-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ce8D8rxZY55oGtjqd+Y3rvwgOX6zNxuGpI209NXGeWDehETSrTlMda0rJarr93Cx xjlIdxlfOguuDr/aPCLfmg== 0000927653-95-000011.txt : 19951119 0000927653-95-000011.hdr.sgml : 19951119 ACCESSION NUMBER: 0000927653-95-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCKESSON CORP CENTRAL INDEX KEY: 0000927653 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 943207296 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-86536 FILM NUMBER: 95590531 BUSINESS ADDRESS: STREET 1: ONE POST ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159838300 FORMER COMPANY: FORMER CONFORMED NAME: SP VENTURES INC DATE OF NAME CHANGE: 19940728 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended September 30, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------ Commission file number 1-13252 ------- McKESSON CORPORATION - ------------------------------------------------------------------ (Exact name of Registrant as specified in its charter) DELAWARE 94-3207296 - ------------------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) One Post Street, San Francisco, California 94104 - ------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (415) 983-8300 - ------------------------------------------------------------------ (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 30, 1995 - ---------------------------- --------------------------------- Common stock, $.01 par value 44,321,681 shares TABLE OF CONTENTS PART I. FINANCIAL INFORMATION ============================== Item Page - ---- ---- 1. Financial Statements Consolidated Balance Sheets September 30, 1995 and March 31, 1995 3 - 4 Condensed Statements of Consolidated Income Three and six months ended September 30, 1995 and 1994 5 Statements of Consolidated Cash Flows Six months ended September 30, 1995 and 1994 6 - 7 Financial Notes 8 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Review 9 - 11 PART II. OTHER INFORMATION =========================== 6. Exhibits and Reports on Form 8-K 12 Exhibit Index 14 PART I. FINANCIAL INFORMATION ============================== McKESSON CORPORATION and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) September 30, March 31, 1995 1995 ---------- ---------- (in millions) ASSETS - ------ Current Assets Cash and cash equivalents $ 370.8 $ 385.4 Marketable securities available for sale 394.8 307.3 Receivables 809.5 778.6 Inventories 1,108.2 1,160.2 Prepaid expenses 86.0 67.9 ------- ------- Total 2,769.3 2,699.4 ------- ------- Property, Plant and Equipment Land 38.9 41.0 Buildings, machinery and equipment 735.9 722.1 ------- ------- Total 774.8 763.1 Accumulated depreciation (402.2) (396.8) ------- ------- Net 372.6 366.3 Goodwill and other intangibles 211.3 214.3 Other assets 223.7 199.2 ------- ------- Total Assets $3,576.9 $3,479.2 ======= ======= (Continued) - 3 - McKESSON CORPORATION and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) September 30, March 31, 1995 1995 ---------- ---------- (in millions) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities Drafts payable $ 174.3 $ 175.7 Accounts payable - trade 1,240.1 1,120.8 Short-term borrowings 87.5 21.7 Current portion of long-term debt 21.4 17.8 Salaries and wages 30.9 40.6 Taxes 91.4 144.0 Interest and dividends 21.3 20.9 Other 132.9 196.7 ------- ------- Total 1,799.8 1,738.2 ------- ------- Postretirement Obligations and Other Noncurrent Liabilities 209.7 208.8 ------- ------- Long-Term Debt 456.0 458.8 ------- ------- Minority Interest in Subsidiary 59.5 59.9 ------- ------- Stockholders' Equity Common stock 0.4 0.4 Other capital 326.5 315.7 Retained earnings 919.4 875.9 Accumulated translation adjustment (44.0) (51.6) ESOP notes and guarantee (124.2) (126.4) Treasury shares, at cost (26.2) (0.5) ------- ------- Net 1,051.9 1,013.5 ------- ------- Total Liabilities and Stockholders' Equity $3,576.9 $3,479.2 ======= ======= See Financial Notes. (Concluded) - 4 - McKESSON CORPORATION and SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED INCOME (unaudited) Three Months Ended Six Months Ended September 30 September 30 --------------- --------------- 1995 1994 1995 1994 ------ ------ ------ ------ (in millions-except per share amounts) REVENUES $3,348.4 $3,255.8 $6,684.4 $6,491.0 COSTS AND EXPENSES Cost of sales 3,063.2 2,986.0 6,116.9 5,946.7 Selling, dist. and admin. 218.7 228.0 430.8 442.3 Interest 12.0 11.2 24.4 22.3 ------- ------- ------- ------- Total 3,293.9 3,225.2 6,572.1 6,411.3 ------- ------- ------- ------- INCOME BEFORE TAXES ON INCOME 54.5 30.6 112.3 79.7 TAXES ON INCOME (21.5) (11.6) (44.9) (31.5) ------- ------- ------- ------- INCOME BEFORE MINORITY INTEREST 33.0 19.0 67.4 48.2 Minority interest in net income of subsidiary (1.3) (1.9) (2.9) (4.7) ------- ------- ------- ------- INCOME AFTER TAXES Continuing operations 31.7 17.1 64.5 43.5 Discontinued operations - 8.4 - 18.0 ------- ------- ------- ------- NET INCOME $ 31.7 $ 25.5 $ 64.5 $ 61.5 ======= ======= ======= ======= EARNINGS PER COMMON SHARE Fully diluted earnings Continuing operations $ .68 $ .36 $ 1.38 $ .93 Discontinued operations - .18 - .40 ------- ------- ------- ------- Total $ .68 $ .54 $ 1.38 $ 1.33 ======= ======= ======= ======= Primary earnings Continuing operations $ .68 $ .36 $ 1.38 $ .96 Discontinued operations - .20 - .43 ------- ------- ------- ------- Total $ .68 $ .56 $ 1.38 $ 1.39 ======= ======= ======= ======= Dividends $ .25 $ .42 $ .50 $ .84 ======= ======= ======= ======= SHARES ON WHICH EARNINGS PER COMMON SHARE WERE BASED Fully diluted 46.7 45.0 46.8 45.0 Primary 46.7 42.0 46.7 41.7 See Financial Notes. - 5 - McKESSON CORPORATION and SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (unaudited) Six Months Ended September 30 ----------------------- 1995 1994 ---------- ---------- (in millions) Operating Activities Income after taxes from cont. op. $ 64.5 $ 43.5 Adjustments to reconcile to net cash provided by operating activities Depreciation 29.7 29.5 Amortization 4.7 5.8 Provision for bad debts 4.2 20.9 Deferred taxes on income (5.2) (1.1) Gain on sale of subsidiary (11.2) - Other (1.3) 1.2 ------- ------- Total 85.4 99.8 ------- ------- Effects of changes in Receivables (37.7) (76.4) Inventories 49.3 (72.0) Accounts and drafts payable 104.3 147.5 Taxes (56.3) (12.6) Other (102.6) (38.5) ------- ------- Total (43.0) (52.0) ------- ------- Net cash provided by continuing operations 42.4 47.8 Discontinued operations 3.3 (5.6) ------- ------- Net cash provided by operating activities 45.7 42.2 ------- ------- Investing Activities Purchases of marketable securities (130.3) - Maturities of marketable securities 49.9 - Property acquisitions (39.7) (40.4) Properties sold 5.8 5.0 Acquisitions of businesses, less cash and short-term investments acquired (11.3) - Proceeds from sale of subsidiary 36.1 - Investing activities - discontinued operations - (9.1) Other 3.1 (1.5) ------- ------- Net cash used by investing activities (86.4) (46.0) ------- ------- (Continued) - 6 - McKESSON CORPORATION and SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (unaudited) Six Months Ended September 30 ----------------------- 1995 1994 ---------- ---------- (in millions) Financing Activities Proceeds from issuance of debt $ 72.3 $ 48.0 Repayment of debt (4.7) (27.9) Capital stock transactions Treasury stock acquired (25.7) - Issuances 3.8 4.6 ESOP notes and guarantee 2.2 5.2 Dividends paid (21.8) (41.7) Financing activities - discontinued operations - 1.0 ------- ------- Net cash provided (used) by financing activities 26.1 (10.8) ------- ------- Net Decrease in Cash and Cash Equivalents (14.6) (14.6) Cash and Cash Equivalents at beginning of period 385.4 89.0 ------- ------- Cash and Cash Equivalents at end of period $ 370.8 $ 74.4 ======= ======= See Financial Notes. (Concluded) - 7 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL NOTES 1. Interim Financial Statements ---------------------------- In the opinion of the Company, these unaudited consolidated financial statements include all adjustments necessary to a fair presentation of its financial position as of September 30, 1995 and the results of its operations and its cash flows for the six months ended September 30, 1995 and 1994. Such adjustments were of a normal recurring nature. The results of operations for the six months ended September 30, 1995 and 1994 are not necessarily indicative of the results for the full years. It is suggested that these interim financial statements be read in conjunction with the annual audited financial statements, accounting policies and financial notes thereto included in the Appendix to the Company's 1995 Proxy Statement which has previously been filed with the Commission. 2. Discontinued Operations ----------------------- Earnings from discontinued operations in the prior year three and six month periods consist of the operations of PCS Health Systems, Inc. ("PCS") which were divested in November 1994. - 8 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL REVIEW Segment Results - --------------- The operating profits of the Company by business segment are as follows:
Three Months Ended Six Months Ended September 30 September 30 ------------------------- ------------------------- % % 1995 1994 Chg. 1995 1994 Chg. ------ ------ ---- ------ ------ ---- ($ in millions) REVENUES Health Care Serv. $3,228.9 $3,143.9 2.7 $6,438.3 $6,259.5 2.9 Water Products 74.1 69.4 6.8 138.1 130.6 5.7 Armor All 39.8 41.1 (3.2) 90.0 97.7 (7.9) Corporate 5.6 1.4 18.0 3.2 ------- ------- ------- ------- Total $3,348.4 $3,255.8 2.8 $6,684.4 $6,491.0 3.0 ======= ======= ======= ======= OPERATING PROFIT Health Care Services $ 48.9 $ 33.0 48.2 $ 103.1 $ 81.5 26.5 Water Products 13.6 10.9 24.8 22.5 18.9 19.0 Armor All 4.2 7.3 (42.5) 9.9 18.1 (45.3) ------- ------- ------- ------- Total 66.7 51.2 30.3 135.5 118.5 14.3 Interest - net (2.6) (10.5) (5.9) (20.8) Corporate and other (9.6) (10.1) (17.3) (18.0) ------- ------- ------- ------- Income before taxes $ 54.5 $ 30.6 78.1 $ 112.3 $ 79.7 40.9 ======= ======= ======= ======= Health Care Services Revenues include: Sales to customers' warehouses $762.6 $712.9 7.0 $1,513.6 $1,440.5 5.1 International revenues 387.1 343.0 12.9 770.2 677.7 13.6 Includes $11.5 million charge in FY95 due to a credit loss arising from a problem receivable in the U.S. pharmaceutical and health care products distribution business. Interest is shown net of corporate interest income. Includes special expense item of $0.8 million in FY95 resulting from a contribution of Armor All stock to the McKesson Foundation.
- 9 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL REVIEW OVERVIEW OF RESULTS - ------------------- Net income from continuing operations for the second quarter increased to $31.7 million, $.68 per fully-diluted share, from $17.1 million, $.36 per share in the prior year (which included a charge of $6.6 million primarily related to a credit loss). For the six month period, net income from continuing operations increased to $64.5 million, $1.38 per share, from $43.5 million, $.93 per share for the comparable period in the prior year. The prior year's three and six month net income included $8.4 million and $18.0 million, respectively, from the operations of PCS which was divested in November of 1994 (the "PCS Transaction") and has been accounted for as a discontinued operation. Health Care Services The Health Care Services segment includes the operations of the Company's U.S. pharmaceutical and health care products distribution businesses and its international pharmaceutical operations (Canada, Mexico, and Central America). This segment accounted for 96% of consolidated revenues and 73% of operating profit for the second quarter, and 96% and 76%, respectively, for the six month period ended September 30, 1995. Segment revenues increased by 3% for both the three and six month periods, from the comparable periods in the prior year. Revenue growth continues to reflect the loss of a high-volume customer at the beginning of the current fiscal year, offset by growth from the independent retail drug store segment, especially the Company's Valu-Rite(R) network of independent pharmacies. Operating profit for the quarter increased by 10% from the prior year (excluding the $11.5 million pretax credit loss in the prior year's quarter) and by 11% for the six month period. These increases reflect, in part, additional operating expense efficiencies and improved international results. Second quarter results include start-up, research and development costs related to the Company's new Health Systems division and to new, technology-based initiatives to improve the Company's competitiveness in the retail and institutional market segments. In addition, in the second quarter expenses were incurred to further streamline operating and administrative functions. Such costs were offset by a pretax gain of $11.2 million from the sale of a Central American pharmaceutical manufacturing subsidiary in the second quarter. - 10 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL REVIEW Water Products Revenues in the Water Products segment increased by 7% for the three months (6% for the six months) compared with the prior year. Operating profits increased 25% to $13.6 million from $10.9 million for the second quarter, compared with the same quarter in the prior year. For the six month period, operating profit increased by 19% to $22.5 million from $18.9 million. This improvement reflects lower operating costs, due in part to the segment's ongoing programs to improve customer service which have reduced customer turnover expenses. Armor All Armor All Products Corp., which is 55% owned by the Company, experienced decreases in revenue of 3% and 8% for the three and six month periods, respectively, compared with the prior year. These decreases resulted from retailers reducing inventory levels in response to slower consumer purchases of automotive appearance products. Operating profits declined by 42% in the quarter and 45% in the six month period due to declining revenues, higher ingredient costs and additional expenses associated with the introduction of new products. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash, equivalents and marketable securities increased $72.9 million during the first half to $765.6 million. Net interest expense decreased during the six month period as compared with the prior year primarily due to earnings on the investment of the proceeds received from the PCS Transaction in the third quarter of fiscal 1995. Until redeployed, the proceeds are being invested in U.S. Treasury securities with maturities ranging up to two years. The Company's debt-to-capital ratio increased from 33% at March 31, 1995 to 35% at September 30, 1995 largely as a result of short-term borrowings by its health care products distribution operations in Canada. During the first six months of fiscal 1996, the Company repurchased 578,685 shares of its common stock for $25.7 million under a previously announced 3.5 million share repurchase program. This program was designed to maintain fully diluted shares at the level prior to the PCS transaction. - 11 - PART II. OTHER INFORMATION =========================== Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits 11 Computation of Earnings per Common Share 27 Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended September 30, 1995. - 12 - SIGNATURE S I G N A T U R E ----------------- Pursuant to the requirements 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 (Registrant) Dated: November 13, 1995 By /s/ Kevin B. Ferrell ------------------------------- Kevin B. Ferrell Vice President and Chief Financial Officer By /s/ Richard H. Hawkins ------------------------------- Richard H. Hawkins Vice President and Controller - 13 - EXHIBIT INDEX Exhibit Number - ------ Description ----------- 11 Computation of Earnings per Common Share 27 Financial Data Schedule - 14 - Exhibit 11 McKESSON CORPORATION COMPUTATION OF EARNINGS PER COMMON SHARE (unaudited) (in millions except per share amounts) Three Months Six Months Ended Ended September 30 September 30 ------------ ------------- 1995 1994 1995 1994 ---- ---- ---- ---- FULLY DILUTED EARNINGS PER SHARE Income after taxes from continuing operations $31.7 $17.1 $64.5 $43.5 Contribution adjustment - Series B ESOP convertible preferred stock(1) - (1.0) - (1.9) ---- ---- ---- ---- 31.7 16.1 64.5 41.6 Discontinued operations - 8.4 - 18.0 ---- ---- ---- ---- Total $31.7 $24.5 $64.5 $59.6 ==== ==== ==== ==== Fully diluted shares Common shares outstanding(2) 46.7 42.0 46.8 41.7 Convertible securities - dilutive - 3.0 - 3.3 ---- ---- ---- ---- Total 46.7 45.0 46.8 45.0 ==== ==== ==== ==== Fully diluted earnings per share Continuing operations $ .68 $ .36 $1.38 $ .93 Discontinued operations - .18 - .40 ---- ---- ---- ---- Total $ .68 $ .54 $1.38 $1.33 ==== ==== ==== ==== PRIMARY EARNINGS PER SHARE Income after taxes from continuing operations $31.7 $17.1 $64.5 $43.5 Dividend requirements - preferred stocks(1) - (1.7) - (3.5) ---- ---- ---- ---- 31.7 15.4 64.5 40.0 Discontinued operations - 8.4 - 18.0 ---- ---- ---- ---- Total $31.7 $23.8 $64.5 $58.0 ==== ==== ==== ==== Primary shares Common shares outstanding(2) 46.7 42.0 46.7 41.7 ==== ==== ==== ==== Primary earnings per share Continuing operations $ .68 $ .36 $1.38 $ .96 Discontinued operations - .20 - .43 ---- ---- ---- ---- Total $ .68 $ .56 $1.38 $1.39 ==== ==== ==== ==== (1) Net of certain tax benefits. (2) Common shares outstanding have been computed by adding the monthly averages (beginning of the month plus end of the month divided by 2), dividing the aggregate by 3 or 6, as appropriate, and adjusting this total for dilutive stock options using the treasury stock method based on the greater of the common share price at the end of the period or the average common share price during the period (fully diluted) and on the average common share price during the period (primary). EX-27 2
5 0000927653 MCKESSON 1,000 6-MOS MAR-31-1996 APR-01-1995 SEP-30-1995 370,800 394,800 859,000 (49,500) 1,108,200 2,769,300 774,800 (402,200) 3,576,900 1,799,800 456,000 400 0 0 1,051,500 3,576,900 0 6,684,400 6,116,900 6,547,700 0 4,200 24,400 112,300 (44,900) 64,500 0 0 0 64,500 1.38 1.38
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