McKesson Corporation J.P. Morgan Healthcare...

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McKesson Corporation

J.P. Morgan Healthcare Conference

John Hammergren

Chairman and

Chief Executive Officer

January 13, 2015

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.

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 in the supplemental material attached as an appendix to

this presentation and posted to www.mckesson.com under the “Investors” tab.

2

1 Approximated as of December 2, 2014; 2 Approximates reported revenues of McKesson and Celesio AG for the twelve months ended September 30, 2014 (USD); 3 As of December 2, 2014.

McKesson At-A-Glance Driving Better Health for Over 180 Years

Founded in

1833

85,000 Employees1

Worldwide

2 Core Segments

Distribution Solutions

Technology Solutions

>$170B

Combined Revenues

20 Countries3

Operates in Over

>12K Owned or Banner

Pharmacies1

Serves Pharmacies and Hospitals

Globally Daily1

120K

2

3

Demand for Healthcare is

Growing

Demographic Trends • Aging Population

• Increase in Chronic Conditions

Rising Healthcare

Global Healthcare Industry in Transformation

Regulatory Environment

Convergence & Consolidation

`

The Age of the

Consumer

Costs

4

A Vision for Better Health…

Better Business

Better Care

Better Connectivity

Payers

Pharmaceutical

Manufacturers

Retail

Pharmacy

Alternate Care Physicians

Hospitals

Regulatory Agencies/

Government

Consumer

We make healthcare

businesses run better

We connect healthcare stakeholders

We enable better

clinical outcomes

5

…Delivering Solutions and Value Globally

Market Leading Positions

• U.S. and Canada – Pharmaceutical Distribution and Services

• Specialty Distribution and Services

• Medical-Surgical Distribution

• European Retail Pharmacy, Distribution and Service Operations

• Technology – connectivity and payer-provider solutions

OneStopSM

6

Healthcare Services Leader in North America

7

US Pharmaceutical: Operational Excellence…

Best-in-class network quality, efficiency and speed

Operational Excellence

Order Accuracy

Manufacturer Services

A Broad Value Proposition

1 As of March 31, 2014

21% CAGR Since FY031

OneStopSM

Generics

99.98 %

8

…Creating Value for Our Customers

Scale and supply chain excellence

Partnering with

Independent Pharmacy

More than 3,5001 stores

1,600+ new stores since 2008

Expanding Relationships with

Institutional Pharmacy Creating

Value for Retail

Pharmacy

1 As of October 31, 2014

9

Canada: Innovation and Market Leadership

Best-in-class network Quality, efficiency and speed

Banner Programs Generic Rx

Specialty Pharmacies & Distribution

85+

>1,700 stores in all 10 provinces and 2 territories

Medicine Shoppe Canada

16 Distribution Centers

7 Specialty Pharmacies

As of March 31, 2014

Infusion Clinics

10

Specialty Health: Positioned for Continued Growth

We touch all aspects of Specialty patient care…

A Broad Value Proposition

• Oncology and Multi-Specialty Distribution and Practice Management

• One of the largest community-based Oncology

networks in the U.S. • Advanced technology

solutions for patients, providers and manufacturers

Pharmacies

Physicians

Hospitals

Government

Payers

Pharma & Biotech Patients

11

Medical-Surgical: A Leader in Alternate Site

1,400

Optimizing distribution

network Executing on supplier

and sourcing opportunities

Investments to drive growth

Focus on

the customer while furthering PSS integration

Combined sales force of more than Reps

Revenues

14% CAGR FY08 – FY14

12

As of March 31, 2014

Technology Solutions: Powering Connectivity

McKesson’s Unique Value Proposition – 360° View

• Expertise working with payers, hospitals, physicians, pharmacies

• Scaled leadership positions

• Comprehensive portfolio

13

A Valuable Generics Channel Partner with Global Scale

Global Sourcing Expertise

2002 2007 2012 2014

NorthStar Program Launch Sivem Launched /

PSS Acquisition

Cypress Acquisition NorthStar / Sivem

Collaboration in Canada

14

• Global procurement team

• Experienced executive

leadership teams

• Shared values and goals

to create opportunities

for customers, business

partners and shareholders

Celesio: Executing Acquisition Synergies A Platform for International Expansion

Annual Synergies

$275M – $325M

by FY19

15

Priorities Post Operating Control

Celesio: Acquisition Milestones

FY15

Operating Control Secured

Begin Execution on Synergies

Annual Synergies

$275M - $325M by FY19

• Our current ownership remains 76%

• We continue to consolidate Celesio’s results

• Minority shareholders will receive an annual dividend of €0.83 per share

• Minority shareholders have a put right at €22.99 per share

FY16 FY17 FY18 FY19

16

In Business for Better Health

Pharmaceutical Distribution

Technology

Specialty

Medical Surgical Supplies

Global Reach

17

20% Adjusted EPS Growth

36% Growth Total Revenues

$89B Total Revenues

Strong Performance: First Half of FY15

For the six months ended September 30, 2014. Percentage growth expressed on a year over year basis relative to the six month period ended September 30, 2013. 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.

26% Growth Adjusted Operating Profit

48% Adjusted

Gross Profit Expansion

18

$101 $106 $108 $112 $122 $122 $138

FY08 FY09 FY10 FY11 FY12 FY13 FY14

We Have a Track Record of Steady

Revenue Growth… ($ Billions)

19

$3.45 $4.27 $4.70 $5.19

$6.35 $6.45

$8.56

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

…That We Have Leveraged into Higher

Adjusted EPS Growth

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.

FY15 Guidance $10.50 - $10.90

20

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

FY08* FY09 FY10 FY11 FY12 FY13 FY14

Our Operating Cash Flows Have

Steadily Increased

*FY08 excludes $962 million Securities Litigation payment.

7 Year Moving Average OCF ($ Billions)

21

$13.7

$7.8 $2.6

Acquisitions

Share

Repurchases

We Remain Committed to Our Historical

Portfolio Approach to Capital Deployment…

FY08 - FY14 ($ Billions)

$1.1 Dividends

Internal Capital

Spending

$25B of capital

deployed from

FY08 – FY14

22

• Making key capital investments internally

to support long-term growth

• Pursuing strategic acquisitions and

managing our portfolio of assets

• Maintaining investment grade ratings

• Maintaining our long-term

and balanced approach to

capital deployment to

create shareholder value

…And We are Well Positioned to Drive

Continued Growth

23

McKesson Drives Sustained Value Creation

Attractive Healthcare Markets

• Public policy agenda supports greater access

and improved efficiency

• Demographics drive long-term demand in

North America and globally

Strong operating

profit, cash flow

growth and a

portfolio approach

to capital

deployment

Well-Positioned Businesses with Margin Expansion Opportunities

• Leading positions

• Operational excellence

• Focus on higher-margin products and services

• Global sourcing expertise

Experienced and

tenured management

team with a steady

track record of

delivering results

24

(a) Certain computations may reflect rounding adjustments

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues 88,816$ -$ -$ -$ -$ 88,816$

Gross profit 5,720$ 5$ -$ -$ 192$ 5,917$

Operating expenses (4,244) 256 111 - - (3,877)

Other income, net 44 - - - - 44

Impairment of equity investment - - - - - -

Interest expenses (200) - - - - (200)

1,320 261 111 - 192 1,884

Income tax expense (404) (80) (37) - (75) (596)

916 181 74 - 117 1,288

(16) (23) (6) - - (45)

900$ 158$ 68$ -$ 117$ 1,243$

3.83$ 0.66$ 0.30$ -$ 0.50$ 5.29$

Diluted weighted average common shares235 235 235 - 235 235

As Recast

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

As Recast

Adjusted

Earnings

(Non-GAAP)

Revenues 137,756$ -$ -$ -$ -$ 137,756$

Gross profit 8,374$ 11$ 3$ -$ 311$ 8,699$

Operating expenses (5,947) 308 155 68 - (5,416)

Other income, net 33 - 14 - - 47

Impairment of equity investment - - - - - -

Interest expense (303) - 46 - - (257)

2,157 319 218 68 311 3,073

Income tax expense (752) (114) (69) (15) (121) (1,071)

1,405 205 149 53 190 2,002

5 (7) (2) - - (4)

1,410$ 198$ 147$ 53$ 190$ 1,998$

6.04$ 0.85$ 0.63$ 0.23$ 0.81$ 8.56$

Diluted weighted average common shares 233 233 233 233 233 233

Income (loss) from continuing operations, net

of tax, attributable to noncontrolling interests

Income from continuing operations, net of

tax, attributable to McKesson Corporation

Diluted earnings per common share from

continuing operations, net of tax, attributable to

McKesson Corporation (a)

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

FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014

(unaudited)

Income from continuing operations, net of

tax, attributable to McKesson Corporation

Diluted earnings per common share from

continuing operations, net of tax, attributable to

McKesson Corporation (a)

(in millions, except per share amounts)

Year Ended March 31, 2014

Income from continuing operations before

income taxes

Income (loss) from continuing operations, net

of tax, attributable to noncontrolling interests

Six Months Ended September 30, 2014

Income from continuing operations before

income taxes

Income from continuing operations after

tax

Income from continuing operations after

tax

(a) Certain computations may reflect rounding adjustments

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues 122,196$ -$ -$ -$ -$ 122,196$

Gross profit 6,881$ 13$ -$ -$ 13$ 6,907$

Operating expenses (4,534) 196 (10) 72 - (4,276)

Other income, net 34 - - - - 34

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

Interest expense (240) - 11 - - (229)

1,950 209 1 72 13 2,245

Income tax expense (587) (76) (6) (27) (5) (701)

1,363 133 (5) 45 8 1,544

- - - - - -

1,363$ 133$ (5)$ 45$ 8$ 1,544$

5.69$ 0.56$ (0.02)$ 0.19$ 0.03$ 6.45$

Diluted weighted average common shares 239 239 239 239 239 239

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues 122,453$ -$ -$ -$ -$ 122,453$

Gross profit 6,435$ 17$ -$ -$ 11$ 6,463$

Operating expenses (4,289) 167 26 149 - (3,947)

Other income, net 20 - - - - 20

Impairment of equity investment - - - - - -

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

1,915 184 26 149 11 2,285

Income tax expense (521) (71) (10) (89) (4) (695)

1,394 113 16 60 7 1,590

- - - - - -

1,394$ 113$ 16$ 60$ 7$ 1,590$

5.56$ 0.45$ 0.07$ 0.24$ 0.03$ 6.35$

Diluted weighted average common shares 251 251 251 251 251 251

Income from continuing operations, net of tax,

attributable to noncontrolling interests

Income from continuing operations, net of

tax, attributable to McKesson Corporation

(in millions, except per share amounts)

Diluted earnings per common share from

continuing operations, net of tax, attributable to

McKesson Corporation (a)

Year Ended March 31, 2012

Income from continuing operations before

income taxes

Income from continuing operations after

tax

Income from continuing operations, net of tax,

attributable to noncontrolling interests

Income from continuing operations, net of

tax, attributable to McKesson Corporation

Diluted earnings per common share from

continuing operations, net of tax, attributable to

McKesson Corporation (a)

Year Ended March 31, 2013

Income from continuing operations before

income taxes

Income from continuing operations after

tax

(unaudited)

FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014

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

(a) Certain computations may reflect rounding adjustments

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues 111,804$ -$ -$ -$ -$ 111,804$

Gross profit 5,828$ 16$ -$ -$ 3$ 5,847$

Operating expenses (4,041) 115 43 213 - (3,670)

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

Impairment of equity investment - - - - - -

Interest expense (222) - 25 - - (197)

1,600 131 52 213 3 1,999

Income tax expense (503) (51) (16) (64) (1) (635)

1,097 80 36 149 2 1,364

- - - - - -

1,097$ 80$ 36$ 149$ 2$ 1,364$

4.17$ 0.30$ 0.14$ 0.57$ 0.01$ 5.19$

Diluted weighted average common shares 263 263 263 263 263 263

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues 108,425$ -$ -$ -$ -$ 108,425$

Gross profit 5,527$ 21$ -$ -$ 8$ 5,556$

Operating expenses (3,558) 97 - (20) - (3,481)

Other income, net 43 - - - - 43

Impairment of equity investment - - - - - -

Interest expense (187) - - - - (187)

1,825 118 - (20) 8 1,931

Income tax expense (605) (46) 8 (3) (646)

1,220 72 - (12) 5 1,285

- - - - - -

1,220$ 72$ -$ (12)$ 5$ 1,285$

4.46$ 0.26$ -$ (0.04)$ 0.02$ 4.70$

Diluted weighted average common shares 273 273 - 273 273 273

Income from continuing operations, net of

tax, attributable to McKesson Corporation

Year Ended March 31, 2011

Income from continuing operations before

income taxes

Income from continuing operations after

tax

Income from continuing operations, net of tax,

attributable to noncontrolling interests

Income from continuing operations, net of

tax, attributable to McKesson Corporation

Diluted earnings per common share from

continuing operations, net of tax, attributable to

McKesson Corporation (a)

Year Ended March 31, 2010

Income from continuing operations before

income taxes

Income from continuing operations after

tax

Income from continuing operations, net of tax,

attributable to noncontrolling interests

(in millions, except per share amounts)

Diluted earnings per common share from

continuing operations, net of tax, attributable to

McKesson Corporation (a)

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

FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014

(unaudited)

(a) Certain computations may reflect rounding adjustments

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues 106,376$ -$ -$ -$ -$ 106,376$

Gross profit 5,251$ 29$ -$ -$ 8$ 5,288$

Operating expenses (4,080) 97 - 493 - (3,490)

Other income, net 74 - - - - 74

Impairment of equity investment (63) - - - - (63)

Interest expense (144) - - - - (144)

1,038 126 - 493 8 1,665

Income tax expense (240) (49) (182) (3) (474)

798 77 - 311 5 1,191

- - - - - -

798$ 77$ -$ 311$ 5$ 1,191$

2.86$ 0.28$ -$ 1.11$ 0.02$ 4.27$

Diluted weighted average common shares 279 279 - 279 279 279

As Reported

(GAAP)

Amortization

of Acquisition-

Related

Intangibles

Acquisition

Expenses and

Related

Adjustments

Litigation

Reserve

Adjustments

LIFO-Related

Adjustments

Adjusted

Earnings

(Non-GAAP)

Revenues 101,454$ -$ -$ -$ -$ 101,454$

Gross profit 4,888$ 27$ -$ -$ (14)$ 4,901$

Operating expenses (3,427) 78 4 (5) - (3,350)

Other income, net 119 - - - - 119

Impairment of equity investment - - - - - -

Interest expense (142) - - - - (142)

1,438 105 4 (5) (14) 1,528

Income tax expense (466) (40) (2) 2 5 (501)

972 65 2 (3) (9) 1,027

- - - - - -

972$ 65$ 2$ (3)$ (9)$ 1,027$

3.26$ 0.22$ 0.01$ (0.01)$ (0.03)$ 3.45$

Diluted weighted average common shares 298 298 298 298 298 298

Diluted earnings per common share from

continuing operations, net of tax, attributable to

McKesson Corporation (a)

Diluted earnings per common share from

continuing operations, net of tax, attributable to

McKesson Corporation (a)

Year Ended March 31, 2008

Income from continuing operations before

income taxes

Income from continuing operations after

Income from continuing operations, net of tax,

attributable to noncontrolling interests

Income from continuing operations, net of

tax, attributable to McKesson Corporation

Year Ended March 31, 2009

Income from continuing operations before

income taxes

Income from continuing operations after

tax

Income from continuing operations, net of tax,

attributable to noncontrolling interests

Income from continuing operations, net of

tax, attributable to McKesson Corporation

(unaudited)

(in millions, except per share amounts)

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

FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014

(a) Certain computations may reflect rounding adjustments

Distribution

Solutions

Technology

Solutions

Corporate &

Interest

Expense Total

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 87,278$ 1,538$ -$ 88,816$ 134,426$ 3,330$ -$ 137,756$ 119,046$ 3,150$ -$ 122,196$ 119,424$ 3,029$ -$ 122,453$

Gross profit 4,998$ 722$ -$ 5,720$ 6,767$ 1,607$ -$ 8,374$ 5,435$ 1,446$ -$ 6,881$ 5,057$ 1,378$ -$ 6,435$

Operating expenses (3,494) (531) (219) (4,244) (4,335) (1,161) (451) (5,947) (3,068) (1,120) (346) (4,534) (2,854) (1,022) (413) (4,289)

Other income, net 37 2 5 44 29 2 2 33 19 4 11 34 16 4 - 20

- - - - - - - - (191) - - (191) - - - -

1,541 193 (214) 1,520 2,461 448 (449) 2,460 2,195 330 (335) 2,190 2,219 360 (413) 2,166

Interest expense - - (200) (200) - - (303) (303) - - (240) (240) - - (251) (251)

1,541$ 193$ (414)$ 1,320$ 2,461$ 448$ (752)$ 2,157$ 2,195$ 330$ (575)$ 1,950$ 2,219$ 360$ (664)$ 1,915$

Gross profit margin 5.73% 46.94% - 6.44% 5.03% 48.26% - 6.08% 4.57% 45.90% - 5.63% 4.23% 45.49% - 5.26%

Operating expenses as a % of revenues 4.00% 34.53% - 4.78% 3.22% 34.86% - 4.32% 2.58% 35.56% - 3.71% 2.39% 33.74% - 3.50%

Operating pre-tax profit as a % of revenues 1.77% 12.55% - 1.71% 1.83% 13.45% - 1.79% 1.84% 10.48% - 1.79% 1.86% 11.89% - 1.77%

Pre-Tax Adjustments:

Gross profit -$ 5$ -$ 5$ 1$ 10$ -$ 11$ 2$ 11$ -$ 13$ 1$ 16$ -$ 17$

Operating expenses 236 20 - 256 255 52 1 308 146 49 1 196 120 47 - 167

Amortization of acquisition-related intangibles 236 25 - 261 256 62 1 319 148 60 1 209 121 63 - 184

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

Operating expenses 100 1 10 111 119 15 21 155 47 7 (64) (10) 24 1 1 26

Other income, net - - - - - - 14 14 - - - - - - - -

Interest expense - - - - - - 46 46 - - 11 11 - - - -

Acquisition expenses and related adjustments 100 1 10 111 119 18 81 218 47 7 (53) 1 24 1 1 26

Operating expenses - Litigation reserve adjustments - - - - 68 - - 68 72 - - 72 149 - - 149

Gross profit - LIFO-related adjustments 192 - - 192 311 - - 311 13 - - 13 11 - - 11

Total pre-tax adjustments 528$ 26$ 10$ 564$ 754$ 80$ 82$ 916$ 280$ 67$ (52)$ 295$ 305$ 64$ 1$ 370$

Adjusted Earnings (Non-GAAP):

Revenues 87,278$ 1,538$ -$ 88,816$ 134,426$ 3,330$ -$ 137,756$ 119,046$ 3,150$ -$ 122,196$ 119,424$ 3,029$ -$ 122,453$

Gross profit 5,190$ 727$ -$ 5,917$ 7,079$ 1,620$ -$ 8,699$ 5,450$ 1,457$ -$ 6,907$ 5,069$ 1,394$ -$ 6,463$

Operating expenses (3,158) (510) (209) (3,877) (3,893) (1,094) (429) (5,416) (2,803) (1,064) (409) (4,276) (2,561) (974) (412) (3,947)

Other income, net 37 2 5 44 29 2 16 47 19 4 11 34 16 4 - 20

- - - - - - - - (191) - - (191) - - - -

2,069 219 (204) 2,084 3,215 528 (413) 3,330 2,475 397 (398) 2,474 2,524 424 (412) 2,536

Interest expense - - (200) (200) - - (257) (257) - - (229) (229) - - (251) (251)

2,069$ 219$ (404)$ 1,884$ 3,215$ 528$ (670)$ 3,073$ 2,475$ 397$ (627)$ 2,245$ 2,524$ 424$ (663)$ 2,285$

Gross profit margin 5.95% 47.27% - 6.66% 5.27% 48.65% - 6.31% 4.58% 46.25% - 5.65% 4.24% 46.02% - 5.28%

Operating expenses as a % of revenues 3.62% 33.16% - 4.37% 2.90% 32.85% - 3.93% 2.35% 33.78% - 3.50% 2.14% 32.16% - 3.22%

Operating pre-tax profit as a % of revenues 2.37% 14.24% - 2.35% 2.39% 15.86% - 2.42% 2.08% 12.60% - 2.02% 2.11% 14.00% - 2.07%

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

FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014

(unaudited)

(in millions)

Income from continuing operations before income taxes

Year ended March 31, 2013 Year ended March 31, 2012Year ended March 31, 2014

Impairment of equity investment

Income from continuing operations before interest expense

Income from continuing operations before income taxes

Impairment of equity investment

Income from continuing operations before interest expense

Six Months Ended September 30, 2014

(a) Certain computations may reflect rounding adjustments

Distribution

Solutions

Technology

Solutions

Corporate &

Interest

Expense Total

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 108,889$ 2,915$ -$ 111,804$ 105,578$ 2,847$ -$ 108,425$ 103,568$ 2,808$ -$ 106,376$ 98,719$ 2,735$ -$ 101,454$

Gross profit 4,565$ 1,263$ -$ 5,828$ 4,219$ 1,308$ -$ 5,527$ 3,955$ 1,296$ -$ 5,251$ 3,586$ 1,302$ -$ 4,888$

Operating expenses (2,673) (1,000) (368) (4,041) (2,260) (967) (331) (3,558) (2,777) (994) (309) (4,080) (2,138) (1,011) (278) (3,427)

Other income (expense), net 5 3 27 35 29 5 9 43 43 6 25 74 35 9 75 119

- - - - - - - - (63) - - (63) - - - -

1,897 266 (341) 1,822 1,988 346 (322) 2,012 1,158 308 (284) 1,182 1,483 300 (203) 1,580

Interest expense (1) - (221) (222) (2) (2) (183) (187) 2 (4) (142) (144) 4 (4) (142) (142)

1,896$ 266$ (562)$ 1,600$ 1,986$ 344$ (505)$ 1,825$ 1,160$ 304$ (426)$ 1,038$ 1,487$ 296$ (345)$ 1,438$

Gross profit margin 4.19% 43.33% - 5.21% 4.00% 45.94% - 5.10% 3.82% 46.15% - 4.94% 3.63% 47.61% - 4.82%

Operating expenses as a % of revenues 2.45% 34.31% - 3.61% 2.14% 33.97% - 3.28% 2.68% 35.40% - 3.84% 2.17% 36.97% - 3.38%

Operating pre-tax profit as a % of revenues 1.74% 9.13% - 1.63% 1.88% 12.15% - 1.86% 1.12% 10.97% - 1.11% 1.50% 10.97% - 1.56%

Pre-Tax Adjustments:

Gross profit -$ 16$ -$ 16$ 1$ 20$ -$ 21$ 1$ 28$ -$ 29$ 1$ 26$ -$ 27$

Operating expenses 70 45 - 115 50 47 - 97 50 47 - 97 28 50 - 78

Amortization of acquisition-related intangibles 70 61 - 131 51 67 - 118 51 75 - 126 29 76 - 105

Gross profit - - - - - - - - - - - - - - - -

Operating expenses 41 - 2 43 - - - - - - - - 4 - - 4

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

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

Acquisition expenses and related adjustments 41 - 11 52 - - - - - - - - 4 - - 4

Operating expenses - Litigation reserve adjustments 213 - - 213 - - (20) (20) 493 - - 493 - - (5) (5)

Gross profit - LIFO-related adjustments 3 - - 3 8 - - 8 8 - - 8 (14) - - (14)

Total pre-tax adjustments 327$ 61$ 11$ 399$ 59$ 67$ (20)$ 106$ 552$ 75$ -$ 627$ 19$ 76$ (5)$ 90$

Adjusted Earnings (Non-GAAP):

Revenues 108,889$ 2,915$ -$ 111,804$ 105,578$ 2,847$ -$ 108,425$ 103,568$ 2,808$ -$ 106,376$ 98,719$ 2,735$ -$ 101,454$

Gross profit 4,568$ 1,279$ -$ 5,847$ 4,228$ 1,328$ -$ 5,556$ 3,964$ 1,324$ -$ 5,288$ 3,573$ 1,328$ -$ 4,901$

Operating expenses (2,349) (955) (366) (3,670) (2,210) (920) (351) (3,481) (2,234) (947) (309) (3,490) (2,106) (961) (283) (3,350)

Other income, net 5 3 11 19 29 5 9 43 43 6 25 74 35 9 75 119

- - - - - - - - (63) - - (63) - - - -

2,224 327 (355) 2,196 2,047 413 (342) 2,118 1,710 383 (284) 1,809 1,502 376 (208) 1,670

Interest expense (1) - (196) (197) (2) (2) (183) (187) 2 (4) (142) (144) 4 (4) (142) (142)

2,223$ 327$ (551)$ 1,999$ 2,045$ 411$ (525)$ 1,931$ 1,712$ 379$ (426)$ 1,665$ 1,506$ 372$ (350)$ 1,528$

Gross profit margin 4.20% 43.88% - 5.23% 4.00% 46.65% - 5.12% 3.83% 47.15% - 4.97% 3.62% 48.56% - 4.83%

Operating expenses as a % of revenues 2.16% 32.76% - 3.28% 2.09% 32.31% - 3.21% 2.16% 33.73% - 3.28% 2.13% 35.14% - 3.30%

Operating pre-tax profit as a % of revenues 2.04% 11.22% - 1.96% 1.94% 14.51% - 1.95% 1.65% 13.64% - 1.70% 1.52% 13.75% - 1.65%

Income from continuing operations before income taxes

Year ended March 31, 2009 Year ended March 31, 2008Year ended March 31, 2010

Impairment of equity investment

Income from continuing operations before interest expense

Income from continuing operations before income taxes

Impairment of equity investment

Income from continuing operations before interest expense

Year ended March 31, 2011

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

FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014

(unaudited)

(in millions)

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