McKesson Reports Fiscal 2013 Third-Quarter Results

  McKesson Reports Fiscal 2013 Third-Quarter Results

  *Revenues of $31.2 billion for the third quarter, up 1%.
  *Third-quarter GAAP earnings per diluted share of $1.24, up 3%.
  *Third-quarter Adjusted Earnings per diluted share of $1.41, up 1%.
  *Board of Directors authorized an additional $500 million share repurchase
    program.
  *Fiscal 2013 Outlook: Adjusted Earnings per diluted share of $7.10 to
    $7.30.

Business Wire

SAN FRANCISCO -- January 31, 2013

McKesson Corporation (NYSE: MCK) today reported that revenues for the third
quarter ended December 31, 2012 were $31.2 billion, up 1% compared to $30.8
billion a year ago. On the basis of U.S. generally accepted accounting
principles (“GAAP”), third-quarter earnings per diluted share was $1.24
compared to $1.20 a year ago.

Third-quarter Adjusted Earnings per diluted share was $1.41, up 1% compared to
$1.40 a year ago.

For the first nine months of the fiscal year, McKesson generated cash from
operations of $276 million, and ended the quarter with cash and cash
equivalents of $2.7 billion. During the first nine months of the fiscal year,
the company paid $147 million in dividends, had internal capital spending of
$268 million and spent $577 million on acquisitions. The company also
repurchased $360 million of its common stock during the third quarter.

Distribution Solutions revenues were up 1% in the third quarter, driven mainly
by growth in our U.S. pharmaceutical direct distribution and services business
and growth in our Medical-Surgical distribution business.

Canadian revenues, on a constant currency basis, increased 3% for the third
quarter. Including the favorable currency impact of 3%, Canadian revenues
increased 6% for the third quarter.

Medical-Surgical distribution and services revenues were up 15% for the third
quarter, driven by market growth, new customers, acquisitions and one
additional sales day.

In the third quarter, Distribution Solutions GAAP operating profit was $525
million and GAAP operating margin was 1.73%. Third-quarter adjusted operating
profit was $569 million and the adjusted operating margin was 1.87%.
Distribution Solutions third-quarter segment results include a $40 million
pre-tax charge related to a legal dispute in our Canadian business.

Technology Solutions revenues were flat in the third quarter compared to the
prior year. GAAP operating profit was $79 million for the third quarter and
GAAP operating margin was 9.56%. Adjusted operating profit was $98 million for
the third quarter and adjusted operating margin was 11.86%. Technology
Solutions third-quarter segment results were impacted by revenue deferral in
our international business.

“Our full year view of the operating performance in our Distribution Solutions
segment is now better than our original expectations, and our full year view
of the operating performance in the primary businesses in Technology Solution
remains unchanged,” said John H. Hammergren, chairman and chief executive
officer. “This operating strength is offset by the charge in our Canadian
business and revenue deferral in our international technology business, and as
a result we are updating our previous outlook for the fiscal year and now
expect Adjusted Earnings per diluted share of $7.10 to $7.30 for the fiscal
year ending March 31, 2013.”

Fiscal Year 2013 Outlook

McKesson expects Adjusted Earnings per diluted share of $7.10 to $7.30 for the
fiscal year ending March 31, 2013, which excludes the following GAAP items:

  *Amortization of acquisition-related intangible assets of approximately 55
    cents per diluted share in Fiscal 2013.
  *Acquisition expenses and related adjustments expected to add approximately
    13 cents per diluted share, including the impact of the $81 million
    pre-tax gain on business combination related to the acquisition of the
    remaining 50% ownership in McKesson’s corporate headquarters building
    completed during the first quarter.
  *Litigation reserve adjustments of approximately 15 cents per diluted
    share.

Adjusted Earnings

McKesson separately reports financial results on the basis of Adjusted
Earnings. Adjusted Earnings is a non-GAAP financial measure defined as GAAP
income from continuing operations, excluding amortization of
acquisition-related intangible assets, acquisition expenses and related
adjustments, and certain litigation reserve adjustments. A reconciliation of
McKesson’s financial results determined in accordance with GAAP to Adjusted
Earnings is provided in Schedules 2, 3 and 4 of the financial statement tables
included with this release.

Risk Factors

Except for historical information contained in this press release, matters
discussed may constitute “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended, that involve risks and uncertainties that
could cause actual results to differ materially from those projected,
anticipated or implied. These statements may be identified by their use of
forward-looking terminology such as “believes”, “expects”, “anticipates”,
“may”, “will”, “should”, “seeks”, “approximately”, “intends”, “plans”,
“estimates” or the negative of these words or other comparable terminology.
The discussion of financial trends, strategy, plans or intentions may also
include forward-looking statements. It is not possible to predict or identify
all such risks and uncertainties; however, the most significant of these risks
and uncertainties are described in the company’s Form 10-K, Form 10-Q and Form
8-K reports filed with the Securities and Exchange Commission and include, but
are not limited to: material adverse resolution of pending legal proceedings;
changes in the U.S. healthcare industry and regulatory environment; changes in
the Canadian healthcare industry and regulatory environment; competition;
substantial defaults in payment or a material reduction in purchases by, or
the loss of, a large customer or group purchasing organization; the loss of
government contracts as a result of compliance or funding challenges; public
health issues in the U.S. or abroad; implementation delay, malfunction,
failure or breach of internal information systems; the adequacy of insurance
to cover property loss or liability claims; the company’s failure to attract
and retain customers for its software products and solutions due to
integration and implementation challenges, or due to an inability to keep pace
with technological advances; the company’s proprietary products and services
may not be adequately protected, and its products and solutions may be found
to infringe on the rights of others; system errors or failure of our
technology products and solutions to conform to specifications; disaster or
other event causing interruption of customer access to data residing in our
service centers; the delay or extension of our sales or implementation cycles
for external software products; changes in circumstances that could impair our
goodwill or intangible assets; foreign currency fluctuations or disruptions to
our foreign operations; new or revised tax legislation or challenges to our
tax positions; the company’s ability to successfully identify, consummate and
integrate strategic acquisitions; general economic conditions, including
changes in the financial markets that may affect the availability and cost of
credit to the company, its customers or suppliers; and changes in accounting
principles generally accepted in the United States of America. The reader
should not place undue reliance on forward-looking statements, which speak
only as of the date they are first made. Except to the extent required by law,
the company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements to reflect events or
circumstances after the date hereof, or to reflect the occurrence of
unanticipated events.

The company has scheduled a conference call for 5:00 PM ET. The dial-in number
for individuals wishing to participate on the call is 719-234-7317. Erin
Lampert, vice president, Investor Relations, is the leader of the call, and
the password to join the call is ‘McKesson’. A replay of this conference call
will be available for five calendar days. The dial-in number for individuals
wishing to listen to the replay is 888-203-1112 and the pass code is 8164902.
A webcast of the conference call will also be available live and archived on
the company’s Investor Relations website at www.mckesson.com/investors.

Shareholders are encouraged to review SEC filings and more information about
McKesson, which are located on the company’s website.

About McKesson

McKesson Corporation, currently ranked 14th on the FORTUNE 500, is a
healthcare services and information technology company dedicated to making the
business of healthcare run better. We partner with payers, hospitals,
physician offices, pharmacies, pharmaceutical companies and others across the
spectrum of care to build healthier organizations that deliver better care to
patients in every setting. McKesson helps its customers improve their
financial, operational, and clinical performance with solutions that include
pharmaceutical and medical-surgical supply management, healthcare information
technology, and business and clinical services. For more information, visit
http://www.mckesson.com.

                                                                   Schedule 1
                                                                                     
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP
(unaudited)
(in millions, except per share amounts)
                                                                                              
                  Quarter Ended December                   Nine Months Ended
                  31,                                      December 31,
                  2012          2011          Change       2012          2011          Change
                                                                                              
Revenues          $ 31,187      $ 30,839      1      %     $ 91,835      $ 91,035      1      %
                                                                                              
Cost of
sales ^ (1)        (29,519 )    (29,273 )   1             (86,847 )    (86,313 )   1
(3)
                                                                                              
Gross               1,668         1,566       7              4,988         4,722       6
profit
                                                                                              
Operating
expenses ^          (1,183  )     (1,047  )   13             (3,334  )     (3,135  )   6
(2) (3)
Litigation
charges             -             (27     )   -              (60     )     (145    )   (59  )
^(4)
Gain on
business           -           -          -             81          -          -
combination
^(5)
Total
operating          (1,183  )    (1,074  )   10            (3,313  )    (3,280  )   1
expenses
                                                                                              
Operating           485           492         (1  )          1,675         1,442       16
income
                                                                                              
Other
income              10            (2      )   -              28            12          133
(expense),
net
Interest           (59     )    (64     )   (8  )         (170    )     (192    )   (11  )
expense
                                                                                              
Income
before              436           426         2              1,533         1,262       21
income
taxes
                                                                                              
Income tax         (138    )    (126    )   10            (454    )    (380    )   19
expense
Net income        $ 298        $ 300        (1  )        $ 1,079      $ 882        22
                                                                                              
Earnings
per common
share ^(6)
Diluted           $ 1.24       $ 1.20       3      %     $ 4.49       $ 3.51       28     %
Basic             $ 1.27       $ 1.22       4      %     $ 4.58       $ 3.57       28     %
                                                                                              
Weighted
average
common
shares
Diluted             240           251         (4  )  %       240           252         (5   ) %
Basic               235           246         (4  )          236           247         (4   )
                                                                                              

       Cost of sales for the third quarter and first nine months of fiscal
^(1)  year 2013 includes the receipt of $8 million and $27 million in our
       Distribution Solutions segment representing our share of settlements of
       antitrust class action lawsuits brought against drug manufacturers.
       
       Distribution Solutions segment operating expenses for the third quarter
^(2)   and first nine months of fiscal year 2013 include a $40 million charge
       for a legal dispute in our Canadian business.
       
       Technology Solutions segment results for the third quarter and first
^(3)   nine months of fiscal year 2012 include product alignment charges of
       $42 million, of which $26 million was recorded in cost of sales and $16
       million was recorded in operating expenses.
       
^(4)   Represent charges for the Average Wholesale Price ("AWP") litigation.
       
       For the first nine months of fiscal year 2013, operating expenses
^(5)   include an $81 million pre-tax ($51 million after-tax) gain on business
       combination related to the acquisition of the remaining 50% ownership
       interest in our corporate headquarters building.
       
^(6)   Certain computations may reflect rounding adjustments.
       

                                                                              Schedule 2A
                                                                                                         
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
(unaudited)
(in millions, except per share amounts)
                                                                                                         
                                                                                      Change
                 Quarter Ended December 31, 2012                                      Vs. Prior Quarter
                              Amortization   Acquisition
                 As           of             Expenses      Litigation    Adjusted     As         Adjusted
                 Reported    Acquisition-  and          Reserve      Earnings     Reported  Earnings
                 (GAAP)       Related        Related       Adjustments   (Non-GAAP)   (GAAP)     (Non-GAAP)
                              Intangibles    Adjustments
                                                                                                         
Revenues         $ 31,187     $   -          $  -          $  -          $ 31,187     1        % 1       %
                                                                                                         
Gross
profit           $ 1,668      $   3          $  -          $  -          $ 1,671      7          6
^(1)
Operating
expenses           (1,183 )       50            10            -            (1,123 )   10         13
^(2)
Other
income             10             -             -             -            10         -          -
(expense),
net
Interest          (59    )     -          1          -         (58    )   (8   )     (9   )
expense
Income
before             436            53            11            -            500        2          (2   )
income
taxes
Income tax        (138   )     (20   )     (2    )     -         (160   )   10         1
expense
Net Income       $ 298      $   33       $  9        $  -        $ 340       (1   )     (3   )
                                                                                                         
Diluted
earnings         $ 1.24     $   0.14     $  0.03     $  -        $ 1.41      3        % 1       %
per common
share ^(4)
Diluted
weighted
average           240         240        240        240       240       (4   )   % (4   )  %
common
shares
                                                                                                         
                                                                                                         
                 Quarter Ended December 31, 2011
                              Amortization   Acquisition
                 As           of             Expenses      Litigation    Adjusted
                 Reported    Acquisition-  and          Reserve      Earnings
                 (GAAP)       Related        Related       Adjustments   (Non-GAAP)
                              Intangibles    Adjustments
                                                                                                         
Revenues         $ 30,839    $   -          $  -          $  -          $ 30,839
                                                                                                         
Gross
profit           $ 1,566     $   5          $  -          $  -          $ 1,571
^(3)
Operating
expenses           (1,074 )       44            8             27           (995   )
^(3)
Other
income             (2     )       -             -             -            (2     )
(expense),
net
Interest          (64    )     -          -          -         (64    )
expense
Income
before             426            49            8             27           510
income
taxes
Income tax        (126   )     (18   )     (3    )     (12   )    (159   )
expense
Net Income       $ 300      $   31       $  5        $  15       $ 351    
                                                                                                         
Diluted
earnings         $ 1.20     $   0.12     $  0.02     $  0.06     $ 1.40   
per common
share ^(4)
Diluted
weighted
average           251         251        251        251       251    
common
shares
                                                                                                         

       Gross profit for the third quarter of fiscal year 2013 includes the
^(1)  receipt of $8 million in our Distribution Solutions segment
       representing our share of settlements of antitrust class action
       lawsuits brought against drug manufacturers.
       
       Distribution Solutions segment operating expenses for the third quarter
^(2)   of fiscal year 2013 include a $40 million charge for a legal dispute in
       our Canadian business.
       
       Technology Solutions segment results for the third quarter of fiscal
^(3)   year 2012 include product alignment charges of $42 million, of which
       $26 million was recorded in cost of sales and $16 million was recorded
       in operating expenses.
       
^(4)   Certain computations may reflect rounding adjustments.
       

Adjusted Earnings (Non-GAAP) Financial Information

Adjusted Earnings represents income from continuing operations, excluding the
effects of the following items from the Company’s GAAP financial results,
including the related income tax effects:

Amortization of acquisition-related intangibles - Amortization expense of
acquired intangible assets purchased in connection with acquisitions by the
Company.

Acquisition expenses and related adjustments - Transaction and integration
expenses that are directly related to acquisitions by the Company. Examples
include transaction closing costs, professional service fees, restructuring or
severance charges, retention payments, employee relocation expenses, facility
or other exit-related expenses, recoveries of acquisition-related expenses or
post-closing expenses, bridge loan fees, and gains or losses on business
combinations.

Litigation reserve adjustments - Adjustments to the Company’s reserves,
including accrued interest, for estimated probable losses for its Average
Wholesale Price and Securities Litigation matters, as such terms were defined
in the Company’s Annual Reports on Form 10-K for the fiscal years ended March
31, 2012 and 2009.

Income taxes on Adjusted Earnings are calculated in accordance with Accounting
Standards Codification 740, “Income Taxes,” which is the same accounting
principles used by the Company when presenting its GAAP financial results.

The Company believes the presentation of non-GAAP measures such as Adjusted
Earnings provides useful supplemental information to investors with regard to
its core operating performance, as well as assists with the comparison of its
past financial performance to the Company’s future financial results.
Moreover, the Company believes that the presentation of Adjusted Earnings
assists investors’ ability to compare its financial results to those of other
companies in the same industry. However, the Company's Adjusted Earnings
measure may be defined and calculated differently by other companies in the
same industry.

The Company internally uses non-GAAP financial measures such as Adjusted
Earnings in connection with its own financial planning and reporting
processes. Specifically, Adjusted Earnings serves as one of the measures
management utilizes when allocating resources, deploying capital and assessing
business performance and employee incentive compensation. Nonetheless,
non-GAAP financial results and related measures disclosed by the Company
should not be considered a substitute for, nor superior to, financial results
and measures as determined or calculated in accordance with GAAP.


                                                                             Schedule 2B
                                                                                                           
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
(unaudited)
(in millions, except per share amounts)
                                                                                                           
                                                                                     Change
                Nine Months Ended December 31, 2012                                  Vs. Prior Period
                             Amortization   Acquisition
                As           of             Expenses      Litigation    Adjusted     As         Adjusted
                Reported    Acquisition-  and          Reserve      Earnings     Reported  Earnings   
                (GAAP)       Related        Related       Adjustments   (Non-GAAP)   (GAAP)     (Non-GAAP)
                             Intangibles    Adjustments
                                                                                                           
Revenues        $ 91,835     $   -          $  -          $  -          $ 91,835     1        % 1          %
                                                                                                           
Gross
profit          $ 4,988      $   11         $  -          $  -          $ 4,999      6          6
^(1)
Operating
expenses          (3,313 )       141           (66    )      60           (3,178 )   1          7
^(2) (3)
Other
income,           28             -             -             -            28         133        133
net
Interest         (170   )     -          1          -         (169   )   (11   )    (12    )
expense
Income
before            1,533          152           (65    )      60           1,680      21         6
income
taxes
Income
tax              (454   )     (57   )     27         (23   )    (507   )   19         2
expense
Net             $ 1,079    $   95       $  (38    )  $  37       $ 1,173     22         8
Income
                                                                                                           
Diluted
earnings
per             $ 4.49     $   0.40     $  (0.16  )  $  0.15     $ 4.88      28       % 13         %
common
share
^(5)
Diluted
weighted
average          240         240        240        240       240       (5    )  % (5     )   %
common
shares
                                                                                                           
                                                                                                           
                Nine Months Ended December 31, 2011
                             Amortization   Acquisition
                As           of             Expenses      Litigation    Adjusted
                Reported    Acquisition-  and          Reserve      Earnings
                (GAAP)       Related        Related       Adjustments   (Non-GAAP)
                             Intangibles    Adjustments
                                                                                                           
Revenues        $ 91,035    $   -          $  -          $  -          $ 91,035
                                                                                                           
Gross
profit          $ 4,722     $   16         $  -          $  -          $ 4,738
^(4)
Operating
expenses          (3,280 )       131           26            145          (2,978 )
^(4)
Other
income,           12             -             -             -            12
net
Interest         (192   )     -          -          -         (192   )
expense
Income
before            1,262          147           26            145          1,580
income
taxes
Income
tax              (380   )     (56   )     (9     )    (53   )    (498   )
expense
Net             $ 882      $   91       $  17       $  92       $ 1,082  
Income
                                                                                                           
Diluted
earnings
per             $ 3.51     $   0.36     $  0.06     $  0.37     $ 4.30   
common
share
^(5)
Diluted
weighted
average          252         252        252        252       252    
common
shares
                                                                                                           

       Gross profit for the first nine months of fiscal year 2013 includes the
^(1)  receipt of $27 million in our Distribution Solutions segment
       representing our share of settlements of antitrust class action
       lawsuits brought against drug manufacturers.
       
       Distribution Solutions segment operating expenses for the first nine
^(2)   months of fiscal year 2013 include a $40 million charge for a legal
       dispute in our Canadian business.
       
       For the first nine months of fiscal year 2013, operating expenses, as
       reported under GAAP, include an $81 million pre-tax ($51 million
^(3)   after-tax) gain on business combination related to the acquisition of
       the remaining 50% ownership interest in our corporate headquarters
       building.
       
       Technology Solutions segment results for the first nine months of
^(4)   fiscal year 2012 include product alignment charges of $42 million, of
       which $26 million was recorded in cost of sales and $16 million was
       recorded in operating expenses.
       
^(5)   Certain computations may reflect rounding adjustments.
       

                                                                            Schedule 3A
                                                                                                                     
McKESSON CORPORATION
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
(unaudited)
(in millions)
                                                                                                                                    
                                                                                                                                    
                       Quarter Ended December 31, 2012           Quarter Ended December 31, 2011           Change
                       As                         Adjusted       As                         Adjusted       As            Adjusted
                       Reported    Adjustments  Earnings       Reported    Adjustments  Earnings       Reported      Earnings
                       (GAAP)                     (Non-GAAP)     (GAAP)                     (Non-GAAP)     (GAAP)        (Non-GAAP)
REVENUES
Distribution
Solutions
Direct
distribution &         $ 22,386     $   -         $ 22,386       $ 21,585     $   -        $ 21,585       4        %    4          %
services
Sales to
customers'              4,468       -        4,468        5,198       -        5,198       (14   )       (14    )
warehouses
Total U.S.
pharmaceutical           26,854         -           26,854         26,783         -           26,783       -             -
distribution &
services
Canada
pharmaceutical           2,633          -           2,633          2,473          -           2,473        6             6
distribution &
services
Medical-Surgical
distribution &          874         -        874          760         -        760         15            15
services
Total
Distribution            30,361      -        30,361       30,016      -        30,016      1             1
Solutions
                                                                                                                                    
Technology
Solutions
Services                 661            -           661            643            -           643          3             3
Software &               145            -           145            152            -           152          (5    )       (5     )
software systems
Hardware                20          -        20           28          -        28          (29   )       (29    )
Total Technology        826         -        826          823         -        823         -             -
Solutions
Revenues               $ 31,187   $   -       $ 31,187      $ 30,839   $   -       $ 30,839      1             1
                                                                                                                                    
GROSS PROFIT
Distribution           $ 1,287      $   -         $ 1,287        $ 1,201      $   -         $ 1,201        7             7
Solutions ^(1)
Technology              381         3        384          365         5        370         4             4
Solutions ^(2)
Gross profit           $ 1,668    $   3       $ 1,671       $ 1,566    $   5       $ 1,571       7             6
                                                                                                                                    
OPERATING
EXPENSES
Distribution
Solutions ^(3)         $ (769   )   $   44        $ (725   )     $ (690   )   $   62        $ (628   )     11            15
(4)
Technology               (302   )       16          (286   )       (297   )       15          (282   )     2             1
Solutions ^(2)
Corporate               (112   )     -        (112   )      (87    )     2        (85    )     29            32
Operating              $ (1,183 )  $   60      $ (1,123 )     $ (1,074 )  $   79      $ (995   )     10            13
expenses
                                                                                                                                    
OTHER INCOME
(EXPENSE), NET
Distribution           $ 7          $   -         $ 7            $ (1     )   $   -         $ (1     )     -             -
Solutions
Technology               -              -           -              1              -           1            -             -
Solutions
Corporate               3           -        3            (2     )     -        (2     )     -             -
Other income           $ 10       $   -       $ 10          $ (2     )  $   -       $ (2     )     -             -
(expense), net
                                                                                                                                    
OPERATING PROFIT
Distribution
Solutions ^ (1)        $ 525        $   44        $ 569          $ 510        $   62        $ 572          3             (1     )
(3) (4)
Technology              79          19       98           69          20       89          14            10
Solutions ^ (2)
Operating profit         604            63          667            579            82          661          4             1
Corporate               (109   )     -        (109   )      (89    )     2        (87    )     22            25
Income before
interest expense       $ 495      $   63      $ 558         $ 490      $   84      $ 574         1             (3     )
and income taxes
                                                                                                                                    
STATISTICS
Operating profit
as a % of
revenues
Distribution
Solutions ^(1)           1.73     %                 1.87     %     1.70     %                 1.91     %   3        bp   (4     )   bp
(3) (4)
Technology               9.56                       11.86          8.38                       10.81        118           105
Solutions ^(2)
                                                                                                                                    

       Results for the third quarter of fiscal year 2013 include the receipt
^(1)  of $8 million representing our share of settlements of antitrust class
       action lawsuits brought against drug manufacturers.
       
       Results for the third quarter of fiscal year 2012 include product
^(2)   alignment charges of $42 million, of which $26 million was recorded in
       cost of sales and $16 million was recorded in operating expenses.
       
^(3)   Results for the third quarter of fiscal year 2013 include a $40 million
       charge for a legal dispute in our Canadian business.
       
^(4)   For the third quarter of fiscal year 2012, results, as reported under
       GAAP, include an AWP litigation charge of $27 million.
       

                                                                                                    Schedule 3B
                                                                                                                                  
McKESSON CORPORATION
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
(unaudited)
(in millions)
                                                                                                                                  
                       Nine Months Ended December 31, 2012       Nine Months Ended December 31, 2011       Change
                       As                         Adjusted       As                         Adjusted       As          Adjusted
                       Reported    Adjustments  Earnings       Reported    Adjustments  Earnings       Reported    Earnings
                       (GAAP)                     (Non-GAAP)     (GAAP)                     (Non-GAAP)     (GAAP)      (Non-GAAP)
REVENUES
Distribution
Solutions
Direct
distribution &         $ 64,625     $   -         $ 64,625       $ 63,484     $   -        $ 63,484       2        %  2          %
services
Sales to
customers'              14,621      -        14,621       14,998      -        14,998      (3    )     (3     )
warehouses
Total U.S.
pharmaceutical           79,246         -           79,246         78,482         -           78,482       1           1
distribution &
services
Canada
pharmaceutical           7,559          -           7,559          7,739          -           7,739        (2    )     (2     )
distribution &
services
Medical-Surgical
distribution &          2,542       -        2,542        2,364       -        2,364       8           8
services
Total
Distribution            89,347      -        89,347       88,585      -        88,585      1           1
Solutions
                                                                                                                                  
Technology
Solutions
Services                 1,983          -           1,983          1,916          -           1,916        3           3
Software &               432            -           432            449            -           449          (4    )     (4     )
software systems
Hardware                73          -        73           85          -        85          (14   )     (14    )
Total Technology        2,488       -        2,488        2,450       -        2,450       2           2
Solutions
Revenues               $ 91,835   $   -       $ 91,835      $ 91,035   $   -       $ 91,035      1           1
                                                                                                                                  
GROSS PROFIT
Distribution           $ 3,841      $   2         $ 3,843        $ 3,590      $   1         $ 3,591        7           7
Solutions ^(1)
Technology              1,147       9        1,156        1,132       15       1,147       1           1
Solutions ^(2)
Gross profit           $ 4,988    $   11      $ 4,999       $ 4,722    $   16      $ 4,738       6           6
                                                                                                                                  
OPERATING
EXPENSES
Distribution
Solutions ^ (3)        $ (2,212 )   $   173       $ (2,039 )     $ (2,136 )   $   258       $ (1,878 )     4           9
(4)
Technology               (881   )       43          (838   )       (857   )       42          (815   )     3           3
Solutions ^(2)
Corporate ^(5)          (220   )     (81  )    (301   )      (287   )     2        (285   )     (23   )     6
Operating              $ (3,313 )  $   135     $ (3,178 )     $ (3,280 )  $   302     $ (2,978 )     1           7
expenses
                                                                                                                                  
OTHER INCOME,
NET
Distribution           $ 17         $   -         $ 17           $ 8          $   -         $ 8            113         113
Solutions
Technology               3              -           3              2              -           2            50          50
Solutions
Corporate               8           -        8            2           -        2           300         300
Other income,          $ 28       $   -       $ 28          $ 12       $   -       $ 12          133         133
net
                                                                                                                                  
OPERATING PROFIT
Distribution
Solutions ^(1)         $ 1,646      $   175       $ 1,821        $ 1,462      $   259       $ 1,721        13          6
(3) (4)
Technology              269         52       321          277         57       334         (3    )     (4     )
Solutions ^(2)
Operating profit         1,915          227         2,142          1,739          316         2,055        10          4
Corporate               (212   )     (81  )    (293   )      (285   )     2        (283   )     (26   )     4
Income before
interest expense       $ 1,703    $   146     $ 1,849       $ 1,454    $   318     $ 1,772       17          4
and income taxes
                                                                                                                                  
STATISTICS
Operating profit
as a % of
revenues
Distribution
Solutions ^ (1)          1.84     %                 2.04     %     1.65     %                 1.94     %   19       bp 10         bp
(3) (4)
Technology               10.81                      12.90          11.31                      13.63        (50   )     (73    )
Solutions ^ (2)
                                                                                                                                  

       Results for the first nine months of fiscal year 2013 include the
^(1)  receipt of $27 million representing our share of settlements of
       antitrust class action lawsuits brought against drug manufacturers.
       
       Results for the first nine months of fiscal year 2012 include product
^(2)   alignment charges of $42 million, of which $26 million was recorded in
       cost of sales and $16 million was recorded in operating expenses.
       
^(3)   Results for the first nine months of fiscal year 2013 include a $40
       million charge for a legal dispute in our Canadian business.
       
       For the first nine months of fiscal years 2013 and 2012, results, as
^(4)   reported under GAAP, include AWP litigation charges of $60 million and
       $145 million.
       
       For the first nine months of fiscal year 2013, operating expenses, as
^(5)   reported under GAAP, include an $81 million pre-tax gain on business
       combination related to the acquisition of the remaining 50% ownership
       interest in our corporate headquarters building.
       

                                                                                        Schedule 4A
                                                                                                                        
McKESSON CORPORATION
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) - BY ADJUSTMENT TYPE
(unaudited)
(in millions)
                                                                                                                           
                                                                                                                           
                          Quarter Ended December 31, 2012                          Quarter Ended December 31, 2011
                                                      Corporate                                                Corporate
                          Distribution  Technology  &          Total            Distribution  Technology  &          Total
                          Solutions      Solutions    Interest                     Solutions      Solutions    Interest
                                                      Expense                                                  Expense
As Reported (GAAP):
Revenues                  $  30,361      $  826       $  -        $ 31,187         $  30,016      $  823       $  -        $ 30,839
                                                                                                                           
Gross profit ^(1)         $  1,287       $  381       $  -        $ 1,668          $  1,201       $  365       $  -        $ 1,566
(2)
Operating expenses           (769    )      (302  )      (112 )     (1,183 )          (690    )      (297  )      (87  )     (1,074 )
^ (2) (3)
Other income                7           -         3       10              (1      )    1         (2   )   (2     )
(expense), net
Income before
interest expense             525            79           (109 )     495               510            69           (89  )     490
and income taxes
Interest expense            -           -         (59  )   (59    )         -           -         (64  )   (64    )
Income before             $  525       $  79      $  (168 )  $ 436           $  510       $  69      $  (153 )  $ 426    
income taxes
                                                                                                                           
Pre-Tax                                  
Adjustments:
Gross profit              $  -           $  3         $  -        $ 3              $  -           $  5         $  -        $ 5
Operating expenses          37          13        -       50              31          13        -       44     
Amortization of
acquisition-related          37             16           -          53                31             18           -          49
intangibles
                                                                                                                           
Operating expenses           7              3            -          10                4              2            2          8
Interest expense            -           -         1       1               -           -         -       -      
Acquisition
expenses and                 7              3            1          11                4              2            2          8
related adjustments
                                                                                                                           
Operating expenses
- Litigation                 -              -            -          -                 27             -            -          27
reserve adjustments
                                                                                                              
Total pre-tax             $  44        $  19      $  1      $ 64            $  62        $  20      $  2      $ 84     
adjustments
                                                                                                                           
Adjusted Earnings
(Non-GAAP):
Revenues                  $  30,361      $  826       $  -        $ 31,187         $  30,016      $  823       $  -        $ 30,839
                                                                                                                           
Gross profit ^(1)         $  1,287       $  384       $  -        $ 1,671          $  1,201       $  370       $  -        $ 1,571
(2)
Operating expenses           (725    )      (286  )      (112 )     (1,123 )          (628    )      (282  )      (85  )     (995   )
^ (2) (3)
Other income                7           -         3       10              (1      )    1         (2   )   (2     )
(expense), net
Income before
interest expense             569            98           (109 )     558               572            89           (87  )     574
and income taxes
Interest income             -           -         (58  )   (58    )         -           -         (64  )   (64    )
(expense), net
Income before             $  569       $  98      $  (167 )  $ 500           $  572       $  89      $  (151 )  $ 510    
income taxes
                                                                                                                                    

       Gross profit for the third quarter of fiscal year 2013 includes the
^(1)  receipt of $8 million in our Distribution Solutions segment
       representing our share of settlements of antitrust class action
       lawsuits brought against drug manufacturers.
       
       Technology Solutions segment results for the third quarter of fiscal
^(2)   year 2012 include product alignment charges of $42 million, of which
       $26 million was recorded in cost of sales and $16 million was recorded
       in operating expenses.
       
       Distribution Solutions segment operating expenses for the third quarter
^(3)   of fiscal year 2013 include a $40 million charge for a legal dispute in
       our Canadian business.
       

                                                                                        Schedule 4B
                                                                                                                        
McKESSON CORPORATION
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) - BY ADJUSTMENT TYPE
(unaudited)
(in millions)
                                                                                                                           
                                                                                                                           
                          Nine Months Ended December 31, 2012                      Nine Months Ended December 31, 2011
                                                      Corporate                                                Corporate
                          Distribution  Technology  &          Total            Distribution  Technology  &          Total
                          Solutions      Solutions    Interest                     Solutions      Solutions    Interest
                                                      Expense                                                  Expense
As Reported (GAAP):
Revenues                  $  89,347      $  2,488     $  -        $ 91,835         $  88,585      $  2,450     $  -        $ 91,035
                                                                                                                           
Gross profit ^(1)         $  3,841       $  1,147     $  -        $ 4,988          $  3,590       $  1,132     $  -        $ 4,722
(2)
Operating expenses           (2,212  )      (881  )      (220 )     (3,313 )          (2,136  )      (857  )      (287 )     (3,280 )
^(2) (3) (4)
Other income, net           17          3         8       28              8           2         2       12     
Income before
interest expense             1,646          269          (212 )     1,703             1,462          277          (285 )     1,454
and income taxes
Interest expense            -           -         (170 )   (170   )         -           -         (192 )   (192   )
Income before             $  1,646     $  269     $  (382 )  $ 1,533         $  1,462     $  277     $  (477 )  $ 1,262  
income taxes
                                                                                                                           
Pre-Tax
Adjustments:
Gross profit              $  2           $  9         $  -        $ 11             $  1           $  15        $  -        $ 16
Operating expenses          103         38        -       141             93          38        -       131    
Amortization of
acquisition-related          105            47           -          152               94             53           -          147
intangibles
                                                                                                                           
Operating expenses           10             5            (81  )     (66    )          20             4            2          26
Interest expense            -           -         1       1               -           -         -       -      
Acquisition
expenses and                 10             5            (80  )     (65    )          20             4            2          26
related adjustments
                                                                                                                           
Operating expenses
- Litigation                 60             -            -          60                145            -            -          145
reserve adjustments
                                                                                                              
Total pre-tax             $  175       $  52      $  (80  )  $ 147           $  259       $  57      $  2      $ 318    
adjustments
                                                                                                                           
Adjusted Earnings
(Non-GAAP):
Revenues                  $  89,347      $  2,488     $  -        $ 91,835         $  88,585      $  2,450     $  -        $ 91,035
                                                                                                                           
Gross profit ^(1)         $  3,843       $  1,156     $  -        $ 4,999          $  3,591       $  1,147     $  -        $ 4,738
(2)
Operating expenses           (2,039  )      (838  )      (301 )     (3,178 )          (1,878  )      (815  )      (285 )     (2,978 )
^ (2) (3)
Other income, net           17          3         8       28              8           2         2       12     
Income before
interest expense             1,821          321          (293 )     1,849             1,721          334          (283 )     1,772
and income taxes
Interest expense            -           -         (169 )   (169   )         -           -         (192 )   (192   )
Income before             $  1,821     $  321     $  (462 )  $ 1,680         $  1,721     $  334     $  (475 )  $ 1,580  
income taxes
                                                                                                                                    

       Gross profit for the first nine months of fiscal year 2013 includes the
^(1)  receipt of $27 million in our Distribution Solutions segment
       representing our share of settlements of antitrust class action
       lawsuits brought against drug manufacturers.
       
       Technology Solutions segment results for the first nine months of
^(2)   fiscal year 2012 include product alignment charges of $42 million, of
       which $26 million was recorded in cost of sales and $16 million was
       recorded in operating expenses.
       
       Distribution Solutions segment operating expenses for the first nine
^(3)   months of fiscal year 2013 include a $40 million charge for a legal
       dispute in our Canadian business.
       
       For the first nine months of fiscal year 2013, operating expenses
^(4)   include an $81 million pre-tax gain on business combination related to
       the acquisition of the remaining 50% ownership interest in our
       corporate headquarters building.
       

                                                             
Schedule 5
                                                                       
McKESSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions)
                                                                       
                                                 December 31,       March 31,
                                                 2012               2012
                                                                       
ASSETS
Current Assets
Cash and cash equivalents                        $   2,726          $  3,149
Receivables, net                                     9,962             9,977
Inventories, net                                     10,390            10,073
Prepaid expenses and other                          361              404
Total Current Assets                                 23,439            23,603
Property, Plant and Equipment, Net                   1,247             1,043
Goodwill                                             5,310             5,032
Intangible Assets, Net                               1,799             1,750
Other Assets                                        1,638            1,665
Total Assets                                     $   33,433         $  33,093
                                                                       
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Drafts and accounts payable                      $   15,047         $  16,114
Short-term borrowings                                -                 400
Deferred revenue                                     1,431             1,423
Deferred tax liabilities                             1,519             1,092
Current portion of long-term debt                    506               508
Other accrued liabilities                           1,705            2,149
Total Current Liabilities                            20,208            21,686
Long-Term Debt                                       3,973             3,072
Other Noncurrent Liabilities                         1,603             1,504
Stockholders' Equity                                7,649            6,831
Total Liabilities and Stockholders' Equity       $   33,433         $  33,093
                                                                       

Schedule 6
                                                            
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in millions)
                                                                      
                                                Nine Months Ended December 31,
                                                2012               2011
                                                                      
                                                                      
OPERATING ACTIVITIES
Net income                                      $   1,079          $  882
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization                       428               408
Other deferred taxes                                499               (15)
Share-based compensation expense                    123               113
Gain on business combination                        (81)              -
Other non-cash items                                53                75
Changes in operating assets and
liabilities, net of acquisitions:
Receivables                                         57                (575)
Inventories                                         (313)             (1,200)
Drafts and accounts payable                         (1,081)           1,636
Deferred revenue                                    49                122
Taxes                                               (88)              171
Litigation charges                                  60                145
Litigation settlement payments                      (470)             (26)
Other                                              (39)             (20)
Net cash provided by operating activities          276              1,716
                                                                      
INVESTING ACTIVITIES
Property acquisitions                               (151)             (170)
Capitalized software expenditures                   (117)             (137)
Acquisitions, less cash and cash                    (577)             (204)
equivalents acquired
Other                                              61               81
Net cash used in investing activities              (784)            (430)
                                                                      
FINANCING ACTIVITIES
Proceeds from short-term borrowings                 1,125             -
Repayments of short-term borrowings                 (1,525)           -
Proceeds from issuances of long-term debt           892               -
Repayments of long-term debt                        (4)               (23)
Common stock transactions:
Issuances                                           112               122
Share repurchases, including shares                 (413)             (672)
surrendered for tax withholding
Dividends paid                                      (147)             (146)
Other                                              42               22
Net cash provided by (used in) financing           82               (697)
activities
Effect of exchange rate changes on cash            3                (10)
and cash equivalents
Net increase (decrease) in cash and cash            (423)             579
equivalents
Cash and cash equivalents at beginning of          3,149            3,612
period
Cash and cash equivalents at end of             $   2,726          $  4,191
period

Contact:

McKesson Corporation
Erin Lampert, 415-983-8391 (Investors and Financial Media)
Erin.Lampert@McKesson.com
Kris Fortner, 415-983-8352 (General and Business Media)
Kris.Fortner@McKesson.com

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