-----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, MFNpHZU2n0uUA2O1oogfImA53MLOngCwkl/Gq1LrOZPzvq5U4/psjX39SCW/J9tQ avuC6afkZ+WYtKUbRSYafg== 0000927653-97-000017.txt : 19970814 0000927653-97-000017.hdr.sgml : 19970814 ACCESSION NUMBER: 0000927653-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 001-13252 FILM NUMBER: 97658560 BUSINESS ADDRESS: STREET 1: ONE POST ST STREET 2: MCKESSON PLAZA CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159838300 MAIL ADDRESS: STREET 1: ONE POST ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 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 June 30, 1997 [ ] 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 June 30, 1997 - ---------------------------- ---------------------------- Common stock, $.01 par value 45,925,182 shares TABLE OF CONTENTS PART I. FINANCIAL INFORMATION ============================== Item Page - ---- ---- 1. Condensed Financial Statements Consolidated Balance Sheets June 30, 1997 and March 31, 1997 3 - 4 Statements of Consolidated Income Three month periods ended June 30, 1997 and 1996 5 Statements of Consolidated Cash Flows Three month periods ended June 30, 1997 and 1996 6 - 7 Financial Notes 8 - 10 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Review 11 - 13 PART II. OTHER INFORMATION =========================== 1. Legal Proceedings 14 4. Submission of Matters to a Vote of Security Holders 14 6. Exhibits and Reports on Form 8-K 15 Exhibit Index 18 PART I. FINANCIAL INFORMATION ============================== McKESSON CORPORATION and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) June 30, March 31, 1997 1997 ------ ------ (in millions) ASSETS - ------ Current Assets Cash and cash equivalents $ 76.8 $ 124.8 Marketable securities available for sale (Note 4) 95.9 105.0 Receivables 1,248.0 1,224.5 Inventories 2,116.9 2,259.5 Prepaid expenses 50.6 47.3 ------- ------- Total 3,588.2 3,761.1 ------- ------- Property, Plant and Equipment Land 37.4 38.0 Buildings, machinery and equipment 758.7 741.3 ------- ------- Total 796.1 779.3 Accumulated depreciation (418.4) (405.7) ------- ------- Net 377.7 373.6 Goodwill and other intangibles 740.0 736.2 Other assets 312.2 301.9 ------- ------- Total Assets $5,018.1 $5,172.8 ======= ======= (Continued) - 3 - McKESSON CORPORATION and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) June 30, March 31, 1997 1997 ------ ------ (in millions, except par value) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities Drafts payable $ 244.8 $ 210.7 Accounts payable - trade 1,632.0 1,854.7 Short-term borrowings 135.2 100.0 Current portion of long-term debt 60.1 60.3 Salaries and wages 37.1 52.9 Taxes 88.1 80.0 Interest and dividends 32.7 21.3 Other 233.4 257.3 ------- ------- Total 2,463.4 2,637.2 ------- ------- Postretirement Obligations and Other Noncurrent Liabilities 256.7 255.1 ------- ------- Long-Term Debt (Note 4) 807.7 824.9 ------- ------- McKesson-obligated mandatorily redeemable preferred securities of subsidiary grantor trust whose sole assets are junior sub- ordinated debentures of McKesson (Note 5) 195.1 194.8 ------- ------- Stockholders' Equity Common stock (200.0 shares authorized, 46.4 issued as of June 30 and March 31, 1997; par value of $.01) 0.4 0.4 Additional paid-in capital 408.0 408.2 Other capital (19.6) (19.2) Retained earnings 1,089.3 1,062.6 Accumulated translation adjustment (44.6) (44.6) ESOP notes and guarantee (116.4) (118.3) Treasury shares, at cost (21.9) (28.3) ------- ------- Net 1,295.2 1,260.8 ------- ------- Total Liabilities and Stockholders' Equity $5,018.1 $5,172.8 ======= ======= See Financial Notes. (Concluded) - 4 - McKESSON CORPORATION and SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (unaudited) Three Months Ended June 30 ---------------------- 1997 1996 ------ ------ (in millions - except per share amounts) REVENUES $4,342.7 $2,670.6 ------- ------- COSTS AND EXPENSES Cost of sales 3,977.9 2,438.7 Selling, distribution and administration 278.5 177.5 Purchased in-process technology (Note 2) - 48.2 Interest 23.1 10.9 ------- ------- Total 4,279.5 2,675.3 ------- ------- INCOME (LOSS) BEFORE TAXES ON INCOME AND DIVIDENDS ON PREFERRED SECURITIES OF SUBSIDIARY TRUST 63.2 (4.7) INCOME TAX EXPENSE (24.0) (16.7) DIVIDENDS ON PREFERRED SECURITIES OF SUBSIDIARY TRUST (1.6) - ------- ------- INCOME (LOSS) AFTER TAXES Continuing operations 37.6 (21.4) Discontinued operations (Note 3) - 3.3 ------- ------- NET INCOME (LOSS) $ 37.6 $ (18.1) ======= ======= EARNINGS (LOSS) PER COMMON SHARE Fully diluted earnings (loss) Continuing operations $ 0.78 $ (0.49) Discontinued operations - 0.08 ------- ------- Total $ 0.78 $ (0.41) ======= ======= Primary earnings (loss) Continuing operations $ 0.79 $ (0.49) Discontinued operations - 0.08 ------- ------- Total $ 0.79 $ (0.41) ======= ======= Dividends $ 0.25 $ 0.25 ======= ======= SHARES ON WHICH EARNINGS (LOSS) PER COMMON SHARE WERE BASED Fully diluted 50.4 43.8 Primary 47.6 43.8 See Financial Notes. - 5 - McKESSON CORPORATION and SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (unaudited) Three Months Ended June 30 ---------------------- 1997 1996 ------ ------ (in millions) Operating Activities Income (loss) from continuing operations $ 37.6 $ (21.4) Adjustments to reconcile to net cash used by operating activities Depreciation 17.7 15.3 Amortization 3.6 2.3 Provision for receivables reserves 2.8 1.7 Deferred taxes on income 2.7 1.0 Other non-cash items (Note 2) (1.0) 49.4 ------- ------- Total 63.4 48.3 ------- ------- Effects of changes in Receivables (25.5) (113.3) Inventories 133.3 51.8 Accounts and drafts payable (165.7) (75.0) Taxes 15.7 16.5 Other (46.9) (15.1) ------- ------- Total (89.1) (135.1) ------- ------- Net cash used by continuing operations (25.7) (86.8) ------- ------- Discontinued operations (1.9) 4.6 ------- ------- Net cash used by operating activities (27.6) (82.2) ------- ------- Investing Activities Purchases of marketable securities (1.2) (0.2) Maturities of marketable securities 11.4 58.3 Property acquisitions (23.1) (19.8) Properties sold 1.7 0.2 Acquisitions of businesses, less cash and short-term investments acquired (3.2) (61.4) Investing activities of discontinued operations - (0.4) Other (11.7) (15.3) ------- ------- Net cash used by investing activities (26.1) (38.6) ------- ------- (Continued) - 6 - McKESSON CORPORATION and SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (unaudited) Three Months Ended June 30 ---------------------- 1997 1996 ------ ------ (in millions) Financing Activities Proceeds from issuance of debt $ 35.1 $ 84.2 Repayment of debt (19.0) (3.3) Dividends paid on preferred securities of subsidiary trust (2.8) - Capital stock transactions Treasury stock acquired - (101.9) Issuances 2.0 5.3 ESOP notes and guarantee 1.9 1.8 Dividends paid (11.5) (10.7) Financing activities of discontinued operations - 0.1 ------- ------- Net cash provided (used) by financing activities 5.7 (24.5) ------- ------- Net Decrease in Cash and Cash Equivalents (48.0) (145.3) Cash and Cash Equivalents at beginning of period 124.8 260.8 ------- ------- Cash and Cash Equivalents at end of period $ 76.8 $ 115.5 ======= ======= See Financial Notes. (Concluded) - 7 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL NOTES 1. Interim Financial Statements - --------------------------------- In the opinion of the Company, these unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of its financial position as of June 30, 1997 and the results of its operations and its cash flows for the three months ended June 30, 1997 and 1996. Except for the $48.2 million charge in fiscal 1997 described in Note 2, such adjustments were of a normal recurring nature. The results of operations for the three months ended June 30, 1997 and 1996 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 Company's 1997 Annual Report to Stockholders which has previously been filed with the Securities and Exchange Commission. 2. Fiscal 1997 Acquisitions - ----------------------------- In April 1996, the Company acquired Automated Healthcare, Inc. ("AHI"), a provider of automated pharmaceutical dispensing equipment for use by health care institutions. In the first quarter of fiscal 1997, a $48.2 million charge was recorded to write off the portion of the purchase price of AHI allocated to technology for which technological feasibility had not been established as of the acquisition date and for which there were no alternate uses. In November 1996, the Company acquired FoxMeyer Corporation's healthcare distribution business ("FoxMeyer"), pursuant to an expedited auction process in the FoxMeyer Corporation bankruptcy proceeding in Wilmington, Delaware. In February 1997, the Company acquired General Medical Inc. ("General Medical"), a multi-market distributor of medical-surgical supplies to acute-care, physician-care, and extended-care markets. The acquisitions were accounted for under the purchase method. The revenues and operating results of AHI, FoxMeyer and General Medical are included in the consolidated financial statements from their respective dates of acquisition. 3. Discontinued Operations - ---------------------------- Earnings from discontinued operations for the three months ended June 30, 1996, consist of the Company's interest in the operations of Armor All Products Corporation and Millbrook Distribution Services, Inc., which were sold in December 1996 and March 1997, respectively. - 8 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL NOTES 4. Marketable Securities - -------------------------- The June 30, 1997 marketable securities balance includes $88.8 million held in trust as exchange property for the Company's $144.6 million principal amount of 4.5% exchangeable subordinated debentures which remain outstanding. 5. Convertible Preferred Securities - ------------------------------------- In February 1997, a wholly owned subsidiary trust of the Company issued 4 million preferred securities shares to the public and 123,720 common securities to the Company. The preferred securities shares are convertible at the holder's option into the Company's common stock. The proceeds of such issuances were invested by the trust in $206,186,000 aggregate principal amount of the Company's 5% Convertible Junior Subordinated Debentures due 2027 (the "Debentures"). The Debentures represent the sole assets of the trust. The Debentures mature on June 1, 2027, bear interest at the rate of 5%, payable quarterly, and are redeemable by the Company beginning in March 2000 at 103.5% of the principal amount thereof. The $6,186,000 of Debentures attributable to the Company's common security interest in the trust have been eliminated, and the preferred securities reflected as outstanding, in the accompanying consolidated financial statements. Holders of the preferred securities are entitled to cumulative cash distributions at an annual rate of 5% of the liquidation amount of $50 per preferred security. Each preferred security is convertible at the rate of .6709 shares of McKesson common stock, subject to adjustment in certain circumstances. The preferred securities will be redeemed upon repayment of the Debentures, and are callable by the Company at 103.5% of the liquidation amount beginning in March 2000. 6. New Accounting Pronouncements - --------------------------------- The Company is required to adopt Statement of Financial Accounting Standards ("SFAS") 128, "Earnings per Share" in the third quarter of fiscal 1998. Earlier application is not permitted. SFAS 128 replaces current EPS reporting requirements and requires a dual presentation of basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Pro forma amounts for basic and diluted EPS, assuming SFAS 128 had been in effect, are as follows: Three Months Ended June 30 ------------------ 1997 1996 ------ ------ ($ in millions) Net Income (Loss) Per Share Basic $ 0.82 $(0.41) Diluted 0.78 (0.41) - 9 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL NOTES The diluted calculation for the three months ended June 30, 1996 excludes the impact of stock options which were anti-dilutive due to the net loss for the period. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130 "Reporting Comprehensive Income," which requires that an enterprise report, by major components and as a single total, the change in its net assets during the period from nonowner sources; and SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information," which establishes annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas, and major customers. Adoption of these statements will not impact the Company's consolidated financial position, results of operations or cash flows, and any effect will be limited to the form and content of its disclosures. Both statements are effective for the Company's fiscal year 1999, with earlier application permitted. - 10 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL REVIEW Segment Results - --------------- Three Months Ended June 30 ------------------- 1997 1996 %Chg ------ ------ ---- ($ in millions) REVENUES Health Care Services U.S. Health Care Pharmaceutical Dist. & Services $3,441.1 $2,219.5 55.0 Medical/Surgical Dist. & Services 446.9 - ------- ------- Total U.S. Health Care 3,888.0 2,219.5 75.2 International 377.8 376.8 0.3 ------- ------- Total Health Care Services 4,265.8 2,596.3 64.3 Water Products 72.3 70.4 2.7 Corporate 4.6 3.9 ------- ------- Total $4,342.7 $2,670.6 62.6 ======= ======= OPERATING PROFIT Health Care Services $ 82.8 $ 3.3(1) Water Products 11.1 9.6 15.6 ------- ------- Total 93.9 12.9 Interest - net(2) (21.8) (7.7) Corporate and other (8.9) (9.9) ------- ------- Income (loss) before taxes $ 63.2 $ (4.7) ======= ======= (1) Includes a $48.2 million write-off for in-process technology related to the April 1996 acquisition of Automated Healthcare, Inc. (2) Interest expense is shown net of corporate interest income. - 11 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL REVIEW Overview of Results - ------------------- Net income for the first quarter increased to $37.6 million, $0.78 per fully diluted share, from a loss of $18.1 million, $(0.41) per share, in the prior year. The prior year net loss included income from discontinued operations of $3.3 million. The fiscal 1997 loss from continuing operations included a $48.2 million charge to write off in-process technology related to the April 1996 acquisition of Automated Healthcare, Inc. The effective income tax rate applicable to continuing operations for the quarter ended June 30, 1996 differed from the effective income tax rate for the current year period primarily due to the write-off of in-process technology which had no associated tax benefit. HEALTH CARE SERVICES The Health Care Services segment includes the operations of the Company's U.S. pharmaceutical and health care products distribution and medical/surgical supplies distribution businesses ("U.S. Health Care") and its international health care distribution businesses in Canada and Mexico. This segment accounted for approximately 98% of revenues from continuing operations in the first quarter. Segment revenues increased by 64% for the quarter compared with the prior year, reflecting revenue from the fiscal 1997 acquisitions (see Note 2), 17% internal growth in the U.S. Health Care pharmaceutical distribution business, and flat international revenues. Operating profit for the quarter, excluding the effect of the $48.2 million charge noted above, increased by 61% to $82.8 million from the prior year, reflecting the increasing contribution from the 1997 acquisitions, stable margins in the U.S. Health Care pharmaceutical distribution business and lower costs associated with the Company's OmniLink product offering. International operating profits declined modestly in the quarter due to the phased transition of a Canadian customer to self-warehousing and lower margins on the replacement business. WATER PRODUCTS Revenues at Water Products increased by 3% for the quarter compared with the prior year. Prior year revenues included $4.5 million in revenues from the Aqua Vend unit, which was sold in March 1997. The 10% increase in revenues from comparable operations resulted from continuing strong grocery sales growth following a series of new product introductions, and continued geographic expansion. Operating profit increased 16% in the quarter to $11.1 million from $9.6 million in the prior year. This increase reflects improved profitability from the expanding grocery business, and cost savings resulting from customer retention programs for the direct delivery business. - 12 - McKESSON CORPORATION and SUBSIDIARIES FINANCIAL REVIEW INTEREST, NET Interest expense, net of interest income, increased to $21.8 million in the quarter from $7.7 million for the prior year period, as a result of the debt issued to finance acquisitions in the second half of fiscal 1997. Liquidity and Capital Resources - ------------------------------- Cash and marketable securities available for sale were $172.7 million at June 30, 1997 and $229.8 million at March 31, 1997. The June 30, 1997 marketable securities balance included $88.8 million from the sale of the Armor All shares which is currently restricted and held in trust as exchange property in connection with the Company's outstanding exchangeable debentures. Cash and marketable securities available for sale decreased by $57.1 million and total debt increased by $17.8 million during the three months ended June 30, 1997. These changes in the quarter primarily reflect a decrease in accounts payable from March 31, 1997 levels. The accounts payable decrease is due to the timing of inventory purchases during the quarter. It is expected that accounts payable balances at March 31, 1998 will be in excess of March 31, 1997 levels. Inventory balances decreased from March 31, 1997 levels due to normal seasonality and Company initiatives designed to increase inventory turnover. Stockholders' equity was $1,295.2 million at June 30, 1997, and the net debt-to-capital ratio was 36% compared with 34% on March 31, 1997. The net debt-to-capital ratio for both periods was computed by reducing the outstanding debt amount by the cash and marketable securities at the end of the period. Fully diluted shares increased to 50.4 million from 43.8 million in the prior year due primarily to the issuance of 2.8 million common shares in conjunction with the General Medical acquisition in February 1997, the 2.7 million common shares underlying the convertible preferred securities issued in February 1997 and the exclusion of potential employee stock option dilution in the prior year due to the net loss reported. Certain of the matters discussed herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks and uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. - 13 - PART II. OTHER INFORMATION =========================== Item 1. Legal Proceedings - -------------------------- As previously reported in the Company's Form 10-K for its fiscal year ended March 31, 1997, a purported class action was filed in July 1995 in the Supreme Court of the State of New York by Richard A. Bernstein against General Medical Corp., Inc. and several other defendants alleging a conspiracy to orchestrate the leveraged buyout of plaintiff's interest in General Medical at an unfairly low price. The complaint alleges common law fraud, breach of fiduciary duty, and inducing breach of fiduciary duty, and seeks rescissionary damages of $50 million, compensatory damages of $25 million and punitive damages of $25 million. The complaint was dismissed in September 1996 and the plaintiff appealed. On July 1, 1997, the Appellate Division of the Supreme Court of the State of New York reversed the prior dismissal and reinstated the complaint. The Company continues to believe that it has meritorious defenses to the allegations made against it and intends to vigorously defend the action. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ The Company's Annual Meeting of Stockholders was held on July 30, 1997. The following matters were voted upon at the meeting and e stockholder votes on each such matter are briefly described below: The Board of Directors' nominees for directors as listed in the proxy statement were each elected to serve for a three year term expiring at the Annual Meeting in 2000. The vote was as follows: Votes Votes For Withheld ---------- --------- Tully M. Friedman 39,168,846 293,280 John M. Pietruski 39,161,793 300,233 Carl E. Reichardt 39,150,449 311,677 The terms of the following named directors continued after the meeting: Mary. G.F. Bitterman Alan Seelenfreund David S. Pottruck Jane E. Shaw Mark A. Pulido Robert H. Waterman, Jr. The 1997 Non-Employee Directors' Equity Compensation and Deferral Plan was approved by the following vote: Votes For Votes Against Votes Withheld ---------- ------------- -------------- 36,087,023 3,188,688 186,415 The proposal to amend and restate the Corporation's 1973 Stock Purchase Plan to make available for purchase an additional 450,000 shares of Common Stock and to make other changes appropriate to facilitate the administration of grants under the Plan was approved by the following vote: Votes For Votes Against Votes Withheld ---------- ------------- -------------- 36,703,781 2,550,522 207,823 - 14 - PART II. OTHER INFORMATION =========================== The proposal to amend the Corporation's 1981 Long-Term Incentive Plan to permit awards under the plan to qualify for exemption under Section 162(m) of the Internal Revenue Code of 1986, and to make other changes necessary to facilitate the administration of awards under the Plan was approved by the following vote: Votes For Votes Against Votes Withheld ---------- ------------- -------------- 38,528,563 741,489 192,074 Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits (11) Computation of Earnings (Loss) per Common Share (27) Financial Data Schedule (99) McKesson Corporation 1994 Stock Option and Restricted Stock Plan (Amended and Restated effective July 30, 1997) (b) Reports on Form 8-K The Registrant filed the following reports on Form 8-K, or amendments to previously filed reports on Form 8-K, during the three months ended June 30, 1997: 1. Form 8-K/A Amendment No. 2 Date of Report: November 22, 1996 Date Filed: April 28, 1997 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits --------------------------------------------------- The Registrant filed the financial statements and pro forma financial information related to its acquisition of the healthcare distribution business of FoxMeyer Corporation. 2. Form 8-K Date of Report: March 31, 1997 Date Filed: April 7, 1997 Item 2. Acquisition or Disposition of Assets --------------------------------------------- The Registrant reported that it had completed the sale of Millbrook Distribution Services, Inc. Item 7(c). Exhibits -------------------- Press Release dated April 2, 1997. 3. Form 8-K Date of Report: May 30, 1997 Date Filed: June 24, 1997 Item 5. Other Events --------------------- On May 30, 1997, the Registrant amended and restated its By-Laws. Item 7(c). Exhibits -------------------- Restated By-Laws of the Registrant, as amended through May 30, 1997. - 15 - PART II. OTHER INFORMATION =========================== 4. Form 8-K Date of Report: June 11, 1997 Date Filed: June 13, 1997 Item 5. Other Events --------------------- On June 11, 1997 the Registrant executed an Underwriting Agreement in connection with the previously announced secondary offering of 2,791,738 shares of its common stock, par value $.01 per share, on behalf of certain selling stockholders. This report was filed in connection with the resale of those shares under the Registrant's shelf registration statement on Form S-3, declared effective on June 9, 1997. Item 7(c). Exhibits -------------------- Underwriting Agreement dated June 11, 1997 by and among Registrant, Morgan Stanley & Co. Incorporated and the Selling Stockholders named therein. - 16 - 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: August 13, 1997 By /s/ Richard H. Hawkins ---------------------------- Richard H. Hawkins Vice President and Chief Financial Officer By /s/ Heidi E. Yodowitz ---------------------------- Heidi E. Yodowitz Controller - 17 - EXHIBIT INDEX Exhibit Number Description - ------- ----------------------------------------------- (11) Computation of Earnings (Loss) per Common Share (27) Financial Data Schedule (99) McKesson Corporation 1994 Stock Option and Restricted Stock Plan (Amended and Restated effective July 30, 1997) - 18 - EX-11 2 Exhibit (11) McKESSON CORPORATION COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE (unaudited) (in millions except per share amounts) Three Months Ended June 30 ------------------- 1997 1996 ------ ------ FULLY DILUTED EARNINGS (LOSS) PER SHARE Income (loss) after taxes from continuing operations $ 37.6 $(21.4) Dividends on preferred securities of subsidiary trust 1.6 - Income from discontinued operations - 3.3 ----- ----- Total $ 39.2 $(18.1) ===== ===== Fully diluted shares Common shares outstanding(1) 47.7 43.8 Convertible preferred securities - dilutive 2.7 - ----- ----- Total 50.4 43.8 ===== ===== Fully diluted earnings (loss) per share Continuing operations $ 0.78 $(0.49) Discontinued operations - 0.08 ----- ----- Total $ 0.78 $(0.41) ===== ===== PRIMARY EARNINGS (LOSS) PER SHARE Income (loss) after taxes Continuing operations $ 37.6 $(21.4) Discontinued operations - 3.3 ----- ----- Total $ 37.6 $(18.1) ===== ===== Primary shares Common shares outstanding(1) 47.6 43.8 ===== ===== Primary earnings (loss) per share Continuing operations $ 0.79 $(0.49) Discontinued operations - 0.08 ----- ----- Total $ 0.79 $(0.41) ===== ===== (1) 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 and, in the calculation for the three months ended June 30, 1997, adjusting this total for dilutive stock options using the treasury stock method. The calculations for the three months ended June 30, 1996, exclude stock options which were anti-dilutive due to the net loss incurred for the period. EX-27 3
5 0000927653 MCKESSON 1,000 3-MOS MAR-31-1997 APR-01-1997 JUN-30-1997 76,800 95,900 1,294,300 46,300 2,116,900 3,588,200 796,100 418,400 5,018,100 2,463,400 807,700 0 0 400 1,294,800 5,018,100 4,342,700 4,342,700 3,977,900 4,279,500 0 2,800 23,100 63,200 24,000 37,600 0 0 0 37,600 0.79 0.78
EX-99 4 Exhibit (99) MCKESSON CORPORATION 1994 STOCK OPTION AND RESTRICTED STOCK PLAN (Amended and Restated effective July 30, 1997) 1. Establishment, Purpose and Definitions. (a) There is hereby adopted the McKesson Corporation 1994 Stock Option and Restricted Stock Plan (the "Plan"). The Plan shall be the successor to the McKesson Corporation 1988 Restricted Stock Plan and the McKesson Corporation 1978 Stock Option Plan (collectively, the "Predecessor Plans") with respect to those awards under the Predecessor Plans which will be equitably adjusted to become awards under the Plan ("Adjusted Awards"), all in connection with the restructuring of McKesson Corporation, a Delaware corporation ("Old McKesson"), that will result in the sale of Old McKesson's PCS business to Eli Lilly and Company (the "Transaction"). In connection with the Transaction, SP Ventures, Inc. shall be renamed McKesson Corporation (both of such entities being referred to herein as the "Company", in each case as the context so requires) and the Plan shall be renamed the McKesson Corporation 1994 Stock Option and Restricted Stock Plan. (b) The purpose of this Plan is to provide a means whereby key executives of the Company and its affiliates may be given an opportunity to purchase shares of the common stock ($0.01 par value) of the Company (the "Stock") pursuant to options which may or may not qualify as "incentive stock options" under Section 422 of the Internal Revenue Code, as amended (the "Code"), and by providing participants with grants of restricted shares of Stock ("Restricted Stock") in accordance with the terms and conditions set forth herein. Until July 30, 1997, the Plan also provided for grants of options to members of the Board of Directors of the Company who were not employed as regular salaried officers or employees of the Company or its affiliates ("Non-Employee Directors"). On that date, the stockholders approved the Non- Employee Directors' Equity Compensation and Deferral Plan (the "1997 Plan"), and all grants of options to Non-Employee Directors from that date forward will be made under the 1997 Plan. All options previously granted to Non-Employee Directors under this Plan will continue to be governed by the terms and conditions in effect at the time of the grant of such options. 2. Stock Subject to the Plan. (a) The aggregate number of shares of Stock available for the grant of awards hereunder shall equal the sum of (a) the number of shares of Stock issuable in connection with Adjusted Awards, plus (b) 4,900,000 (all such shares shall be subject to equitable adjustment as provided herein). With respect to the shares of Stock referred to in clause (b) above (the "Future Award Shares") no more than 1,100,000 shares may be awarded as Restricted Stock (subject to equitable adjustment as provided herein). The maximum number of Future Award Shares that may be granted to any individual during any plan year in the form of Restricted Stock shall not exceed 20,000 and the maximum number of Future Award Shares that may be granted to any individual in the form of options during any plan year shall not exceed 300,000; in each case, such maximum number shall be subject to equitable adjustment as provided herein. All awards of Future Award Shares shall be contingent on the approval of the Plan by the stockholders of the Company at its first annual meeting of stockholders next following consummation of the Transaction. As the Committee (as hereinafter defined) may determine from time to time, the Stock may consist either in whole or in part of shares of authorized but unissued Stock, or shares of authorized and issued Stock reacquired by the Company and held in its treasury. If an option covered by Future Award Shares is surrendered for cash or for any other reason (except surrender for shares of Stock) ceases to be exercisable in whole or in part, the shares which were subject to such option but as to which the option had not been exercised shall continue to be available for grants of stock options under the Plan. If any shares of Stock underlying Restricted Stock grants which are covered by Future Award Shares shall be reacquired by the Company pursuant to the termination provisions described herein or in the instruments evidencing the making of such Restricted Stock grants, such shares shall again be available for grant of Restricted Stock awards under the Plan (to the extent permitted under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Prior to the granting of awards, the Company shall be under no obligation to reserve or retain in its treasury any particular number of shares of Stock at any time, and no particular shares of Stock, whether issued or held as treasury Stock, shall be identified as being available for future awards under the Plan. (b) In the case of options which are intended to qualify as "incentive stock options" under Section 422 of the Code, the aggregate fair market value (determined as of the time the option is granted) of the Stock with respect to which incentive stock options are exercisable for the first time by any eligible key executive during any calendar year (under this Plan and any other plans of the Company) shall not exceed $100,000. (c) In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, stock, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Stock such that an adjustment is appropriate in order to preserve (but not increase) the rights of participants under the Plan, then the Committee shall make such equitable changes or adjustments as it deems necessary or appropriate to any or all of (i) the number and kind of shares which may thereafter be issued in connection with Future Award Shares (with respect to both Restricted Stock and option awards), (ii) the number and kind of shares issued in respect of outstanding Adjusted Awards, (iii) the number and kind of shares issued in respect of outstanding awards of Future Award Shares, and (iv) the exercise price relating to any options. 3. Eligibility. Persons who shall be eligible to have granted to them awards provided for by the Plan shall be such key executives of the Company and its affiliates as the Committee, in its sole discretion, shall designate from time to time. 4. Administration of the Plan. (a) The Plan shall be administered by a committee (the "Committee") consisting of not less than two directors of the Company to be appointed by the Board, each of whom is an "outside director" within the meaning of Section 162(m) of the Code and a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act. (b) The Committee may from time to time determine which key executives of the Company and its affiliates shall be granted awards under the Plan, the terms thereof, and the number of shares covered by an option or the number of shares of Restricted Stock to be granted. (c) The Committee shall have the sole authority, in its absolute discretion, to adopt, amend, and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan, to construe and interpret the Plan, the rules and regulations, and the instruments evidencing awards granted under the Plan and to make all other determinations deemed necessary or advisable for the administration of the Plan. All decisions, determinations, and interpretations of the Committee shall be final and binding on all participants and other interested parties. 5. Stock Options and Stock Appreciation Rights. (a) The Option Price. The exercise price of each option shall not be less than the fair market value of the Stock covered by such option on the date the option is granted, except that the option price associated with Adjusted Awards shall be such price as results from the equitable adjustment of such awards. Such fair market value shall, if the Stock is not listed or admitted to trading on a stock exchange, be the mean between the lowest reported bid price and highest reported asked price of the Stock on the date the option is granted in the over-the-counter market, as reported by any publication of general circulation selected by the Company which regularly reports the market price of the Stock in such market, or, if the Stock is then listed or admitted to trading on any stock exchange, the composite closing price on such day as reported in the Wall Street Journal; provided, however, that if the Committee determines that as a result of the Transaction fair market value may be more accurately determined based on the average closing price of the Stock over a three-consecutive-day period immediately prior to the grant, then such average will constitute fair market value. Such price shall be subject to adjustment as provided in paragraph 2(c) hereof. (b) Terms and Conditions of Options. (i) Each option granted pursuant to the Plan shall be evidenced by a written grant agreement (the "Agreement") executed by the Company and the person to whom such option is granted which shall provide such terms and conditions as the Committee may determine, in its sole discretion. (ii) Unless otherwise provided in the Agreement, the term of each option shall be for no more than ten years and three months; provided however that the term of each option intended to qualify as an "incentive stock option" shall be for no more than ten years. (iii) The Agreement may contain such other terms, provisions, and conditions as may be determined by the Committee (not inconsistent with this Plan) including, without limitation, provisions relating to stock appreciation rights ("SARs") with respect to options granted hereunder. Unless otherwise provided in the Agreement, the Committee may, in its sole discretion, extend the post-termination exercise period with respect to an option (but not beyond the original term of such option). If an option, or any part thereof, is intended to qualify as an "incentive stock option", the Agreement shall contain those terms and conditions necessary to so qualify said option or such part thereof. (iv) The Committee shall have the authority to accelerate the exercisability of any outstanding option at such time and under such circumstances as it, in its sole discretion, deems appropriate. (v) Adjusted Awards shall remain subject to the same terms and conditions to which they were subject prior to any equitable adjustment made in respect of the Transaction. (c) Stock Appreciation Rights. The Committee may, under such terms and conditions as it deems appropriate, authorize the surrender by an optionee of all or part of an unexercised option and authorize a payment in consideration thereof of an amount equal to the difference obtained by subtracting the option price of the shares then subject to exercise under such option from the fair market value of the Stock represented by such shares on the date of surrender, provided that the Committee determines that such settlement is consistent with the purpose of the Plan. Such payment may be made in shares of Stock valued at their fair market value on the date of surrender of such option or in cash, or partly in shares and partly in cash. Acceptance of such surrender and the manner of payment shall be in the discretion of the Committee. If an option is surrendered for cash, the shares covered by the surrendered option will thereafter be available for grant under the Plan to the extent permitted under Rule 16b-3 of the Exchange Act. (d) Use of Proceeds. Proceeds realized from the sale of Stock pursuant to options granted under the Plan shall constitute general funds of the Company. 6. Restricted Stock Awards. (a) Terms and Conditions. Each Restricted Stock grant made pursuant to the Plan shall be evidenced by an Agreement executed by the Company and the person to whom such Restricted Stock is granted (the "Grantee"). Each Restricted Stock grant made under the Plan shall, unless otherwise provided in the Agreement, contain the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Committee. Adjusted Awards shall maintain the same terms and conditions to which they were subject prior to any equitable adjustment made in respect of the Transaction. (b) Restrictions. Until the restrictions imposed on any Restricted Stock grant shall lapse, shares of Stock granted to a participant pursuant to a Restricted Stock grant: (i) shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of, and (ii) shall, if the Grantee's continuous employment with the Company shall terminate for any reason, unless otherwise provided in the Agreement, be returned to the Company forthwith, and all the rights of the Grantee to such shares shall immediately terminate; provided that if the Committee, in its sole discretion, shall within ninety (90) days of such termination of employment, notify the participant in writing of its decision not to terminate the Grantee's rights in such shares, then the Grantee shall continue to be the owner of such shares subject to such continuing restrictions as the Committee may prescribe in such notice. If the Grantee's interests in the shares granted pursuant to a Restricted Stock grant shall be terminated, such Grantee shall forthwith deliver or cause to be delivered to the Secretary of the Company the certificate(s), if any, previously delivered to the Grantee for such shares, accompanied by such endorsement(s) and/or instrument(s) of transfer as may be required by the Secretary of the Company. (c) Lapse of Restrictions. Except as otherwise provided in the Plan or the Agreement, the restrictions imposed on any Restricted Stock grant shall commence with the date of the grant and continue during a period set by the Committee. Notwithstanding the foregoing, the Committee may accelerate the lapsing of restrictions on a Restricted Stock grant under such terms and conditions as it may deem appropriate. (d) Restrictive Legend; Certificates May be Held in Custody. Each certificate evidencing shares granted pursuant to a Restricted Stock grant may bear an appropriate legend referring to the terms, conditions and restrictions described in the Plan and in the instrument evidencing the Restricted Stock grant. Any attempt to dispose of such shares in contravention of such terms, conditions and restrictions shall be invalid. The Committee may enact rules which provide that the certificates evidencing such shares may be held in custody by a bank or other institution, or that the Company may itself hold such shares in custody, until restriction thereon shall have lapsed. (e) Restrictions upon Making of Restricted Stock Grants. The registration or qualification under any federal or state law of any shares to be granted pursuant to Restricted Stock grants or the resale or other disposition of any such shares by or on behalf of the Grantees receiving such shares may be necessary or desirable as a condition of or in connection with such Restricted Stock grants, and, in any such event, if the Committee in its sole discretion so determines, delivery of the certificates for such shares shall not be made until such registration or qualification shall have been completed. (f) Special Provisions Regarding Awards. Notwithstanding anything to the contrary contained herein, unless otherwise provided in the Agreement governing a Restricted Stock grant, Restricted Stock awards granted pursuant to this Section 6 to Executive Officers (as such term is defined in Rule 3b-7 promulgated under the Exchange Act) shall be based on the attainment by the Company (or a subsidiary or division of the Company if applicable) of performance goals pre-established by the Committee, during a performance period pre-established by the Committee, based on one or more of the following criteria: (i) the attainment of a specified percentage return on total capital employed by the Company (or a subsidiary or division of the Company); (ii) the attainment of a specified percentage return on total stockholder equity of the Company; (iii) the attainment of a specified percentage increase in earnings per share of Stock from continuing operations; (iv) the attainment of a specified percentage increase in net income of the Company; (v) the attainment of a specified percentage increase in profit before taxation of the Company (or a subsidiary or division of the Company); and (vi) the attainment of a specified percentage increase in revenues of the Company (or a subsidiary or division of the Company). In addition, such performance goals may be based upon the attainment of specified levels of Company performance under one or more of the measures described above relative to the performance of other corporations. Each such performance criteria shall be evaluated in accordance with generally accepted accounting principles. Such shares of Restricted Stock shall be released from restrictions only after the attainment of such performance measures have been certified by the Committee. 7. Change in Control. Upon a Change in Control (as hereinafter defined), then notwithstanding anything herein to the contrary, all options granted under the Plan that are outstanding at the time of such Change in Control shall become immediately exercisable in full and all restrictions with respect to shares of Restricted Stock shall lapse and such shares shall become fully vested and exercisable. A "Change in Control" of the Company shall be deemed to have occurred if any of the events set forth in any one of the following paragraphs shall occur: (i) any "person" (as such term is used in sections 13(d) and 14(d) of the Exchange Act), excluding the Company or any of its affiliates, a trustee or any fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, an underwriter temporarily holding securities pursuant to an offering of such securities or a corporation owned, directly or indirectly, by stockholders of the Company in substantially the same proportions as their ownership of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of not more than two consecutive years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the holders of the Stock immediately prior to such transaction or series of transactions continue to have the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately prior to such transaction or series of transactions. 8. Amendment and Termination of the Plan. The Board at any time and from time to time may suspend, terminate, modify or amend the Plan; provided, however, that an amendment which requires stockholder approval in order for the Plan to continue to comply with Section 162(m) of the Code or any other law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of stockholders. No suspension, termination, modification or amendment of the Plan may adversely affect any award previously granted without the written consent of the Grantee. 9. Assignability. Each option award granted pursuant to this Plan shall, during the participant's lifetime, be exercisable only by him. No award nor any right thereunder shall be transferable by the participant by operation of law or otherwise other than by will, the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or the Employee Retirement Income Security Act of 1974, as amended. 10. Payment Upon Exercise. Payment of the purchase price upon exercise of any option granted under this Plan shall be made in cash; provided that the Committee, in its sole discretion, may permit an option holder to pay the option price, in whole or in part, by tendering to the Company shares of Stock owned by the option holder, and having a fair market value equal to the option price. The fair market value of such Stock shall be determined by the Committee as it deems appropriate, or as may be required in order to comply with any applicable law or regulation. 11. Effective Date and Duration of the Plan. The Plan shall become effective upon its adoption by the Board and the approval thereof by Old McKesson as the sole stockholder of the Company; provided, however, that the effectiveness of the Plan shall be contingent upon the occurrence of the Transaction and all awards of Future Award Shares shall be contingent on the approval of the Plan by the stockholders of the Company at its first annual meeting of stockholders. Unless sooner terminated, the Plan shall remain in effect until terminated by action of the Board, provided, however, that the duration of the Plan shall in no event exceed ten years from the date of the adoption of the Plan by the Board. Termination of the Plan shall not affect any awards previously granted pursuant thereto, which shall remain in effect until their restrictions shall have lapsed (with respect to Restricted Stock grants) or until exercised (with respect to option grants) all in accordance with their terms. 12. Agreement by Participant Regarding Withholding Taxes. If the Committee shall so require, as a condition of exercise of an option or SAR or upon the lapsing of restrictions imposed on Restricted Stock (each a "Tax Event"), each participant shall agree that no later than the date of the Tax Event, the participant will pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld upon the Tax Event. Alternatively, the Committee may provide, in its sole discretion, that a participant may elect, to the extent permitted or required by law, to have the Company deduct federal, state and local taxes of any kind required by law to be withheld upon the Tax Event from any payment of any kind due to the participant, including withholding of Shares. 13. Rights as a Shareholder. A participant granted an award hereunder or a transferee of an award shall have no rights as a stockholder with respect to any shares covered by the award until the date of the issuance of a stock certificate to him for such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distribution of other rights for which the record date is prior to the date such stock certificate is issued, except as otherwise provided in the Plan. 14. No Rights to Employment. Nothing in the Plan or in any award granted or Agreement entered into pursuant hereto shall confer upon any participant the right to continue in the employ of, or in an independent contractor relationship with, the Company or any subsidiary or to be entitled to any remuneration or benefits not set forth in the Plan or such Agreement or to interfere with or limit in any way the right of the Company or any such subsidiary to terminate such participant's employment. Awards granted under the Plan shall not be affected by any change in duties or position of a participant as long as such participant continues to be employed by, or in a consultant relationship with, the Company or any subsidiary. 15. Interpretation. The Plan is designed and intended to comply with Rule 16b-3 promulgated under the Exchange Act and Section 162(m) of the Code and all provisions hereof shall be construed in a manner to so comply. -----END PRIVACY-ENHANCED MESSAGE-----