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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  For the fiscal year ended December 31, 1999

                                      OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934


       For the transition period from ____________ to _____________


                        Commission file number: 0-11355
                                                -------

                       BINDLEY WESTERN INDUSTRIES, INC.
                       --------------------------------
            (Exact name of registrant as specified in its charter)


              INDIANA                                         84-0601662
  (State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                         Identification No.)


8909 Purdue Road, Indianapolis, Indiana                         46268
(Address of principal executive offices)                      (Zip Code)


Registrant's telephone number, including area code:  (317) 704-4000

          Securities registered pursuant to Section 12(b) of the Act:

    Common Stock ($.01 par value)               New York Stock Exchange
           (Title of class)              (Name of exchange on which registered)


          Securities registered pursuant to section 12(g) of the Act:

                                     NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports),  and (2) has been subject to such filing
requirements for the past 90 days.  Yes   x      No ____
                                        ------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

                                 $425,537,218

Aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the last sale price for such stock on March xx, 2000
(assuming solely for the purposes of this calculation that all Directors and
Officers of the Registrant are "affiliates")

                                  34,157,479

       Number of shares of Common Stock outstanding as of March 17, 2000

                      DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document have been incorporated by reference into this
annual report on Form 10-K:

IDENTITY OF DOCUMENT                               PARTS OF FORM 10-K INTO WHICH
                                                   DOCUMENT IS INCORPORATED

                                                        PART III
Proxy Statement to be filed for the
2000 Annual Meeting of Common
Shareholders of Registrant
<PAGE>

                       BINDLEY WESTERN INDUSTRIES, INC.
                             Indianapolis, Indiana

              Annual Report to Securities and Exchange Commission
                               December 31, 1999


                                    Part I


Item 1.   Business.

General
-------

          Bindley Western Industries, Inc., an Indiana corporation, is the fifth
largest distributor of pharmaceuticals and related products in the United
States.  We sell ethical (prescription) pharmaceuticals, health and beauty care
products, and homecare merchandise to chain drug companies that operate their
own warehouses as well as independent drug stores, hospitals, clinics, HMOs and
other managed care providers.  We operate from 18 distribution centers in 14
states, serving customers located throughout the United States and in U.S.
military facilities in Europe.  By using us as a primary source of
pharmaceuticals, our customers can centralize purchasing functions, exercise
better inventory control, maintain better security and reduce handling costs.

          We sell to chain warehouses and direct store delivery customers.
During 1999, we serviced three of the 10 largest chain warehouse customers in
the United States.  We believe that technological innovation and emphasis on
customer service is critical to our ability to serve chain warehouse customers.
Since 1987, we have focused significant resources on increasing sales to direct
store delivery customers.  Direct store delivery sales increased from $171
million in 1987 to $4.9 billion in 1999.  To complement our internal growth and
strengthen our position in the northeastern and southeastern United States, we
purchased J.E. Goold in 1992, Kendall Drug in 1994, Tennessee Wholesale Drug in
1997 and Central Pharmacy Services in 1999.

          Bindley Western's sales of $8.5 billion for 1999 represented the
31st consecutive year of record sales, equating to a compound growth rate of
approximately 20% since our inception in 1968.  Our growth has resulted from
acquisitions, expansion into new geographic areas and increased market share.

Spin-off of Priority Healthcare Corporation
-------------------------------------------

          On December 31, 1998, we distributed to our shareholders the remaining
82% interest that we then owned in our subsidiary, Priority Healthcare
Corporation ("Priority").  We formed Priority in 1994 to focus on distributing
products and providing services to the growing alternate site component of the
healthcare industry.  The net cost of the acquisitions which created Priority
was approximately $7 million.  The total market capitalization of the Priority
shares distributed to our shareholders exceeded $500 million.

          The spin-off resulted in the removal of $107.5 million of assets and
$37.2 million of liabilities from our consolidated balance sheet as of December
31, 1998.  The results of

                                                                               2
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operations for Priority, net of minority interest, for 1998 and earlier periods
are included in our consolidated statement of earnings because Priority was a
subsidiary through December 31, 1998.


Acquisition of Central Pharmacy
-------------------------------

          On August 31, 1999, we acquired Central Pharmacy Services, Inc., a
Georgia corporation, through the merger of one of our wholly owned subsidiaries
with and into Central Pharmacy, resulting in Central Pharmacy becoming a wholly
owned subsidiary of ours. Headquartered in Atlanta, Georgia, Central Pharmacy
operates centralized nuclear pharmacies that prepare and deliver
radiopharmaceuticals for use in nuclear imaging procedures in hospitals and
clinics. Central Pharmacy operates 29 specialized pharmacies located in 13
states. Central Pharmacy's revenues increased from $4.4 million in 1993 to $43.9
million in 1999, an average annual compound growth rate of 47%.

          Central Pharmacy operates centralized nuclear pharmacies that prepare
and deliver unit dose radiopharmaceuticals for use in nuclear imaging procedures
in hospitals and clinics.  Nuclear medicine uses small amounts of radioactive
material for the safe diagnosis, treatment and monitoring of disease.  In
nuclear imaging procedures, a special camera scans a patient who has swallowed,
inhaled or been injected with a diluted radiopharmaceutical compound that emits
radiotracers.  The special camera is able to detect the radiotracer emissions
from the compound.  The compounds are usually specific to a particular organ in
which they concentrate and help the reader of the scan detect irregularities in
organ tissue for the identification of cancer or other diseases.  Common types
of scans include heart, bone, liver, renal, lung and brain scans.  Nuclear
imaging is a way to gather medical information that may otherwise be
unavailable, that may otherwise require invasive surgery or that otherwise would
have necessitated more expensive diagnostic tests.

          Hospitals and clinics that perform diagnostic imaging procedures have
two means of acquiring the radiopharmaceuticals: they can buy directly from
manufacturers in bulk and perform the compounding and unit dosing themselves, or
they can purchase from centralized nuclear pharmacies principally in unit dose
form.

          In addition to its core radiopharmaceutical compounding, dispensing
and distribution services, Central Pharmacy has recently expanded its service
offerings with its NuScan Services division.  NuScan provides nuclear medicine
imaging department outsourcing services to hospital clients.  The hospital
provides the space for the imaging department, while the radiopharmaceuticals,
equipment, personnel, scheduling and management are all controlled by NuScan.
NuScan charges the hospital on a fee-per-scan basis, which effectively switches
the department from a fixed to a variable cost.

          The descriptions of the businesses of Bindley Western and Central
Pharmacy are discussed separately in this report because of the recent nature of
this acquisition.


Segments
--------

          The core operations of Bindley Western are included in the BWI segment
while the operations of Central Pharmacy comprise the Nuclear Pharmacy segment.
Prior to the spin-off, the operations of Priority comprised the Priority
segment.

                                                                               3
<PAGE>

          These segments have different management teams and infrastructures to
facilitate their specific customer needs and marketing strategies. These
segments are discussed separately in this report. See also Note 3 to the
Consolidated Financial Statements.

Suppliers
---------

BWI

          In every year for the last five years, sales of ethical (prescription)
pharmaceutical products accounted for approximately 85% of our total sales
volume. Our 800 plus suppliers are comprised of branded pharmaceutical
manufacturers, generic pharmaceutical manufacturers, private label manufacturers
of pharmaceutical and over-the-counter products, various health and beauty care
and home health care vendors, and other wholesale distributors which purchase
products directly from the manufacturer or sources other than the manufacturer.
Of the approximately 54,000 products in our inventory, a comparatively small
number account for a disproportionately large share of the total dollar volume
of products sold. Our five largest suppliers in 1999 were Pfizer, Bristol-Myers
Squibb Company, Astra Pharmaceutical, Eli Lilly and Company and SmithKline
Beecham. While none of these vendors account for over 10% of net sales, as a
group, they are significant. We maintain many competing products in inventory
and are not dependent upon any single supplier. Nevertheless, the loss of a
major supplier could adversely affect our business if we could not locate
alternate sources of supply. Our arrangements with suppliers typically may be
canceled by either party, without cause, on one month's notice. Many of these
arrangements are not governed by formal agreements. We believe our relationships
with our suppliers are generally good.

Nuclear Pharmacy

          Although supplier contracts are negotiated centrally, each of our
pharmacy managers has the discretion to order from suppliers based on local
market demand for products and delivery availability from suppliers. However, in
the aggregate, the largest suppliers to Nuclear Pharmacy are Nycomed Amersham,
Mallinckrodt Medical, Inc. and DuPont Pharmaceuticals Company. These top three
suppliers accounted for 86% of total purchases in 1999, 79% of total purchases
in 1998 and 74% of total purchases in 1997.

Customers and Markets
---------------------

BWI

          We categorize our sales as either "brokerage sales" or "from stock
sales". Brokerage sales are made to the chain warehouse market and from stock
sales are made directly from our inventory to both the chain warehouse and
direct store delivery markets. See Item 6 -- Selected Financial Data for
revenues from brokerage sales and from stock sales.

                                                                               4
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          Direct Store Delivery Market. We provide direct store delivery service
to chain drug stores (both warehousing and non-warehousing), independent drug
stores, hospitals, clinics, HMOs, state and federal agencies and other health
care providers. These customers generally purchase less than full-case lots on a
daily basis when they need a particular item. While smaller in quantity, these
sales typically generate higher margins than sales to warehouse customers.
Shipments to direct store customers are delivered on a daily basis by our
vehicles or by carriers.

          Our direct store delivery business has experienced significant growth.
Since 1987, direct store delivery sales increased from $171 million to $4.9
billion in 1999, a compound annual growth rate of 32%. Direct store delivery
sales as a percentage of net sales increased from approximately 16% to
approximately 58% during that period. During 1999, no single direct store
delivery customer accounted for 10% or more of our total net sales.

          We compete with other drug wholesalers for direct store delivery sales
by offering value added services that our customers would not be likely to
develop on their own. These value added services are designed to enhance the
competitiveness of independent, small chain and managed care pharmacies. Two
examples are our "Profit Partners" and "1st Choice for Value" programs. These
are both PC-based, marketing support and merchandising programs which include a
generic pharmaceutical source program, a home health care program, a private
label over the counter program and the Rx Vector and Global Vector purchasing
and inventory management systems.

          We believe that there are opportunities for growth in direct store
delivery sales by expanding into new geographical areas and increasing our
market share in existing markets. We are focused on the development of new
services and programs through interaction and cooperation with both customers
and suppliers, all of which are designed to enhance profitability, provide added
value to the customer and strengthen our role in the distribution channel. These
programs include computerized ordering systems, inventory management programs,
generic pharmaceutical source programs, repack programs, innovative advertising
and marketing campaigns and merchandising programs, including private label
product lines and e-commerce business solutions.

          Chain Warehouse Market. Chain warehouse customers purchase in full-
case lots for redistribution to individual retail outlets. Approximately 42% of
our net sales in 1999 were to chain drug warehouse customers. At December 31,
1999, our largest chain drug customers and the approximate period of time they
had done business with us were: Eckerd Corporation (27 years) and CVS (30
years). The following chain drug warehouse customers each accounted for over 10%
of net sales during the years shown: Eckerd Corporation (16%) and CVS (21%) in
1999; Eckerd Corporation (18%) and CVS (17%) in 1998; and CVS (22%), Rite Aid
Corporation (18%) and Eckerd Corporation (16%) in 1997. Net sales to these
customers aggregated 37% of net sales for 1999, 35% of net sales for 1998 and
56% of net sales for 1997.

          By using us as a primary source of pharmaceuticals, a chain drug
customer can centralize its purchasing functions, exercise better inventory
control, maintain better security and reduce handling costs. Inventory control
and security are particularly important to these customers because of the
relatively high dollar value of pharmaceuticals in relation to their physical
size. In addition, we offer chain drug customers systems and procedures that we
have

                                                                               5
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developed to facilitate their compliance with the recordkeeping and physical
security requirements of the Controlled Substances Act of 1970 and the
Prescription Drug Marketing Act of 1987. Additionally, we offer software to
these customers which permits direct communication between our computers and
theirs.

          We have, from time to time, entered into written understandings with
some chain warehouse customers setting forth various terms and conditions of
sale.  Generally, we have few long-term contracts with our major customers and
the relationship is terminable at will by either party.  The loss of any one of
our major chain warehouse customers could have a material adverse effect on our
operations.  During the second quarter of 1998, Rite Aid informed us that it had
signed a supply agreement with another wholesaler that became effective in May
1998.  In 1997, Rite Aid accounted for 18% of our net sales.  Sales to Rite Aid
were predominantly to their warehouses.  The loss of this customer has not had a
material adverse impact on our operations.  See also, Note 14 -- Major Customers
in our financial statements.

Nuclear Pharmacy

          We actively serve two types of customers: hospitals and outpatient
clinics. Each type of customer receives product deliveries through the same
network, but there are differences in the frequency and types of doses, the
number and timing of deliveries and the method of purchasing. Approximately 475
hospital customers generate nearly two-thirds of our revenue. Over the past
several years, the hospital industry has undergone significant consolidation.
The hospitals that have not participated in this trend have aggregated
purchasing clout through group purchasing associations. We have been able to
participate in bidding on these accounts in partnership with other nuclear
pharmacy providers, due to the mismatch between the broad national coverage of
the group purchasing organizations and hospital consolidators and the focused,
regional coverage of our Nuclear Pharmacy segment. The Nuclear Pharmacy segment
also services approximately 115 clinic customers. Clinic customers differ from
hospitals in their price sensitivity, product focus and timing of deliveries.
While clinic customers are very price sensitive due to reimbursement concerns,
they tend to order exclusively the higher margin cardiology products on a
regular basis, which produces attractive margins. However, due to their
outpatient population, clinics do not require emergency deliveries, which
produce lower margins due to the small quantity of orders.

          Central Pharmacy has partnered with two radiopharmaceutical
manufacturers to advance its position with group purchasing organizations.
Mallinckrodt Medical, Inc. has a contract that lasts through June 2004 with
Premier Purchasing Partners, L.P., the largest hospital group purchasing
organization in the United States representing approximately 30% of hospitals,
in which Mallinckrodt is the exclusive distributor of nuclear medicine products
to Premier members. Mallinckrodt established a similar relationship with
Consorta Catholic Resource Partners ("Consorta") in December 1999. We have a
parallel agreement with Mallinckrodt in which we are the exclusive service
representative for these Premier and Consorta accounts in specific geographic
areas. Our ability to sign new contracts with Premier and Consorta customers
under this arrangement is strong, but not automatic. Each contract must be
enrolled individually at the time the contract is up for renewal and
renegotiation, and therefore requires significant joint sales efforts by our
local pharmacy managers and the local Mallinckrodt and Premier representatives.


                                                                               6
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          Similarly, Nycomed Amersham has a contract that lasts through 2001
with Novation LLC, a group purchasing organization that represents approximately
30% of all United States hospitals, in which Nycomed/Amersham is the exclusive
distributor of nuclear medicine products to Novation members. We have a parallel
agreement with Nycomed/Amersham to be the exclusive service representative for
these Novation accounts in specific geographic areas. The Novation contract is
very similar to the Premier contract in the manner of obtaining customers.

Internal Systems Development
----------------------------

BWI

          We have developed and continue to improve our specialized internal
operating and management systems. We control inventories and accounts receivable
through the use of data processing and management information systems which we
developed. These assets are monitored by distribution center management using
real time connections to the Company's centralized data center. At present, many
operational functions, including accounting, cash management, accounts
receivable and inventory control are conducted through data processing
operations at our Indianapolis, Indiana facility. Data is transmitted to and
from on-site data processing equipment at the distribution centers.

Nuclear Pharmacy

          We have developed programs to enhance internal operating and
management systems. We control accounts receivable, accounts payable and group
purchasing organization billing through the use of internally developed software
programs. The majority of operational functions, including accounting, cash
management, and accounts receivable are conducted through data processing
operations in the Atlanta, Georgia facility. Accounts receivable and accounts
payable data are transmitted electronically to and from on-site data processing
equipment at each of the pharmacies.

Expansion/Acquisitions
----------------------

          We have made several acquisitions since 1992. We continue to seek
opportunities to expand operations through our acquisition of wholesale drug
distributors and other businesses in the healthcare industry.

          Within the past two years, we have established six distribution
centers in new operational areas and replaced three older distribution centers
with new centers.

          Presented below is a brief discussion of acquisitions by Bindley
Western since 1992. All of the acquisitions, other than the acquisition of
Central Pharmacy, have been accounted for under the purchase method and,
accordingly, the results of operations of the acquired companies have been
included in our financial statements from the effective date of acquisition. The
purchase price has been allocated based on a determination of the fair value of
the assets acquired and liabilities assumed. The goodwill associated with these
acquisitions is being amortized on a straight line basis over periods not
exceeding 40 years. See, also, Note 15 - Statement of Cash Flows in our
financial statements.

                                                                               7
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          J.E. Goold. On March 25, 1992, we effected a merger with J.E. Goold, a
full-line, full-service distributor of pharmaceutical, health and beauty care
and home health care products based in Portland, Maine.

          Kendall Drug Company. Effective July 1, 1994, we acquired the net
assets of Kendall Drug Company, a wholesale distributor of pharmaceutical
products and health and beauty care products based in Shelby, North Carolina.

          Priority Healthcare Services Corporation. On February 7, 1996, we
acquired all of the assets of the infusion services division of Infectious
Disease of Indiana, P.S.C. Through February 7, 1997, this business was operated
as National Infusion Services, Inc., a physician managed provider of infusion
services programs to patients in a variety of settings, including the home,
extended care facilities and its outpatient center in Indianapolis, Indiana. On
that date, the corporate name was changed to Priority Healthcare Services
Corporation. We expended approximately $9.0 million and incurred a long-term
obligation of approximately $1.5 million, resulting in approximately $9.8
million in intangible assets. See Note 6 - Intangibles and Note 9 - Long Term
Debt in our consolidated financial statements.

          Tennessee Wholesale Drug Company. Effective July 31, 1997, we
purchased substantially all of the operating assets and assumed most of the
liabilities and contractual obligations of Tennessee Wholesale Drug Company,
Inc. ("TWD"), a full-line, full-service wholesale drug company with a
distribution facility in Nashville, Tennessee. We expended approximately $27
million which approximated the net book value of the assets and liabilities
acquired. While the acquisition was not material to us as a whole, it provided
further opportunities for us to expand our presence in the direct store delivery
and managed care markets.

          Priority Healthcare Corporation. In August 1994, we formed Priority
Healthcare as our subsidiary by combining the businesses of two acquisitions
that we had made in 1993. From 1994 to 1997, Priority acquired three other
businesses in California and Florida. In October 1997, Priority Healthcare
completed an initial public offering in which 18% of its stock was issued to the
public. On December 31, 1998, we distributed to our shareholders the remaining
82% interest that we then owned in Priority Healthcare.

          Central Pharmacy. On August 31, 1999, we acquired Central Pharmacy
Services, Inc. through a merger in which Central Pharmacy became a wholly owned
subsidiary of ours. We issued approximately 2.9 million shares of our common
stock in connection with the acquisition, along with options to purchase
approximately 300,000 shares of our common stock in exchange for previously
outstanding Central Pharmacy options. We are accounting for the acquisition of
Central Pharmacy as a pooling of interests and the financial statements are
based on the assumption that the companies were combined for all periods
presented. Headquartered in Atlanta, Georgia, Central Pharmacy operates
centralized nuclear pharmacies that prepare and deliver radiopharmaceuticals for
use in nuclear imaging procedures in hospitals and clinics. Central Pharmacy
operates 29 specialized pharmacies located in 13 states.

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Employees
---------

BWI

          At February 29, 2000, we had approximately 1435 employees, of whom
approximately 4% were covered by a single collective bargaining agreement. We
believe that our relationship with our employees is good.

Nuclear Pharmacy

          At February 29, 2000, we had a total of approximately 360 employees,
none of whom were covered by a collective bargaining agreement.

Competition
-----------

BWI

          We compete with national full-line, full-service wholesale drug
distributors, some of which are larger and have substantially greater financial
resources than we do. We also compete with local and regional drug distributors,
direct selling manufacturers and specialty distributors. While competition is
primarily price oriented, it can also be affected by delivery requirements,
credit terms, technology services, depth of product line and other customer
service requirements. We cannot assure you that we will not encounter increased
competition in the future that could adversely affect our business. In recent
years there has been a trend toward consolidation in the wholesale drug
industry, as shown by the purchase of a number of distributors by national
wholesalers. We estimate that there are currently approximately 35 full-line,
full-service wholesale drug distributors in the United States.

Nuclear Pharmacy

          We have only one significant competitor, Syncor International, a
publicly-traded national chain. Syncor is primarily a nuclear pharmacy services
company engaged in compounding, dispensing and distributing radiopharmaceutical
products and services to hospitals and clinics in the United States and
overseas. We also compete with the distribution arms of some major
manufacturers, such as Mallinckrodt and Nycomed/Amersham, but to a lesser extent
since they operate mostly in the largest metropolitan markets.

Government Regulation
---------------------

BWI

          We are subject to regulation by federal, state and local government
agencies and must obtain licenses or permits from, and comply with operating and
security standards of, the United States Drug Enforcement Administration, the
Food and Drug Administration ("FDA") and numerous state agencies. Each of our
distribution centers is licensed to distribute ethical pharmaceutical products
and certain controlled substances in accordance with the requirements of the
Prescription Drug Marketing Act of 1987 and the Controlled Substances Act of
1970.

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          If we fail to comply with these laws and regulations, we could be
subject to both criminal and civil sanctions. We have full-time regulatory
compliance managers and outside advisors conduct compliance reviews at our
locations. We have also implemented a company-wide ethics and corporate
compliance program. We believe that our operations comply in all material
respects with applicable laws and regulations. However, because the health care
industry will continue to be subject to substantial regulations, we cannot
assure you that our activities will not be reviewed or challenged by the
government in the future.

          Since Congress enacted the Prescription Drug Marketing Act ("PDMA") in
1987, we have conducted our alternate source purchasing and state licensing
activities in accordance with this legislation. On December 3, 1999, the FDA
published final regulations, to become effective December 4, 2000, that will,
among other things, require (a) alternate source vendors to provide purchasers
of pharmaceutical drugs with either (i) written proof that they are authorized
to distribute a manufacturer's pharmaceutical drugs or (ii) a statement
identifying each prior sale, purchase, or trade of that particular
pharmaceutical drug starting in the chain of distribution with the manufacturer
and (b) at least 44 states to change the record retention requirements for
wholesale distributors of prescription drugs from the current two years to three
years. Although the final regulations will require us to make some modifications
with respect to our current business practices related to alternate source
purchases and record retention, we do not anticipate that the final regulations
will have a material adverse effect on our business or results of operations.

Nuclear Pharmacy

          We operate in a highly regulated industry which requires licenses or
permits from the Federal Nuclear Regulatory Commission, the Radiologic Health
Agency of each state in which we operate, the applicable State Board of Pharmacy
and the Department of Transportation which regulates the transport of
potentially hazardous material. We devote substantial human and financial
resources to complying with these applicable regulations.

Industry Overview
-----------------

          The wholesale drug industry in the United States continues to
experience significant growth. As reported by the National Wholesale Druggists'
Association, industry sales grew from $30 billion in 1990 to approximately $83
billion in 1998, a compound annual growth rate of 14%. Today, industry analysts
estimate over 80% of pharmaceutical sales are distributed through wholesalers
compared to less than 47% in 1970. Order processing, inventory management and
product delivery by wholesale distributors allow manufacturers to better
allocate their resources to research and development, manufacturing and
marketing their products. Wholesale distribution provides customers access to a
single supply source for a full line of pharmaceutical and health care products
that are manufactured by hundreds of other companies. Wholesale distribution can
lower customers' inventory, reduce costs and delivery time and improve
purchasing and inventory information. Wholesale distribution also offers value
added programs that can reduce customers' costs and increase their operating
efficiencies.

          We believe the pharmaceutical industry, including drug wholesalers and
related health care distributors and providers, will continue to grow as a
result of the following trends:

                                                                              10
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          Aging Population. The number of individuals over 65 in the United
States is expected to grow 25% from approximately 28 million in 1985 to
approximately 35 million by the year 2000. This age group suffers from a greater
incidence of chronic illnesses and disabilities than the rest of the population
and is estimated to account for approximately two-thirds of total health care
expenditures by the end of the decade.

          Introduction of New Pharmaceuticals. Traditional research and
development as well as the advent of new research and production methods, such
as biotechnology, continue to generate new compounds that are more effective in
treating diseases. We believe that ongoing research and development expenditures
by the leading pharmaceutical manufacturers will contribute to the continued
growth of the industry. Drug therapy has had a beneficial impact on the overall
increase in aggregate health care costs, by reducing expensive surgeries and
prolonged hospital stays. The Health Care Financing Administration estimates
that expenditures in the United States for pharmaceuticals will more than triple
by 2008 from current levels.

          Managed Care. To remain competitive, pharmaceutical manufacturers are
required to sell their products to the managed care market, wherein employers
negotiate discounts from health care providers by committing to long-term
contracts involving thousands of patients. Health care costs are linked more
tightly to the provision of managed health care services, especially with
hospitals and doctors, than under traditional medical insurance plans. Managed
care organizations generally provide full coverage for prescription drugs to
lower health care costs by improving access to medical treatment rather than
delaying treatment until more expensive services are required. The costs
associated with the prescription drug benefit are monitored by the managed care
organization primarily through the establishment of tightly controlled
formularies of approved prescription drugs, including generic substitutes, and
by drug utilization review procedures wherein physicians' prescribing practices
and patients' usage are closely scrutinized. Even though there has been a recent
trend to increase co-payments, implement tighter drug formularies and cap annual
pharmaceutical costs per patient, analysts have determined that these efforts
have done little thus far to decrease demand for pharmaceutical drugs as part of
a general healthcare delivery strategy.

          Increased Use of Generic Drugs. The growth of managed care's influence
on pharmacy along with the introduction of generic equivalent products for many
top selling brand name drugs has caused the generic market to grow
substantially. Branded drugs with annual sales of approximately $24 billion are
expected to come off patent in the next three years, thus expanding the generic
marketing opportunity. Analysts estimate that the size of the generic market is
expected to nearly double from $8.8 billion in 1998 to $16.6 billion in 2003.

          Pharmaceutical Price Increases. As a result of competitive market-
driven cost containment measures implemented by both the private and public
sectors since 1993, pharmaceutical price increases are less than in prior years.
Nevertheless, we believe that price increases by pharmaceutical manufacturers
will continue to equal or exceed the overall Consumer Price Index, which is due
in large part to relatively inelastic demand in the face of higher prices
charged for patented drugs as manufacturers have attempted to recoup costs
associated with the research and development, clinical testing and FDA approval
of new products.

                                                                              11
<PAGE>

          Continued Industry Consolidation. Largely in response to cost
containment pressure from private and governmental payers and the focus on
health care reform in the United States during the 1990's, the health care
industry is experiencing significant consolidation at the manufacturer,
wholesaler and customer levels. Pharmaceutical manufacturers consolidate to
reduce operating expenses, gain access to new drugs in the pipeline and enhance
marketing efforts in a managed care environment. Chain drug stores consolidate
through combining with other drug chains, as well as acquiring independent drug
stores. Independent drug stores are also consolidating through regional and
national affiliations. The number of pharmaceutical wholesalers in the United
States has decreased from 139 in 1980 to approximately 35 full-line, full-
service wholesalers at the end of 1999.

          Medicare Prescription Drug Benefit. An emerging debate centers around
proposed legislation to offer an outpatient drug benefit for Medicare
beneficiaries. Although this proposed federal legislation could slow down the
recent growth of the pharmaceutical industry because of politically imposed
price controls, some analysts believe that drug wholesalers will benefit because
of increased volume and generic drug participation.

          e-Commerce. Because wholesale drug distributors perform the
fulfillment function for on-line pharmacies, the recent advent of e-commerce
companies that distribute pharmaceuticals via the Internet should not threaten
-- and may even benefit -- drug distributors. Most industry observers have
determined that successful e-commerce companies will need to partner with retail
drug chains or pharmacy benefits management companies to provide for the orderly
administration of related claims.

                                                                              12
<PAGE>

Item 2.   Properties.

BWI

          We currently have 18 distribution centers located in 14 states.

          Each of our distribution centers has been constructed or adapted to
our specifications for climate control, alarm systems and segregated security
areas for controlled substances. We use modern warehousing techniques and
equipment designed to accommodate both chain drug warehouses and direct store
delivery customers. At each location, a manager supervises warehouse, delivery
and local sales functions. We use our own vans and trucks, as well as contract
carriers, common carriers and couriers to deliver products. We believe that our
facilities are adequate to serve our current and anticipated needs without
making any capital expenditures at levels which are materially higher than the
amounts we have spent in the past.

          Our distribution centers are listed below:

<TABLE>
<CAPTION>
                                        Square               Owned or
               Location                 Footage               Leased
               --------                 -------               ------
<S>                                     <C>                  <C>
Austell, Georgia                         56,160              Leased
Dallas, Texas                            44,000              Owned
Denver, Colorado                         42,725              Leased
Grapevine, Texas                         70,000              Leased
Houston, Texas                           39,000              Owned
Indianapolis, Indiana                    57,200              Owned
Kansas City, Missouri                    45,696              Leased
Middletown, Pennsylvania                112,000              Owned
Milwaukee, Wisconsin                     40,040              Leased
Nashville, Tennessee                     93,000              Owned
Orange, Connecticut                     185,000              Owned
Orlando, Florida                         94,600              Owned
Portland, Maine                          60,000              Owned
Portland, Oregon                         46,000              Leased
San Dimas, California                    53,500              Leased
Shelby, North Carolina                   96,500              Owned
Westbrook, Maine                        132,000              Owned
Woodland, California                     47,000              Leased
</TABLE>

          We lease approximately 76,000 square feet for our corporate
headquarters in Indianapolis, Indiana for our accounting, human resources,
information systems, purchasing and sales and marketing departments, along with
our executive offices and related staff. This is a 15 year lease which began
April 30, 1999.

                                                                              13
<PAGE>

Nuclear Pharmacy

          We operate 29 centralized nuclear pharmacies. All of the pharmacies
are leased. The following table shows the locations of the pharmacies and sites:

<TABLE>
<CAPTION>
State                    City                     State            City
-----                    ----                     -----            ----
<S>                      <C>                      <C>              <C>

Alabama                  Birmingham               Nebraska         Omaha
                         Gadsden

Arkansas                 Fort Smith               Oklahoma         Tulsa
                         Little Rock
                         Ozark


Florida                  Gainesville              Oregon           Eugene
                         Jacksonville                              Medford
                         Port Charlotte
                         Palm City
                         Winter Haven


Kentucky                 Lexington                Tennessee        Chattanooga
                         Louisville                                Nashville


Louisiana                Baton Rouge              Texas            Lake Area
                         Houma
                         Lafayette
                         Monroe


Mississippi              Jackson                  Virginia         Richmond
                         Meridian                                  Charlottesville
                                                  Washington       Spokane
                                                                   Tacoma
</TABLE>


                                                                              14
<PAGE>

Item 3.   Legal Proceedings.

     Bindley Western was named a defendant, along with six other pharmaceutical
wholesalers and 24 pharmaceutical manufacturers, in a consolidated class action
filed in the United States District Court for the Northern District of Illinois
in 1993.  (In re Brand Name Prescription Drugs Litigation, MDL 997.)  The
           ----------------------------------------------
complaint alleges that the defendants conspired to fix prices of brand-name
prescription drugs sold to retail pharmacies at artificially high levels in
violation of the federal antitrust laws.  The complaint seeks injunctive relief,
unspecified treble damages, costs, interest and attorneys' fees.  Additional
complaints were filed in the federal class action by two chain drug companies
naming certain pharmaceutical manufacturers and wholesalers, including us, as
defendants.  These complaints contain allegations and claims for relief that are
substantially similar to those in the earlier class action complaint.  In
addition, we are a defendant in additional actions brought by plaintiffs who
"opted out" of the federal class action.  The vast majority of the complaints in
these actions contain allegations and claims for relief that are substantially
similar to those in the federal class action.  The remaining complaints add
allegations that the defendants' conduct violated state law.  We have denied the
allegations in each of the amended complaints filed in these opt out lawsuits.
Discovery in the opt out cases is currently ongoing and no trial dates have yet
been scheduled.

     On July 1, 1996, we and several other wholesalers were joined as defendants
in a proceeding filed in the Circuit Court of Greene County, Alabama.  (Durrett
                                                                        -------
v. The Upjohn Company, Civil Action No. 94-029.)  An order dismissing the action
---------------------
and taxing costs against the plaintiffs was entered by the Circuit Court on
November 29, 1999.

     On June 16, 1998, we were named a defendant in an action filed in the
Circuit Court for Cocke County, Tennessee purportedly on behalf of consumers of
prescription drugs in the following states:  Tennessee, Alabama, Arizona,
Florida, Kansas, Maine, Michigan, Minnesota, New Mexico, North Carolina, North
Dakota, South Dakota, West Virginia and Wisconsin.  (Graves et al. v. Abbott
                                                     -----------------------
Laboratories et al., Civil Action No. 25,109-II.)  The complaint charges that
-------------------
pharmaceutical manufacturers and wholesalers, including us, engaged in a price-
fixing conspiracy in violation of Tennessee's Trade Practices Act and Consumer
Protection Act, and the unfair or deceptive trade practices statutes of the
other jurisdictions named therein.  We have denied the allegations of the
complaint and all proceedings in this suit have been stayed until further order
of the Circuit Court.

     We have denied any liability to the plaintiffs in the prescription drug
price litigation described above and have been defending ourselves vigorously.
On October 21, 1994, we entered into an agreement with the other defendants,
wholesalers and pharmaceutical manufacturers covering all of the prescription
drug price actions. Under this agreement:  (1) the manufacturer defendants
agreed to reimburse us and the other wholesaler defendants for litigation costs
incurred, up to an aggregate amount of $9 million; and (2) if a judgment is
entered against both manufacturers and wholesalers, our total exposure for joint
and several liability would be limited to the lesser of 1% of such judgment or
$1 million.  In addition, we have released any claims which we might have had
against the manufacturers for the claims presented by the plaintiffs in these
actions.  As a result of the settlements discussed in the next paragraph, we
have periodically received reimbursement of our legal fees and expenses in
excess of our proportionate share of the $9 million, and we expect to receive
reimbursement of substantially all of such fees and expenses in the future.

                                                                              15
<PAGE>

     Several of the manufacturer defendants and the class plaintiffs have
reached settlement agreements with regard to the In re Brand Name Prescription
                                                 -----------------------------
Drugs class action.  Under these agreements, the settling manufacturer
-----
defendants retain certain contingent liabilities under the October 21, 1994
agreement discussed in the preceding paragraph.  The trial against the remaining
defendants, including us, began on September 14, 1998.  On November 30, 1998,
the court granted all remaining defendants' motions for judgments as a matter of
law and dismissed all class claims against us and other defendants.  The class
plaintiffs appealed the Court's ruling, and, on July 13, 1999, the appeals court
dismissed the wholesalers, including us, from the case.  On February 22, 2000,
the United States Supreme Court denied the plaintiffs' petition for certiorari,
thus concluding the In re Brand Name Prescription Drugs class action litigation.
                    -----------------------------------

     After discussions with counsel, we believe that any allegations of
liability against us in the remaining prescription drug pricing cases described
above are without merit and that any liability that we may have is not likely to
have a material adverse effect on our financial condition, results of
operations, or cash flows.

     The Company has been advised that it is a potential defendant in an ongoing
grand jury investigation being conducted by the U.S. Attorney's Office in Las
Vegas, NV. The investigation concerns transactions between wholesale
pharmaceutical distributors and licensed institutional pharmacies known as
closed-door pharmacies. Closed-door or institutional pharmacies are entitled to
purchase pharmaceuticals at a discount from wholesale prices, but typically have
an agreement with the manufacturers to service only their own long-term care
patients. Wholesalers seek chargeback credits from the manufacturers for sales
to closed-door pharmacies.

     The Company understands that the government's inquiry focuses principally
on whether pharmaceutical manufacturers have been defrauded by institutional or
closed-door pharmacies, which allegedly resold discount-priced pharmaceutical
drugs at a profit in violation of agreements with pharmaceutical manufacturers
to purchase the product solely for their own use.  The government is examining
whether the Company, through any of its employees, participated in these
transactions by selling discount-priced pharmaceutical drugs with knowledge of
the pharmacies' plans to resell the product at a profit.  These sales of excess
pharmaceutical drugs were allegedly made to alternate source vendors that, in
turn, sold the product in the secondary market to numerous wholesale
distributors and other customers.

     To date, the government's investigation has been substantially focused on
sales that the Company made at the San Dimas, California division of Bindley
Western Drug Company to certain institutional pharmacies located in California
and Nevada, principally between 1995 and 1997.  The Company no longer employs
the two managers who were primarily involved in the questioned sales.  One was
terminated by the Company approximately two years ago for violation of the
Company's ethics code, and the other abruptly resigned in October 1999 during
the investigation of this matter.  The Company has determined that sales to
institutional pharmacies served by the San Dimas division of Bindley Western
Drug Company represented less than 1% of total Company sales during the period
in question.  The Company has further determined that no related business has
been conducted with these accounts for an extended period.

                                                                              16
<PAGE>

     The Company believes that its two former managers have admitted to certain
wrongdoing in connection with their activities while employed by the Company.
The Company is cooperating with the government and has undertaken its own
investigation.  At this stage of the government's investigation, the Company
does not believe it is possible to predict or determine the outcome, resolution
or timing of the final resolution of this matter.  The Company is currently
unable to estimate the range of any potential loss, the amount of which could
have a material adverse effect on the Company's financial condition, results of
operations and/or cash flows.

     We are also subject to ordinary and routine lawsuits and governmental
inspections, investigations and proceedings incidental to our business, the
outcome of which should not have a material adverse effect on our financial
condition, results of operations, or cash flows.

                                                                              17
<PAGE>

Item 4.   Submission of Matters to a Vote of Security Holders.

     No matters were submitted during the fourth quarter of 1999 to a vote of
our security holders, through the solicitation of proxies or otherwise.

Executive Officers of the Company

     The following is a list of our executive officers, their ages and the
positions held by each of them. These positions may exclude other positions held
with our subsidiaries. These executive officers serve at the discretion of our
Board. There is no family relationship between any of our executive officers.

          Name                     Age                       Position
          ----------------------------------------------------------------------

          William E. Bindley        59           Chairman of the Board, Chief
                                                 Executive Officer and President
          Keith W. Burks            42           Executive Vice President
          Michael D. McCormick      52           Executive Vice President,
                                                 General Counsel and Secretary
          Thomas J. Salentine       60           Executive Vice President and
                                                 Chief Financial Officer
          Gregory S. Beyerl         42           Vice President and Controller
          Michael L. Shinn          45           Treasurer

Gregory S. Beyerl, who is a certified public accountant, joined the Bindley
Western Drug Company Division in 1986 as Assistant Controller and was promoted
to division Controller in 1987, division Vice President in 1990 and corporate
Vice President and Controller in 1992.  He was previously with the accounting
firm of Price Waterhouse.  Mr. Beyerl also holds an MBA degree.

Michael L. Shinn joined Bindley Western as Treasurer in May 1992.  Mr. Shinn is
a certified public accountant and was previously the Director of Corporate
Taxation for the Indianapolis office of the accounting firm of Price Waterhouse.
His duties include responsibility for our entire tax function, including our
subsidiaries and divisions.

(Pursuant to General Instruction (G)(3) of Form 10-K, the foregoing information
pertaining to executive officers who are not standing for election as members of
the Board of Directors is included as an unnumbered Item in Part I of this
Annual Report instead of being included in our Proxy Statement for our 2000
Annual Meeting of Shareholders.)

                                                                              18
<PAGE>

                                    PART II

Item 5.   Market for the Registrant's Common Equity and Related Stockholder
          Matters.

     Our common stock, $.01 par value, is traded on the New York Stock Exchange
under the symbol "BDY." On June 3, 1998, a 4-for-3 stock split of our common
stock was paid in the form of a stock dividend to shareholders of record at the
close of business on May 21, 1998. On June 25, 1999, another 4-for-3 stock split
of our common stock was paid in the form of a stock dividend to shareholders of
record at the close of business on June 11, 1999. The following table is
adjusted to reflect retroactively the June 3, 1998 stock split and the June 25,
1999 stock split as well as the December 31, 1998 spin-off of Priority
Healthcare Corporation's common stock. The table shows the range of the reported
high and low prices for our common stock as reported on the New York Stock
Exchange for the years ended December 31, 1999 and December 31, 1998.

     1999                               High      Low
     January 1 - March 31               25.83     16.22
     April 1 - June 30                  24.89     20.63
     July 1 - September 30              24.06     13.50
     October 1 - December 31            15.56     11.75

     1998                               High      Low
     January 1 - March 31               11.27      8.02
     April 1 - June 30                  13.07     10.10
     July 1 - September 30              13.76     10.27
     October 1 - December 31            19.51      9.93

     At March 17, 2000, 34,157,479 shares of our common stock were outstanding,
which were held by approximately 1,224 holders of record.

     We paid cash dividends on our common stock of 2 cents per share on 9
different quarterly dates for the period beginning March 25, 1997 and ending
March 23, 1999. The 2 cents per share dividend remained unchanged after the June
3, 1998 stock split. We paid cash dividends on our common stock of 1.5 cents per
share on 4 different quarterly dates for the period beginning July 16, 1999 and
ending March 24, 2000. In addition, on December 31, 1998, we completed the spin-
off of our subsidiary Priority Healthcare by distributing to the holders of our
common stock all of the shares of Priority Class A common stock that we owned.
We distributed 10,214,286 shares of Priority Class A common stock on the basis
of .448 shares of Priority Class A common stock for each share of our common
stock outstanding on the record date, December 15, 1998. As a result of the
distribution, Priority ceased to be a subsidiary of ours. Future dividends will
be paid in accordance with declarations by our Board of Directors in its sole
discretion. Our primary bank line of credit agreement requires us to maintain
specified levels of working capital and net worth, which may limit our ability
to pay dividends in the future.

     During the third quarter of 1994, we established an Automatic Dividend
Reinvestment Plan for our shareholders. This voluntary plan provides for
periodic investment of shareholder dividends in shares of our common stock plus
the opportunity to make voluntary cash payments up to $5,000 per month to
purchase additional shares without incurring any service charges or brokerage
fees.

                                                                              19
<PAGE>

Sales of Unregistered Securities

     On May 20, 1999, we issued a total of 1,435 shares, adjusted to reflect the
June 25, 1999 stock split, of our common stock to our seven non-employee
directors as the stock portion of their annual retainer. This issuance was
exempt from the registration requirements of the Securities Act of 1933, as
amended, under Section 4(2) of the Securities Act.

     On June 25, 1999, all of our 22,921,685 shares of common stock outstanding
on the record date of June 11, 1999, were split on a four-for-three basis, paid
as a stock dividend. This transaction was exempt from the registration
requirements of the Securities Act because it did not involve a "sale" of a
security within the meaning of Section 2(3) of the Securities Act.

     On August 31, 1999, we issued a total of 2,922,055 shares of our common
stock in connection with our acquisition of Central Pharmacy Services. This
issuance was exempt from the registration requirements of the Securities Act
under Section 4(2) of the Securities Act.

     On December 27, 1999, we sold $25 million of our 7.93% Senior Notes due
December 27, 2004 to Nationwide Life Insurance Company. This sale was exempt
from the registration requirements of the Securities Act under Section 4(2) of
the Securities Act.

                                                                              20
<PAGE>

Item 6.                              Selected Financial Data

The selected financial data set forth below should be read in conjuction with
the Company's financial statements and related notes included elsewhere in this
report. All of our financial information includes the results of Bindley Western
Industries, Inc. ("BWI") and Central Pharmacy Services, Inc. ("Central
Pharmacy") for all periods presented giving retroactive effect to the merger on
August 31, 1999 which has been accounted for as a pooling of interests.

            Five Year Financial Review and Selected Financial Data
                       Bindley Western Industries, Inc.

<TABLE>
<CAPTION>
(in thousands, except share data)
-------------------------------------------------------------------------------------------------------------------------------
                                                   1999           1998 (1)            1997             1996            1995
-------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>              <C>               <C>              <C>              <C>
Net sales from stock                           $ 5,039,180      $ 4,156,799       $ 2,784,450      $ 2,145,262      $ 1,941,212
Net brokerage sales                              3,468,425        3,497,422         4,549,687        3,190,219        2,741,415
Other income                                         1,939            1,915             1,908            1,410            2,559
Cost of products sold                            8,287,842        7,448,331         7,181,415        5,207,565        4,573,233
Selling, general and administrative                121,542          118,340            89,402           77,396           67,705
Other expenses                                      36,082           46,375            24,704           21,447           17,239

Earnings before income taxes                        64,078           43,090            40,524           30,483           27,009
Provision for income taxes                          25,782           18,989            15,806           12,865           11,383
Minority interest in net income
  of consolidated subsidiary                             -            1,865               212                -                -
Net earnings                                        38,296           22,236            24,506           17,618           15,626

Earnings per share: (2)(3)
  Basic                                        $      1.14      $      0.70       $      0.95      $      0.76      $      0.70
  Diluted                                      $      1.05      $      0.66       $      0.83      $      0.67      $      0.62

Cash dividends declared per Common Share       $     0.065      $      0.08       $      0.08      $      0.08      $      0.08

Other financial data:
Current assets                                 $ 1,582,855      $ 1,180,276       $ 1,188,403      $   854,890      $   780,041
Total assets                                     1,702,822        1,293,957         1,292,944          946,285          852,776
Current liabilities                              1,284,706          954,510           903,945          621,037          575,690
Long-term debt                                      38,698              733            32,282          101,861           72,562
Total liabilities                                1,328,107          958,330           940,389          725,928          653,358
Minority interest                                        -                -            11,010                -                -
Shareholders equity                                374,715          335,627           341,545          220,357          199,418
Book value per share (2)(3)                          11.02            13.08             18.32            15.56            14.40
</TABLE>

(1)  On December 31, 1998, BWI distributed to the holders of BWI Common Stock
all of the 10,214,286 shares of Priority Class A Common Stock owned by BWI in
the form of a dividend. As a result of the distribution, Priority ceased to be a
subsidiary of BWI as of December 31, 1998 and as such, its assets, liabilities
and equity are not included in the December 31, 1998 Consolidated Balance Sheet.
However, Priority's results of operations, net of minority interest, for the
year ended December 31, 1998 are included in the BWI Consolidated Statement of
Earnings as Priority was a subsidiary of the Company for the full year of 1998.

(2)  On June 3, 1998, a 4-for-3 split of the Company's Common Stock was effected
in the form of a dividend to all shareholders of record at the close of business
on May 21, 1998. Accordingly, all historical weighted average and per share
amounts have been restated to reflect the stock split. Share amounts in the
consolidated Balance Sheets reflect the actual share amounts outstanding for
each period presented.

(3)  On June 25, 1999, a 4-for-3 split of the Company's Common Stock was
effected in the form of a dividend to all shareholders of record at the close of
business on June 11, 1999. Accordingly, all historical weighted average and per
share amounts have been restated to reflect the stock split. Share amounts in
the consolidated Balance Sheets reflect the actual share amounts outstanding for
each period presented.

                                                                              21
<PAGE>

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations.

The discussion and analysis that follows should be read in conjunction with the
Consolidated Financial Statements and related notes included elsewhere in this
report.

We have made the following acquisitions which affect the comparison of the
results of operations on a year to year basis. All acquisitions, except Central
Pharmacy Services, Inc., have been accounted for under the purchase method and,
accordingly, the results of operations of the acquired entities are included in
the Company's financial statements from the respective dates of acquisition.

Tennessee Wholesale Drug Company - Effective July 31, 1997, we acquired
substantially all of the operating assets and assumed most of the liabilities of
Tennessee Wholesale Drug Company ("TWD"). TWD is a full-line, full-service
wholesale drug company with a distribution facility in Nashville, Tennessee.

Grove Way Pharmacy - Effective August 6, 1997, we, through our Priority
Healthcare Corporation ("Priority") subsidiary, acquired substantially all of
the assets of Grove Way Pharmacy, Inc. ("Grove Way"), a specialty distributor of
vaccines located in Castro Valley, California.

Central Pharmacy Services, Inc. - On August 31, 1999, we completed the merger
with Central Pharmacy Services, Inc. ("Central Pharmacy") of Atlanta, Georgia
for approximately $55 million of our common stock. Central Pharmacy operates
specialized pharmacies in 29 cities located in 13 states. These pharmacies
prepare and deliver unit dose radiopharmaceuticals for use in nuclear imaging
procedures in hospitals and clinics. The transaction was accounted for as a
pooling of interests and the financial statements for the periods ended December
31, 1999, 1998 and 1997 are based on the assumption that the companies were
combined for the full period.

          On December 31, 1998, we distributed to the holders of our common
stock all of the 10,214,286 shares of Priority Class A common stock owned by us
on the basis of .448 shares of Priority Class A common stock for each share of
our common stock outstanding on the record date, December 15, 1998. The two
classes of Priority common stock entitle holders to the same rights and
privileges, except that holders of shares of Priority Class A common stock are
entitled to three votes per share on all matters submitted to a vote of holders
of Priority common stock and holders of shares of Priority Class B common stock
are entitled to one vote per share on such matters. As a result of the
distribution, Priority ceased to be our subsidiary as of December 31, 1998 and,
therefore, its assets, liabilities and equity are not included in our December
31, 1998 Consolidated Balance Sheet. However, Priority's results of operations,
net of minority interest, for the year ended December 31, 1998 are included in
our Consolidated Statement of Earnings as Priority was our subsidiary for the
full year of 1998.

Results of Operations.

Net sales for 1999, 1998 and 1997 were $8,508 million, $7,654 million, and
$7,334 million, respectively. This represents an 11% increase for 1999 over 1998
(15% when Priority's sales are excluded from 1998 results) and a 4% increase in
1998 over 1997. In all years, Central Pharmacy sales accounted for less than 1%
of total sales. The 1999 brokerage type sales

                                                                              22
<PAGE>

("brokerage sales") remained relatively constant when compared to 1998. We
experienced increased sales to existing customers that offset the impact of the
loss of a single chain warehouse customer during the second quarter of 1998. The
loss of this customer resulted in a 23% decrease in 1998 brokerage sales when
compared to 1997. Brokerage sales generate very little gross margin, however,
they provide for increased working capital and support our programs to attract
more direct store delivery business from chain customers. Sales from our
inventory ("from stock sales") increased 21% in 1999 (30% when Priority's sales
are excluded from 1998 results). From stock sales include sales from our
inventory to chain customers and direct store delivery business. We continued to
expand our presence in the direct store delivery portion of the business through
increased sales to existing customers and the addition of new customers. Direct
store delivery sales increased by 25% from 1998 to 1999 (35% when Priority's
sales are excluded from 1998 results) and 50% from 1997 to 1998. As a percentage
of total sales, direct store delivery sales represented 58% in 1999, 51% in 1998
and 35% in 1997. In both periods, the increase related to pricing was
approximately equal to the increase in the Consumer Price Index. Net sales for
Priority were $276 million in 1998 and $231 million in 1997. This growth was
generated internally and reflected primarily the addition of new customers, new
product introductions (including the new Rebetron treatment for Hepatitis-C),
additional sales to existing customers and, to a lesser extent, the acquisition
of Grove Way Pharmacy and inflationary price increases.

Gross margins for 1999, 1998 and 1997 were $220 million, $206 million and $153
million, respectively. These increases in gross margin resulted primarily from
internal growth. Gross margins as a percent of net sales increased from 2.08% in
1997 to 2.69% in 1998 and then decreased to 2.58% in 1999. However, after the
exclusion of Priority, gross margins as a percent of sales were 1.82% for 1997
and 2.37% in 1998. These increases in gross margins resulted from the change in
mix away from the lower margin brokerage sales to the higher margin from stock
sales in the BWI segment and also the increased sales of the higher margin
Nuclear Pharmacy segment. The change in mix resulted from both the increased
direct store delivery business and the loss of the chain warehouse customer. In
all years, the pressure on sell side margins continued and the purchasing gains
associated with pharmaceutical price inflation remained relatively constant.
Gross margins for Priority were $31.1 million for 1998 and $23.2 million for
1997. Gross margins as a percent of sales for Priority for 1998 and 1997 were
11.30% and 10.01%, respectively. The increase in 1998 margins over 1997 margins
was primarily attributed to the change in sales mix resulting from significantly
higher sales by Priority Healthcare Pharmacy which generated higher gross
margins than those of Priority Healthcare Distribution.

Other income in 1999, 1998 and 1997 represented finance charges on certain
customers' receivables and gains on the sale of assets. The 1999 and 1998
balances also include approximately $200,000 of interest related to the note
from the CEO of the Company.

Selling, general and administrative ("SGA") expenses were $121.5 million, $118.3
million and $89.4 million in 1999, 1998 and 1997, respectively. When Priority is
excluded, SGA was $104.3 million for 1998 and $78.8 million for 1997. The
increase in SGA in the BWI segment resulted from costs associated with our
continued expansion, normal inflationary increases and increased variable costs
to support the growing direct store delivery business. In 1999, we incurred
startup costs associated with the opening of new distribution centers in
Milwaukee, Wisconsin, Kansas City, Missouri and Denver, Colorado. In 1998, we
incurred startup costs associated with the opening of new distribution centers
in Woodland, California and Portland,

                                                                              23
<PAGE>

Oregon. The variable costs related to the direct store delivery business
include, among others, delivery expense, warehouse expense, and labor costs. The
remainder of the increase is associated with the continued expansion, and the
opening of new specialized pharmacies, in our Nuclear Pharmacy segment. Our
commitment to growth in both our direct store delivery sales and our Nuclear
Pharmacy segment will result in increased SGA in the future. However, management
remains focused on controlling SGA through improved technology, better asset
management and opportunities to consolidate distribution centers. This focus has
resulted in a decrease in SGA expense as a percent of from stock sales to 2.41%
in 1999 from 2.85% in 1998 (2.69%, excluding Priority) and 3.21% in 1997 (3.09%,
excluding Priority). SGA for Priority was $14.0 million in 1998 and $10.6
million in 1997. As a percent of sales, SGA for Priority for 1998 was 5.1% as
compared to 4.6% in 1997. This increase was the result of expenses associated
with the opening of the Grove City, Ohio facility, which opened in November
1997, training and payroll costs from hiring additional sales personnel at
Priority Healthcare Pharmacy and increased overall costs of being a publicly
traded company.

Depreciation and amortization was $10.5 million, $8.9 million and $8.2 million
in 1999, 1998 and 1997, respectively. When Priority is excluded, depreciation
and amortization was $7.7 million in 1998 and $7.0 million in 1997. These
increases were the result of the building of new facilities, expansion and
automation of existing facilities and investments in management information
systems. Depreciation and amortization for Priority was $1.2 million for both
1998 and 1997.

Interest expense for 1999, 1998 and 1997 was $23.4 million, $18.6 million and
$16.2 million, respectively. The inclusion of interest expense for Priority in
1998 and 1997 was not material. The average short-term borrowings outstanding
were $338 million, $249 million, and $152 million at an average short-term
interest rate of 5.5%, 6.3% and 6.4% for 1999, 1998 and 1997, respectively. We
also had in place a private placement of $30 million Senior Notes due December
27, 1999 at an interest rate of 7.25%. Interest expense associated with these
Notes was approximately $2.2 million in 1999, 1998 and 1997. On December 27,
1999, we repaid this private placement and negotiated a new private placement of
$25 million Senior Notes due December 27, 2004 at an interest rate of 7.93%.

In 1999, we recorded as an unusual item the one-time, pre-tax charge of
approximately $2.1 million, which approximated $1.6 million on an after-tax
basis, related to the acquisition of Central Pharmacy. In the fourth quarter of
1998, we recorded as an unusual item the one-time, pre-tax charge of
approximately $19.0 million, which approximated $14.0 million on an after-tax
basis. Of the $19.0 million charge, $11.0 million represented a non-cash charge
for the acceleration of the amortization of compensation related to restricted
stock grants in connection with the Priority spin-off, $7.0 million represented
the non-cash write-off of goodwill that had been carried on the books from an
acquisition dating back to early 1996 and $1.0 million represented the
settlement of litigation associated with that acquisition. See also, Note 1 -
Significant Accounting Policies, Note 6 - Intangibles, Note 9 - Long-term Debt,
Note 12 - Capital Stock and Note 16 - Legal Proceedings, of the Company's
financial statements for further discussion.

The provision for income taxes represented 40.2%, 44.1% and 39.0% of earnings
before taxes in 1999, 1998 and 1997, respectively. The increase in the 1998
effective rate was attributable to the nondeductible element of restricted stock
grants expensed in 1998.

On October 7, 1996 we and our subsidiary, National Infusion Services (now known
as Priority

                                                                              24
<PAGE>

Healthcare Services Corporation) ("PHSC"), were named as defendants in an action
filed by Thomas G. Slama, M.D. in the Superior Court of Hamilton County,
Indiana. Dr. Slama is a former director of the company and formerly was Chief
Executive Officer and President of PHSC. The complaint alleged breach of
contract and defamation arising from the termination of Dr. Slama's employment
with PHSC in October 1996. On October 26, 1998, Dr. Slama filed a Second Amended
Complaint which added Priority and William E. Bindley as defendants and stated
additional claims for breach of contract, breach of oral contract, breach of
fiduciary duty, securities fraud and conversion. Pursuant to an Indemnification
and Hold Harmless Agreement we indemnified and held harmless Priority and its
subsidiaries from and against any and all costs, damages, charges and expenses
(including without limitation legal and other professional fees) which Priority
might incur or which may be charged against Priority in any way based upon,
connected with or arising out of the lawsuit filed by Dr. Slama. All defendants
answered the complaint, denied the merits of Dr. Slama's claims, and also filed
a counterclaim against Dr. Slama which sought, among other things, declaratory
relief, compensatory and (in some instances) treble damages, punitive damages,
attorneys' fees, interest and costs. On December 31, 1998, a Settlement
Agreement was executed by and among the parties named above pursuant to which
mutual releases were obtained and, on January 4, 1999, a one-time payment of
$875,000 was made by the Company to Dr. Slama. The corresponding Joint
Stipulation of Dismissal was approved by the Court on January 11, 1999.

Liquidity-Capital Resources.

          On October 29, 1997, Priority consummated an initial public offering
("IPO"). Priority registered 2,300,000 shares of Class B common stock, all of
which were sold in a firm commitment underwriting at an aggregate offering price
of $33.35 million. After underwriters' discount of $2.32 million and expenses
incurred by Priority in conjunction with the IPO of $1.05 million, the net
offering proceeds to Priority were approximately $29.98 million.

          On December 31, 1998, we distributed to the holders of our common
stock all of the 10,214,286 shares of Priority Class A common stock owned by us
on the basis of .448 shares of Priority Class A common stock for each share of
our common stock outstanding on the record date, December 15, 1998. The two
classes of Priority common stock entitle holders to the same rights and
privileges, except that holders of shares of Priority Class A common stock are
entitled to three votes per share on all matters submitted to a vote of holders
of Priority common stock and holders of shares of Priority Class B common stock
are entitled to one vote per share on such matters. As a result of the
distribution, Priority ceased to be our subsidiary. From the date of the IPO
until the December 31, 1998 distribution to the holders of our common stock, we
owned 81.6% of the outstanding common stock of Priority. In 1998, the amount of
net earnings associated with the minority interest was $1.9 million as compared
to $212,000 in 1997.

Our operations consumed $134.9 million in cash for the year ended December 31,
1999. The use of funds resulted from an increase in accounts receivables and
inventories. These uses were offset by an increase in accounts payable. The
increase in accounts receivables is a direct result of the overall increase in
direct store sales. The increase in inventories resulted from increased
purchases associated with the start up of our new distribution centers in
Milwaukee, Wisconsin and Kansas City, Missouri, additional volume associated
with the inventory and purchasing management systems with certain customers and
buildup related to Year 2000. The increase in accounts payable is attributed to
the timing of payments of invoices related to
                                                                              25
<PAGE>

inventory purchases. We continue to closely monitor working capital in relation
to economic and competitive conditions. However, our emphasis on direct store
delivery business will continue to require both net working capital and cash.

Capital expenditures for 1999 were $23.9 million. These were predominantly for
distribution centers, the expansion and automation of existing distribution
centers and the investment in additional management information systems.

On April 30, 1999, we sold our corporate office building to an unrelated party
and signed a 15 year lease for the top two floors of the building. This lease
meets the criteria of a capital lease and resulted in the recording of an asset
and liability in the amount of the present value of minimum lease payments of
$13.4 million. The asset is being amortized over the term of the lease.

Effective July 31, 1997, we purchased substantially all of the operating assets
and assumed most of the liabilities and contractual obligations of TWD. We
expended approximately $27 million for the acquisition of TWD, which
approximated the fair value of the net assets acquired.

Effective August 6, 1997, Priority acquired substantially all of the operating
assets and assumed most of the liabilities of Grove Way Pharmacy, Inc., a
specialty distributor of vaccines and injectables located in Castro Valley,
California. The amount expended approximated the fair value of the net assets
acquired.

On August 27, 1997, we called for redemption on September 12, 1997 all of our
outstanding 6 1/2% Convertible Subordinated Debentures Due 2002 at a redemption
price of $1,039 per $1,000 principal amount of Debentures plus accrued interest
through the redemption date. Debenture holders could elect to convert their
debentures into shares of our common stock through September 12, 1997, which was
the redemption date. Holders of all but $119,000 principal amount of the
$67,350,000 outstanding Debentures elected to convert their Debentures into
common stock at the rate of 50.4 shares of common stock for each $1,000
principal amount of Debentures. The redemption reduced our long-term debt by
$67,350,000 and increased by 3.4 million the number of issued shares of our
common stock.

We hold a note receivable with a principal balance of $3.2 million from the CEO
of the Company. The proceeds of this note, which bears interest at 6.5% per
annum and matures on December 16, 2000, were used by the CEO to exercise stock
options. The note provides for annual interest only payments with outstanding
interest and principal to be repaid at maturity.

In December 1998, we established a receivables securitization facility (the
"Receivables Facility") pursuant to which we sell substantially all of our
receivables arising in connection with the sale of goods or the rendering of
services ("Receivables") to Bindley Western Funding Corporation ("Funding
Corp."), a wholly owned special purpose corporation subsidiary. The Receivables
are sold to Funding Corp. on a continuous basis, and the cash generated by sales
of interests in the Receivables or by collections on the Receivables retained is
used by Funding Corp. to, among other things, purchase additional Receivables
originated by the Company. The assets of Funding Corp. will be available first
and foremost to satisfy claims of Funding Corp. creditors.

In connection with the Receivables Facility, Funding Corp. entered into a
Receivables Purchase

                                                                              26
<PAGE>

Agreement, dated as of December 28, 1998, with Falcon Asset Securitization
Corporation ("Falcon"), an affiliate of Bank One, NA ("Bank One"), certain other
financial institutions (collectively with Falcon, the "Purchasers"), and Bank
One, as Agent. Pursuant to the Receivables Purchase Agreement, Funding Corp.
may, from time to time, sell interests in the Receivables ("Receivables
Interests") to the Agent for the benefit of the Purchasers. Each Receivables
Interest has an associated Discount Rate and Tranche Period applicable to it, as
selected by Funding Corp. The Discount Rate may, at Funding Corp.'s election, be
the Base Rate (the corporate prime or base rate announced from time to time by
Bank One) or, with respect to the Receivables Interests purchased by Falcon, the
CP Rate (generally, a commercial paper related rate based on Falcon's funding
charges) or, with respect to the Receivables Interests purchased by other
Purchasers, the LIBO Rate (generally, LIBOR for the applicable Tranche Period,
plus 1.25% per annum). The Receivables Facility terminates on December 13, 2000,
and is subject to final termination on December 28, 2003, subject to earlier
termination in certain events. At December 31, 1999, there were $350 million of
Receivables Interests outstanding, which is the maximum amount that could be
drawn on this facility, bearing a Discount Rate of 6.1% per annum. We account
for the Receivables Facility as a financing transaction in our consolidated
financial statements.

In connection with the implementation of the Receivables Facility, we
renegotiated our bank line of credit on December 28, 1999 and now have $150
million of available credit. For 1999, the net increase in borrowings under the
bank credit agreement was $25.5 million. At December 31, 1999, we had borrowed
$45 million under the bank credit agreement and had a remaining availability of
$105 million.

On December 27, 1999, we repaid our $30 million Senior Notes. In addition on
December 27, 1999 we completed a new private placement of $25 million Senior
Notes due December 27, 2004 at an interest rate of 7.93%.

We believe that our cash on hand, bank line of credit, Receivables Facility and
working capital management efforts are sufficient to meet future working capital
requirements. However, see Note 16 to our Consolidated Financial Statements for
a description of certain contingencies.

Our primary exposure to market risk consists of changes in interest rates on
borrowings. An increase in interest rates would adversely affect our operating
results and the cash flow available to fund operations and expansion. Based on
the average variable borrowings for 1999, an increase of 10% in our average
variable borrowing rate would result in a $2.2 million annual increase in
interest expense. Conversely, a 10% decrease in the average variable borrowing
rate would result in a $2.2 million annual decrease in interest expense. We
continually monitor this risk and review the potential benefits of entering into
hedging transactions, such as interest rate swaps, to mitigate the exposure to
interest rate fluctuations. At December 31, 1999, we were not a party to any
hedging transactions.

Our principal working capital needs are for inventory and accounts receivable.
We sell inventory to our chain drug warehouse and other customers on various
payment terms. This requires significant working capital to finance inventory
purchases and entails accounts receivable exposure in the event any of our chain
warehouse or other major customers encounter financial difficulties. Although we
monitor closely the creditworthiness of our major customers and, when feasible,
obtain security interests in the inventory sold, there can be no assurance that
we will not incur some collection loss on chain drug or other major customer
accounts receivable in the future.

                                                                              27
<PAGE>

Year 2000.

Currently, we have not experienced any significant Year 2000 related problems,
nor do we anticipate any Year 2000 related problems in the future. There have
been no instances where mission-critical and/or non-mission-critical systems
have failed to perform correctly. In addition, we have not experienced any
repercussions of Year 2000 related issues with either our suppliers or
customers. The total cumulative costs to make our systems compliant for the Year
2000 were approximately $1 million.

Inflation.

Our financial statements are prepared on the basis of historical costs and are
not intended to reflect changes in the relative purchasing power of the dollar.
Because of our ability to take advantage of forward purchasing opportunities,
the Company believes that our gross profits generally increase as a result of
manufacturers' price increases in the products we distribute. Gross profits may
decline if the rate of price increases by manufacturers declines.

Generally, price increases are passed through to customers as they are received
by the Company and therefore reduce the negative effect of inflation. Other
non-inventory cost increases, such as payroll, supplies and services, have been
partially offset during the past three years by increased volume and
productivity.

Forward Looking Statements.

Certain statements included in this annual report which are not historical facts
are forward looking statements. Such forward looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward looking statements involve certain risks and
uncertainties including, but not limited to, changes in interest rates,
competitive pressures, changes in customer mix, financial stability of major
customers, investment procurement opportunities, asserted and unasserted claims
and changes in government regulations or the interpretation thereof, which could
cause actual results to differ from those in the forward looking statements.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

See discussion in Item 7.

Item 8.   Financial Statements and Supplementary Data.

The financial data required to be included under this item is submitted in a
separate section of this report and incorporated herein by reference.

Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure.

Not Applicable.

                                                                              28
<PAGE>

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant.

The information required by this Item concerning the Directors and nominees for
Directors of the Company and concerning disclosure of delinquent filers is
incorporated herein by reference from the Company's definitive Proxy Statement
for its 2000 annual meeting of common shareholders, to be filed with the
Commission pursuant to Regulation 14A within 120 days after the end of the
Company's last fiscal year. Information concerning the executive officers of the
Company is also included under "Executive Officers of the Company" at the end of
Part I of this Annual Report. Such information is incorporated herein by
reference, in accordance with General Instruction G(3) to Form 10-K and
Instruction 3 to Item 401(b) of Regulation S-K.

Item 11.  Executive Compensation.

The information required by this Item concerning remuneration of the Company's
officers and Directors and information concerning material transactions
involving such officers and Directors is incorporated herein by reference from
the Company's definitive Proxy Statement for its 2000 annual meeting of common
shareholders to be filed with the Commission pursuant to Regulation 14A within
120 days after the end of the Company's last fiscal year.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

The information required by this Item concerning the stock ownership of
management and five percent beneficial owners is incorporated herein by
reference from the Company's definitive Proxy Statement for its 2000 annual
meeting of common shareholders to be filed with the Commission pursuant to
Regulation 14A within 120 days after the end of the Company's last fiscal year.

Item 13.  Certain Relationships and Related Transactions.

The information required by this Item concerning certain relationships and
related transactions is incorporated herein by reference from the Company's
definitive Proxy Statement for its 2000 annual meeting of common shareholders to
be filed with the Commission pursuant to Regulation 14A within 120 days after
the end of the Company's last fiscal year.

                                                                              29
<PAGE>

                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

The documents listed below are filed as a part of this report except as
otherwise indicated:

          (a)  1. Financial Statements. The following described financial
statements, required to be filed by Item 8 and incorporated therein by reference
are set forth on pages F-1 through F-31.

<TABLE>
          <S>                                                          <C>
          Report of Independent Accountants                            F-1
          Consolidated Statements of Earnings for each of the three
            years in the period ended December 31, 1999                F-2
          Consolidated Balance Sheets as of December 31, 1999
            and 1998                                                   F-3
          Consolidated Statements of Cash Flows for each of the
            three years in the period ended December 31, 1999          F-4
          Consolidated Statements of Shareholders' Equity for
            each of the three years in the period ended December 31,
            1999                                                       F-5
          Notes to Consolidated Financial Statements                   F-6 TO F-31
</TABLE>

               2.   Financial Statement Schedules. No financial statement
schedules are included as the information required by Rule 5-04 is not
applicable, or is not material.

               3.   Exhibits. The list of exhibits filed as part of this report
                    is incorporated herein by reference to the Index to Exhibits
                    beginning at Page E-1.

          (b)  Reports on Form 8-K. On November 17, 1999, we filed a current
report on Form 8-K, which described our merger with Central Pharmacy Services,
Inc., and which included the following historical financial statements, restated
to reflect the pooling of interest from Central Pharmacy: Consolidated
Statements of Earnings for each of the three years in the period ended December
31, 1998, Consolidated Balance Sheets as of December 31, 1998 and 1997,
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1998, and Consolidated Statements of Shareholders' Equity for
each of the three years in the period ended December 31, 1998.

                                                                              30
<PAGE>

                       Report of Independent Accountants

To the Board of Directors and Shareholders
of Bindley Western Industries, Inc.:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)1 on page 30 present fairly, in all material
respects, the financial position of Bindley Western Industries, Inc. and its
subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999 in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.


PricewaterhouseCoopers LLP
Indianapolis, Indiana
March 21, 2000

                                      F-1
<PAGE>

                      Consolidated Statements of Earnings
               Bindley Western Industries, Inc. and Subsidiaries

<TABLE>
<CAPTION>
For the years ended December 31,                1999           1998             1997
(In thousands, except share data)
<S>                                     <C>             <C>              <C>
Revenues:
  Net sales from stock                   $ 5,039,180    $ 4,156,799      $ 2,784,450
  Net brokerage sales                      3,468,425      3,497,422        4,549,687
                                        ------------    -----------      -----------
  Total net sales                          8,507,605      7,654,221        7,334,137
  Other income                                 1,939          1,915            1,908
                                        ------------    -----------      -----------
                                           8,509,544      7,656,136        7,336,045

Cost and expenses:
  Cost of products sold                    8,287,842      7,448,331        7,181,415
  Selling, general and administrative        121,542        118,340           89,402
  Depreciation and amortization               10,548          8,894            8,162
  Interest                                    23,438         18,648           16,192
  Unusual items                                2,096         18,833              350
                                        ------------    -----------      -----------
                                           8,445,466      7,613,046        7,295,521
Earnings before income taxes
  and minority interest                       64,078         43,090           40,524
                                        ------------    -----------      -----------
Provision for income taxes:
  Current                                     25,782         22,636           19,640
  Deferred                                                   (3,647)          (3,834)
                                        ------------    -----------      -----------
                                              25,782         18,989           15,806

Minority interest in net income of
  consolidated subsidiary                                     1,865              212
                                        ------------    -----------      -----------
Net earnings                             $    38,296    $    22,236      $    24,506
                                        ============    ===========      ===========
Earnings per share:
  Basic                                  $      1.14    $      0.70      $      0.95
  Diluted                                $      1.05    $      0.66      $      0.83

Average shares outstanding:
  Basic                                   33,478,470     31,651,034       25,834,292
  Diluted                                 36,467,639     33,508,668       31,890,035

</TABLE>

(See accompanying notes to consolidated financial statements)

                                      F-2
<PAGE>

                          Consolidated Balance Sheets
               Bindley Western Industries, Inc. and Subsidiaries


<TABLE>
<CAPTION>
December 31,                                                                       1999            1998
(In thousands, except share data)
<S>                                                                          <C>             <C>
Assets
Current assets:
  Cash                                                                       $    34,910     $    42,982
  Accounts receivable, less allowance for doubtful
    accounts of $9,547 for 1999 and $7,550 for 1998                              721,830         456,994
  Finished goods inventory                                                       803,021         660,089
  Deferred income taxes                                                           13,168          11,552
  Other current assets                                                             9,926           8,659
                                                                             -----------     -----------
                                                                               1,582,855       1,180,276
                                                                             -----------     -----------
  Other assets                                                                        18              90
                                                                             -----------     -----------

  Fixed assets, at cost                                                          129,140         121,850
   Less: accumulated depreciation                                                (27,773)        (27,660)
                                                                             -----------     -----------
                                                                                 101,367          94,190
                                                                             -----------     -----------
  Intangibles, net                                                                18,582          19,401
                                                                             -----------     -----------

    Total assets                                                             $ 1,702,822     $ 1,293,957
                                                                             ===========     ===========



Liabilities and Shareholders' Equity
Current liabilities:
  Short-term borrowings                                                      $    45,000     $    19,500
  Securitized borrowings                                                         349,963         224,163
  Private placement debt                                                                          30,000
  Accounts payable                                                               864,271         644,461
  Note payable to Priority Healthcare Corporation                                                 16,517
  Other current liabilities                                                       25,472          19,869
                                                                             -----------     -----------
                                                                               1,284,706         954,510
                                                                             -----------     -----------
Long-term debt                                                                    38,698             733
                                                                             -----------     -----------
Deferred income taxes                                                              4,703           3,087
                                                                             -----------     -----------


Shareholders' equity:
  Common stock. $.01 par value-authorized 53,333,333 shares;
    issued 35,213,201 and 26,345,421 shares, respectively                          3,415           3,406
  Special shares, $.01 par value-authorized 1,000,000 shares
  Additional paid in capital                                                     225,459         215,177
  Note receivable from officer                                                    (3,228)         (3,228)
  Retained earnings                                                              166,550         130,953
                                                                             -----------     -----------
                                                                                 392,196         346,308
                                                                             -----------     -----------
  Less: shares in treasury-at cost 1,212,232 and 689,161, respectively           (17,481)        (10,681)
                                                                             -----------     -----------
  Total shareholders' equity                                                     374,715         335,627
                                                                             -----------     -----------
 Commitments and contingencies
                                                                             -----------     -----------

   Total liabilities and shareholders' equity                                $ 1,702,822     $ 1,293,957
                                                                             ===========     ===========
</TABLE>

(See accompanying notes to consolidated financial statements)

                                      F-3
<PAGE>

                     Consolidated Statements of Cash Flows
               Bindley Western Industries, Inc. and Subsidiaries

<TABLE>
<CAPTION>
For the years ended December 31,                                      1999           1998           1997
<S>                                                           <C>            <C>            <C>
(In thousands)
Cash flow from operating activities:
  Net income                                                  $     38,296   $     22,236   $     24,506

  Adjustments to reconcile net income to
   net cash provided (used) by operating activities:
    Depreciation and amortization                                   10,548          8,894          8,162
    Deferred income taxes                                                          (3,647)        (3,834)
    Minority interest                                                               1,865            212
    Compensation expense on stock option grant                                                       350
    Compensation expense on restricted stock                                        1,589
    Interest capitalized on conversion of debt                                                     1,970
    Gain on sale of fixed assets                                      (183)          (310)           (77)
    Unusual items                                                                  18,833

 Change in assets and liabilities,
   net of acquisitions:
    Accounts receivable                                           (264,836)        94,814       (229,880)
    Finished goods inventory                                      (142,933)      (163,310)       (63,276)
    Accounts payable                                               219,810        (60,700)       151,919
    Other current assets and liabilities                             4,371            816          4,317
                                                              ------------   ------------   ------------

    Net cash provided (used) by operating activities              (134,927)       (78,920)      (105,631)
                                                              ------------   ------------   ------------

Cash flow from investing activities:
    Purchase of fixed assets and other assets                      (23,897)       (34,254)       (23,164)
    Proceeds from sale of fixed assets                              20,600            540          2,127
    Acquisition of businesses                                                        (774)       (27,711)
    Distribution of Priority Healthcare Corporation                                    (2)
                                                              ------------   ------------   ------------
    Net cash used by investing activities                           (3,297)       (34,490)       (48,748)
                                                              ------------   ------------   ------------

Cash flow from financing activities:
    Proceeds from sale of stock                                     10,291         26,795         14,741
    Proceeds from IPO of subsidiary                                                               29,982
    Related party note receivable                                                                 (3,228)
    Addition (reduction) of other debt, net                        (21,940)        (1,574)        (1,823)
    Proceeds under line of credit agreement                      1,540,500      1,600,000      1,496,000
    Payments under line of credit agreement                     (1,515,000)    (1,727,500)    (1,401,000)
    Proceeds from securitized borrowings                           125,800        224,163
    Payments to acquire treasury shares                             (6,800)        (6,754)          (777)
    Dividends                                                       (2,699)        (1,633)        (1,083)
                                                              ------------   ------------   ------------
    Net cash provided by financing activities                      130,152        113,497        132,812
                                                              ------------   ------------   ------------

Net increase (decrease) in cash                                     (8,072)            87        (21,567)
Cash at beginning of year                                           42,982         42,895         64,462
                                                              ------------   ------------   ------------

Cash at end of year                                           $     34,910   $     42,982   $     42,895
                                                              ============   ============   ============
</TABLE>

(See accompanying notes to consolidated financial statements)

                                      F-4
<PAGE>

                Consolidated Statements of Shareholders' Equity
               Bindley Western Industries, Inc. and Subsidiaries

<TABLE>
<CAPTION>
                                         Common Stock           Treasury Stock
                                     -------------------- ----------------------
                                                                               Additional          Note
                                          Shares              Shares              Paid in    Receivable  Retained  Shareholders'
                                     Outstanding  Amount Outstanding   Amount     Capital  From Officer  Earnings         Equity
--------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
<S>                                   <C>         <C>    <C>         <C>         <C>       <C>           <C>       <C>
Balances at December 31, 1996         14,508,459  $3,342    348,291  $ (3,150)   $ 93,523                $126,642       $220,357

Net earnings                                                                                               24,506         24,506
Dividends at $.08 per share                                                                                (1,083)        (1,083)
Shares issued upon exercise of
   stock options                       1,123,109      12                           14,730                                 14,742
Shares issued upon conversion of
   debt                                3,394,147      34                           67,460                                 67,494
IPO of subsidiary                                                                  24,405                  (5,221)        19,184
IPO option grant                                                                      350                                    350
Note receivable from officer                                                                     (3,228)                  (3,228)
Purchase of treasury shares                                  32,651      (777)                                              (777)
                                     ----------- -------  ---------  --------    --------      --------  --------       --------
Balances at December 31, 1997         19,025,715   3,388    380,942    (3,927)    200,468        (3,228)  144,844        341,545

Net earnings                                                                                               22,236         22,236
Dividends at $.08 per share                                                                                (1,633)        (1,633)
Shares issued upon exercise of
   stock options                       1,346,049      14                           26,781                                 26,795
Shares issued upon issuance of
   restricted stock                      350,000       4                           12,334                                 12,338
Shares issued upon stock split         5,623,657            131,351
Distribution of Priority Healthcare                                               (24,406)                (34,494)       (58,900)
Purchase of treasury shares                                 176,868    (6,754)                                            (6,754)
                                     ----------- -------  ---------  --------    --------      --------  --------       --------
Balances at December 31, 1998         26,345,421  $3,406    689,161   (10,681)    215,177        (3,228)  130,953        335,627

Net earnings                                                                                               38,296         38,296
Dividends at $.065 per share                                                                               (2,699)        (2,699)
Shares issued upon exercise of
   stock options                         927,148       9                           10,282                                 10,291
Shares issued upon stock split         7,940,632            301,466
Purchase of treasury shares                                 221,605    (6,800)                                            (6,800)
                                     -----------  ------  ---------  --------    --------      --------  --------       --------
Balances at December 31, 1999         35,213,201  $3,415  1,212,232  $(17,481)   $225,459       $(3,228) $166,550       $374,715
                                     ===========  ======  =========  ========    ========      ========  ========       ========
</TABLE>

(See accompanying notes to consolidated financial statements)

                                      F-5
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

     Principles of consolidation. The consolidated financial statements include
the accounts of Bindley Western Industries, Inc. and its subsidiaries ("BWI" or
the "Company").  All significant intercompany accounts and transactions have
been eliminated.


     Merger with Central Pharmacy Services, Inc. Effective August 31, 1999, BWI
completed the merger with Central Pharmacy Services, Inc ("Central Pharmacy") by
exchanging 2.9 million shares of BWI common stock for all of the common stock of
Central Pharmacy.  Each share of Central Pharmacy was exchanged for 26.38 shares
of BWI common stock.  In addition, outstanding Central Pharmacy employee stock
options were converted at the same exchange factor into options to purchase
approximately 300,000 shares of BWI common stock.  The consolidated financial
statements include Central Pharmacy for all periods presented. In 1999, we
recorded as an unusual item the one-time, pre-tax charge of approximately $2.1
million, which approximated $1.6 million on an after-tax basis, related to the
acquisition of Central Pharmacy.


     Revenue recognition.  The Company differentiates sales as either brokerage
type sales ("brokerage sales") or sales from the Company's inventory ("from
stock sales"). Brokerage sales are made to the chain warehouse market, whereas
from stock sales are made to both the chain warehouse and direct store delivery
markets. Revenues are recorded at the time of shipment.


     Inventories.  Inventories are stated on the basis of lower of cost or
market using the first-in, first-out (FIFO) method.


     Fixed assets. Depreciation is computed on the straight-line method for
financial reporting purposes.  Accelerated methods are primarily used for income
tax purposes. Assets, valued at cost, are generally being depreciated over their
estimated useful lives as follows:


                                     Estimated useful life (years)
Buildings and furnishings                        5-35
Leasehold improvements                           3-20
Transportation and other equipment               3-20
Data equipment and software                      3-5

     In 1999, the Company implemented the Statement of Position 98-1 "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use".  As
a result, costs incurred for the coding, installation and testing of internal
use software were capitalized beginning in 1999. These costs are recorded as
capitalized software and generally amortized over three years.

                                      F-6
<PAGE>

     In the event facts and circumstances indicate an asset could be impaired,
an evaluation of the undiscounted estimated future cash flows is compared to the
asset's carrying amount to determine if a write-down is required.

     Debt  issue costs.  Debt issue costs are amortized on a straight-line basis
over the life of the Convertible Subordinated Debentures ("Debentures"), which
were redeemed on September 12, 1997, and the private placement debt.

     Intangibles. The Company continually monitors its cost in excess of net
assets acquired ("goodwill") and its other intangibles (customer lists and
covenants not to compete) to determine whether any impairment of these assets
has occurred.  In making such determination, the Company evaluates the
performance, on an undiscounted basis, of the underlying businesses which gave
rise to such amounts.  Goodwill is being amortized on the straight-line method
over periods not exceeding 40 years.  Other intangibles are being amortized on
the straight-line method over five to 15 years.

     Earnings per share.  Basic earnings per share is based on the weighted
average number of common shares outstanding during each period.  The diluted
earnings per share is based on the weighted average number of common shares and
dilutive potential common shares outstanding during each period.  See Note 17
for a reconciliation of earnings per share.

     Income taxes.  In accordance with the provisions of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes," the Company accounts
for income taxes using the asset and liability method.  The asset and liability
method requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of temporary differences that currently exist
between the tax bases and financial reporting bases of the Company's assets and
liabilities.

     Use of estimates.  The preparation of financial statements in accordance
with generally accepted accounting principles requires the use of estimates made
by management.  Actual results could differ from those estimates.

     Fair value of financial instruments.  The carrying values of cash, accounts
receivable, other current assets, short-term borrowings, accounts payable and
other current liabilities approximate their fair market values due to the short-
term maturity of these instruments.  The fair market value of long term debt was
determined based on market quoted rates or was estimated using rates currently
available to the Company for debt with similar terms and maturities.

     Other income. Other income for 1999, 1998 and 1997 was substantially all
interest income and gains on the sale of assets.

     Prior year reclassifications.  Certain amounts in the prior year financial
statements have been reclassified to conform to the current year presentation.

                                      F-7
<PAGE>

NOTE 2 - DISTRIBUTION OF PRIORITY HEALTHCARE CORPORATION

     On December 31, 1998, the Company distributed to the holders of the
Company's common stock all of the 10,214,286 shares of Priority Healthcare
Corporation ("Priority") Class A common stock owned by the Company on the basis
of .448 shares Priority Class A common stock for each share of BWI common stock
outstanding on the record date, December 15, 1998. As a result of the
distribution, Priority ceased to be a subsidiary of the Company as of December
31, 1998. The dividend distribution of $58.9 million represents the Company's
ownership interest in the net assets of Priority. The spin-off resulted in the
removal of $107.5 million of assets and $37.2 million of liabilities from the
Company's Consolidated Balance Sheet as of December 31, 1998.

     The results of operations for Priority, net of minority interest, for the
year ended December 31, 1998 are included in the Company's Consolidated
Statement of Earnings as Priority was a subsidiary for the full year of 1998.
Summary Statement of Earnings data for Priority is presented in Note 3 below.

NOTE 3 - OPERATING SEGMENTS

     In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information", was issued effective for fiscal years ended after December
15, 1998. The Statement designates the internal management accountability
structure as the source of the Company's reportable segments. The statement also
requires disclosures about products and services, geographic areas and major
customers. The adoption of this standard did not affect results of operations or
financial position but did affect the disclosure of segment information.

     Prior to 1998, the Company operated as one industry segment.  The 1997
information presented below has been restated in order to conform to the current
year presentation.

     Giving effect to the Central Pharmacy merger, the Company has three
reportable segments, BWI, Priority and Nuclear Pharmacy, which conduct
substantially all of their business within the United States.  The BWI segment
specializes in the distribution of pharmaceuticals and related health care
products to chain drug companies which operate their own warehouses, individual
drug stores, supermarkets and mass retailers with their own pharmacies,
hospitals, clinics, HMOs, state and federal government agencies and other health
care providers.  The Priority segment distributed specialty pharmaceuticals and
related medical supplies to the alternate site healthcare market and was a
provider of patient-specific, self-injectable biopharmaceuticals and disease
treatment programs to individuals with chronic diseases. The Nuclear Pharmacy
segment prepares and delivers unit dose radiopharmaceuticals for use in nuclear
imaging procedures in hospitals and clinics.  During 1999 approximately 86% of
this segment's purchases of pharmaceuticals were from three vendors accounting
for 44%, 26% and 16% of this segment's cost of sales for the year ended 1999.
The significant customers reported in Note 14 are all sold through the BWI
segment.

                                      F-8
<PAGE>

     These segments have separate management teams and infrastructures to
facilitate their specific customer needs and marketing strategies.  The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies.  The intersegment sales and
transfers are not significant.  As discussed in Note 2, Priority ceased to be a
subsidiary of the Company as of December 31, 1998 and, therefore, its assets,
liabilities and equity are not included in the Company's Consolidated Balance
Sheets at December 31, 1999 and 1998.

     Segment information for the years ended 1999, 1998 and 1997 was as follows:

<TABLE>
<CAPTION>
                                                                                     Nuclear
(in thousands)                                     BWI          Priority            Pharmacy            Total
<S>                                        <C>                  <C>                 <C>             <C>
1999
Revenues                                    $8,463,700                              $43,905         $8,507,605
Interest expense                                23,390                                   48             23,438
Depreciation and amortization                    9,945                                  603             10,548
Unusual items                                    1,054                                1,042              2,096
Segment net earnings                            35,599                                2,697             38,296
Total assets                                 1,692,646                               10,176          1,702,822
Capital expenditures                            22,931                                  966             23,897

1998
Revenues                                    $7,345,726          $275,626            $32,869         $7,654,221
Interest expense                                18,310               155                183             18,648
Depreciation and amortization                    7,179             1,234                481              8,894
Unusual items                                   18,833                                                  18,833
Segment net earnings                             8,996            10,143              3,097             22,236
Total assets                                 1,286,575                                7,382          1,293,957
Capital expenditures                            32,636               905                713             34,254

1997
Revenues                                    $7,078,940          $230,982            $24,215         $7,334,137
Interest expense                                15,907                                  285             16,192
Depreciation and amortization                    6,270             1,161                731              8,162
Segment net earnings                            17,595             6,151                760             24,506
Total assets                                 1,196,051            91,728              5,165          1,292,944
Capital expenditures                            21,916               727                521             23,164
</TABLE>

NOTE 4 - SHORT-TERM BORROWINGS

     The Company's unsecured short-term bank line of credit was $150,000,000 as
of December 31, 1999. The line was available, as necessary, for general
corporate purposes at rates based upon prevailing money market rates.  At
December 31, 1999, 1998 and 1997, the

                                      F-9
<PAGE>

Company had borrowed on its short-term line of credit $45,000,000 at a rate of
5.7%, $19,500,000 at a rate of 5.4% and $147,000,000 at a rate of 6.6%,
respectively.

     No compensating balance is required on the line. Certain conditions
relating to the maintenance of net worth, total debt and interest coverage
ratios have been imposed by the lenders.

     A summary of 1999, 1998 and 1997 borrowings under the line of credit is as
follows:

<TABLE>
<CAPTION>
                            Maximum short-term                  Average                Average
Year                                borrowings               borrowings          interest rate
----------------------------------------------------------------------------------------------
<S>                       <C>                                <C>                 <C>
(in thousands)
1999                                  $174,000                 $ 96,000                    6.2%
1998                                  $338,000                 $249,000                    6.3%
1997                                  $270,000                 $152,000                    6.4%
</TABLE>

     On December 27, 1996, the Company completed a private placement of $30
million Senior Notes due December 27, 1999 at an interest rate of 7.25%.  On
December 27, 1999, the Company repaid these Senior Notes with the proceeds from
the newly issued private placement Senior Notes discussed in Note 9.

     In December 1998, the Company established a receivables securitization
facility (the "Receivables Facility") pursuant to which the Company sells
substantially all of its receivables arising in connection with the sale of
goods or the rendering of services ("Receivables") to Bindley Western Funding
Corporation ("Funding Corp."), a wholly owned special purpose corporation
subsidiary. The Receivables are sold to Funding Corp. on a continuous basis, and
the cash generated by sales of interests in the Receivables or by collections on
the Receivables retained is used by Funding Corp. to, among other things,
purchase additional Receivables originated by the Company. The assets of Funding
Corp. will be available first and foremost to satisfy claims of Funding Corp.
creditors.

     In connection with the Receivables Facility, Funding Corp. entered into a
Receivables Purchase Agreement, dated as of December 28, 1998, with Falcon Asset
Securitization Corporation ("Falcon"), an affiliate of The Bank One, NA ("Bank
One"), certain other financial institutions (collectively with Falcon, the
"Purchasers"), and Bank One, as Agent.  Pursuant to the Receivables Purchase
Agreement, Funding Corp. may, from time to time, sell interests in the
Receivables ("Receivables Interests") to the Agent for the benefit of the
Purchasers.  Each Receivables Interest has an associated Discount Rate and
Tranche Period applicable to it, as selected by Funding Corp.  The Discount Rate
may, at Funding Corp.'s election, be the Base Rate (the corporate prime or base
rate announced from time to time by Bank One) or, with respect to the
Receivables Interests purchased by Falcon, the CP Rate (generally, a commercial
paper related rate based on Falcon's funding charges) or, with respect to the
Receivables Interests purchased by other Purchasers, the LIBO Rate (generally,
LIBOR for the

                                     F-10
<PAGE>

applicable Tranche Period, plus 1.25% per annum). For 1999, the average
Receivables interests outstanding was $242 million at an average interest rate
of 5.4%. At December 31, 1999, there were $350 million of Receivables Interests
outstanding, which is the maximum amount that could be drawn on this facility,
bearing a Discount Rate of 6.1% per annum and at December 31, 1998, there were
$224 million of Receivables Interests outstanding, bearing a Discount Rate of
5.5% per annum. The Receivables Facility terminates on December 13, 2000, and is
subject to final termination on December 28, 2003, subject to earlier
termination in certain events. The Company accounts for the Receivables Facility
as a financing transaction in its consolidated financial statements. This
facility and the private placement of $25 million Senior Notes discussed in
Note 9, contain certain conditions related to the maintenance of net worth,
total debt and interest coverage ratios.

     Central Pharmacy's working capital line of credit agreement with a bank, as
amended on April 8, 1999, allows Central Pharmacy to borrow up to $3,500,000.
Amounts borrowed under this agreement bear interest at the bank's prime rate
(8.5% at December 31, 1999) and are due on April 7, 2000.  The line of credit
agreement contains various covenants which place restrictions on Central
Pharmacy's current ratio, indebtedness and operating cash flows.  Amounts
borrowed under this agreement are secured by Central Pharmacy's assets.  As of
December 31, 1999 and 1998, there was no outstanding balance on this line of
credit.


NOTE 5 - FIXED ASSETS

<TABLE>
<CAPTION>
December 31,                                                1999               1998
-------------------------------------------------------------------------------------
(in thousands)
<S>                                                    <C>                   <C>
Land                                                    $  4,449             $  6,749
Buildings and furnishings                                 37,441               53,163
Leasehold improvements                                     3,551                2,907
Transportation and other equipment                        47,522               37,378
Data equipment and software                               22,708               21,653
Capitalized leases                                        13,468
                                                        -----------------------------
                                                         129,139              121,850

Less: Accumulated Depreciation                           (27,772)             (27,660
                                                        -----------------------------
                                                        $101,367             $ 94,190
                                                        =============================
</TABLE>

                                     F-11
<PAGE>

NOTE 6- INTANGIBLES


<TABLE>
<CAPTION>
December 31,                            1999                              1998
---------------------------------------------------------------------------------
<S>                                <C>                               <C>
(in thousands)
Goodwill                               $ 23,543                          $ 23,537
Accumulated amortization                 (6,071)                           (5,424)
                                    ---------------------------------------------
Goodwill, net                            17,472                            18,113

Other                                     3,179                             3,179
Accumulated amortization                 (2,069)                           (1,891)
                                    ---------------------------------------------
Other, net                                1,110                             1,288
                                    ---------------------------------------------
Intangibles, net                       $ 18,582                          $ 19,401
                                    =============================================
</TABLE>

     In performing the review for impairment on the intangible assets related to
Priority Healthcare Services, the Company determined that the loss of key
personnel as part of the distribution of Priority and the recent and projected
operating results and cash flows were not adequate to support the recorded
amount. In the fourth quarter of 1998, the Company wrote off approximately $6
million in goodwill and $2 million in other intangibles, which is presented in
the Consolidated Statement of Earnings as part of the unusual items caption.
Priority Healthcare Services is a component of the BWI segment.

NOTE 7 - RELATED PARTY TRANSACTIONS

     At December 31, 1999 and 1998, the Company held a note receivable with a
principal balance of $3.2 million from the Chief Executive Officer of the
Company in connection with his exercise of stock options granted to him under
the 1993 Stock Option and Incentive Plan. This note, which bears interest at
6.5% per annum, matures on December 16, 2000 and provides for annual interest
only payments, beginning in 1998, with outstanding interest and principal to be
repaid at maturity. In both 1999 and 1998, other income includes $200,000 of
interest income related to this note.

     At December 31, 1998, the Company owed Priority $16.5 million. This amount
was due on demand and represented loans of excess cash balances of Priority to
the Company on a short-term basis, bearing interest at the Company's average
incremental borrowing rate. At December 31, 1998, the incremental borrowing rate
was 6.3%. This balance was repaid in 1999.

NOTE 8 - INCOME TAXES

     The provision for income taxes includes state income taxes of $4,326,000,
$3,320,000 and $2,706,000 in 1999, 1998 and 1997, respectively.

                                     F-12
<PAGE>

     The following table indicates the significant elements contributing to the
difference between the U.S. federal statutory tax rate and the effective tax
rate:

<TABLE>
<CAPTION>
Year ended December 31,                                 1999                  1998                   1997
----------------------------------------------------------------------------------------------------------------
<S>                                             <C>                   <C>                    <C>
Percentage of earnings before taxes:
U.S. federal statutory rate                              35.0%                 35.0%                  35.0%
State and local taxes on income, net of
   Federal income tax benefit                             4.4%                  5.0%                   4.4%
Nondeductible element of restricted
   stock grants                                                                 5.7%
Central Pharmacy utilization of NOL                                            (2.3%)                  (.8%)
   carryforwards
Other                                                      .8%                   .7%                    .4%
                                              ------------------------------------------------------------------
Effective rate                                           40.2%                 44.1%                  39.0%
                                              ==================================================================
</TABLE>

     Presented below are the significant elements of the net deferred tax
balance sheet accounts at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
(in thousands)                                       1999             1998
                                                     ----             ----
<S>                                               <C>               <C>
Deferred tax assets:
  Current:
     Accounts receivable                            $ 8,051         $ 6,635
     Inventories                                      1,049           1,371
     Deferred compensation                            3,458           2,382
     Other, net                                         610           1,164
                                                  -------------------------
Subtotal                                             13,168          11,552

  Long-term:
     Acquired net operating loss benefits               311             368
     Intangibles                                      2,411           2,474
                                                  -------------------------
Subtotal                                              2,722           2,842
                                                  -------------------------

Total deferred tax assets                           $15,890         $14,394
                                                  =========================

Deferred tax liabilities:
  Current                                           $               $

  Long-term:
     Fixed assets                                     7,425           5,897
     Other, net                                                          32
                                                  -------------------------
Subtotal                                              7,425           5,929
                                                  -------------------------

Total deferred tax liabilities                      $ 7,425         $ 5,929
                                                  =========================
</TABLE>

                                     F-13
<PAGE>

     In connection with a prior year acquisition, the Company acquired federal
net operating loss carryforwards of $2.3 million. Due to certain tax law
limitations, annual utilization of the carryforward is limited to $163,000. The
remaining tax loss carryforward at December 31, 1999 is $1.1 million. The
carryover period expires in 2006.

     Prior to the merger between BWI and Central Pharmacy, the respective
companies' income tax returns were filed separately from each other. In its 1998
and 1997 returns, Central Pharmacy utilized $1,385,000 and $935,000,
respectively, of net operating loss carryforwards. At December 31, 1998, Central
Pharmacy had utilized all of its NOL carryforwards.

NOTE 9 - LONG-TERM DEBT

     On December 27, 1999, the Company completed a private placement of $25
million Senior Notes due December 27, 2004 at an interest rate of 7.93%. The
Company estimates the fair market value at December 27, 1999 approximates the
principal amount based on the proximity of the issuance date to the fiscal year
end.

     On April 30, 1999, the Company sold its corporate office building to an
unrelated party for approximately net book value and signed a 15 year lease for
the top two floors of the building. The lease meets the criteria of a
capitalized lease and resulted in the recording of an asset and liability in the
amount of the present value of minimum lease payments of $13.4 million. The
asset is being amortized over the term of the lease.

     The remaining 1999 balance, and substantially all of the 1998 balance, was
comprised of a mortgage obligation.

     In 1998, a $1.2 million obligation, which related to the purchase of
Priority Healthcare Services, was included as a reduction of the fourth quarter
unusual items charge resulting from the litigation settlement agreement on
December 31, 1998.

NOTE 10 - PROFIT SHARING PLAN

     The Company and its subsidiaries maintain a qualified Profit Sharing Plan
("Profit Sharing Plan") for eligible employees. All employees are generally
eligible to participate in the Profit Sharing Plan as of the first January 1,
April 1, July 1 or October 1 after having completed at least one year of service
(as defined in the Profit Sharing Plan) and having reached age 21.

     The annual contribution of the Company and its subsidiaries to the Profit
Sharing Plan is at the discretion of the Board and is generally 8% of the
Participant's compensation for the year. The employer contribution for a year is
allocated among the Participants employed on the last day of the year in
proportion to their relative compensation for the year. The Company's

                                     F-14
<PAGE>

Contributions to the plan for the years ended December 31, 1999, 1998 and 1997
were $2,077,000, $1,785,000 and $1,576,000, respectively.

     The Profit Sharing Plan has been amended to adopt, effective as of January
1, 2000, one of the permissible safe harbor methods of satisfying the
nondiscrimination test for elective deferrals under the 401(k) feature of the
Profit Sharing Plan. Under this safe harbor method, the Company and its
subsidiaries will make a contribution each year, on behalf of their eligible
employees, equal to 3% of the employee's eligible compensation for the year.
These contributions, and attributable earnings, will be 100% vested at all
times, rather than subject to the graded vesting schedule that applies to the
discretionary contributions by the Company and its subsidiaries. The annual
contribution of the Company and its subsidiaries to the Profit Sharing Plan
beyond the 3% safe harbor contribution is at the discretion of the Board, and
the Company expects that the combination of the safe harbor contributions and
discretionary contributions by the Company and its subsidiaries will generally
total 8% of a participant's compensation for the year. The employer contribution
for a year is allocated among participants employed on the last day of the year
in proportion to their relative compensation for the year.

     Subject to limitations imposed by the Code, a participant may, in addition
to receiving a share of the employer contribution, have a percentage of his or
her compensation withheld from pay and contributed to the Profit Sharing Plan.
Subject to applicable Code requirements, employees may make "rollover"
contributions to the Profit Sharing Plan of qualifying distributions from other
employers' qualified plans.

     A Participant's interest in amounts withheld from his or her pay and
contributed to the Profit Sharing Plan or in rollover contributions and in the
earnings on those amounts are fully vested at all times. A Participant's
interest in discretionary employer contributions made on his or her behalf and
the earnings on those contributions become 20% vested after three years of
service and an additional 20% vested during each of the next four years. A
Participant's interest in discretionary employer contributions made on his or
her behalf and the earnings on those contributions will also become fully vested
when the employee retires at age 65 or older, dies or becomes totally disabled.

     All contributions to the Profit Sharing Plan are paid in cash to a trustee
bank, as trustee, and are invested by the trustee until distributed to
Participants or their beneficiaries. Participants are permitted to direct the
trustee as to the investment of their accounts by choosing among several
investment funds that are offered under the Profit Sharing Plan, including one
fund consisting of common stock of the Company. Participants may elect to invest
in one fund or a combination of the available funds according to their
investment goals. If a Participant does not make an investment election, his or
her Profit Sharing Plan accounts will be invested in a fund designated by the
Company.

                                     F-15
<PAGE>

     Effective July 1, 1993, Central Pharmacy adopted the Central Pharmacy
Services, Inc. 401(k) Plan (the "Plan"), a defined contribution plan which
intended to qualify under Section 401(k) of the Internal Revenue Code. The Plan
also includes a cash or defined arrangement to qualify under Section 401(k) of
the code. All employees of Central Pharmacy are eligible to participate in the
Plan after one year of service. Participants may contribute up to 20% of their
base salaries to the Plan, and Central Pharmacy will match 100% of the
participants' contributions up to 2% of their base salaries. Contributions to
the Plan were approximately $118,000, $90,000 and $71,000 for the years ended
December 31, 1999, 1998, and 1997, respectively. The plan was frozen effective
as of the close of business on December 31, 1999, and the Plan will be merged
into the Profit Sharing Plan in the second quarter of 2000.

NOTE 11 - MINORITY INTEREST

     On October 29, 1997, the Company consummated an initial public offering
("IPO") of its Priority Healthcare Corporation ("Priority") subsidiary. Priority
registered 2,300,000 shares of Class B common stock, all of which were sold in a
firm commitment underwriting at an aggregate offering price of $33.35 million.
After underwriters' discount of $2.32 million and expenses incurred in
conjunction with the IPO of $1.05 million, the net offering proceeds to Priority
were approximately $29.98 million.

     The Priority IPO resulted in the establishment of minority interest of $11
million, which represented the minority shareholders' interest in shareholders'
equity of Priority, and an increase of $19.2 million in the Company's additional
paid in capital, which represented the Company's incremental share of Priority's
shareholders' equity, both at October 29, 1997.

     See Note 2 for discussion of the Company's distribution of Priority.

NOTE 12 - CAPITAL STOCK

     The Company's capitalization consists of 53,333,333 authorized shares of
common stock and 1,000,000 authorized shares of Special Stock. Both the common
stock and Special Stock have a $.01 par value per share. On June 25, 1999, a 4-
for-3 stock split was effected in the form of a stock dividend to shareholders
of record at the close of business on June 11, 1999. On June 3, 1998, a 4-for-3
stock split was effected in the form of a stock dividend to shareholders of
record at the close of business on May 21, 1998.

     Prior to May 20, 1993, the Company had a 1983 Incentive Stock Option Plan,
a 1983 Nonqualified Option Plan, and a 1987 Stock Option and Incentive Plan. The
number of shares available for issuance pursuant to such plans aggregated
2,500,000 shares. Incentive stock options, granted at a minimum of 100% of fair
market value, and nonqualified stock options, granted at a minimum of 85% of
fair market value, both exercisable for up to 10 years from the date of grant,
were authorized under such plans.

                                     F-16
<PAGE>

     On May 20, 1993, the Company's shareholders approved the 1993 Stock Option
and Incentive Plan (the "1993 Plan") authorizing 1,000,000 shares of the
Company's common stock for sale or award to officers and key employees
(including any such officer or employee who holds at least 10% of the Company's
common stock) as stock options or restricted stock. Options generally become
exercisable over a one to four year period following date of grant and expire 10
years following date of grant. No further awards will be made from the shares of
common stock that remained available for grants under the prior stock option
plans.

     On May 19, 1994, the Company's shareholders approved amendments to the
Company's 1983 Incentive Stock Option Plan, the 1983 Nonqualified Stock Option
Plan, the 1987 Stock Option and Incentive Plan and the 1993 Plan to permit the
Company's Compensation and Stock Option Committee of the Board of Directors
("Committee") to allow participants under these plans, including the holders of
outstanding options, to exercise an option during its term following cessation
of employment by reason of death, disability or retirement. Such amendments also
permitted the Committee, in its sole discretion, to change the exercise and
termination terms of options granted if such changes are otherwise consistent
with applicable federal and state laws. In addition, the 1993 Plan was amended
to (i) increase from 1,000,000 to 1,500,000 the number of shares authorized for
issuance pursuant to awards made under the 1993 Plan; (ii) limit to 100,000
shares the number of shares that any one participant may receive under the 1993
Plan during any calendar year; and (iii) provide that the Board of Directors may
amend the 1993 Plan in any respect without shareholder approval, unless such
approval is required to comply with Rule 16b-3 under the Securities Exchange Act
of 1934 or Section 422 of the Internal Revenue Code of 1986. On May 16, 1996,
the Company's shareholders approved an amendment to the 1993 Plan to increase to
3,000,000 the number of shares authorized for issuance pursuant to awards made
under the 1993 Plan. At the May 21, 1998 annual shareholders meeting, the
Company's shareholders approved an amendment to the 1993 Plan to (i) increase to
4,000,000 (restated to 5,333,332 as a result of the June 3, 1998 stock split, to
7,821,973 as a result of the spin-off of Priority, and to 10,271,118 as a result
of the June 25, 1999 stock split, each restatement made pursuant to an anti-
dilution provision contained in the 1993 Plan) the number of shares authorized
for issuance pursuant to awards made under the 1993 Plan and (ii) increase to
300,000 the number of shares that any one participant may receive under the 1993
Plan during any calendar year.

     On May 14, 1991, the Company's shareholders approved the Outside Directors
Stock Option Plan (the "Directors Plan"). Each eligible director is
automatically granted an option to purchase 1,000 shares of the Company's common
stock on June 1 of each year beginning in 1991. The option exercise price per
share is 85% of the fair market value of one share of common stock on the date
of grant. Each option becomes exercisable six months following the date of grant
and expires 10 years following the date of grant.

     On December 11, 1998, the Company's Board of Directors adopted the 1998
Non-Qualified Stock Option Plan (the "1998 Non-Qualified Plan"), which reserves
for issuance 600,000 shares of the Company's common stock held by the Company as
treasury shares. On

                                     F-17
<PAGE>

July 22, 1999, the Company's Board of Directors approved an amendment to the
1998 Non-Qualified Plan to increase the reserves for issuance to 1,200,000
shares of the Company's common stock held by the Company as treasury shares. The
1998 Non-Qualified Plan provides for the grant of non-qualified stock options to
employees who are not officers or directors of the Company or its affiliates.
Under the 1998 Non-Qualified Plan, no individual participant may receive awards
for more than 50,000 shares in any calendar year. Options generally become
exercisable over a one to four year period following date of grant and expire 10
years following date of grant.

     The Central Pharmacy 1993 Stock Option Plan (the "Central Pharmacy Option
Plan") provided for the issuance of options to employees of Central Pharmacy for
the purchase of shares of Central Pharmacy's common stock. Options were issued
with exercise prices equal to or in excess of the fair market value of Central
Pharmacy's common stock, as determined by Central Pharmacy's Board of Directors,
on the date of grant. Vesting and terms of all options are determined by Central
Pharmacy's Board of Directors and may vary by optionee; however, the term may be
no longer than 10 years from the date of grant.

     In accordance with the terms of the Central Pharmacy Option Plan and merger
between BWI and Central Pharmacy, all options outstanding under the Central
Pharmacy option plan vested at the date of the merger. Furthermore, all such
outstanding Central Pharmacy options were converted to BWI options pursuant to
the terms of the merger which, in essence, provided that such options would be
converted based on the calculated "in-the-money" amounts and exercise price to
fair market value ratios at the time of the merger. Additionally, in accordance
with the terms of the merger, no further options can be issued from the Central
Pharmacy Option Plan subsequent to the merger.

     In accordance with the provisions of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has
elected to continue following Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its stock option plans, and accordingly,
generally does not recognize compensation expense related to these options. If
the Company had elected to recognize compensation expense based on the fair
value of the options at the grant date as prescribed by SFAS 123, pro forma net
income and earnings would have been:

                                     F-18
<PAGE>

<TABLE>
<CAPTION>
For the years ended December 31,         1999          1998          1997
---------------------------------------------------------------------------
(in thousands, except share data)
<S>                                     <C>           <C>           <C>
Net earnings - as reported              $38,296       $22,236       $24,506
Net earnings - pro forma                $35,219       $18,946       $21,971
Earnings per share
 Basic - as reported                       1.14           .70           .95
 Basic - pro forma                         1.05           .60           .85
 Diluted - as reported                     1.05           .66           .83
 Diluted - pro forma                        .97           .57           .75
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions for the following years ended December 31:

<TABLE>
<CAPTION>
                                         1999          1998          1997
                                        ----------------------------------
<S>                                     <C>           <C>            <C>
Company Options
  Risk free interest rates              4.96%         5.31%          5.71%
  Expected dividend yields               .53%          .16%           .26%
  Expected life of options              4.98          4.34           4.66
  Volatility of stock price            32.94%        28.85%         27.23%
  Weighted average fair
      value of options                $ 6.91        $ 9.34         $10.16

Priority Options
  Risk free interest rates                            5.02%          5.90%
  Expected dividend yields                             .00%           .00%
  Expected life of options                            4.71           4.60
  Volatility of stock price                          55.94%         54.79%
  Weighted average fair
      value of options                              $ 9.65         $ 7.52
</TABLE>

     Compensation expense based on the fair value of options granted prior to
January 1, 1995 was not included in the preceding pro forma calculations.
Therefore, the resulting pro forma compensation cost may not be representative
of that to be expected in future years.

                                     F-19
<PAGE>

     Changes in stock options under the Company's plans are shown below, (all
historical shares and per share amounts have been restated to reflect the two
aforementioned 4-for-3 stock splits):

<TABLE>
<CAPTION>
                                                           Weighted
                                           Number          average
                                          of Shares        option price
-----------------------------------------------------------------------
<S>                                      <C>                <C>
Options outstanding
   at December 31, 1996                     6,286,824            $ 7.75

Forfeited during 1997                         (77,538)           $ 8.94
Granted during 1997                         1,537,463            $16.32
Exercised during 1997                      (1,799,888)           $ 6.32
                                          -----------

Options outstanding
   at December 31, 1997                     5,946,861            $10.38

Forfeited during 1998                        (206,049)           $10.81
Granted during 1998                            41,651            $16.76
Exercised during 1998                      (1,948,979)           $ 8.71
                                          -----------

Options outstanding
   at December 31, 1998                     3,833,484            $11.28

Effect of Spin-off of
    Priority Healthcare (1)                 3,193,251
                                          -----------

Converted options outstanding
    at December 31, 1998                    7,026,735            $ 6.15
                                          ===========

Forfeited during 1999                         (75,493)           $13.54
Granted during 1999                         1,362,361            $18.57
Exercised during 1999                      (1,055,623)           $ 5.48
                                          =============================

Options outstanding
    at December 31, 1999                    7,257,980            $ 8.51
                                          =============================

Exercisable
   at December 31, 1999                     4,868,072            $ 5.82
                                          =============================

Available for grant
   at December 31, 1999                       961,058
                                          ===========
</TABLE>

                                     F-20
<PAGE>

(1)  As a result of the spin-off of Priority, in order to preserve the economic
value of the outstanding stock options, effective after the close of business on
December 31, 1998, all such outstanding options were converted pursuant to anti-
dilution provisions contained in the various stock option plans. As these
options were converted in accordance with accounting principles issued by the
Financial Accounting Standards Board, no compensation expense was recorded as a
result of such conversion.

     In certain cases, the exercise of stock options results in state and
federal income tax deductions to the Company on the difference between the
market price at the date of exercise and the option price. The tax benefits
obtained from these deductions of $4,476,000, $9,593,000 and $3,305,000 are
included in additional paid in capital in 1999, 1998 and 1997, respectively.

     Additional information regarding the Company's options outstanding at
December 31, 1999 is shown below:

<TABLE>
<CAPTION>
                                                    Exercise Price Range
------------------------------------------------------------------------------------------------------
                              $.59      $2.93 - $5.68    $7.48 - $12.88    $16.75 - $23.95        Total
------------------------------------------------------------------------------------------------------
<S>                    <C>          <C>               <C>                <C>               <C>
Number of options
 outstanding               192,329          3,666,198         2,157,335          1,242,118    7,257,980

Weighted average
 exercise price           $    .59      $        4.80    $         9.31      $       19.26   $     8.51

Weighted average
 remaining
 contractual life             6.03               5.63              8.01               9.10         6.94

Number of shares
 exercisable               192,329          3,369,938         1,296,474              9,331    4,868,072

Weighted average
 exercisable price        $    .59       $       4.75      $       9.29      $       20.36    $    5.82
</TABLE>

     During 1998, the Company issued 350,000 (restated to 466,667 to reflect the
1998 stock split) restricted stock grants to certain key executives with a grant
date fair value of $35.25 per share. Pending the lapse of the forfeiture and
transfer restrictions established by the Compensation and Stock Option
Committee, the grantee generally had all the rights of a shareholder, including
the right to vote the shares and the right to receive all dividends thereon.
Upon issuance of the restricted stock grants, unearned compensation equivalent
to the market value at the date of grant was recorded as unamortized value of
restricted stock and was charged to earnings over the period during which the
restrictions lapsed. Compensation expense related to these restricted stock
grants of $1.6 million was recorded in the first nine

                                     F-21
<PAGE>

months of 1998. The remaining $11.1 million was recorded in the fourth quarter
of 1998 as part of the unusual items when the lapse of the forfeiture and
transfer restrictions on the restricted stock was accelerated by the
Compensation and Stock Option Committee.

     Priority's stock option plans. Presented below is information concerning
Priority's stock option plans for the years ended December 31, 1998 and 1997.
The information has not been updated to reflect events subsequent to December
31, 1998.

     On August 25, 1997, Priority's Board of Directors and the then sole
shareholder (the Company) adopted Priority's 1997 Stock Option and Incentive
Plan (the "1997 Stock Option Plan"). The 1997 Stock Option Plan reserved for
issuance 1,250,000 shares of Priority Class B common stock, subject to
adjustment in certain events. The 1997 Stock Option Plan provided for the grant
of options to purchase shares of Class B common stock and restricted shares of
Class B common stock to officers, key employees and consultants of Priority.
Stock options granted under the 1997 Stock Option Plan were either options
intended to qualify for federal income tax purposes as "incentive stock options"
or options not qualifying for favorable tax treatment ("nonqualified stock
options"). No individual participant could receive awards for more than 300,000
shares in any calendar year.

     Also on August 25, 1997, Priority's Board of Directors and the then sole
shareholder (the Company) adopted Priority's Outside Directors Stock Option Plan
("the Priority Directors Plan"). The number of shares of Priority's Class B
common stock authorized for issuance pursuant to the Priority Directors Plan was
25,000. Each eligible director was granted an option to purchase 1,000 shares of
Priority's Class B common stock on June 1 of 1998. The option exercise price per
share was equal to the fair market value of one share of Class B common stock on
the date of grant. Each option became exercisable six months following the date
of grant and will expire 10 years following the date of grant.

     On September 15, 1998, Priority's Board of Directors adopted the Broad
Based Stock Option Plan, which reserved for issuance 400,000 shares of Priority
Class B common stock. The Broad Based Stock Option Plan provided for the grant
of nonqualified stock options to key employees who were not officers or
directors of Priority or its affiliates. The number of shares which could be
granted under the Broad Based Plan during any calendar year could not exceed
40,000 shares to any one person.

                                     F-22
<PAGE>


     Changes in stock options under all of Priority's plans through December 31,
1998 are shown below:

<TABLE>
<CAPTION>
                                   Number            Option price
                                   of shares            per share
------------------------------------------------------------------------
<S>                             <C>              <C>
Options outstanding
   at December 31, 1996
Forfeited during 1997                  (13,800)  $  14.50 to $14.50
Granted during 1997                    473,050   $  14.50 to $15.00
Exercised during 1997
                                 -------------
Options outstanding
   at December 31, 1997                459,250   $  14.50 to $15.00
                                 =============

Forfeited during 1998                  (29,120)  $  14.50 to $20.00
Granted during 1998                    601,953   $  12.24 to $20.00
Exercised during 1998
                                 -------------
Options outstanding
   at December 31, 1998              1,032,083   $   12.24 to $20.00
                                 =============
</TABLE>

NOTE 13 - COMMITMENTS

     The Company leases warehouse and office space under noncancelable operating
leases expiring at various dates through 2005, with options to renew for various
periods.

     On April 30, 1999, the Company sold its corporate office building to an
unrelated party for approximately net book value and signed a 15 year lease for
the top two floors of the building. The lease meets the criteria of a
capitalized lease and resulted in the recording of an asset and liability in the
amount of the present value of minimum lease payments of $13.4 million. The
asset is being amortized over the term of the lease.

                                     F-23
<PAGE>

     The following is a summary of the future minimum lease commitments under
capitalized leases and under operating leases as of December 31, 1999:


Year ended December 31,                      Capitalized  Operating
                                                Leases      Leases
-------------------------------------------------------------------
(in thousands)

2000                                           $ 1,221      $ 2,956
2001                                             1,221        2,625
2002                                             1,221        1,963
2003                                             1,221        1,568
2004                                             1,322          982
Later years                                     13,916          264
                                              --------      -------
Total minimum lease payments                    20,122      $10,358
                                              --------      =======
Imputed interest                                 6,998
                                              --------
Present value of minimum capitalized
  lease obligations                            $13,124
                                              ========

     The consolidated rent expense for the years ended December 31, 1999, 1998
and 1997 was $2,414,000, $2,961,000 and $2,615,000, respectively.

     Prior to the sale of the corporate office building on April 30, 1999, the
Company received rental income of $313,000 from operating lease agreements for
the bottom three floors of the building.

NOTE 14 -  MAJOR CUSTOMERS

     The BWI segment services customers in 48 states and Puerto Rico from its 18
distribution centers located in 14 states. The Nuclear Pharmacy segment operates
specialized pharmacies in 13 states. The principal customers of the BWI segment
are chain drug companies that operate their own warehouses. Other customers
include independent drug stores, chain drug stores, supermarkets and mass
merchandisers with their own pharmacies, hospitals, clinics, HMOs, state and
federal government agencies and other health care providers. The following chain
drug warehouse customers each accounted for over 10% of the Company's net sales
during the years shown: Eckerd Corporation (16%) and CVS (21%) in 1999; Eckerd
Corporation (18%) and CVS (17%) in 1998; and CVS (22%), Rite Aid Corporation
(18%) and Eckerd Corporation (16%) in 1997. Sales to these customers aggregated
37%, 35% and 56% of net sales in 1999, 1998 and 1997, respectively. The Company
sells inventory to its chain drug warehouse and other customers on various
payment terms. This entails accounts receivable exposure, especially if any of
its chain warehouse customers encounter financial difficulties. Although the
Company monitors closely the creditworthiness of its major customers and, when
feasible, obtains security interests in the inventory sold, there can be no
assurance

                                     F-24
<PAGE>

that the Company will not incur the write-off or writedown of chain drug
accounts receivable in the future.

     During the second quarter of 1998, Rite Aid informed the Company that Rite
Aid signed a supply agreement with another wholesaler that began in May 1998. In
1997, Rite Aid comprised 18% of the Company's sales. Sales to Rite Aid were
predominantly to their warehouses. The loss of this customer did not have a
material adverse impact on the Company's results of operations.

NOTE 15 - STATEMENT OF CASH FLOWS

     Cash paid for interest expense and income taxes was as follows:


December 31,            1999                  1998                  1997
(in thousands)
Interest               $20,730              $20,330               $14,697
Income taxes           $19,871              $15,017               $16,935


     Presented below is a brief discussion of recent acquisitions by the
Company. The purchase price has been allocated based on a determination of the
fair value of the assets acquired and liabilities assumed. The goodwill
associated with these acquisitions is being amortized on a straight line basis
not exceeding 40 years. All acquisitions were treated as purchases and the
financial statements include the results of operations from the respective
effective date of acquisition. Results of operations of the acquired companies
from January 1 of the year of acquisition to the effective dates of the
transactions are not material to the consolidated results of operations of the
Company for the respective years.

     In January 1996, the Company formed a new subsidiary, National Infusion
Services, Inc. ("NIS"). Effective February 8, 1996, the Company through its NIS
subsidiary purchased the assets of the infusion services division of Infectious
Disease of Indiana P.S.C. NIS provided quality care to patients in a variety of
settings. In February 1997, the corporate name was changed from NIS to Priority
Healthcare Services Corporation. The Company acquired the assets of NIS for
approximately $9 million in cash and incurred a long-term obligation of
approximately $1.5 million, resulting in approximately $9.8 million in
intangible assets. As discussed in Note 6 and Note 9 above, the remaining
balance of the intangible assets and the long-term obligation were written off
as part of the unusual items caption in the fourth quarter of 1998.

     Effective July 31, 1997, the Company purchased substantially all of the
operating assets and assumed most of the liabilities and contractual obligations
of Tennessee Wholesale Drug Company ("TWD"). The Company expended approximately
$27 million for the acquisition of TWD, which approximated the fair value of the
net assets acquired. During 1998, the Company closed the TWD divisions located
in Baltimore, Maryland and Tampa, Florida. The customers of

                                     F-25
<PAGE>

these divisions are serviced from existing facilities. The Company recognized a
liability related to the closure of the facilities of $413,000 as of December
31, 1997. The Company offered all employees an opportunity to interview for
openings elsewhere in the Company and agreed to pay a lump sum relocation cost
to those that relocated. Employees who did not relocate and worked up to the
designated date of his/her separation of employment received a benefits and
compensation package based on his or her tenure with the Company. The plan also
included operational and data processing costs associated with the closure. Both
facilities were closed in 1998 and the costs associated with those closures were
paid and approximated the liability established.

     Effective August 6, 1997, Priority acquired substantially all of the
operating assets and assumed most of the liabilities of Grove Way Pharmacy,
Inc., a specialty distributor of vaccines and injectables located in Castro
Valley, California. The amount expended approximated the fair value of the net
assets acquired.

     In 1997, Central Pharmacy acquired certain assets and assumed certain
liabilities of Nu-Scan, Inc., Sholars Drugs, Inc. and Alpha Nuclear Pharmacy,
Inc. Aggregate consideration for these transactions was approximately $666,000,
consisting of approximately $441,000 in cash (including $25,000 paid in 1998)
and a note payable for $225,000. Central Pharmacy recorded $60,000 as noncompete
agreements in accordance with the terms of the asset purchase and other related
agreements. The remainder of the excess of the cost over the fair value of net
assets acquired of approximately $612,000 has been recorded as goodwill and is
being amortized on a straight-line basis over 20 years.

     In December 1998, Central Pharmacy acquired the remaining interest in its
50% owned affiliate, Central Source Pharmacy Services, LLC for cash
consideration of approximately $877,000. The excess of cost over the fair value
of net assets acquired of approximately $780,000 has been recorded as goodwill
and is being amortized on a straight-line basis over 20 years.

NOTE 16 - LEGAL PROCEEDINGS

     In a consolidated class action filed in the United States District Court
for the Northern District of Illinois in 1993, the Company, other pharmaceutical
wholesalers and pharmaceutical manufacturers were named as defendants, In re
                                                                       -----
Brand Name Prescription Drugs Litigation, MDL 997.  Plaintiffs alleged that
----------------------------------------
pharmaceutical manufacturers and wholesalers conspired to fix prices of brand-
name prescription drugs sold to retail pharmacies at artificially high levels
in violation of the federal antitrust laws. The plaintiffs sought injunctive
relief, unspecified treble damages, costs, interest and attorneys' fees. The
Company denied the complaint allegations.

     Several of the manufacturer defendants and the class plaintiffs have
reached settlement agreements.  Under these agreements, the settling
manufacturer defendants retain certain contingent liabilities under the October
21, 1994 agreement discussed below. The trial against

                                     F-26
<PAGE>

the remaining defendants, including the Company, began on September 14, 1998. On
November 30, 1998, the Court granted all remaining defendants' motions for
judgments as a matter of law, dismissing all In re Brand Name Prescription Drugs
                                                    ----------------------------
class claims against the Company and other defendants. The class plaintiffs
appealed the Court's ruling and, on July 13, 1999, the appeals court dismissed
the wholesalers, including the Company, from the case. On February 22, 2000, the
United States Supreme Court denied the plaintiffs' petition for certiorari, thus
concluding the In re Brand Name Prescription Drugs class action litigation.
               -----------------------------------

     At this time, the Company is a defendant in 115 additional cases brought by
plaintiffs who "opted out" of the federal class action described above. One
hundred eleven of these complaints contain allegations and claims for relief
that are substantially similar to those in the federal class action. The four
remaining complaints add allegations that the defendants' conduct violated state
law. The damages period in these cases begins in October 1993. The Company has
denied the allegations in all of these complaints. Discovery in the opt out
cases is currently ongoing and no trial dates have yet been scheduled.

     On November 20, 1997, two additional complaints were filed in the MDL 997
proceeding by Eckerd Corporation and American Drug Stores naming certain
pharmaceutical manufacturers and wholesalers, including the Company, as
defendants. These complaints contain allegations and claims for relief that are
substantially similar to those in the federal class action. The Company has
denied the allegations in these complaints. No trial date has been set in these
cases.

     On July 1, 1996, the Company and several other wholesalers were joined as
the defendants in a seventh amended and restated complaint filed in the Circuit
Court of Greene County, Alabama, Durrett v. The Upjohn Company, Civil Action No.
                                 -----------------------------
94-029.  An order dismissing the action and taxing costs against the plaintiffs
was entered by the Circuit Court on November 29, 1999.

     On June 16, 1998, a suit was filed in the Circuit Court for Cocke County,
Tennessee purportedly on behalf of consumers of prescription drugs in the
following states: Tennessee, Alabama, Arizona, Florida, Kansas, Maine, Michigan,
Minnesota, New Mexico, North Carolina, North Dakota, South Dakota, West Virginia
and Wisconsin.  Graves et al. v. Abbott Laboratories et al., Civil Action No.
                -------------------------------------------
25,109-II. The complaint charges that pharmaceutical manufacturers and
wholesalers, including the Company, engaged in a price-fixing conspiracy in
violation of Tennessee's Trade Practices Act and Consumer Protection Act, and
the unfair or deceptive trade practices statutes of the other jurisdictions
named therein. The Company has denied the allegations of the complaint and all
proceedings in this suit have been stayed until further order of the Circuit
Court.

     On October 21, 1994, the Company entered into an agreement with the other
wholesalers and pharmaceutical manufacturers covering all of the cases listed
above. Among other things, the agreement provides that for all judgments that
might be entered against both the

                                     F-27
<PAGE>

manufacturer and wholesaler defendants, the Company's total exposure for joint
and several liability is limited to $1 million and the wholesaler defendants are
indemnified for $9 million in related legal fees and expenses. As a result of
the previously noted settlements, we have periodically received reimbursement of
our legal fees and expenses in excess of our proportionate share of the $9
million, and we expect to receive reimbursement of substantially all of such
fees and expenses in the future.

     The Company is unable to form a reasonably reliable conclusion regarding
the likelihood of a favorable or unfavorable outcome of these cases, each of
which is being defended vigorously.  The Company believes the allegations of
liability are without merit with regard to the wholesaler defendants and that
the attendant liability of the Company, if any, would not have a material
adverse effect on the Company's financial condition or liquidity.  Adverse
decisions, although not anticipated, could have a material adverse effect on the
Company's results of operations.

     On October 7, 1996, the Company and its subsidiary, National Infusion
Services (now known as Priority Healthcare Services Corporation) ("PHSC"), were
named as defendants in an action filed by Thomas G. Slama, M.D. in the Superior
Court of Hamilton County, Indiana. Dr. Slama is a former director of the Company
and formerly was Chief Executive Officer and President of PHSC. The complaint
alleged breach of contract and defamation arising from the termination of Dr.
Slama's employment with PHSC in October 1996. On October 26, 1998, Dr. Slama
filed a Second Amended Complaint which added Priority and William E. Bindley as
defendants and stated additional claims for breach of contract, breach of oral
contract, breach of fiduciary duty, securities fraud and conversion. Pursuant to
an Indemnification and Hold Harmless Agreement the Company indemnified and held
harmless Priority and its subsidiaries from and against any and all costs,
damages, charges and expenses (including without limitation legal and other
professional fees) which Priority might incur or which may be charged against
Priority in any way based upon, connected with or arising out of the lawsuit
filed by Dr. Slama. The Company, PHSC, Priority and Mr. Bindley answered the
complaint, denied the merits of Dr. Slama's claims, and also filed a
counterclaim against Dr. Slama which sought, among other things, declaratory
relief, compensatory and (in some instances) treble damages, punitive damages,
attorneys' fees, interest and costs. On December 31, 1998, a Settlement
Agreement was executed by and among the parties named above pursuant to which
mutual releases were obtained, and on January 4, 1999, a one-time payment of
$875,000 was made by the Company to Dr. Slama. The corresponding Joint
Stipulation of Dismissal was approved by the Court on January 11, 1999. This one
time payment, and approximately $150,000 of legal costs, were included in the
unusual item charge recorded in the fourth quarter of 1998.

     The Company has been advised that it is a potential defendant in an ongoing
grand jury investigation being conducted by the U.S. Attorney's Office in Las
Vegas, NV. The investigation concerns transactions between wholesale
pharmaceutical distributors and licensed institutional pharmacies known as
closed-door pharmacies. Closed-door or institutional pharmacies are entitled to
purchase pharmaceuticals at a discount from wholesale prices, but typically have
an

                                     F-28
<PAGE>

agreement with the manufacturers to service only their own long-term care
patients. Wholesalers seek chargeback credits from the manufacturers for sales
to closed-door pharmacies.

     The Company understands that the government's inquiry focuses principally
on whether pharmaceutical manufacturers have been defrauded by institutional or
closed-door pharmacies, which allegedly resold discount-priced pharmaceutical
drugs at a profit in violation of agreements with pharmaceutical manufacturers
to purchase the product solely for their own use. The government is examining
whether the Company, through any of its employees, participated in these
transactions by selling discount-priced pharmaceutical drugs with knowledge of
the pharmacies' plans to resell the product at a profit. These sales of excess
pharmaceutical drugs were allegedly made to alternate source vendors that, in
turn, sold the product in the secondary market to numerous wholesale
distributors and other customers.

     To date, the government's investigation has been substantially focused on
sales that the Company made at the San Dimas, California division of Bindley
Western Drug Company to certain institutional pharmacies located in California
and Nevada, principally between 1995 and 1997. The Company no longer employs the
two managers who were primarily involved in the questioned sales. One was
terminated by the Company approximately two years ago for violation of the
Company's ethics code, and the other abruptly resigned in October 1999 during
the investigation of this matter. The Company has determined that sales to
institutional pharmacies served by the San Dimas division of Bindley Western
Drug Company represented less than 1% of total Company sales during the period
in question. The Company has further determined that no related business has
been conducted with these accounts for an extended period.

     The Company believes that its two former managers have admitted to certain
wrongdoing in connection with their activities while employed by the Company.
The Company is cooperating with the government and has undertaken its own
investigation. At this stage of the government's investigation, the Company does
not believe it is possible to predict or determine the outcome, resolution or
timing of the final resolution of this matter. The Company is currently unable
to estimate the range of any potential loss, the amount of which could have a
material adverse effect on the Company's financial condition, results of
operations and/or cash flows.

     We are also subject to ordinary and routine lawsuits and governmental
inspections, investigations and proceedings incidental to our business, the
outcome of which should not have a material adverse effect on our financial
condition, results of operations, or cash flows.

                                     F-29

<PAGE>

NOTE 17 - EARNINGS PER SHARE


The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for 1999, 1998 and 1997.


<TABLE>
<CAPTION>
                                                  1999                 1998               1997
----------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S>                                      <C>                  <C>                <C>
Basic:
Net earnings                             $      38,296        $      22,236      $      24,506
Weighted shares outstanding                 30,556,415           28,728,979         22,912,237
Shares issued in
 Central Pharmacy merger                     2,922,055            2,922,055          2,922,055
Basic shares Outstanding                    33,478,470           31,651,034         25,834,292
Per share amount                         $        1.14        $         .70      $         .95

Diluted:
Net earnings                             $      38,296        $      22,236      $      24,506
6 1/2% convertible
  debentures                                                                             1,889
Diluted earnings                         $      38,296        $      22,236      $      26,395
Weighted shares outstanding                 30,556,415           28,728,979         22,912,237
Debentures                                                                           4,193,297
Shares issued in
 Central Pharmacy merger                     2,922,055            2,922,055          2,922,055
Stock Options                                2,989,169            1,708,990          1,862,446
Restricted Stock                                                    148,644
Diluted Shares                              36,467,639           33,508,668         31,890,035
Per share amount                         $        1.05        $         .66      $         .83
</TABLE>

The earnings per share for 1998 and 1997 have been restated to give effect for
the 4-for-3 stock split on June 25, 1999 and the earnings per share for 1997 has
been restated to give effect for the 4-for-3 stock split on June 3, 1998.

See Note 12 regarding changes to outstanding options at the close of business on
December 31, 1998.

                                     F-30
<PAGE>

NOTE 18 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)


The following table presents the quarterly financial data for 1999 and 1998.


<TABLE>
<CAPTION>
                                   First                Second             Third           Fourth
                                  Quarter               Quarter           Quarter          Quarter
----------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S>                              <C>                  <C>              <C>                <C>
1999
   Net sales                     $1,985,165           $2,055,841       $2,145,845         $2,320,754
   Gross margin                      51,740               53,724           55,481             58,816
   Net earnings                       9,704                9,810            8,528             10,251
   Earnings per share:
     Basic (1)                   $     0.29           $     0.29       $     0.25         $     0.30
     Diluted (1)                       0.27                 0.27             0.23               0.29

1998
   Net sales                     $1,969,157           $1,856,142       $1,821,594         $2,007,328
   Gross margin                      46,217               50,842           51,896             56,933
   Net earnings                       8,007                9,069            8,763             (3,603)
   Earnings per share:
     Basic (1)                   $     0.26           $     0.29       $     0.28         $    (0.11)
     Diluted (1)                       0.24                 0.27             0.26              (0.11)
</TABLE>

(1) The earnings per share for first quarter of 1998 have been restated to give
effect for the 4-for-3 stock split effected in the form of a dividend on June 3,
1998 to shareholders of record on May 21, 1998. The earnings per share for 1998
and the first quarter of 1999 have been restated to give effect for the 4-for-3
stock split effected in the form of a dividend on June 25, 1999 to shareholders
of record on June 11, 1999.

                                     F-31
<PAGE>

       Signatures

       Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


March 24, 2000                BINDLEY WESTERN INDUSTRIES, INC.

                                   By /s/ William E. Bindley
                                      -----------------------------
                                          William E. Bindley
                                          Chairman, President
                                          and Chief Executive Officer


       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
<S>                              <C>                                                     <C>
       Signature                                       Title                                   Date
/s/ William E. Bindley
----------------------
    William E. Bindley           Chairman of the Board and President (Principal
                                 Executive Officer); Director                            March 24, 2000


/s/ William F. Bindley, II
--------------------------
    William F. Bindley, II       Director                                                March 24, 2000

/s/ Keith W. Burks
------------------
    Keith W. Burks               Executive Vice President; Director                      March 24, 2000

/s/ Seth B. Harris
------------------
    Seth B. Harris               Director                                                March 24, 2000

/s/ Robert L. Koch, II
----------------------
    Robert L. Koch, II           Director                                                March 24, 2000

/s/ Michael D. McCormick
------------------------
    Michael D. McCormick         Executive Vice President, General Counsel and
                                 Secretary; Director                                     March 24, 2000

/s/ J. Timothy McGinley
-----------------------
    J. Timothy McGinley          Director                                                March 24, 2000

/s/ James K. Risk, III
----------------------
    James K. Risk, III           Director                                                March 24, 2000

/s/ Thomas J. Salentine
-----------------------
    Thomas J. Salentine          Executive Vice President and Chief Financial
                                 Officer (Principal Accounting and Financial             March 24, 2000
                                 Officer); Director
</TABLE>
<PAGE>

<TABLE>
<S>                              <C>                                                     <C>
/s/ K. Clay Smith
-----------------
    K. Clay Smith                Director                                                March 24, 2000

/s/ Carolyn Woo
-----------------
    Carolyn Woo                  Director                                                March 24, 2000
</TABLE>
<PAGE>

                       INDEX TO EXHIBITS (12/31/99 10-K)


<TABLE>
<CAPTION>
                                                                                            Page No.
 Exhibit                                                                                      This
   No.                                      Description                                      Filing
----------       ---------------------------------------------------------------            ---------
<S>              <C>                                                                       <C>
  3-A       1    (i)Amended and Restated Articles of Incorporation of
                 Registrant....................................................

            2    (ii)Amendment to Restated Articles of Incorporation
                 increasing number of authorized shares........................

            3    (iii)Amendment to Restated Articles of Incorporation
                 establishing terms of Class A Preferred Stock.................

            17   (iv)Amendment to Restated Articles of Incorporation
                 increasing number of authorized shares........................

            15   (v)Amendment to Restated Articles of Incorporation increasing
                 number of authorized shares...................................

  3-B       18   Restated By-Laws of Registrant, as amended to date............

  4-A       16   (i)Third Amended and Restated Credit Agreement, dated as of
                 December 28, 1998, by and among Registrant, NationsBank,
                 N.A., The Bank of Tokyo-Mitsubishi, Ltd., KeyBank National
                 Association, Suntrust Bank, Central Florida, N.A., National
                 City Bank of Indiana, Fifth Third Bank, Indiana, (f/k/a The
                 Fifth Third Bank of Central Indiana), The Northern Trust
                 Company, NBD Bank, N.A., and Bank One, Indiana, NA, as Agent..

                 (ii)First Amendment to Third Amended and Restated Credit
                 Agreement, dated as of December 16, 1999, by and among
                 Registrant, Bank One, Indiana, NA, KeyBank National
                 Association, Suntrust Bank, Central Florida, N.A., National
                 City Bank of Indiana, Fifth Third Bank, Indiana, The Northern
                 Trust Company, The Huntington National Bank and Comerica
                 Bank..........................................................

  4-B       16   (i)Receivables Purchase Agreement, dated as of December 28,
                 1998, among Bindley Western Funding Corporation, Falcon Asset
                 Securitization Corporation, NBD Bank, N.A., KeyBank National
                 Association, Comerica Bank, NationsBank, N.A., Fifth Third
                 Bank, Indiana, National City Bank of Indiana, and The First
                 National Bank of Chicago, as Agent............................
 </TABLE>

                                      E-1
<PAGE>

<TABLE>
<CAPTION>
                                                                                            Page No.
 Exhibit                                                                                      This
   No.                                      Description                                      Filing
----------       ---------------------------------------------------------------            ---------
<S>              <C>                                                                        <C>
                 (ii)Amendment No. 1 to Receivables Purchase Agreement, dated
                 as of December 15, 1999, among Bindley Western Funding
                 Corporation, Falcon Asset Securitization Corporation, and Bank
                 One, NA..................................................................

  4-C            Note Purchase Agreement, dated as of December 15, 1999,
                 between Registrant and Nationwide Life Insurance Company,
                 relating to 7.93% Senior Notes due December 27, 2004 of
                 Registrant...............................................................

                 Registrant agrees to furnish to the Securities and Exchange
                 Commission, upon request, a copy of each instrument with
                 respect to other issues of Registrant's long-term debt, the
                 authorized principal amount of which exceeds 10% of Registrant's
                 total assets on a consolidated basis.....................................

  10-A*     6    (iii)Employee Benefit Trust Agreement of Registrant dated
                 November 30, 1990........................................................

            5    (v)Split Dollar Insurance Agreement dated December 11, 1992
                 between Registrant and William F. Bindley, II and K. Clay
                 Smith as trustees of the William E. Bindley Irrevocable Trust............

            5    (vi)The William E. Bindley Trust Agreement dated December 11,
                 1992 between William E. Bindley, grantor, and William F. Bindley,
                 II and K. Clay Smith, trustees...........................................

  10-B*     7    (i)Nonqualified Stock Option Plan of Registrant..........................

           10    (ii)Amendment to the Nonqualified Stock Option Plan of Registrant........

  10-C*    7     (i)Incentive Stock Option Plan of Registrant.............................

           10    (ii)Amendment to the Incentive Stock Option Plan of Registrant...........

  10-D*    8     (i)1987 Stock Option and Incentive Plan of Registrant....................

           9   (ii)Amendment to 1987 Stock Option and Incentive Plan......................
</TABLE>

                                      E-2
<PAGE>

<TABLE>
<CAPTION>
                                                                                            Page No.
 Exhibit                                                                                      This
   No.                                      Description                                      Filing
----------       ---------------------------------------------------------------            ---------
<S>              <C>                                                                        <C>
             9   (iii)Outside Directors Stock Option Plan of Registrant............

             10  (iv)Amendment to the 1987 Stock Option and Incentive Plan of
                 Registrant........................................................

             24  (v)First Amendment to Outside Directors Stock Option Plan of
                 Registrant........................................................

  10-E*      5   (i)1993 Stock Option and Incentive Plan of Registrant.............

             10  (ii) First Amendment to the 1993 Stock Option and Incentive Plan
                 of Registrant.....................................................

             14  (iii) Second Amendment to the 1993 Stock Option and Incentive
                 Plan of Registrant................................................

             20  (iv)Third Amendment to the 1993 Stock Option and Incentive Plan
                 of Registrant.....................................................

             21  (v)Fourth Amendment to the 1993 Stock Option and Incentive Plan
                 of Registrant.....................................................

  10-H       4   Distribution Agreement, dated as of October 23, 1998, between
                 Registrant and Priority Healthcare Corporation.

  10-I       23  Revolving Credit Promissory Note between Registrant (Maker) and
                 Priority Healthcare Corporation (Holder)..........................

  10-J*      13  Form of Termination Benefits Agreement, dated April 1, 1996,
                 between Registrant and each of William E. Bindley, Keith W.
                 Burks, Michael D. McCormick, and Thomas J. Salentine..............

  10-K           Agreement of Purchase and Sale and Joint Escrow Instructions
                 ("Purchase Agreement"), dated March 30, 1999, between College
                 Park Plaza Associates, Inc. and College Park Plaza, Inc.,
                 relating to the sale of Registrant's headquarters building
                 located at 8909 Purdue Road, Indianapolis, Indiana; First
                 Amendment to Purchase Agreement, dated April 12, 1999, Second
                 Amendment to Purchase Agreement, dated April 22, 1999, and Third
                 Amendment to Purchase Agreement, dated April 30, 1999.............
</TABLE>

                                      E-3
<PAGE>

<TABLE>
<CAPTION>
                                                                                            Page No.
 Exhibit                                                                                      This
   No.                                      Description                                      Filing
----------       ---------------------------------------------------------------            ---------
<S>              <C>                                                                        <C>
  10-L           Lease Agreement, dated April 30, 1999, between Registrant and
                 College Park Plaza, LLC, relating to the lease of Registrant's
                 headquarters located at 8909 Purdue Road, Indianapolis,
                 Indiana...........................................................

  10-Y      12   Collective Bargaining Agreement dated October 21, 1994 between
                 J.E. Goold & Co. and Truck Drivers, Warehousemen and Helpers
                 Union Local No. 340...............................................

  10-Z*     10   (i)401(k) Profit Sharing Plan (Nonstandardized) Adoption
                 Agreement of Registrant, effective January 1, 1994................

            11   (ii)Amendment to page 4 of the 401(k) Profit Sharing Plan
                 (Nonstandardized) Adoption Agreement of Registrant, effective
                 January 1, 1994...................................................

            12   (iii)401(k) Profit Sharing Plan (Nonstandardized) Adoption
                 Agreement of Registrant, effective January 1, 1996................

            12   (iv)Amendment to page 6 of the 401(k) Profit Sharing Plan
                 (Nonstandardized) Adoption Agreement of Registrant, effective
                 January 1, 1996...................................................

            19   (v)Amendment to Item B.3 of the 401(k) Profit Sharing Plan
                 (Nonstandardized) Adoption Agreement of Registrant, effective
                 October 1, 1997...................................................

            19   (vi)401(k) Profit Sharing Plan (Nonstandardized) Participation
                 Agreement of Registrant, effective July 31,1997...................

            19   (vii)401(k)  Profit Sharing Plan (Nonstandardized) Participation
                 Agreement of Registrant, effective August 8, 1997.................


            22   (viii)Profit Sharing Plan of Bindley Western Industries, Inc. &
                 Subsidiaries (PRISM(R) Prototype Retirement Plan and Trust).......


            25   (ix)Spin-off Amendment to the Profit Sharing Plan of Registrant
                 effective December 11, 1998.......................................
</TABLE>

                                      E-4
<PAGE>

<TABLE>
<CAPTION>
                                                                                               Page No.
Exhibit                                                                                          This
No.                                              Description                                    Filing
----------         --------------------------------------------------------------------       ----------
<S>          <C>                                                                              <C>
             /25/  (x)Second Amendment to the Profit Sharing Plan of Registrant
                   effective December 31, 1999.........................................

             /25/  (xi)Third Amendment to the Profit Sharing Plan of Registrant
                   effective January 1, 2000...........................................

  10-AA*     /11/  (i)Form of Profit Sharing Excess Plan and related Trust between
                   Registrant and each of William E. Bindley, Keith W. Burks,
                   Michael D. McCormick, and Thomas J. Salentine.......................

             /11/  (ii)Form of 401(k) Excess Plan and Related Trust between Registrant
                   and each of William E. Bindley, Keith W. Burks, Michael D.
                   McCormick, and Thomas J. Salentine..................................

             /12/  (iii)First Amendment to 401(k) Excess Plan..........................

             /19/  (iv)Form of Profit Sharing Excess Plan, restated as of January
                   1,1996, between Registrant and each of William E. Bindley, Keith W.
                   Burks, Michael D. McCormick, Robert L. Myers, and Thomas J.
                   Salentine...........................................................

             /19/  (v)Form of 401(k) Excess Plan, restated as of January 1, 1996,
                   between Registrant and each of William E. Bindley, Keith W. Burks,
                   Michael D. McCormick, Robert L. Myers, and Thomas J. Salentine......

  10-BB*     /16/  (i) 1998 Non-Qualified Stock Option Plan of Registrant, as
                   amended.............................................................

             /26/  (ii) Amendment to 1998 Non-Qualified Stock Option Plan of
                   Registrant..........................................................

  10-CC*     /25/  Central Pharmacy Services, Inc. 1993 Stock Option Plan, as
                   amended.............................................................

    21             List of subsidiaries of Registrant..................................

    23             Written Consent of PricewaterhouseCoopers LLP.......................

    27             Financial Data Schedule.............................................
</TABLE>
-----------------------
*The indicated exhibit is a management contract, compensatory plan, or
arrangement required to be filed by Item 601 of Regulation S-K.

                                      E-5
<PAGE>

/1/  The copy of this exhibit filed as the same exhibit number to the
     Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
     1987 is incorporated herein by reference.

/2/  The copy of this exhibit filed as Exhibit 4(a)(ii) to the Registrant's
     Registration Statement on Form S-3 (Registration No. 33-45965) is
     incorporated herein by reference.

/3/  The copy of this exhibit filed as Exhibit 1 to the Registrant's Quarterly
     Report on Form 10-Q for the quarter ended June 30, 1992 is incorporated
     herein by reference.

/4/  The copy of this exhibit filed as Exhibit 10 to the Registrant's Current
     Report on Form 8-K, as filed with the Commission on January 4, 1999, is
     incorporated herein by reference.

/5/  The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1992 is incorporated herein by reference.

/6/  The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1990 is incorporated herein by reference.

/7/  The copy of this exhibit filed as the same exhibit number to the
     Registrant's Registration Statement on Form S-1 (Registration No. 2-84862)
     is incorporated herein by reference.

/8/  The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1986 is incorporated herein by reference.

/9/  The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1991 is incorporated herein by reference.

/10/ The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1993 is incorporated herein by reference.

/11/ The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1994 is incorporated herein by reference.

/12/ The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1995 is incorporated herein by reference.

/13/ The copy of this exhibit filed as Exhibit 10-CC to the Registrant's
     Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 is
     incorporated herein by reference.

                                      E-6
<PAGE>

/14/ The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1996 is incorporated herein by reference.

/15/ The copy of this exhibit filed as Exhibit 4 to the Registrant's Current
     Report on Form 8-K, as filed with the Commission on August 23, 1999, is
     incorporated herein by reference.

/16/ The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1998 is incorporated herein by reference.

/17/ The copy of this exhibit filed as Exhibit 4.1 (iv) to the Registrant's
     Registration Statement on Form S-8 (Registration No. 333-57975) is
     incorporated herein by reference.

/18/ The copy of this exhibit filed as Exhibit 4.2 to the Registrant's
     Registration Statement on Form S-8 (Registration No. 333-57975) is
     incorporated herein by reference.

/19/ The copy of this exhibit filed as the same exhibit number to the
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1997 is incorporated herein by reference.

/20/ The copy of this exhibit filed as Exhibit 4.3 (iv) to the Registrant's
     Registration Statement on Form S-8 (Registration No. 333-60279) is
     incorporated herein by reference.

/21/ The copy of this exhibit filed as Exhibit 4.3 (v) to the Registrant's
     Registration Statement on Form S-8 (Registration No. 333-60279) is
     incorporated herein by reference.

/22/ The copy of this exhibit filed as Exhibit 4.3 to the Registrant's
     Registration Statement on Form S-8 (Registration No. 333-57975) is
     incorporated herein by reference.

/23/ The copy of this exhibit filed as Exhibit 10-G (ii) to the Registrant's
     Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 is
     incorporated herein by reference.

/24/ The copy of this exhibit filed as the same exhibit number to the
     Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
     1999 is incorporated herein by reference.

/25/ The copy of this exhibit filed as the same exhibit number to the
     Registrant's Quarterly Report on Form 10-Q for the quarter ended September
     30, 1999 is incorporated herein by reference.

/26/ The copy of this exhibit filed as Exhibit 4.3(ii) to the Registrant's
     Registration Statement on Form S-8 (Registration No. 333-85379) is
     incorporated herein by reference.

                                      E-7