Citi Global Healthcare Conference - McKesson...

McKesson: In Business for Better Health Citi Global Healthcare Conference

James Beer

Executive Vice President and

Chief Financial Officer

McKesson Corporation

February 25, 2014

Forward-Looking Statements

Some of the information in this presentation is not historical in nature and may

constitute forward-looking statements, which are made pursuant to the safe

harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statements may be identified by the 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. These forward-

looking statements involve risks and uncertainties that could cause actual

results to differ materially from those projected, anticipated or implied by such

statements. Although it is not possible to predict or identify all such risks and

uncertainties, they may include, but are not limited to, those described in the

Company’s annual, quarterly and current reports (i.e., Form 10-K, Form 10-Q

and Form 8-K) as filed or furnished with the Securities and Exchange

Commission (SEC). You are cautioned not to place undue reliance on any such

forward-looking statements, which speak only as of the date such statements

were first made. To the degree financial information is included in this

presentation, it is in summary form only and must be considered in the context

of the full details provided in the Company’s most recent annual, quarterly or

current report as filed or furnished with the SEC. The Company’s SEC reports

are available at www.mckesson.com under the “Investors” tab. 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.

2

GAAP / Non-GAAP

Reconciliation

In an effort to provide additional

and useful information regarding

the Company’s financial results

and other financial information as

determined by generally accepted

accounting principles (GAAP),

certain materials presented during

this event include non-GAAP

information. The rationale for

management’s use of non-GAAP

information, a reconciliation of that

information to GAAP, and other

related information is available on

www.mckesson.com under the

“Investors” tab. A reconciliation

between GAAP and non-GAAP

financial information is available in

the supplemental material

attached as an appendix to this

presentation.

Driving Better Health for 180 years

McKesson At-a-Glance

3

• Headquartered in

San Francisco, CA

Unless indicated otherwise, presentation reflects results as of FYE13.

McKesson Drives Sustained Value Creation

4

Attractive healthcare markets

• Public policy agenda supports greater

access and improved efficiency

• Demographics drive long-term demand

Strong balance

sheet and solid

liquidity position

used for a portfolio

approach to capital

deployment

Well-positioned businesses with margin expansion opportunities

• Leading positions

• Operational excellence

• Focus on higher-margin products and services

Experienced and

tenured management

team with a steady

track record of

delivering results

Leadership Positions In Both Segments

5

Technology Solutions

#1 pharmaceutical distributor

in U.S. and Canada

#1 in medical-surgical distribution

to alternate care sites

Leading position specialty health

#1 in medical-management software

and services to payers

Leading RelayHealth claims-processing

and connectivity business

Leader in revenue-cycle and

resource-management solutions

Distribution Solutions

Note: Rankings based on market revenue (as reported).

$93 $101 $106 $108 $112

$122 $122

FY07 FY08 FY09 FY10 FY11 FY12 FY13

We Have A Track Record Of Steady

Revenue Growth…

Revenues for fiscal years 2007 through 2013 from continuing operations.

6

$ Billions

$2.81 $3.41

$4.23 $4.65 $5.13 $6.28 $6.38

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

…That We Have Leveraged Into Higher

Adjusted EPS Growth…

Reflects non-GAAP information calculated on an Adjusted Earnings basis. Reconciliation to GAAP information for fiscal years 2007 through 2013 is available in the appendix to this

presentation and on the Company’s website under the “Investors” tab.

Adjusted EPS for fiscal years 2007 through 2014 from continuing operations only. FY14 guidance represents range provided on January 30, 2014 on the Company’s Q3 Earnings Call.

7

FY14 Guidance

$8.05 - $8.20

2013 2012 Chg

RevenuesDistribution Solutions 97,094$ 89,347$ 9%

Technology Solutions 2,374 2,206 8%

99,468$ 91,553$ 9%

Adjusted Operating ProfitDistribution Solutions 2,310$ 1,826$ 27%

Technology Solutions 336 320 5%

2,646$ 2,146$ 23%

Income from Continuing 1,349$ 1,177$ 15%

Operations After Tax

Diluted WASO 233 240 -3%

Adjusted EPS 5.79$ 4.89$ 18%

Nine Months Ended December 31,

Reflects non-GAAP information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company’s website

under the “Investors” tab.

… And Solid Results Through Third Quarter

Fiscal 2014

8

(In Millions except Adjusted EPS)

We’ve Steadily Increased Operating Cash Flow

7-Year Moving Average

OC

F $

Bil

lio

ns

$2.5

$2.0

$1.5

$1.0

$0.5 FY07 FY08* FY09 FY10 FY11 FY12 FY13

*FY08 excludes $962 million Securities Litigation payment.

9

$8.7

$8.8 $2.6

Share

Repurchases

Acquisitions

And We Have A History Of Effective Capital

Deployment

10

FY07 – FY13 $ Billions

$8.8B in Value-Creating Acquisitions from FY07 – FY13

PSS World Medical $1.9B • Expanding medical surgical reach and capabilities

Drug Trading - Katz $0.9B • Solidifying market leadership in Canada

US Oncology $2.1B and OTN $0.5B • Building unique assets and strength in the specialty

market

Per-Se $1.8B • Establishing a leadership position in healthcare

connectivity solutions

$0.9 Dividends

Internal Capital

Spending

PSS World Medical Integration Update

11

Leadership Integration

Synergies

Salesforce Engagement

Expanding Global Reach

12

Celesio Overview More Positive Lives

* Source: Figures presented for FY12 reflect the values reported in the publicly-filed financial statements of Celesio AG.

13

• Founded in 1835 and listed since 1904

• Headquartered in Stuttgart, Germany

• Operates in 14 countries

• 39,000 employees

• Extensive network of pharmacies in Europe

• Leading positions as a pharmaceutical distributor in Europe

• Successful collaboration model for independent pharmacy offering

Financials*:

FY12 Revenue: € 22.3 B

FY12 EBIT: € 370.1 M

Planned Transaction Timeline

14

F4Q 2014 ending March 31, 2014

F1Q 2015 beginning April 1, 2014

F2Q 2015

• Achieves ownership of >75%

of diluted shares

• McKesson begins to

consolidate financial results

of Celesio

• Domination process begins

• Operational control expected

late in 1H FY15

beginning July 1, 2014

Combination Drives Value Creation

15

Accretion • Expected accretion to Adjusted Earnings per share of $1.00 to $1.20 in the

first twelve months

• Assumes 100% ownership of Celesio

Synergies • Anticipated annual synergies between $275 million and $325 million realized

by the fourth year following the completion of the required steps to obtain

operational control

Balance Sheet • Strong pro-forma balance sheet

• McKesson is committed to maintaining its status as an investment grade

rated company in the final permanent financing structure

Financing • Financed a portion of the transaction with offshore cash

• Bridge financing facility funded transaction balance

• Permanent financing structure to be determined

Creating A Global Healthcare Services Leader

16

• 120,000 pharmacy and

hospital delivery locations

• 11,000+ community pharmacies

• 82,500 employees worldwide

• $150+ billion in annual revenues

17

USA

CANADA

IRELAND

SLOVENIA

GERMANY

INDIA

CHINA

TAIWAN

MALAYSIA

SPAIN

MALTA

PHILIPPINES

HUNGARY

SOUTH KOREA

THAILAND

ISRAEL

POLAND

HONG KONG

ITALY

BRITISH VIRGIN ISLANDS

BERMUDA

ENGLAND

IRELAND

SLOVENIA

GERMANY

SPAIN

MALTA

HUNGARY

POLAND

ITALY

ENGLAND

Europe India China

SOUTH KOREA

TAIWAN

HONG KONG

Global Sourcing Excellence

Expanded Distribution Agreement With Rite Aid

18

Driving Supply Chain Efficiencies

Sourcing Expertise

OneStopSM Generics

In Business For Better Health

19

Appendix

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. 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, gains or losses related to foreign currency contracts, 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, 2013 and 2009. LIFO‐related adjustments ‐ Last‐In‐First‐Out (“LIFO”) inventory related adjustments. 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.

Adjusted Earnings (Non-GAAP) Financial

Information

22

GAAP/Adjusted Earnings (Non-GAAP)

Reconciliation

23

McKESSON CORPORATION

RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)

FOR FISCAL 2007 THROUGH NINE MONTHS ENDED DECEMBER 31, 2013

(unaudited)

(in millions, except per share amounts)

Nine Months Ended December 31, 2013

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues $ 99,468 $ - $ - $ - $ - $ 99,468

Gross profit $ 5,769 $ 15 $ 3 $ - $ 186 $ 5,973

Operating expenses (3,958) 196 66 68 - (3,628)

Other income, net 7 - 13 - - 20

Impairment of an equity investment - - - - - -

Interest expense (187) - 10 - - (177)

Income from continuing operations before income taxes 1,631 211 92 68 186 2,188

Income tax expense (639) (79) (33) (15) (73) (839)

Income from continuing operations $ 992 $ 132 $ 59 $ 53 $ 113 $ 1,349

Diluted earnings per common share from continuing operations (b) $ 4.26 $ 0.57 $ 0.24 $ 0.23 $ 0.49 $ 5.79

Nine Months Ended December 31, 2012 (a)

As Recast

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues $ 91,553 $ - $ - $ - $ - $ 91,553

Gross profit $ 4,889 $ 9 $ - $ - $ 5 $ 4,903

Operating expenses (3,209) 138 (67) 60 - (3,078)

Other income, net 28 - - - - 28

Impairment of an equity investment - - - - - -


Income from continuing operations before income taxes 1,538 147 (66) 60 5 1,684

Income tax expense (454) (55) 27 (23) (2) (507)

Income from continuing operations $ 1,084 $ 92 $ (39) $ 37 $ 3 $ 1,177

Diluted earnings per common share from continuing operations (b) $ 4.51 $ 0.38 $ (0.16) $ 0.15 $ 0.01 $ 4.89

(a) Fiscal 2007- Fiscal 2013 results, as reported under GAAP, have been recast to exclude discontinued operations. Fiscal 2007 - Fiscal 2013 Adjusted Earnings (Non-GAAP) have been

recast to exclude discontinued operations and Last-In-First-Out ("LIFO")-related adjustments.

(b) Certain computations may reflect rounding adjustments.


Reconciliation

24




(unaudited)


Year Ended March 31, 2013 (a)

As Recast

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues $ 122,069 $ - $ - $ - $ - $ 122,069

Gross profit $ 6,848 $ 13 $ - $ - $ 13 $ 6,874

Operating expenses (4,523) 196 (10) 72 - (4,265)


Impairment of an equity investment (191) - - - - (191)




Income from continuing operations $ 1,347 $ 133 $ (5) $ 45 $ 8 $ 1,528

Diluted earnings per common share from continuing operations (b) $ 5.62 $ 0.56 $ (0.02) $ 0.19 $ 0.03 $ 6.38


As Recast

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues $ 122,321 $ - $ - $ - $ - $ 122,321

Gross profit $ 6,402 $ 17 $ - $ - $ 11 $ 6,430



Impairment of equity investments - - - - - -

Interest expense (251) - - - - (251)



Income from continuing operations $ 1,379 $ 113 $ 16 $ 60 $ 7 $ 1,575

Diluted earnings per common share from continuing operations (b) $ 5.49 $ 0.45 $ 0.07 $ 0.24 $ 0.03 $ 6.28





Reconciliation

25




(unaudited)



As Recast

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues $ 111,677 $ - $ - $ - $ - $ 111,677

Gross profit $ 5,797 $ 16 $ - $ - $ 3 $ 5,816


Other income, net 35 - (16) - - 19





Income from continuing operations $ 1,083 $ 80 $ 36 $ 149 $ 2 $ 1,350

Diluted earnings per common share from continuing operations (b) $ 4.12 $ 0.30 $ 0.14 $ 0.57 $ - $ 5.13


As Recast

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues $ 108,295 $ - $ - $ - $ - $ 108,295

Gross profit $ 5,498 $ 21 $ - $ - $ 8 $ 5,527

Operating expenses (3,549) 97 - (20) - (3,472)




Income from continuing operations before income taxes 1,806 118 - (20) 8 1,912

Income tax expense (601) (46) - 8 (3) (642)

Income from continuing operations $ 1,205 $ 72 $ - $ (12) $ 5 $ 1,270

Diluted earnings per common share from continuing operations (b) $ 4.41 $ 0.26 $ - $ (0.04) $ 0.02 $ 4.65





Reconciliation

26




(unaudited)



As Recast

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues $ 106,234 $ - $ - $ - $ - $ 106,234

Gross profit $ 5,213 $ 29 $ - $ - $ 8 $ 5,250

Operating expenses (4,060) 97 - 493 - (3,470)


Impairment of equity investments (63) - - - - (63)


Income from continuing operations before income taxes 1,019 126 - 493 8 1,646

Income tax expense (233) (49) - (182) (3) (467)

Income from continuing operations $ 786 $ 77 $ - $ 311 $ 5 $ 1,179

Diluted earnings per common share from continuing operations (b) $ 2.82 $ 0.28 $ - $ 1.11 $ 0.02 $ 4.23


As Recast

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues $ 101,311 $ - $ - $ - $ - $ 101,311

Gross profit $ 4,861 $ 27 $ - $ - $ (14) $ 4,874

Operating expenses (3,414) 78 4 (5) - (3,337)




Income from continuing operations before income taxes 1,423 105 4 (5) (14) 1,513

Income tax expense (463) (40) (2) 2 5 (498)

Income from continuing operations $ 960 $ 65 $ 2 $ (3) $ (9) $ 1,015

Diluted earnings per common share from continuing operations (b) $ 3.22 $ 0.22 $ 0.01 $ (0.01) $ (0.03) $ 3.41





Reconciliation

27




(unaudited)



As Recast

(GAAP)

Amortization

of

Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues $ 92,647 $ - $ - $ - $ - $ 92,647

Gross profit $ 4,186 $ 12 $ - $ - $ (64) $ 4,134

Operating expenses (2,946) 40 7 (6) - (2,905)




Income from continuing operations before income taxes 1,269 52 11 (6) (64) 1,262

Income tax expense (326) (20) (4) (81) 25 (406)

Income from continuing operations $ 943 $ 32 $ 7 $ (87) $ (39) $ 856

Diluted earnings per common share from continuing operations (b) $ 3.09 $ 0.12 $ 0.02 $ (0.29) $ (0.13) $ 2.81

(a) Fiscal 2007- Fiscal 2013 results, as reported under GAAP, have been recast to exclude discontinued operations. Fiscal 2007 - Fiscal 2013 Adjusted Earnings (Non-

GAAP) have been recast to exclude discontinued operations and Last-In-First-Out ("LIFO")-related adjustments.



Reconciliation

28


RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)


(unaudited)

(in millions)

Nine Months Ended December 31, 2013 Nine Months Ended December 31, 2012 (a) Year Ended March 31, 2013 (a)

Distribution Solutions Technology Solutions

Corporate &

Interest Expense TOTAL Distribution Solutions Technology Solutions

Corporate &

Interest Expense TOTAL Distribution Solutions

Technology Solutions

Corporate &

Interest Expense TOTAL

As Reported (GAAP):

Revenues $ 97,094 $ 2,374 $ - $ 99,468 $ 89,347 $ 2,206 $ - $ 91,553 $ 119,046 $ 3,023 $ - $ 122,069

Gross profit $ 4,642 $ 1,127 $ - $ 5,769 $ 3,841 $ 1,048 $ - $ 4,889 $ 5,435 $ 1,413 $ - $ 6,848

Operating expenses (2,799) (857) (302) (3,958) (2,212) (777) (220) (3,209) (3,068) (1,109) (346) (4,523)

Other income, net 13 (1) (5) 7 17 3 8 28 19 4 11 34

Impairment of equity investments - - - - - - - - (191) - - (191)

Operating pre-tax profit 1,856 269 (307) 1,818 1,646 274 (212) 1,708 2,195 308 (335) 2,168

Interest expense - - (187) (187) - - (170) (170) - - (240) (240)

Income from continuing operations

before income taxes $ 1,856 $ 269 $ (494) $ 1,631 $ 1,646 $ 274 $ (382) $ 1,538 $ 2,195 $ 308 $ (575) $ 1,928

Gross profit margin 4.78% 47.47% - 5.80% 4.30% 47.51% - 5.34% 4.57% 46.74% - 5.61%

Operating expenses as a % of revenues 2.88% 36.10% - 3.98% 2.48% 35.22% - 3.51% 2.58% 36.69% - 3.71%

Operating pre-tax profit as a % of revenues 1.91% 11.33% - 1.83% 1.84% 12.42% - 1.87% 1.84% 10.19% - 1.78%

Pre-Tax Adjustments:

Gross profit $ 1 $ 14 $ - $ 15 $ 2 $ 7 $ - $ 9 $ 2 $ 11 $ - $ 13

Operating expenses 161 35 - 196 103 35 - 138 146 49 1 196

Amortization of acquisition-

related intangibles 162 49 - 211 105 42 - 147 148 60 1 209

Gross profit - 3 - 3 - - - - - - - -

Operating expenses 38 15 13 66 10 4 (81) (67) 47 7 (64) (10)

Other income, net - - 13 13 - - - - - - - -

Interest expense - - 10 10 - - 1 1 - - 11 11

Acquisition expenses

and related adjustments 38 18 36 92 10 4 (80) (66) 47 7 (53) 1

Operating expenses - Litigation

reserve adjustments 68 - - 68 60 - - 60 72 - - 72

Gross Profit - LIFO-related adjustments 186 - - 186 5 - - 5 13 - - 13

Total pre-tax adjustments $ 454 $ 67 $ 36 $ 557 $ 180 $ 46 $ (80) $ 146 $ 280 $ 67 $ (52) $ 295

Adjusted Earnings (Non-GAAP):

Revenues $ 97,094 $ 2,374 $ - $ 99,468 $ 89,347 $ 2,206 $ - $ 91,553 $ 119,046 $ 3,023 $ - $ 122,069

Gross profit $ 4,829 $ 1,144 $ - $ 5,973 $ 3,848 $ 1,055 $ - $ 4,903 $ 5,450 $ 1,424 $ - $ 6,874

Operating expenses (2,532) (807) (289) (3,628) (2,039) (738) (301) (3,078) (2,803) (1,053) (409) (4,265)

Other income, net 13 (1) 8 20 17 3 8 28 19 4 11 34

Impairment of equity investments - - - - - - - - (191) - - (191)


Interest expense - - (177) (177) - - (169) (169) - - (229) (229)






(a) Fiscal 2007- Fiscal 2013 results, as reported under GAAP, have been recast to exclude discontinued operations. Fiscal 2007 - Fiscal 2013 Adjusted Earnings (Non-GAAP) have been recast to exclude discontinued operations and Last-In-First-Out ("LIFO")-related

adjustments.


Reconciliation

29




(unaudited)

(in millions)

Year Ended March 31, 2012 (a) Year Ended March 31, 2011 (a) Year Ended March 31, 2010 (a)


Corporate &


Corporate &


Corporate &


As Reported (GAAP):

Revenues $ 119,424 $ 2,897 $ - $ 122,321 $ 108,889 $ 2,788 $ - $ 111,677 $ 105,578 $ 2,717 $ - $ 108,295

Gross profit $ 5,057 $ 1,345 $ - $ 6,402 $ 4,565 $ 1,232 $ - $ 5,797 $ 4,219 $ 1,279 $ - $ 5,498

Operating expenses (2,854) (1,011) (413) (4,278) (2,673) (990) (368) (4,031) (2,260) (958) (331) (3,549)

Other income, net 16 4 - 20 5 3 27 35 29 5 9 43

Impairment of equity investments - - - - - - - - - - - -


Interest expense - - (251) (251) (1) - (221) (222) (2) (1) (183) (186)







Gross profit $ 1 $ 16 $ - $ 17 $ - $ 16 $ - $ 16 $ 1 $ 20 $ - $ 21

Operating expenses 120 47 - 167 70 45 - 115 50 47 - 97


related intangibles 121 63 - 184 70 61 - 131 51 67 - 118

Operating expenses 24 1 1 26 41 - 2 43 - - - -

Other income, net - - - - - - (16) (16) -

Interest expense - - - - - - 25 25 - - - -


and related adjustments 24 1 1 26 41 - 11 52 - - - -


reserve adjustments 149 - - 149 213 - - 213 - - (20) (20)

Gross Profit - LIFO-related adjustments 11 - - 11 3 - - 3 8 - - 8

Total pre-tax adjustments $ 305 $ 64 $ 1 $ 370 $ 327 $ 61 $ 11 $ 399 $ 59 $ 67 $ (20) $ 106


Revenues $ 119,424 $ 2,897 $ - $ 122,321 $ 108,889 $ 2,788 $ - $ 111,677 $ 105,578 $ 2,717 $ - $ 108,295

Gross profit $ 5,069 $ 1,361 $ - $ 6,430 $ 4,568 $ 1,248 $ - $ 5,816 $ 4,228 $ 1,299 $ - $ 5,527

Operating expenses (2,561) (963) (412) (3,936) (2,349) (945) (366) (3,660) (2,210) (911) (351) (3,472)

Other income, net 16 4 - 20 5 3 11 19 29 5 9 43

Impairment of equity investments - - - - - - - - - - - -


Interest expense - - (251) (251) (1) - (196) (197) (2) (1) (183) (186)






(a) Fiscal 2007- Fiscal 2013 results, as reported under GAAP, have been recast to exclude discontinued operations. Fiscal 2007- Fiscal 2013 Adjusted Earnings (Non-GAAP) have been recast to exclude discontinued operations and Last-In-First-Out ("LIFO")-related adjustments.


Reconciliation

30




(unaudited)

(in millions)

Year Ended March 31, 2009 (a) Year Ended March 31, 2008 (a) Year Ended March 31, 2007 (a)


Corporate &


Corporate &


Corporate &


As Reported (GAAP):

Revenues $ 103,568 $ 2,666 $ - $ 106,234 $ 98,719 $ 2,592 $ - $ 101,311 $ 90,738 $ 1,909 $ - $ 92,647

Gross profit $ 3,955 $ 1,258 $ - $ 5,213 $ 3,586 $ 1,275 $ - $ 4,861 $ 3,252 $ 934 $ - $ 4,186


Other income, net 43 4 25 72 35 6 75 116 39 5 83 127

Impairment of equity investments (63) - - (63) - - - - - - - -


Interest expense 2 (3) (142) (143) 4 (2) (142) (140) - (3) (95) (98)







Gross profit $ 1 $ 28 $ - $ 29 $ 1 $ 26 $ - $ 27 $ - $ 12 $ - $ 12

Operating expenses 50 47 - 97 28 50 - 78 15 25 - 40


related intangibles 51 75 - 126 29 76 - 105 15 37 - 52

Operating expenses - - - - 4 - - 4 3 4 - 7

Other income, net - - -

Interest expense - - - - - - - - - - 4 4


and related adjustments - - - - 4 - - 4 3 4 4 11


reserve adjustments 493 - - 493 - - (5) (5) - - (6) (6)

Gross Profit - LIFO-related adjustments 8 - - 8 (14) - - (14) (64) - - (64)

Total pre-tax adjustments $ 552 $ 75 $ - $ 627 $ 19 $ 76 $ (5) $ 90 $ (46) $ 41 $ (2) $ (7)


Revenues $ 103,568 $ 2,666 $ - $ 106,234 $ 98,719 $ 2,592 $ - $ 101,311 $ 90,738 $ 1,909 $ - $ 92,647

Gross profit $ 3,964 $ 1,286 $ - $ 5,250 $ 3,573 $ 1,301 $ - $ 4,874 $ 3,188 $ 946 $ - $ 4,134


Other income, net 43 4 25 72 35 6 75 116 39 5 83 127

Impairment of equity investments (63) - - (63) - - - - - - - -


Interest expense 2 (3) (142) (143) 4 (2) (142) (140) - (3) (91) (94)






(a) Fiscal 2007- Fiscal 2013 results, as reported under GAAP, have been recast to exclude discontinued operations. Fiscal 2007 - Fiscal 2013 Adjusted Earnings (Non-GAAP) have been recast to exclude discontinued operations and Last-In-First-Out ("LIFO")-related

adjustments.

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