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