Market Overview

McKesson Provides Financial Update to Reflect Creation of a New Healthcare Information Technology Company


McKesson Corporation (NYSE:MCK), a leading global healthcare services
and information technology company, and Change Healthcare Holdings, Inc.
(CHC), a leading provider of software and analytics, network solutions
and technology-enabled services, today announced in a separate press
release the creation of Change Healthcare, a new healthcare information
technology company. The entity combines substantially all of CHC's
business and the majority of McKesson Technology Solutions (MTS) into a
new company.

"As discussed when we first announced this transaction, Change
Healthcare will work to deliver material synergies and prepare for an
IPO," said John H. Hammergren, chairman and chief executive officer,
McKesson Corporation, and chairman of the board, Change Healthcare. "We
believe a scaled healthcare software and analytics, and
technology-enabled services company will ultimately unlock the value of
our contributed MTS businesses for our shareholders, in a tax-efficient

Completion of Financing and Transaction Overview

In conjunction with the creation of the new company, Change Healthcare
raised approximately $6.1 billion in debt, which was utilized to fund
cash payments of approximately $1.25 billion to McKesson and
approximately $1.75 billion to CHC stockholders, cover transaction costs
and repay approximately $2.8 billion of existing CHC debt.

McKesson owns approximately 70% of Change Healthcare, with the remaining
equity ownership held by CHC stockholders, including Blackstone and
Hellman & Friedman.

Consistent with the agreement between McKesson and CHC stockholders,
which provides for joint governance over Change Healthcare, McKesson
will account for its investment in Change Healthcare using the equity
method of accounting.

Transaction Impact to McKesson

In its fourth quarter results, McKesson anticipates recording a pre-tax
gain of approximately $2.9 billion to $3.5 billion, which includes $1.25
billion in cash receipts previously noted, and associated non-cash
income tax expense of approximately $0.5 billion to $0.8 billion, both
of which will be excluded from Adjusted Earnings. As a result of the net
gain, McKesson will add approximately $10.70 to $12.35 in GAAP earnings
per diluted share from continuing operations.

Compared to previous guidance, the company's fourth quarter Fiscal 2017
financial results will exclude GAAP and adjusted operating income from
MTS' contributed businesses for the month of March, which is estimated
to be $48 million to $61 million, or approximately 13 cents to 17 cents
in GAAP and Adjusted Earnings per diluted share. This one-month
exclusion is driven by the closing date of the transaction. The month of
March in MTS' fiscal year is a higher-than-average contributor to annual
revenue and operating profit, as is typical in a technology business.

McKesson will account for its equity share of Change Healthcare's
earnings on a one-month lag. These earnings will be presented in "Other
income, net" in the MTS segment. McKesson will record its associated
income taxes on these earnings in the "Income tax expense" caption of
the consolidated income statement.

Therefore, during the month of March 2017, McKesson's consolidated
income statement will contain neither the earnings of the MTS
contributed businesses due to the timing of the close, nor any equity
earnings from the new company owing to the one-month lag. As a result,
McKesson is updating its Fiscal 2017 GAAP outlook to $20.35 to $22.50
per diluted share from continuing operations, and $12.45 to $12.75 per
diluted share, which excludes approximately $1.28 to $1.30 in charges to
Adjusted Earnings related to a goodwill impairment and the Cost
Alignment Plan announced in March 2016. Excluding the transaction timing
effect, the underlying Fiscal 2017 key assumptions provided in
conjunction with McKesson's earnings press release on January 25, 2017
are unchanged.

Based on the recently completed debt financing, McKesson's 70% share of
Change Healthcare's initial annual interest expense run rate is expected
to be approximately $200 million, equivalent to an average interest rate
of approximately 4.7%. Much of Change Healthcare's debt is pre-payable
without penalty and may be repaid ahead of the scheduled maturity under
certain conditions.

As part of the transaction close process, McKesson will record its share
of a one-time, non-cash reduction to the carrying value of its deferred
revenue balance. This non-cash adjustment will reduce McKesson's
reported earnings in Fiscal 2018 by approximately $140 million to $170

Selected MTS Financial Information

Using fiscal year-to-date December 31, 2016 results from MTS'
contributed businesses, the annualized GAAP revenues, GAAP operating
income, and adjusted operating income are approximately $1.9 billion,
$335 million and $425 million, respectively. Adjusted operating income
excludes approximately $90 million in amortization of
acquisition-related intangible assets and acquisition expenses and
related adjustments.

McKesson will continue to report its operations in two segments,
McKesson Distribution Solutions (MDS) and MTS. McKesson's equity
ownership of Change Healthcare will be reflected in the MTS segment.
Commencing in Fiscal 2018, McKesson will transition RelayHealth Pharmacy
from MTS to the MDS segment.

"I want to thank all of the employees who made today possible and who
will continue the important work ahead," continued Hammergren. "I would
also like to acknowledge the tremendous leadership demonstrated by Pat
Blake, who drove the MTS results that made this transaction possible,"
Hammergren concluded.

Conference Call Details

The company has scheduled a conference call for today, Thursday, March 2nd,
at 9:00 AM ET. The dial-in number for individuals wishing to participate
on the call is 719-234-7317. Craig Mercer, senior vice president,
Investor Relations, is the leader of the call, and the password to join
the call is ‘McKesson'. The live webcast for the conference call can be
accessed on the company's Investor Relations website at

A telephonic 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 719-457-0820 and the pass code is 4550394.

About McKesson Corporation

McKesson Corporation, currently ranked 5th on the FORTUNE 500, is a
global leader in healthcare supply chain management solutions, retail
pharmacy, community oncology and specialty care, and healthcare
information technology. McKesson partners with pharmaceutical
manufacturers, providers, pharmacies, governments and other
organizations in healthcare to help provide the right medicines, medical
products and healthcare services to the right patients at the right
time, safely and cost-effectively. United by our ICARE shared
principles, our 70,000 employees across more than 16 countries work
every day to innovate and deliver opportunities that make our customers
and partners more successful — all for the better health of patients.
McKesson has been named the "Most Admired Company" in the healthcare
wholesaler category by FORTUNE, a "Best Place to Work" by the Human
Rights Campaign Foundation, a top military-friendly company by Military
Friendly®, and a "Best Employer for Healthy Lifestyles" by The National
Business Group on Health. For more information, visit

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: changes in the U.S. healthcare industry
and regulatory environment; managing foreign expansion, including the
related operating, economic, political and regulatory risks; changes in
the Canadian healthcare industry and regulatory environment; exposure to
European economic conditions, including recent austerity measures taken
by certain European governments; changes in the European regulatory
environment with respect to privacy and data protection regulations;
fluctuations in foreign currency exchange rates; the company's ability
to successfully identify, consummate, finance and integrate
acquisitions; the company's ability to manage and complete divestitures;
material adverse resolution of pending legal proceedings; competition
and industry consolidation; 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; cyberattack, natural disaster, or malfunction of
sophisticated internal computer systems to perform as designed; 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 or services 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; new or revised tax
legislation or challenges to our tax positions; 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; changes in accounting principles generally accepted in the
United States of America; withdrawal from participation in multiemployer
pension plans or if such plans are reported to have underfunded
liabilities; inability to realize the expected benefits from the
company's restructuring and business process initiatives; difficulties
with outsourcing and similar third party relationships; risks associated
with the company's retail expansion; and the company's inability to keep
existing retail store locations or open new retail locations in
desirable places. 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.

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