit serves the pharmaceutical supply management needs of hospitals,
health care organizations, and integrated health networks. MGM provides medical-
surgical supply management needs across the continuum of care, including acute
care, primary care and extended care. MAH manufactures and markets automated
pharmacy systems, including the ROBOT-Rx/TM/system, a robotic pharmacy
dispensing and utilization tracking system that enables hospitals to lower
pharmacy costs while significantly improving the accuracy of pharmaceutical
dispensing, AcuDose-Rx/TM/ pharmaceutical dispensing technology and AcuScan/TM/
that automates and streamlines the medication information requirements at the
patient bedside. Medpath provides distribution primarily of oncology medication
for use in the physician office market.
McKesson Pharmaceutical Services and International Group. McKesson
Pharmaceutical Services and International Group combines the Company's retail
marketing, pharmaceutical procurement and product management functions in a
single group that is focused on (i) helping manufacturers meet their marketing
goals and (ii) creating affiliation programs and information technologies for
the Company's retail customers. The linkage of these functions allows the
Company to enhance the flow of pharmaceutical products from manufacturers to
retailers to patients through advanced marketing programs and information
services, including the Valu-Rite(R), Valu-Rite/CareMax/SM/ and Health Mart(R)
retail networks, the OmniLink(R) centralized pharmacy technology platform, which
offers retail network members connectivity with managed care organizations
while promoting compliance with managed care plans, and Pay$ystems, which
provides 24-hour advanced funding of third-party reimbursements. The group
includes HDS, which performs specialized logistics, marketing support and
patient services for manufacturers, and McKesson BioServices Corporation, which
provides biomedical support services to the pharmaceutical and biotechnology
industries, the U.S. Government, universities and institutions, and contract
research organizations. Also, included in this group is Medis, the largest
pharmaceutical distributor in Canada.
3
McKesson Customer Operations Group. McKesson Customer Operations Group
comprises the Company's pharmaceutical distribution operations and retail
pharmacy sales and services, addressing the needs of independent pharmacies,
retail pharmacy chains, food stores and mass merchandisers. The Company is in
the process of implementing its Acumax(R) Plus warehouse management systems in
its pharmaceutical distribution centers, providing real-time inventory
statistics and tracking product from the receiving dock to shipping through
scanned bar-code information with accuracy levels of more than 99%. This system
is designed to ensure that the right product arrives at the right time and place
for both the Company's customers and their patients.
COMPETITION
In every area of operations, the distribution businesses face strong
competition both in price and service from national, regional and local full-
line, short-line and specialty wholesalers, service merchandisers, self-
warehousing chains, mail-order facilities and from manufacturers engaged in
direct distribution. The particular areas in which U.S. Health Care Services
provides services are in a rapid state of development, and therefore there are
no clearly defined markets in which U.S. Health Care Services competes. It
nonetheless faces competition from various other service providers and from
pharmaceutical and other health care manufacturers (as well as other potential
customers of U.S. Health Care Services) which may from time to time decide to
develop, for their own internal needs, those services which are provided by U.S.
Health Care Services and other competing service providers. Price, quality of
service, and, in some cases, convenience to the customer are generally the
principal competitive elements in the Health Care Services segment.
INTELLECTUAL PROPERTY
The principal trademarks and service marks of the Health Care Services
segment are: ECONOMOST(R), ECONOLINK(R), McKesson INFOLINK/SM/, VALU-RITE(R),
Valu-Rite/CareMax/SM/, OmniLink(R), Health Mart(R), ROBOT-Rx/TM/, AcuDose-Rx/TM/
and AcuScan-Rx/TM/. The Company also owns other registered and unregistered
trademarks and service marks and similar rights. Registration for all of the
principal marks has been obtained, or applied for, in the United States. The
United States federal registrations of these trademarks and service marks have
ten or twenty year terms, depending on date of registration; the Canadian
registrations have fifteen year terms. All are subject to unlimited renewals.
The Company believes this business has taken all necessary steps to preserve the
registration and duration of its trademarks and service marks, although no
assurance can be given that it will be able to successfully enforce or protect
its rights thereunder in the event that they are subject to third-party
infringement. The Company does not consider any particular patent, license,
franchise or concession to be material to the business of the Health Care
Services segment.
WATER PRODUCTS
PRODUCTS & MARKETS
Water Products is a leading provider in the $3.4 billion bottled water
industry in the United States. It is one of the largest bottled water companies
in most of the geographic markets in which it competes and the third largest
overall in the United States. Water Products is primarily engaged in the
processing and sale of bottled drinking water delivered to more than 530,000
homes and businesses under its Sparkletts(R), Alhambra(R), and Crystal/TM/
brands in California, Arizona, Nevada, Oklahoma, Washington, Texas and New
Mexico. It also sells packaged water through retail stores.
4
COMPETITION
Although this business faces competition from several larger competitors,
the competition is generally widely dispersed between many different entities.
Principal among the large local competitors of the Water Products segment are:
Arrowhead (California and Arizona) and Ozarka/Oasis (Texas) (both owned by
Nestle); Hinckley & Schmitt (Arizona, Las Vegas, and Southern California) and
Sierra Springs (Northern California and Texas) (both owned by Suntory
International Corporation); Crystal Geyser (nationally distributed); Evian
(nationally distributed) (owned by Groupe Danone, S.A.) and private label
brands. This operation faces significant competition in both price and service
in all aspects of its business.
INTELLECTUAL PROPERTY
The principal trademarks and service marks of the Water Products segment
are: SPARKLETTS/R/, ALHAMBRA/R/, and CRYSTAL/TM/. Water Products also owns
other registered and unregistered trademarks and service marks used by the Water
Products segment. All of the principal trademarks and service marks are
registered in the United States, in addition to certain other jurisdictions.
The United States federal registrations of these trademarks have terms of ten or
twenty years, depending on date of registration, and are subject to unlimited
renewals. The Company believes this business has taken all necessary steps to
preserve the registration and duration of its trademarks and service marks,
although no assurance can be given that it will be able to successfully enforce
or protect its rights thereunder in the event that they are subject to third-
party infringement. The Company does not consider any particular patent,
license, franchise or concession to be material to the business of the Water
Products segment.
AMERISOURCE MERGER AGREEMENT
On September 23, 1997, the Company and AmeriSource announced the execution
of a definitive Merger Agreement providing for the Company to acquire
AmeriSource (the "Merger"). On March 3, 1998, the FTC voted to block the
proposed Merger. On March 9, 1998, the FTC filed a complaint in the United
States District Court for the District of Columbia seeking a preliminary
injunction to halt the Merger. On March 18, 1998, McKesson and AmeriSource each
announced that they will oppose the FTC's motion for preliminary injunction. A
hearing on the FTC's motion is expected to begin June 9, 1998. Although the
Merger and the transactions contemplated thereby have been approved by
stockholders of both companies, there can be no assurance that McKesson and
AmeriSource will prevail in this litigation, that the Merger will be completed,
or that it will be completed as contemplated or what the results of the Merger
might be.
Under the terms of the Merger Agreement, stockholders of AmeriSource would
receive a fixed exchange ratio of 1.42 shares of McKesson common stock for each
share of AmeriSource common stock. The Company would issue up to 36.4 million
new shares of common stock in the Merger, and would assume the long-term debt of
AmeriSource which was approximately $631 million at March 31, 1998. The merger
of the two companies has been structured as a tax-free transaction and would be
accounted for as a pooling of interests. The combined company would operate
under the McKesson name and would be headquartered in San Francisco. Upon
completion of the Merger, R. David Yost, currently president and chief executive
officer of AmeriSource, would become group president of the AmeriSource Services
Group and a McKesson corporate vice president. Also upon completion of the
Merger, McKesson's board of directors would be expanded from nine to twelve
members, which would include Mr. Yost and two other directors from the current
AmeriSource board.
AmeriSource has reported that it is one of the nation's top three
distributors in serving the hospital and managed care market segment and the
fourth largest full-service wholesale distributor of pharmaceutical products and
related health care services in the United States.
5
(2) OTHER INFORMATION ABOUT THE BUSINESS
Customers -- No material part of the business is dependent upon a single or
a very few customers, the loss of any one of which could have a material adverse
effect on the Company or any of its business segments.
Environmental Legislation -- The Company sold its chemical distribution
operations in fiscal 1987. In connection with the disposition of those
operations, the Company retained responsibility for certain environmental
obligations and has entered into agreements with the Environmental Protection
Agency and certain states pursuant to which it is or may be required to conduct
environmental assessments and cleanups at several closed sites. These matters
are described further in Item 3 "Legal Proceedings" on pages 7 to 10 of this
report. Other than any capital expenditures which may be required in connection
with those matters, the Company does not anticipate making substantial capital
expenditures for environmental control facilities or to comply with
environmental laws and regulations in the future. The amount of capital
expenditures expended by the Company for environmental compliance was not
material in fiscal 1998 and is not expected to be material in the next fiscal
year.
Employees -- At March 31, 1998, the Company employed approximately 13,700
persons.
Backlog Orders -- Both of the Company's segments seek to promptly fill or
otherwise satisfy the orders of each such segment's customers. Accordingly,
neither of the Company's segments has a significant backlog of customer orders.
Risk Factors --
Risk Generally Associated with Acquisitions: An element of the Company's
growth strategy is to pursue strategic acquisitions that either expand or
complement its business, and the Company routinely reviews such potential
acquisition opportunities. Acquisitions involve a number of special risks,
including the diversion of management's attention to the assimilation of the
operations from other business concerns, difficulties in the integration of
operations and systems, delays or difficulties in opening and operating larger
distribution centers in an integrated distribution network, the assimilation and
retention of the personnel of the acquired companies, challenges in retaining
the customers of the combined businesses and potential adverse short-term
effects on operating results. In addition, the Company may require additional
debt or equity financing for future acquisitions, which may not be available on
terms favorable to the Company, if at all. The inability of the Company to
successfully finance, complete and integrate strategic acquisitions in a timely
manner could have an adverse impact on the Company's results of operations and
its ability to effect a portion of its growth strategy.
Changing United States Health Care Environment: In recent years, the
health care industry has undergone significant change driven by various efforts
to reduce costs, including potential national health care reform, trends toward
managed care, cuts in Medicare, consolidation of pharmaceutical and medical-
surgical supply distributors, and the development of large, sophisticated
purchasing groups. This industry is expected to continue to undergo significant
changes for the foreseeable future. Other healthcare industry factors that
could have a material adverse effect on the Company's results of operations
include: (i) changes in governmental support of health care services, the
method by which such services are delivered or the prices for such services;
(ii) other legislation or regulations governing such services or mandated
benefits; or (iii) changes in pharmaceutical manufacturers' pricing or
distribution policies.
6
Computer Technologies: The Company relies heavily on computer technologies
to operate its business. As a result, the Company continuously seeks to upgrade
and improve its computer systems in order to provide better service to its
customers and to support the Company's growth. The Company has conducted an
assessment of its computer systems and has begun to make the changes necessary
to make its computer systems Year 2000 compliant. The Company believes that
with modifications to or replacements of its existing computer-based systems, it
will be Year 2000 compliant by March 31, 1999, although the Company cannot
provide any assurance in this regard. The Company's systems rely in part on the
computer-based systems of its trading partners. As part of the Company's
assessment, an overview of certain of its trading partners' Year 2000 compliance
strategies is being performed, and the Company plans to conduct extensive
systems testing with such trading partners during calendar 1999. Nevertheless,
if any trading partners or other entity upon which they rely failed to become
Year 2000 compliant, the Company could be adversely affected. The Company
incurred approximately $7 million in fiscal 1998 and expects to incur between
$10 and $15 million in each of the next two fiscal years in costs associated
with modification to the Company's existing systems to make them Year 2000
compliant and related testing, including planned testing with trading partners.
Such costs are being expensed as incurred. Year 2000 project costs are
difficult to estimate accurately and the projected cost could change due to
unanticipated technological difficulties, project vendor delays, and project
vendor costs overruns. The inability of the Company to successfully complete
its Year 2000 compliance project or to maintain computer systems that meet the
Company's and its customers' needs could have an adverse effect on the Company.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Information as to foreign operations included in Financial Note 15,
"Segments of Business" on pages 49 and 50 of the Consolidated Financial
Statements which is included as Exhibit 13 to this Form 10-K Report, is
incorporated herein by reference.
ITEM 2. PROPERTIES
Because of the nature of the Company's principal businesses, plant,
warehousing, office and other facilities are operated in widely dispersed
locations. The warehouses are typically owned or leased on a long-term basis.
Information as to material lease commitments included in Financial Note 10,
"Lease Obligations" on page 39 of the 1998 Consolidated Financial Statements
which is included as Exhibit 13 to this Form 10-K Report, is incorporated herein
by reference. The Company believes its present facilities to be in satisfactory
condition and adequate for the Company's current and anticipated needs without
making capital expenditures materially higher than historical levels.
ITEM 3. LEGAL PROCEEDINGS
In addition to commitments and obligations in the ordinary course of
business, the Company is subject to various claims, other pending and potential
legal actions for product liability and other damages, investigations relating
to governmental laws and regulations, and other matters arising out of the
normal conduct of the Company's business.
7
The Company currently is a defendant in numerous civil antitrust actions
filed since 1993 in federal and state courts by retail pharmacies. The federal
cases have been coordinated for pretrial purposes in the United States District
Court in the Northern District of Illinois and are known as MDL 997. MDL 997
consists of a consolidated class action (the "Federal Class Action") as well as
approximately 109 additional actions brought by approximately 3,500 individual
retail, chain and supermarket pharmacies (the "Individual Actions"). There are
numerous other defendants in these actions including several pharmaceutical
manufacturers and several other wholesale distributors. These cases allege, in
essence, that the defendants have violated the Sherman Act by conspiring to fix
the prices of brand name pharmaceuticals sold to plaintiffs at artificially
high, and non-competitive levels, especially as compared with the prices charged
to mail order pharmacies, managed care organizations and other institutional
buyers. A class has been certified in the Federal Class Action. The Seventh
Circuit Court of Appeals reversed the District Court's grant of summary judgment
in favor of the Company and the other wholesale distributors in the Federal
Class Action. Trial of the Federal Class Action is currently scheduled to begin
on September 14, 1998. The Individual Actions will remain in the Northern
District of Illinois for pre-trial purposes, but will be remanded to their
original transferor jurisdictions for trial.
The currently pending state court antitrust cases against the Company are
in California, Alabama and Mississippi. The Company has been dismissed pursuant
to a settlement in cases which were pending in Wisconsin (K-S Pharmacy, et al.
v. Abbott Laboratories, et al.) and Minnesota (Salk Drug v. Abbott Laboratories,
et al.). The state cases are based essentially on the same facts alleged in the
Federal Class Action and Individual Actions and assert violations of state
antitrust and/or unfair competition laws. The case in California (referred to
as Coordinated Special Proceeding, Pharmaceutical Cases I, II & III) is pending
in Superior Court for the State of California (San Francisco County). A class
of retail pharmacies has been certified and the case is trailing MDL 997. The
case in Alabama (Durrett, et al. v. The Upjohn Co. et al.) is venued in the
Circuit Court for Greene County, Alabama . A class has not yet been certified,
and the case is currently before the Alabama Supreme Court on an appeal from the
denial of defendants' motion to dismiss. The case in Mississippi (Montgomery
Drug Co. et al. v. The Upjohn Co. et al.) is pending in the Chancery Court of
Prentiss County, Mississippi. The Chancery Court has held that the case may not
be maintained as a class action.
In each of the cases, plaintiffs seek remedies in the form of injunctive
relief and unquantified monetary damages, and attorneys fees and costs.
Plaintiffs in the California cases also seek restitution. In addition, trebled
damages are sought in the Federal Class Action, the Individual Actions and the
California case and statutory penalties of $500 per violation are sought in the
Mississippi and Alabama cases. The Company believes it has meritorious defenses
to the allegations made against it and intends to vigorously defend itself in
all of these actions. In addition, the Company has entered into a judgment
sharing agreement with certain pharmaceutical manufacturer defendants, which
provides generally that the Company (together with the other wholesale
distributor defendants) will be held harmless by such pharmaceutical
manufacturer defendants and will be indemnified against the costs of adverse
judgments, if any, against the wholesaler and manufacturers in these or similar
actions, in excess of $1 million in the aggregate per wholesale distributor
defendant.
In January 1997, the Company and twelve pharmaceutical manufacturers (the
"Manufacturer Defendants') were named as defendants in the matter of FoxMeyer
Health Corporation vs. McKesson Corporation, et. al. filed in the District Court
in Dallas County, Texas. In its complaint, Plaintiff (the parent corporation of
FoxMeyer Drug Company and FoxMeyer Corporation collectively, "FoxMeyer
Corporation") alleges that, among other things, the Company (i) defrauded
Plaintiff, (ii) competed unfairly and tortiously interfered with FoxMeyer
Corporation's business operations, and (iii) conspired with the Manufacturer
Defendants, all in order to destroy FoxMeyer Corporation's business, restrain
trade and monopolize the marketplace, and allow the Company to purchase that
business at a distressed price. Plaintiff seeks relief against all defendants
in the form of compensatory damages of at least $400 million, punitive damages,
attorneys fees and costs. The Company answered the complaint, denying the
allegations, and removed the case to federal bankruptcy court in Dallas (the
"Texas Action").
8
In March 1997, the Company and the Manufacturer Defendants filed a
complaint in intervention against Plaintiff (now known as Avatex Corporation) in
the action filed against Avatex by the FoxMeyer Unsecured Creditors Committee in
the United States Bankruptcy Court for the District of Delaware. The complaint
in intervention seeks declaratory relief and an order enjoining Avatex from
pursuing the Texas Action. Motions for summary judgment filed by the Company,
the Manufacturer Defendants and the Chapter 7 trustee in the Delaware action are
pending, as is a motion by Avatex to transfer the complaint in intervention to
the Texas Bankruptcy Court. In August 1997, the Texas Bankruptcy Court entered
an order denying the defendants' motion to transfer the case to the District of
Delaware and deferred ruling on the plaintiff's motion to demand the case to the
Texas State Court until the bankruptcy court in Delaware has ruled on the
motions for the summary judgment. The Company believes it has meritorious
defenses to the allegations made against it and intends to vigorously defend
this litigation.
In July 1995, a purported class action was filed in the Supreme Court of
the State of New York against General Medical Corp., Inc. (also known as
McKesson General Medical) and several other defendants by Richard A. Bernstein,
Chairman and President of Rabco Health Services, Inc. and Chairman of General
Medical at the time of its leveraged buyout in 1993. Plaintiff alleges a
conspiracy to orchestrate the buyout of plaintiff's interest in Rabco at an
unfairly low price. Plaintiff alleges common law fraud, breach of fiduciary
duty and inducing breach of fiduciary duty. Plaintiff seeks rescissionary
damages of $50 million, compensatory damages of $25 million, and punitive
damages of $25 million. The complaint was initially dismissed with prejudice by
the Court but that order was reversed by the Court's Appellate Division.
Defendants thereupon filed their answers to the complaint together with a motion
for leave to appeal to the Court of Appeals, which motion was denied. A renewed
motion by defendants General Medical and GM Holdings to dismiss and/or for
summary judgment is pending. The Company believes it has meritorious defenses
to the allegations made against it and intends to vigorously defend the action.
The Company has been named along with several other defendants in two
lawsuits in California, Royer v. Wyeth-Ayerst Laboratories, et al. and Valentine
v. Wyeth-Ayerst Laboratories, et al., alleging that the plaintiffs have been
injured because they took the drugs fenfluramine or dexfenfluramine with
phentermine, commonly known as dexfen-phen or fen-phen. The Company has
tendered the cases to manufacturers of the drugs and has filed an answer in one
of the cases pending a reply. In addition, a third fen-phen case, Galvan v.
American Home Products, et al., filed in New York state court against a customer
of the Company, has been tendered to the Company by the customer. This case is
being defended by counsel retained by the Company to protect the customer's
interest pending the determination of tender to the manufacturers.
Primarily as a result of the operation of its former chemical businesses,
which were divested in fiscal 1987, the Company is involved in various matters
pursuant to environmental laws and regulations:
The Company has received claims and demands from governmental agencies
relating to investigative and remedial action purportedly required to address
environmental conditions alleged to exist at five sites where the Company (or
entities acquired by the Company) formerly conducted operations; and the
Company, by administrative order or otherwise, has agreed to take certain
actions at those sites, including soil and groundwater remediation.
The current estimate (determined by the Company's environmental staff, in
consultation with outside environmental specialists and counsel) of the upper
limit of the Company's range of reasonably possible remediation costs for these
five sites is approximately $19 million, net of approximately $4 million which
third parties have agreed to pay in settlement or which the Company expects,
based on either on agreements or nonrefundable contributions which are ongoing,
to be contributed by third parties. The $19 million is expected to be paid out
between April 1998 and March 2028 and is included in the Company's recorded
environmental reserves at March 31, 1998.
9
In addition, the Company has been designated as a potentially responsible
party (PRP) by the U.S. Environmental Protection Agency under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended (the
"Superfund" law), for environmental assessment and cleanup costs as the result
of the Company's alleged disposal of hazardous substances at 18 Superfund
sites. With respect to each of these Superfund sites, numerous other PRP's have
similarly been designated and, while the current state of the law potentially
imposes joint and several liability upon PRPs, as a practical matter costs of
these sites are typically shared with other PRPs. The Company's estimated
liability at those 18 Superfund sites is approximately $1 million, net of $2
million which insurance companies, and $2 million which another PRP, are
expected or have agreed to contribute to the Company's allocated share. The
aggregate settlements and costs paid by the Company in Superfund matters to date
has not been significant. The $1 million is included in the Company's recorded
environmental reserves at March 31, 1998.
The potential costs to the Company related to environmental matters is
uncertain due to such factors as: the unknown magnitude of possible pollution
and cleanup costs; the complexity and evolving nature of governmental laws and
regulations and their interpretations; the timing, varying costs and
effectiveness of alternate cleanup technologies; the determination of the
Company's liability of proportion to other PRPs; and the extent, if any, to
which such costs are recoverable from insurance or other parties.
Management believes, based on current knowledge and the advice of the
Company's counsel, that the outcome of the litigation and governmental
proceedings discussed in the preceding paragraphs will not have a material
adverse effect on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the Company's stockholders was held on February 9,
1998, to consider and vote upon a proposal to approve the issuance of shares of
the Company's common stock, par value $0.01 per share, in connection with the
merger of AmeriSource with and into the Company in accordance with the Agreement
and Plan of Merger dated September 22, 1997, as amended, by and among the
Company, Patriot Acquisition Corp., a newly formed, wholly-owned subsidiary of
the Company, and AmeriSource. The proposal was approved by the following vote
of the Company's stockholders:
Votes For Votes Against Votes Withheld
--------- ------------- --------------
78,175,266 242,734 256,612
10
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers of the Registrant as of June 1, 1998. The number of years of service
with the Company includes service with predecessor companies (including the
company known as "Old Mckesson," formerly "McKesson") and acquired companies.
There are no family relationships between any of the executive officers or
directors of the Registrant. The executive officers are chosen annually to
serve until the first meeting of the Board of Directors following the next
annual meeting of stockholders and until their successors are elected and have
qualified, or until death, resignation or removal, whichever is sooner.
NAME AGE POSITION WITH REGISTRANT AND BUSINESS EXPERIENCE
- ------------------ ------- ------------------------------------------------
Mark A. Pulido 45 Chief Executive Officer since April 1997 and
President and Chief Operating Officer and a
Director since May 1996. Chief Executive Officer,
Sandoz Pharmaceuticals Corporation (January-April
1996) and Chief Operating Officer (December 1994-
December 1995). Other positions in the previous
five years, all with Red Line Healthcare
Corporation, a Sandoz affiliate: Chairman of the
Board (December 1994-January 1996), Chairman,
President and Chief Executive Officer (March 1992-
November 1994), President and Chief Executive
Officer (January 1992-March 1992). Service with
the Company- 2 years 1 month.
William A. Armstrong 57 Vice President Human Resources and Administration
since September 1994. Formerly Vice President
Human Resources and Administration (April 1993-
November 1994) and Vice President Administration
(July 1991-April 1993) of McKesson. Service with
the Company - 26 years.
Michael T. Dalby 52 Vice President Strategic Planning since September
1994. Principal at McKinsey & Company, Inc., an
international management consulting firm (1988-
1994). Service with the Company - 3 years 9
months.
John H. Hammergren 39 Vice President since January 1996 and Group
President, McKesson Health Systems Group since
August 1997; President, McKesson Health Systems
(January 1996-August 1997). President,
Medical/Surgical Division, Kendall Healthcare
Products Company (1993-1996) and Vice President
and General Manager (1991-1993). Service with the
Company - 2 years 5 months.
Richard H. Hawkins 48 Vice President and Chief Financial Officer since
September 1996; Vice President and Controller
(September 1994-September 1996). Formerly Vice
President (April 1993-November 1994) and
Controller (April 1990-November 1994) of McKesson,
Chief Financial Officer (September 1993-November
1994) of McKesson's Drug Company division and Vice
President Finance (February 1991-April 1993) of
McKesson's Distribution Group. Service with the
Company - 14 years.
Nicholas A. Loiacono 45 Treasurer since March 1998 and Vice President
Finance since August 1997. Group Vice President
Finance, Sulzer Medica USA, Inc. (international
manufacturer and distributor of implantable
medical devices) from July 1992 to August 1997.
Service with the Company - 10 months.
11
NAME AGE POSITION WITH REGISTRANT AND BUSINESS EXPERIENCE
- ------------------ ------- -------------------------------------------------
David L. Mahoney 43 Vice President since September 1994 and Group
President, Pharmaceutical Services and
International Group since August 1997. President,
Pharmaceutical and Retail Services (August 1996-
August 1997); President, Pharmaceutical Services
Group (February-August 1996). Formerly President
of Healthcare Delivery Systems, Inc., a wholly-
owned subsidiary of the Company, (September 1994-
December 1995) and Vice President Strategic
Planning (July 1990-September 1994) of McKesson.
Service with the Company - 8 years.
Mark T. Majeske 40 Vice President since August 1996 and Group
President, Customer Operations Group since August
1997; President, Customer Operations (August 1996-
August 1997); and Executive Vice President, Field
Operations (November 1995-July 1996) and Executive
Vice President, Central Region, Drug Company
division (July 1994-November 1995). Senior Vice
President of Field Operations Hamilton HallMark
Electronics (April-July 1994) and Vice President
of Strategic, Canada and NAFTA Operations from
1992 to April 1994. Service with the Company - 3
years 11 months.
Ivan D. Meyerson 53 Vice President and General Counsel since July
1994. Formerly Vice President and General Counsel
(January 1987-November 1994) of McKesson. Service
with the Company - 20 years.
Nancy A. Miller 54 Vice President and Corporate Secretary since July
1994. Formerly Vice President and Corporate
Secretary (December 1989-November 1994) of
McKesson. Service with the Company- 20 years .
Charles A. Norris 52 Vice President and President of McKesson Water
Products Company, a wholly-owned subsidiary of the
Company, since September 1994. Formerly Vice
President of McKesson (April 1993-November 1994)
and President (May 1990-November 1994) of McKesson
Water Products Company, a wholly-owned subsidiary
of McKesson. Service with the Company - 8 years.
Carmine J. Villani 55 Vice President and Chief Information Officer since
January 1997; Vice President, Information
Management of the Drug Company division (November
1994-January 1997). Formerly Vice President,
Technology Integration (1992-1994) of McKesson.
Service with the Company - 6 years.
Heidi E. Yodowitz 44 Controller since October 1996; Staff Vice
President, Planning & Analysis (1995 to 1996) and
Assistant Controller (September 1994-1995).
Formerly Assistant Controller of McKesson (June
1990-September 1994). Service with the Company - 8
years.
12
PART II
5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) MARKET INFORMATION
The principal market on which the Company's common stock is traded is the
New York Stock Exchange. The Company's stock is also traded on the Pacific
Exchange, Inc. High and low prices for the common stock by quarter included in
Financial Note 17, "Quarterly Financial Information (Unaudited)" on pages 53 and
54 of the 1998 Consolidated Financial Statements which is included as Exhibit 13
to this Form 10-K Report, are incorporated herein by reference.
(b) HOLDERS
The number of record holders of the Company's common stock at March 31,
1998 was approximately 14,000.
(c) DIVIDENDS
Dividend information included in Financial Note 17, "Quarterly Financial
Information (Unaudited)" on pages 53 and 54 of the 1998 Consolidated Financial
Statements which is included as Exhibit 13 to this Form 10-K Report, is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data presented on pages 2 to 7 of the 1998 Consolidated
Financial Statements which is included as Exhibit 13 to this Form 10-K Report,
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of the Company's financial condition
and results of operations appearing in the Financial Review on pages 8 to 20 of
the 1998 Consolidated Financial Statements which is included as Exhibit 13 to
this Form 10-K Report, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is included in the Financial Review on
pages 8 to 20 of the 1998 Consolidated Financial Statements which is included as
Exhibit 13 to this Form 10-K Report, and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements and Supplementary Data presented on pages 24 to 54 of
the 1998 Consolidated Financial Statements which is included as Exhibit 13 to
this Form 10-K Report, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is incorporated by
reference from the Company's 1998 Proxy Statement (the "Proxy Statement").
Certain information relating to Executive Officers of the Company appears at
pages 11 and 12 of this Form 10-K Annual Report. The information with respect
to this item required by Item 405 of Regulation S-K is incorporated herein by
reference from the Company's Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated herein by reference
from the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated herein by reference
from the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain transactions with management is
incorporated by reference from the Company's Proxy Statement.
14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Company and the
Independent Auditors' Report appear on pages 23 to 54 of the 1998 Consolidated
Financial Statements which is included as Exhibit 13 to this Form 10-K report,
and are incorporated herein by reference. Page number references are to the
1998 Consolidated Financial Statements.
PAGE
----
Independent Auditors' Report 23
Consolidated Financial Statements
Statements of Consolidated Income for the years ended
March 31, 1998, 1997 and 1996 24
Consolidated Balance Sheets, March 31, 1998, 1997 and 1996 25
Statements of Consolidated Stockholders' Equity for the years
Ended March 31, 1998, 1997 and 1996 26
Statements of Consolidated Cash Flows for the years ended
March 31, 1998, 1997 and 1996 28
Financial Notes 29
10-K
The following are included herein: PAGE
----
Independent Auditors' Report on Supplementary Financial Schedule 18
Supplementary Financial Schedule:
II Consolidated Valuation and Qualifying Accounts 19
Financial statements and schedules not included or incorporated by
reference herein have been omitted because of the absence of conditions under
which they are required or because the required information, where material, is
shown in the financial statements, financial notes or supplementary financial
information.
Exhibits submitted with this Form 10-K as filed with the SEC and those
incorporated by reference to other filings are listed on the Exhibit Index on
pages 20 to 25.
15
(b) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the three months ended
March 31, 1998:
1. Form 8-K
Date of Report: February 24, 1998 Date Filed: February 24, 1998
Item 5. Other Events
---------------------
The Registrant filed pro forma combined financial data of the Company and
AmeriSource Health Corporation to update the pro forma data included in
Amendment No. 1 to the Company's Registration Statement on Form S-4
(Registration No. 333-40587) filed with the Commission on January 2, 1998.
The Registrant reported that on February 24, 1998 it completed a private
placement of $300 million senior unsecured debt securities.
2. Form 8-K
Date of Report: March 18, 1998 Date Filed: March 19, 1998
Item 5. Other Events
---------------------
The Registrant and AmeriSource Health Corporation each announced their
opposition to the complaint brought March 9, 1998 by the Federal Trade
Commission seeking a preliminary injunction to halt the merger of the two
companies.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
McKESSON CORPORATION
Date: May 29, 1998 By: /s/ Richard H. Hawkins
------------------------------------
RICHARD H. HAWKINS, VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on May 29, 1998 by the following persons on behalf
of the Registrant and in the capacities indicated:
/s/ Mark A. Pulido /s/ Richard H. Hawkins
- ------------------------------------- --------------------------------------
MARK A. PULIDO, PRESIDENT AND RICHARD H. HAWKINS, VICE PRESIDENT AND
CHIEF EXECUTIVE OFFICER AND DIRECTOR CHIEF FINANCIAL OFFICER
(PRINCIPAL EXECUTIVE OFFICER) (PRINCIPAL FINANCIAL OFFICER)
/s/ Heidi E. Yodowitz
- -------------------------------------
HEIDI E. YODOWITZ, CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
/s/ Mary G. F. Bitterman /s/ Tully M. Friedman
- ------------------------------------- --------------------------------------
MARY G. F. BITTERMAN, DIRECTOR TULLY M. FRIEDMAN, DIRECTOR
/s/ John M. Pietruski
- ------------------------------------- --------------------------------------
JOHN M. PIETRUSKI, DIRECTOR DAVID S. POTTRUCK, DIRECTOR
/s/ Alan Seelenfreund
- ------------------------------------- --------------------------------------
CARL E. REICHARDT, DIRECTOR ALAN SEELENFREUND, DIRECTOR;
CHAIRMAN OF THE BOARD
/s/ Jane E. Shaw /s/ Robert H. Waterman, Jr.
- ------------------------------------- --------------------------------------
JANE E. SHAW, DIRECTOR ROBERT H. WATERMAN, JR., DIRECTOR
17
INDEPENDENT AUDITORS' REPORT ON
SUPPLEMENTARY FINANCIAL SCHEDULE
The Stockholders and Board of Directors of McKesson Corporation:
We have audited the consolidated financial statements of McKesson Corporation
and subsidiaries as of March 31, 1998, 1997 and 1996, and for the years then
ended and have issued our report thereon dated May 18, 1998. Such consolidated
financial statements and report are included in the 1998 Annual Report to
Stockholders and are incorporated herein by reference. Our audits also included
the consolidated supplementary financial schedule of McKesson Corporation,
listed in Item 14(a). This consolidated supplementary financial schedule is the
responsibility of the Corporation's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
supplementary financial schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
San Francisco, California
May 18, 1998
18
SCHEDULE II
MCKESSON CORPORATION - CONSOLIDATED
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(IN THOUSANDS)
Column A Column B Column C Column D Column E
- ---------------------------------- ----------- --------------------------------- ---------------- -------------------
Additions
---------------------------------
Balance at Charged to Charged to
Beginning Costs and Other Balance at
Description of Period Expenses Accounts Deductions (1) End of Period (2)
- ---------------------------------- ----------- ------------- ---------- ---------------- -------------------
AMOUNTS DEDUCTED FROM
ASSETS TO WHICH THEY APPLY:
Year Ended March 31, 1998
- ----------------------------------
Allowances for doubtful
accounts receivable $21,978 $ 10,238 $ - $ 3,134 $ 29,082
Other reserves 22,736 20,067 - 13,056 29,747
------- ------------- ---------- ---------------- -------------------
$44,714 $ 30,305 $ - $ 16,190 $ 58,829
======= ============= ========== ================ ===================
Year Ended March 31, 1997
- ----------------------------------
Allowances for doubtful
accounts receivable $23,743 $ 23,035(3) $ - $ 24,800 $ 21,978
Other reserves 15,240 18,470 - 10,974 22,736
------- ------------- ---------- ---------------- -------------------
$38,983 $ 41,505 $ - $ 35,774 $ 44,714
======= ============= ========== ================ ===================
Year Ended March 31, 1996
- ----------------------------------
Allowances for doubtful
accounts receivable $38,249 $ 13,679 $ - $ 28,185 $ 23,743
Other reserves 13,098 10,595 - 8,453 15,240
------- ------------- ---------- ---------------- -------------------
$51,347 $ 24,274 $ - $ 36,638 $ 38,983
======= ============= ========== ================ ===================
- --------------------------------------------
NOTES:
1998 1997 1996
-------- ------------- ----------
(1) Deductions:
Written off $15,379 $25,107 $28,338
Credited to other accounts 811 10,667 8,300
-------- ------- -------
Total $16,190 $35,774 $36,638
======= ======= =======
(2) Amounts shown as deductions from:
Current receivables $58,063 $43,948 $38,088
Other assets 766 766 895
------- ------- -------
Total $58,829 $44,714 $38,983
======= ======= =======
(3) Includes charges of $15.1 million for receivable reserves related to
management's reevaluation of the U.S. Health Care business' estimated
exposures for bad debts, disputed amounts, customer allowances and rebates.
See Financial Note 3.
19
EXHIBIT INDEX
Exhibit
Number Description
- -------- -------------------------------------------------------------------
2.1 Asset Purchase Agreement dated as of October 3, 1996 by and among
FoxMeyer Corporation, FoxMeyer Drug Company, Health Mart, Inc.,
FoxMeyer Software, Inc., FoxMeyer Funding, Inc., Healthcare
Transportation System, Inc. and Merchandise Coordinator Services
Corporation as Sellers, and the Company, as Purchaser and FoxMeyer
Health Corporation (Exhibit 2.1 (11)).
2.2 First Amendment and Waiver to the Asset Purchase Agreement dated as of
November 7, 1996 by and among FoxMeyer Health Corporation, FoxMeyer
Corporation, FoxMeyer Drug Company, Healthcare Transportation System,
Inc., FoxMeyer Software, Inc., FoxMeyer Funding, Inc., Health Mart,
Inc., Merchandise Coordinator Services Corporation d/b/a FoxMeyer
Trading Company, and the Company (Exhibit 2.2 (11)).
2.3 Agreement and Plan of Merger, dated as of January 28, 1997, by and
among General Medical Inc., the Company, Spider Acquisition
Corporation and certain stockholders named therein (Exhibit 2.1 (2)).
2.4 Agreement and Plan of Merger by and among the Company, Patriot
Acquisition Corp., a wholly owned subsidiary of the Company ("Merger
Sub") and AmeriSource Health Corporation ("AmeriSource") dated as of
September 22, 1997 (Exhibit 99.1)(3)).
2.5 Letter Agreement, dated November 19, 1997, among the Company,
AmeriSource and Merger Sub, amending the Merger Agreement (Exhibit 2.2
(4)).
2.6 Letter Agreement, dated December 30, 1997, among the Company, Merger
Sub and AmeriSource, further amending the Merger Agreement (Exhibit
2.3 (4)).
3.1 Restated Certificate of Incorporation of the Company, as filed with
the Office of the Delaware Secretary of State on February 7, 1996
(Exhibit 3.1(5)).
3.2 Restated By-Laws of the Company, as amended through May 30, 1997
(Exhibit 3.1 (6)).
4.1 Rights Agreement dated as of October 21, 1994, by and between the
Company and First Chicago Trust Company of New York, as Rights Agent
(Exhibit 4.1 (7)).
4.2 Amended and Restated Declaration of Trust of McKesson Financing Trust,
dated as of February 20, 1997, among the Company, as Sponsor, The
First National Bank of Chicago, as Institutional Trustee, First
Chicago Delaware, Inc., as Delaware Trustee and William A. Armstrong,
Ivan D. Meyerson and Nancy A. Miller, as Regular Trustees (Exhibit 4.2
(8)).
4.3 McKesson Corporation Preferred Securities Guarantee Agreement, dated
as of February 20, 1997, between the Company, as Guarantor, and The
First National Bank of Chicago, as Preferred Guarantor Trustee
(Exhibit 4.7 (9)).
4.4 Indenture dated as of March 11, 1997, by and between the Company, as
Issuer, and The First National Bank of Chicago, as Trustee (Exhibit
4.4 (10)).
20
EXHIBIT INDEX
Exhibit
Number Description
- -------- -------------------------------------------------------------------
4.5 Registrant agrees to furnish to the Commission upon request a copy of
each instrument defining the rights of security holders with respect
to issues of long-term debt of the Registrant, the authorized
principal amount of which does not exceed 10% of the total assets of
the Registrant.
10.1 Stock Option Agreement by and between the Company and AmeriSource
dated September 22, 1997. (Exhibit 99.2 (3)).
10.2 Voting/Support Agreement by and among 399 Venture Partners, Inc., the
Company and Merger Sub dated September 22, 1997 (Exhibit 99.3 (3)).
10.3 Registration Rights Agreement by and between the Company and 399
Venture Partners, Inc. dated September 22, 1997 (Exhibit 99.4 (3)).
* 10.4 McKesson Corporation 1994 Stock Option and Restricted Stock Plan
(as amended through January 28, 1998 (Exhibit (10) (11)).
* 10.5 McKesson Corporation Supplemental PSIP (Exhibit 10.7 (12)).
* 10.6 McKesson Corporation Deferred Compensation Administration Plan
amended as of March 30, 1994 (Exhibit 10.8 (12)).
* 10.7 McKesson Corporation Deferred Compensation Administration Plan
II, as amended effective October 29, 1997 (Exhibit 10.13 (4)).
* 10.8 McKesson Corporation Directors' Deferred Compensation Plan
(Exhibit 10.10 (12)).
* 10.9 McKesson Corporation 1994 Option Gain Deferral Plan, as amended
effective October 29, 1997 (Exhibit 10.15 (4)).
* 10.10 McKesson Corporation 1985 Executives' Elective Deferred
Compensation Plan, amended as of October 27, 1993 (Exhibit 10.13
(12)).
* 10.11 McKesson Corporation Management Deferred Compensation Plan,
amended as of March 30, 1994 (Exhibit 10.14 (12)).
* 10.12 McKesson Corporation 1984 Executive Benefit Retirement Plan,
amended as of May 30, 1997 (Exhibit 10.14 (10)).
* 10.13 McKesson Corporation 1988 Executive Survivor Benefits Plan,
amended as of October 27, 1993 (Exhibit 10.16 (12)).
* 10.14 McKesson Corporation Executive Medical Plan Summary (Exhibit
10.17 (13)).
* 10.15 McKesson Corporation 1988 Management Survivor Benefits Plan,
amended as of November 1, 1990 (Exhibit 10.18 (12)).
21
EXHIBIT INDEX
Exhibit
Number Description
- -------- -------------------------------------------------------------------
* 10.16 McKesson Corporation Severance Policy for Executive Employees (amended
and restated as of May 31, 1996) (Exhibit 10.2 (14)).
* 10.17 McKesson Corporation 1989 Management Incentive Plan, as amended
through September 24, 1997 (Exhibit 10.22 (4)).
* 10.18 McKesson Corporation 1981 Long-Term Incentive Plan (As Amended through
January 29, 1997) (Exhibit C (15)).
* 10.19 McKesson Corporation Stock Purchase Plan (As amended and restated
through March 26, 1997) (Exhibit B (15)).
* 10.20 McKesson Corporation 1997 Non-Employee Directors' Equity Compensation
and Deferral Plan, as amended through October 29, 1997
(Exhibit 10.32 (4)).
* 10.21 Form of Termination Agreement by and between the Company and certain
designated Executive Officers (Exhibit 10.23 (16)).
* 10.22 Form of Employment Agreement effective as of January 31, 1996
by and between the Company and a corporate Vice President who is also
President of the Company's Health Systems Group (Exhibit 10.1 (14)).
* 10.23 Form of Employment Agreement, made effective as of May 20,
1996, by and between the Company and its President and Chief Executive
Officer (Exhibit 10.26 (10)).
10.24 Agreement and Plan of Merger, dated as of November 26, 1996, by and
among Armor All Products Corporation, The Clorox Company and Shield
Acquisition Corporation (Exhibit 10.1 (17)).
10.25 First Amendment to the Agreement and Plan of Merger, dated as of
December 1, 1996, by and among Armor All Products Corporation, The
Clorox Company and Shield Acquisition Corporation (Exhibit 10.2 (17)).
10.26 Stockholder Agreement, dated as of November 26, 1996, by and among
the Company, The Clorox Company and Shield Acquisition Corporation
(Exhibit 10.3 (17)).
* 10.27 Form of Consulting Agreement, dated as of March 28, 1997, by
and between the Company and its Chairman and former Chief Executive
Officer (Exhibit 10.32 (10)).
10.28 Credit Agreement entered into as of March 31, 1995, among the
Company, Medis Health and Pharmaceutical Services Inc., an indirect
wholly-owned subsidiary of the Company, the several financial
institutions from time to time party to the agreement (collectively
the "Banks"), Bank of America National Trust and Savings Association,
as Agent for the Banks, Chemical Bank, as Co-Agent for the Banks and
Bank of America Canada, as Canadian Administrative Agent. (Exhibit
10.25 (7)).
22
EXHIBIT INDEX
Exhibit
Number Description
- -------- -------------------------------------------------------------------
10.29 Custodial Agreement Acknowledgment entered into as of March 31,
1995, among the Company and Bank of America National Trust and Savings
Association (the "Custodian") in its capacity as Custodian under the
Custodial Agreement and as Agent for the Banks from time to time party
to the Credit Agreemen t. (Exhibit 10.26 (7)).
10.30 Pledge Agreement entered into as of March 31, 1995 among the Company
(the "Pledgor") and Bank of America National Trust and Savings
Association, as Agent for the Banks from time to time party to the
Credit Agreement. (Exhibit 10.27 (7)).
10.31 Guaranty entered into as of March 31, 1995 among the Company (the
"Guarantor"), in favor of and for the benefit of Bank of America
National Trust and Savings Association, as Agent for and
representative of the Banks party to the Credit Agreement. (Exhibit
10.28 (7)).
10.32 First Amendment to Credit Agreement dated as of August 31, 1995,
among the Company, Medis Health and Pharmaceutical Services Inc., an
indirect wholly-owned subsidiary of the Company, the several financial
institutions party to the 1995 Credit Agreement (the "Banks"), Bank of
America Canada as Canadian Administrative Agent, Chemical Bank as co-
agent for the Banks, the Bank of America National Trust and Savings
Association as agent for the Banks (Exhibit 10.37 (10)).
10.33 Second Amendment to Credit Agreement dated as of April 10, 1996,
among the Company, Medis Health and Pharmaceutical Services Inc., an
indirect wholly-owned subsidiary of the Company, the several financial
institutions party to the 1995 Credit Agreement (the "Banks"), Bank of
America Canada as Canadian Administrative Agent, The Chase Manhattan
Bank as co-agent for Banks, and Bank of America National Trust and
Savings Association as agent for the Banks (Exhibit 10.38(10)).
10.34 Third Amendment to Credit Agreement dated as of November 4, 1996,
among the Company, Medis Health and Pharmaceutical Services Inc., an
indirect wholly-owned subsidiary of the Company, the several
financial institutions party to the 1995 Credit Agreement (the
"Banks"), Bank of America Canada as Canadian Administrative Agent, The
Chase Manhattan Bank as co-agent for the Banks, and Bank of America
National Trust and Savings Association as agent for the Banks
(Exhibit 10.39 (10)).
10.35 Pledge and Security Agreement entered into as of August 31, 1995,
among Macfor International Finance Company, a wholly-owned subsidiary
of the Company, and Bank of America National Trust and Savings
Association, as agent for the several financial institutions from time
to time party to the 1995 Credit Agreement (Exhibit 10.40 (10)).
10.36 Custody Agreement dated as of August 14, 1995, between Bank of
America National Trust and Savings Association, as Custodian, and
Macfor International Finance Company, a wholly-owned subsidiary of the
Company (Exhibit 10.41 (10)).
23
EXHIBIT INDEX
Exhibit
Number Description
- -------- -------------------------------------------------------------------
10.37 Custodial Agreement Acknowledgment entered into as of August 31,
1995, between Macfor International Finance Company, a wholly-owned
subsidiary of the Company, and Bank of America National Trust and
Savings Association, as custodian and as agent for the several
financial institutions from time to time party to the 1995 Credit
Agreement (Exhibit 10.42 (10)).
10.38 Credit Agreement entered into as of November 4, 1996, among the
Company, the several financial institutions from time to time party to
the agreement (the "Banks"), The Chase Manhattan Bank as co-agent for
the Banks, and Bank of America National Trust and Savings Association
as agent for the Banks (Exhibit 10.43 (10)).
10.39 Letter Loan Agreement dated as of February 21, 1997, between the
Company and Bank of America National Trust and Savings Association
(Exhibit 10.44 (10)).
13 1998 Consolidated Financial Statements.
21 List of Subsidiaries of the Company.
23 Independent Auditors' Consent.
27 Financial Data Schedule.
99 Registration Rights Agreement by and between the Company and 399
Venture Partners, Inc. dated September 22, 1997 (Exhibit 99.4 (13)).
- --------------------------------------------
Footnotes to Exhibit Index:
* Denotes management contract or compensatory plan, contract or arrangement.
(1) Incorporated by reference to designated exhibit to the Company's Current
Report on Form 8-K filed with the Commission on November 22, 1996, File No.
1-13252.
(2) Incorporated by reference to designated exhibit to the Company's Current
Report on Form 8-K filed with the Commission on February 5, 1997, File No.
1-13252.
(3) Incorporated by reference to designated exhibit to the Company's Current
Report on Form 8-K filed with the Commission on September 24, 1997, File
No. 1-13252.
(4) Incorporated by reference to designated exhibit to Amendment No. 1 to the
Company's Registration Statement on Form S-4 filed with the Commission on
January 2, 1998, Registration No. 333-40587.
(5) Incorporated by reference to designated exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1996, as amended by
Amendment No. 1 on Form 10K/A, filed February 13, 1997, File No. 1-13252.
(6) Incorporated by reference to designated exhibit to the Company's Current
Report on Form 8-K filed with the Commission on June 24, 1997, File No. 1-
13252.
(7) Incorporated by reference to designated exhibit to Amendment No. 3 to the
Company's Registration Statement on Form 10 filed with the Commission on
October 27, 1994, File No. 1-13252.
(8) Incorporated by reference to designated exhibit to Amendment No. 1 to the
Company's Registration Statement on Form S-3 filed with the Commission on
June 18, 1997, Registration No. 333-26443.
(9) Incorporated by reference to designated exhibit to the Company's
Registration Statement on Form S-3 filed with the Commission on May 2,
1997, Registration No. 333-26443.
(10) Incorporated by reference to designated exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997, File No.
1-13252.
24
EXHIBIT INDEX
Exhibit
Number Description
- -------- -------------------------------------------------------------------
(11) Incorporated by reference to designated exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-
13252.
(12) Incorporated by reference to designated exhibit to Amendment No. 1 to the
Company's Registration Statement on Form 10 filed with the Commission on
August 26, 1994, File No. 1-13252.
(13) Incorporated by reference to designated exhibit to Amendment No. 2 to the
Company's Registration Statement on Form 10 filed with the Commission on
October 11, 1994, File No. 1-13252.
(14) Incorporated by reference to designated exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996, File No. 1-13252.
(15) Incorporated by reference to designated exhibit to the Company's definitive
Proxy Statement dated June 18, 1997, for the Annual Meeting of Stockholders
held on July 30, 1997.
(16) Incorporated by reference to designated exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995, File no. 1-
13252.
(17) Incorporated by reference to designated exhibit to the Company's Current
Report on Form 8-K filed with the Commission on December 10, 1996 , File
No. 1-13252.
25