|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
Delaware
|
|
94-3207296
|
(State or other jurisdiction
of incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
One Post Street, San Francisco, California
|
|
94104
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
Large accelerated filer
|
|
x
|
|
Accelerated filer
|
|
o
|
Non-accelerated filer
|
|
o
|
|
Smaller reporting company
|
|
o
|
|
|
|
|
Emerging growth company
|
|
o
|
Class
|
|
Outstanding as of
|
September 30, 2018
|
Common stock, $0.01 par value
|
|
195,376,222 shares
|
|
Item
|
Page
|
|
|
|
|
|
|
|
|
|
1.
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
2.
|
||
|
|
|
3.
|
||
|
|
|
4.
|
||
|
|
|
|
|
|
|
|
|
1.
|
||
|
|
|
1A.
|
||
|
|
|
2.
|
||
|
|
|
3.
|
||
|
|
|
4.
|
||
|
|
|
5.
|
||
|
|
|
6.
|
||
|
|
|
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenues
|
$
|
53,075
|
|
|
$
|
52,061
|
|
|
$
|
105,682
|
|
|
$
|
103,112
|
|
Cost of Sales
|
(50,271
|
)
|
|
(49,227
|
)
|
|
(100,099
|
)
|
|
(97,718
|
)
|
||||
Gross Profit
|
2,804
|
|
|
2,834
|
|
|
5,583
|
|
|
5,394
|
|
||||
Operating Expenses
|
(2,033
|
)
|
|
(2,009
|
)
|
|
(4,063
|
)
|
|
(3,936
|
)
|
||||
Goodwill Impairment Charges
|
—
|
|
|
(350
|
)
|
|
(570
|
)
|
|
(350
|
)
|
||||
Restructuring and Asset Impairment Charges
|
(82
|
)
|
|
(236
|
)
|
|
(178
|
)
|
|
(236
|
)
|
||||
Total Operating Expenses
|
(2,115
|
)
|
|
(2,595
|
)
|
|
(4,811
|
)
|
|
(4,522
|
)
|
||||
Operating Income
|
689
|
|
|
239
|
|
|
772
|
|
|
872
|
|
||||
Other Income, Net
|
20
|
|
|
69
|
|
|
60
|
|
|
82
|
|
||||
Loss from Equity Method Investment in Change Healthcare
|
(56
|
)
|
|
(61
|
)
|
|
(112
|
)
|
|
(181
|
)
|
||||
Interest Expense
|
(66
|
)
|
|
(69
|
)
|
|
(127
|
)
|
|
(137
|
)
|
||||
Income from Continuing Operations Before Income Taxes
|
587
|
|
|
178
|
|
|
593
|
|
|
636
|
|
||||
Income Tax Expense
|
(35
|
)
|
|
(122
|
)
|
|
(122
|
)
|
|
(217
|
)
|
||||
Income from Continuing Operations
|
552
|
|
|
56
|
|
|
471
|
|
|
419
|
|
||||
Income from Discontinued Operations, Net of Tax
|
1
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||
Net Income
|
553
|
|
|
56
|
|
|
473
|
|
|
421
|
|
||||
Net Income Attributable to Noncontrolling Interests
|
(54
|
)
|
|
(55
|
)
|
|
(112
|
)
|
|
(111
|
)
|
||||
Net Income Attributable to McKesson Corporation
|
$
|
499
|
|
|
$
|
1
|
|
|
$
|
361
|
|
|
$
|
310
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings Per Common Share Attributable to McKesson Corporation
|
|
|
|
|
|
|
|
||||||||
Diluted
|
|
|
|
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
2.51
|
|
|
$
|
0.01
|
|
|
$
|
1.79
|
|
|
$
|
1.46
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
||||
Total
|
$
|
2.51
|
|
|
$
|
0.01
|
|
|
$
|
1.80
|
|
|
$
|
1.47
|
|
Basic
|
|
|
|
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
2.52
|
|
|
$
|
0.01
|
|
|
$
|
1.80
|
|
|
$
|
1.47
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
||||
Total
|
$
|
2.52
|
|
|
$
|
0.01
|
|
|
$
|
1.81
|
|
|
$
|
1.48
|
|
|
|
|
|
|
|
|
|
||||||||
Dividends Declared Per Common Share
|
$
|
0.39
|
|
|
$
|
0.34
|
|
|
$
|
0.73
|
|
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted Average Common Shares
|
|
|
|
|
|
|
|
||||||||
Diluted
|
199
|
|
|
210
|
|
|
201
|
|
|
211
|
|
||||
Basic
|
198
|
|
|
209
|
|
|
200
|
|
|
210
|
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net Income
|
$
|
553
|
|
|
$
|
56
|
|
|
$
|
473
|
|
|
$
|
421
|
|
|
|
|
|
|
|
|
|
||||||||
Other Comprehensive Income, Net of Tax
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments arising during the period
|
26
|
|
|
265
|
|
|
(103
|
)
|
|
577
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses) on cash flow hedges arising during the period
|
2
|
|
|
(3
|
)
|
|
2
|
|
|
11
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Retirement-related benefit plans
|
4
|
|
|
(3
|
)
|
|
12
|
|
|
(8
|
)
|
||||
Other Comprehensive Income (Loss), Net of Tax
|
32
|
|
|
259
|
|
|
(89
|
)
|
|
580
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive Income
|
585
|
|
|
315
|
|
|
384
|
|
|
1,001
|
|
||||
Comprehensive Income Attributable to Noncontrolling Interests
|
(47
|
)
|
|
(88
|
)
|
|
(68
|
)
|
|
(260
|
)
|
||||
Comprehensive Income Attributable to McKesson Corporation
|
$
|
538
|
|
|
$
|
227
|
|
|
$
|
316
|
|
|
$
|
741
|
|
|
Six Months Ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
473
|
|
|
$
|
421
|
|
Adjustments to reconcile to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
475
|
|
|
463
|
|
||
Goodwill and other asset impairment charges
|
611
|
|
|
539
|
|
||
Loss from equity method investment in Change Healthcare
|
112
|
|
|
181
|
|
||
Deferred taxes
|
60
|
|
|
42
|
|
||
Credits associated with last-in, first-out inventory method
|
(43
|
)
|
|
(3
|
)
|
||
Other non-cash items
|
(138
|
)
|
|
(18
|
)
|
||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
||||
Receivables
|
(1,705
|
)
|
|
(812
|
)
|
||
Inventories
|
(398
|
)
|
|
(1,217
|
)
|
||
Drafts and accounts payable
|
1,197
|
|
|
1,808
|
|
||
Taxes
|
(99
|
)
|
|
86
|
|
||
Other
|
(227
|
)
|
|
(151
|
)
|
||
Net cash provided by operating activities
|
318
|
|
|
1,339
|
|
||
|
|
|
|
||||
Investing Activities
|
|
|
|
||||
Payments for property, plant and equipment
|
(178
|
)
|
|
(164
|
)
|
||
Capitalized software expenditures
|
(70
|
)
|
|
(91
|
)
|
||
Acquisitions, net of cash, cash equivalents and restricted cash acquired
|
(840
|
)
|
|
(1,874
|
)
|
||
Proceeds from sale of businesses and investments, net
|
46
|
|
|
164
|
|
||
Payments received on Healthcare Technology Net Asset Exchange
|
—
|
|
|
126
|
|
||
Other
|
59
|
|
|
(26
|
)
|
||
Net cash used in investing activities
|
(983
|
)
|
|
(1,865
|
)
|
||
|
|
|
|
||||
Financing Activities
|
|
|
|
||||
Proceeds from short-term borrowings
|
19,735
|
|
|
8,464
|
|
||
Repayments of short-term borrowings
|
(18,342
|
)
|
|
(8,343
|
)
|
||
Repayments of long-term debt
|
(5
|
)
|
|
(545
|
)
|
||
Common stock transactions:
|
|
|
|
||||
Issuances
|
38
|
|
|
83
|
|
||
Share repurchases, including shares surrendered for tax withholding
|
(888
|
)
|
|
(701
|
)
|
||
Dividends paid
|
(139
|
)
|
|
(121
|
)
|
||
Other
|
(201
|
)
|
|
(109
|
)
|
||
Net cash provided by (used in) financing activities
|
198
|
|
|
(1,272
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(87
|
)
|
|
109
|
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(554
|
)
|
|
(1,689
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
2,672
|
|
|
4,254
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
2,118
|
|
|
$
|
2,565
|
|
1.
|
Significant Accounting Policies
|
(In millions)
|
Amounts Recognized as of Acquisition Date (Provisional As Adjusted)
|
||||
Receivables
|
$
|
120
|
|
||
Other current assets, net of cash and cash equivalents acquired
|
73
|
|
|||
Goodwill
|
375
|
|
|||
Intangible assets
|
326
|
|
|||
Other long-term assets
|
51
|
|
|||
Current liabilities
|
(72
|
)
|
|||
Other long-term liabilities
|
(89
|
)
|
|||
Net assets acquired, net of cash and cash equivalents
|
$
|
784
|
|
5.
|
Restructuring and Asset Impairment Charges
|
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Total
|
||||||||
Severance and employee-related costs, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
6
|
|
Exit-related costs
(1)
|
5
|
|
|
5
|
|
|
35
|
|
|
45
|
|
||||
Asset impairments and accelerated depreciation
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Total
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
42
|
|
|
$
|
53
|
|
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Total
|
||||||||
Severance and employee-related costs, net
|
$
|
3
|
|
|
$
|
10
|
|
|
$
|
7
|
|
|
$
|
20
|
|
Exit-related costs
(1)
|
6
|
|
|
7
|
|
|
56
|
|
|
69
|
|
||||
Asset impairments and accelerated depreciation
|
4
|
|
|
1
|
|
|
17
|
|
|
22
|
|
||||
Total
|
$
|
13
|
|
|
$
|
18
|
|
|
$
|
80
|
|
|
$
|
111
|
|
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Total
|
||||||||
Balance, March 31, 2018
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net restructuring charges recognized
|
13
|
|
|
18
|
|
|
80
|
|
|
111
|
|
||||
Non-cash charges
|
(4
|
)
|
|
(1
|
)
|
|
(17
|
)
|
|
(22
|
)
|
||||
Cash payments
|
(6
|
)
|
|
(7
|
)
|
|
(18
|
)
|
|
(31
|
)
|
||||
Balance, September 30, 2018
|
$
|
3
|
|
|
$
|
10
|
|
|
$
|
45
|
|
|
$
|
58
|
|
6.
|
Divestitures
|
7.
|
Income Taxes
|
8.
|
Redeemable Noncontrolling Interests and Noncontrolling Interests
|
(In millions)
|
Noncontrolling Interests
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, March 31, 2018
|
$
|
253
|
|
$
|
1,459
|
|
Net income attributable to noncontrolling interests
|
89
|
|
23
|
|
||
Other comprehensive income
|
—
|
|
(44
|
)
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
(23
|
)
|
||
Payments to noncontrolling interests
|
(106
|
)
|
—
|
|
||
Exercises of Put Right
|
—
|
|
—
|
|
||
Other
|
(28
|
)
|
—
|
|
||
Balance, September 30, 2018
|
$
|
208
|
|
$
|
1,415
|
|
(In millions)
|
Noncontrolling Interests
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, March 31, 2017
|
$
|
178
|
|
$
|
1,327
|
|
Net income attributable to noncontrolling interests
|
91
|
|
20
|
|
||
Other comprehensive loss
|
—
|
|
149
|
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
(20
|
)
|
||
Payments of noncontrolling interests
|
(47
|
)
|
—
|
|
||
Exercises of Put Right
|
—
|
|
(53
|
)
|
||
Other
|
(3
|
)
|
—
|
|
||
Balance, September 30, 2017
|
$
|
219
|
|
$
|
1,423
|
|
9.
|
Earnings Per Common Share
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
(In millions, except per share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Income from continuing operations
|
$
|
552
|
|
|
$
|
56
|
|
|
$
|
471
|
|
|
$
|
419
|
|
Net income attributable to noncontrolling interests
|
(54
|
)
|
|
(55
|
)
|
|
(112
|
)
|
|
(111
|
)
|
||||
Income from continuing operations attributable to McKesson
|
498
|
|
|
1
|
|
|
359
|
|
|
308
|
|
||||
Income from discontinued operations, net of tax
|
1
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||
Net income attributable to McKesson
|
$
|
499
|
|
|
$
|
1
|
|
|
$
|
361
|
|
|
$
|
310
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
198
|
|
|
209
|
|
|
200
|
|
|
210
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Options to purchase common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Restricted stock units
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Diluted
|
199
|
|
|
210
|
|
|
201
|
|
|
211
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings per common share attributable to McKesson:
(1)
|
|
|
|
|
|
|
|
||||||||
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
2.51
|
|
|
$
|
0.01
|
|
|
$
|
1.79
|
|
|
$
|
1.46
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
||||
Total
|
$
|
2.51
|
|
|
$
|
0.01
|
|
|
$
|
1.80
|
|
|
$
|
1.47
|
|
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
2.52
|
|
|
$
|
0.01
|
|
|
$
|
1.80
|
|
|
$
|
1.47
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
||||
Total
|
$
|
2.52
|
|
|
$
|
0.01
|
|
|
$
|
1.81
|
|
|
$
|
1.48
|
|
(1)
|
Certain computations may reflect rounding adjustments.
|
10.
|
Goodwill and Intangible Assets, Net
|
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Total
|
||||||||||
Balance, March 31, 2018
|
$
|
4,110
|
|
|
$
|
1,850
|
|
|
$
|
2,070
|
|
|
$
|
2,894
|
|
|
$
|
10,924
|
|
Goodwill acquired
|
—
|
|
|
37
|
|
|
360
|
|
|
5
|
|
|
402
|
|
|||||
Goodwill impairment charges
|
—
|
|
|
(570
|
)
|
|
—
|
|
|
—
|
|
|
(570
|
)
|
|||||
Acquisition accounting, transfers and other adjustments
|
13
|
|
|
1
|
|
|
15
|
|
|
6
|
|
|
35
|
|
|||||
Foreign currency translation adjustments, net
|
(40
|
)
|
|
(108
|
)
|
|
—
|
|
|
(16
|
)
|
|
(164
|
)
|
|||||
Balance, September 30, 2018
|
$
|
4,083
|
|
|
$
|
1,210
|
|
|
$
|
2,445
|
|
|
$
|
2,889
|
|
|
$
|
10,627
|
|
|
September 30, 2018
|
|
March 31, 2018
|
||||||||||||||||||||||
(Dollars in millions)
|
Weighted
Average
Remaining
Amortization
Period
(years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||||||||
Customer relationships
|
12
|
|
$
|
4,036
|
|
|
$
|
(1,797
|
)
|
|
$
|
2,239
|
|
|
$
|
3,619
|
|
|
$
|
(1,550
|
)
|
|
$
|
2,069
|
|
Service agreements
|
12
|
|
1,027
|
|
|
(406
|
)
|
|
621
|
|
|
1,037
|
|
|
(386
|
)
|
|
651
|
|
||||||
Pharmacy licenses
|
25
|
|
777
|
|
|
(357
|
)
|
|
420
|
|
|
684
|
|
|
(196
|
)
|
|
488
|
|
||||||
Trademarks and trade names
|
14
|
|
925
|
|
|
(223
|
)
|
|
702
|
|
|
932
|
|
|
(187
|
)
|
|
745
|
|
||||||
Technology
|
4
|
|
141
|
|
|
(86
|
)
|
|
55
|
|
|
147
|
|
|
(84
|
)
|
|
63
|
|
||||||
Other
|
5
|
|
288
|
|
|
(197
|
)
|
|
91
|
|
|
262
|
|
|
(176
|
)
|
|
86
|
|
||||||
Total
|
|
|
$
|
7,194
|
|
|
$
|
(3,066
|
)
|
|
$
|
4,128
|
|
|
$
|
6,681
|
|
|
$
|
(2,579
|
)
|
|
$
|
4,102
|
|
11.
|
Debt and Financing Activities
|
12.
|
Pension Benefits
|
13.
|
Hedging Activities
|
|
Balance Sheet
Caption
|
September 30, 2018
|
|
March 31, 2018
|
||||||||||||||||
|
Fair Value of
Derivative
|
U.S. Dollar Notional
|
|
Fair Value of
Derivative
|
U.S. Dollar Notional
|
|||||||||||||||
(In millions)
|
Asset
|
Liability
|
|
Asset
|
Liability
|
|||||||||||||||
Derivatives designated for hedge accounting
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts (current)
|
Prepaid expenses and other
|
$
|
15
|
|
$
|
—
|
|
$
|
81
|
|
|
$
|
15
|
|
$
|
—
|
|
$
|
81
|
|
Foreign exchange contracts (noncurrent)
|
Other Noncurrent Assets
|
15
|
|
—
|
|
81
|
|
|
14
|
|
—
|
|
81
|
|
||||||
Cross currency swaps (current)
|
Prepaid expenses and other/Other accrued liabilities
|
31
|
|
12
|
|
371
|
|
|
—
|
|
7
|
|
504
|
|
||||||
Cross currency swaps (noncurrent)
|
Other Noncurrent Assets/Liabilities
|
44
|
|
115
|
|
3,508
|
|
|
—
|
|
222
|
|
3,508
|
|
||||||
Total
|
|
$
|
105
|
|
$
|
127
|
|
|
|
$
|
29
|
|
$
|
229
|
|
|
||||
Derivatives not designated for hedge accounting
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts (current)
|
Prepaid expenses and other
|
$
|
—
|
|
$
|
—
|
|
$
|
25
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
13
|
|
Foreign exchange contracts (current)
|
Other accrued liabilities
|
—
|
|
—
|
|
15
|
|
|
—
|
|
—
|
|
16
|
|
||||||
Total
|
|
$
|
—
|
|
$
|
—
|
|
|
|
$
|
—
|
|
$
|
—
|
|
|
14.
|
Fair Value Measurements
|
15.
|
Commitments and Contingent Liabilities
|
16.
|
Stockholders’ Equity
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
(In millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Foreign currency translation adjustments
(1)
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments arising during period, net of income tax benefit of nil, nil, nil and nil
(2) (3)
|
$
|
5
|
|
|
$
|
303
|
|
|
$
|
(268
|
)
|
|
$
|
685
|
|
Reclassified to income statement, net of income tax expense of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
5
|
|
|
303
|
|
|
(268
|
)
|
|
685
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses) on net investment hedges arising during period, net of income tax (expense) benefit of ($7), $25, ($58) and $69
(4)
|
21
|
|
|
(38
|
)
|
|
165
|
|
|
(108
|
)
|
||||
Reclassified to income statement, net of income tax expense of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
21
|
|
|
(38
|
)
|
|
165
|
|
|
(108
|
)
|
||||
Unrealized gains (losses) on cash flow hedges
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses) on cash flow hedges arising during period, net of income tax expense of nil, nil, nil and nil
|
2
|
|
|
(3
|
)
|
|
2
|
|
|
11
|
|
||||
Reclassified to income statement, net of income tax expense of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
2
|
|
|
(3
|
)
|
|
2
|
|
|
11
|
|
||||
Changes in retirement-related benefit plans
(5)
|
|
|
|
|
|
|
|
||||||||
Net actuarial loss and prior service cost arising during the period, net of income tax benefit of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Amortization of actuarial loss, prior service cost and transition obligation, net of income tax expense of $2, nil, $2 and nil
(6)
|
3
|
|
|
1
|
|
|
4
|
|
|
2
|
|
||||
Foreign currency translation adjustments and other, net of income tax expense of nil, nil, nil and nil
|
1
|
|
|
(4
|
)
|
|
8
|
|
|
(10
|
)
|
||||
|
4
|
|
|
(3
|
)
|
|
12
|
|
|
(8
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of tax
|
$
|
32
|
|
|
$
|
259
|
|
|
$
|
(89
|
)
|
|
$
|
580
|
|
(1)
|
Foreign currency translation adjustments primarily result from the conversion of non-U.S. dollar financial statements of our foreign subsidiary, McKesson Europe, into the Company’s reporting currency, U.S. dollars, during the second quarters and first six months of 2019 and 2018.
|
(2)
|
During the first six months of 2019, the net foreign currency translation losses were primarily due to the weakening of the Euro and British pound sterling against the U.S. dollar from
April 1, 2018
to
September 30, 2018
. During the second quarter and first six months of 2018, the net foreign currency translation gains were primarily due to the strengthening of the Euro, Canadian dollar and British pound sterling against the U.S. dollar from April 1, 2017 to September 30, 2017.
|
(3)
|
The second quarter and first six months of 2019 include net foreign currency translation losses of
$7 million
and
$46 million
and the second quarter and first six months of 2018 include net foreign currency translation gains of
$33 million
and
$148 million
attributable to redeemable noncontrolling interests.
|
(4)
|
The second quarter and first six months of 2019 include foreign currency gains of
$23 million
and
$184 million
on the net investment hedges from the
€1.95 billion
Euro-denominated notes and
£450 million
British pound sterling-denominated notes and gains of
$5 million
and
$39 million
on the net investment hedges from the cross-currency swaps. The second quarter and first six months of 2018 include foreign currency losses of
$63 million
and
$177 million
on the net investment hedges from the
€1.20 billion
Euro-denominated notes and
£450 million
British pound sterling-denominated notes.
|
(5)
|
The second quarter and first six months of 2019 include net actuarial gains of
nil
and
$2 million
and the second quarter and first six months of 2018 include net actuarial losses of
nil
and
$1 million
, which are attributable to redeemable noncontrolling interests.
|
(6)
|
Pre-tax amount reclassified into cost of sales and operating expenses in our condensed consolidated statements of operations. The related tax expense was reclassified into income tax expense in our condensed consolidated statements of operations.
|
|
Foreign Currency Translation Adjustments
|
|
|
|
|
|
|
||||||||||||
(In millions)
|
Foreign Currency Translation Adjustments, Net of Tax
|
|
Unrealized Gains (Losses) on Net Investment Hedges,
Net of Tax
|
|
Unrealized Gains (Losses) on Cash Flow Hedges,
Net of Tax
|
|
Unrealized Net Gains (Losses) and Other Components of Benefit Plans, Net of Tax
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||||||||
Balance at June 30, 2018
|
$
|
(1,492
|
)
|
|
$
|
(44
|
)
|
|
$
|
(61
|
)
|
|
$
|
(204
|
)
|
|
(1,801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive income before reclassifications
|
5
|
|
|
21
|
|
|
2
|
|
|
1
|
|
|
29
|
|
|||||
Amounts reclassified to earnings and other
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|||||
Other comprehensive income
|
5
|
|
|
21
|
|
|
2
|
|
|
4
|
|
|
32
|
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|||||
Other comprehensive income attributable to McKesson
|
12
|
|
|
21
|
|
|
2
|
|
|
4
|
|
|
39
|
|
|||||
Balance at September 30, 2018
|
$
|
(1,480
|
)
|
|
$
|
(23
|
)
|
|
$
|
(59
|
)
|
|
$
|
(200
|
)
|
|
$
|
(1,762
|
)
|
|
Foreign Currency Translation Adjustments
|
|
|
|
|
|
|
||||||||||||
(In millions)
|
Foreign Currency Translation Adjustments, Net of Tax
|
|
Unrealized Gains (Losses) on Net Investment Hedges,
Net of Tax
|
|
Unrealized Gains (Losses) on Cash Flow Hedges,
Net of Tax
|
|
Unrealized Net Gains (Losses) and Other Components of Benefit Plans, Net of Tax
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||||||||
Balance at March 31, 2018
|
$
|
(1,258
|
)
|
|
$
|
(188
|
)
|
|
$
|
(61
|
)
|
|
$
|
(210
|
)
|
|
$
|
(1,717
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive income (loss) before reclassifications
|
(268
|
)
|
|
165
|
|
|
2
|
|
|
8
|
|
|
(93
|
)
|
|||||
Amounts reclassified to earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|||||
Other comprehensive income (loss)
|
(268
|
)
|
|
165
|
|
|
2
|
|
|
12
|
|
|
(89
|
)
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
(46
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(44
|
)
|
|||||
Other comprehensive income (loss) attributable to McKesson
|
(222
|
)
|
|
165
|
|
|
2
|
|
|
10
|
|
|
(45
|
)
|
|||||
Balance at September 30, 2018
|
$
|
(1,480
|
)
|
|
$
|
(23
|
)
|
|
$
|
(59
|
)
|
|
$
|
(200
|
)
|
|
$
|
(1,762
|
)
|
17.
|
Related Party Balances and Transactions
|
18.
|
Segments of Business
|
•
|
McKesson Canada which distributes pharmaceutical and medical products and operates Rexall Health retail pharmacies;
|
•
|
McKesson Prescription Technology Solutions which provides innovative technologies that support retail pharmacies; and
|
•
|
Our
70%
equity ownership interest in a joint venture, Change Healthcare, which is accounted for by us using the equity investment method of accounting.
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
(In millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
U.S. Pharmaceutical and Specialty Solutions
(1)
|
$
|
41,610
|
|
|
$
|
40,603
|
|
|
$
|
82,587
|
|
|
$
|
80,885
|
|
European Pharmaceutical Solutions
(1)
|
6,639
|
|
|
6,773
|
|
|
13,574
|
|
|
13,155
|
|
||||
Medical-Surgical Solutions
(1)
|
1,948
|
|
|
1,660
|
|
|
3,651
|
|
|
3,193
|
|
||||
Other
|
2,878
|
|
|
3,025
|
|
|
5,870
|
|
|
5,879
|
|
||||
Total Revenues
|
$
|
53,075
|
|
|
$
|
52,061
|
|
|
$
|
105,682
|
|
|
$
|
103,112
|
|
|
|
|
|
|
|
|
|
||||||||
Operating profit
|
|
|
|
|
|
|
|
||||||||
U.S. Pharmaceutical and Specialty Solutions
(2)
|
$
|
610
|
|
|
$
|
710
|
|
|
$
|
1,153
|
|
|
$
|
1,185
|
|
European Pharmaceutical Solutions
(3)
|
10
|
|
|
(547
|
)
|
|
(550
|
)
|
|
(512
|
)
|
||||
Medical-Surgical Solutions
|
105
|
|
|
118
|
|
|
198
|
|
|
226
|
|
||||
Other
(4) (5)
|
95
|
|
|
74
|
|
|
209
|
|
|
91
|
|
||||
Total
|
820
|
|
|
355
|
|
|
1,010
|
|
|
990
|
|
||||
Corporate Expenses, Net
(6)
|
(167
|
)
|
|
(108
|
)
|
|
(290
|
)
|
|
(217
|
)
|
||||
Interest Expense
|
(66
|
)
|
|
(69
|
)
|
|
(127
|
)
|
|
(137
|
)
|
||||
Income from Continuing Operations Before Income Taxes
|
$
|
587
|
|
|
$
|
178
|
|
|
$
|
593
|
|
|
$
|
636
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues, net by geographic area
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
43,774
|
|
|
$
|
42,558
|
|
|
$
|
86,664
|
|
|
$
|
84,669
|
|
Foreign
|
9,301
|
|
|
9,503
|
|
|
$
|
19,018
|
|
|
$
|
18,443
|
|
||
Total Revenues
|
$
|
53,075
|
|
|
$
|
52,061
|
|
|
$
|
105,682
|
|
|
$
|
103,112
|
|
(1)
|
Revenues derived from services represent less than
1%
of our U.S. Pharmaceutical and Specialty Solutions segment’s total revenues, less than
10%
of our European Pharmaceutical Solutions segment’s total revenues and less than
1%
of our Medical-Surgical Solutions segment’s total revenues.
|
(2)
|
Our U.S. Pharmaceutical and Specialty Solutions segment’s operating profit for the second quarter and first six months of 2019 includes
$22 million
and
$43 million
, and for the second quarter and first six months of 2018 includes
$29 million
and
$3 million
pre-tax credits related to our last-in, first-out (“LIFO”) method of accounting for inventories. The LIFO inventory credit in the first six months of 2019 was higher primarily due to lower full year expectations for net price increases compared to the same period a year ago. Operating profit for the first six months of 2019 also includes
$35 million
of cash receipts for our share of antitrust legal settlements.
|
(3)
|
European Pharmaceutical Solutions segment’s operating profit for the first six months of 2019 includes non-cash goodwill impairment charges (pre-tax and after-tax) of
$570 million
. European Pharmaceutical Solutions segment’s operating profit for the second quarter and first six months of 2018 includes pre-tax charges of
$236 million
(
$197 million
after-tax) primarily related to the impairment of certain long-lived assets and employee severance for our U.K. retail businesses. The second quarter and first six months of 2018 include a non-cash goodwill impairment charge (pre-tax and after-tax) of
$350 million
within our former (prior to the 2019 first quarter realignment in our operating segment structure) Distribution Solutions segment.
|
(4)
|
The second quarter and first six months of 2019 operating profit for Other include pre-tax restructuring and asset impairment charges of
$42 million
(
$37 million
after-tax) and
$80 million
(
$76 million
after-tax) primarily associated with the closure of retail pharmacy stores within our Canadian business. The first six months of 2019 includes a pre-tax gain from escrow settlement of
$97 million
representing certain indemnity and other claims related to our 2017 third quarter acquisition of Rexall Health.
|
(5)
|
Operating profit for Other for the second quarter and first six months of 2019 includes a pre-tax credit of
$90 million
(
$66 million
after-tax) representing the derecognition of the TRA liability payable to the shareholders of Change. Operating profit for Other also includes our proportionate share of loss from Change Healthcare of
$56 million
and
$112 million
for the second quarter and first six months of 2019, and
$61 million
and
$181 million
for the second quarter and first six months of 2018. Operating profit for the first six months of 2018 also includes a pre-tax gain of
$37 million
(after-tax gain of
$22 million
) upon the finalization of net working capital and other adjustments related to the contribution of the majority of our Core MTS Business to Change Healthcare in the fourth quarter of 2017.
|
(6)
|
Corporate expenses, net, for the second quarter and first six months of 2019 include a pre-tax charge of
$43 million
(
$32 million
after-tax) and
$59 million
(
$48 million
after-tax) representing opioid-related costs, primarily related to litigation expenses and other-related costs.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
(Dollars in millions, except per share data)
|
Quarter Ended September 30,
|
|
|
|
Six Months Ended September 30,
|
|
|
||||||||||||||
2018
|
|
2017
|
Change
|
|
2018
|
|
2017
|
Change
|
|||||||||||||
Revenues
|
$
|
53,075
|
|
|
$
|
52,061
|
|
2
|
|
%
|
|
$
|
105,682
|
|
|
$
|
103,112
|
|
2
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross Profit
|
2,804
|
|
|
2,834
|
|
(1
|
)
|
|
|
5,583
|
|
|
5,394
|
|
4
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross Profit Margin
|
5.28
|
|
|
5.44
|
|
(16
|
)
|
bp
|
|
5.28
|
|
|
5.23
|
|
5
|
|
bp
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Expenses
|
(2,033
|
)
|
|
(2,009
|
)
|
1
|
|
%
|
|
(4,063
|
)
|
|
(3,936
|
)
|
3
|
|
%
|
||||
Goodwill Impairment Charges
|
—
|
|
|
(350
|
)
|
(100
|
)
|
|
|
(570
|
)
|
|
(350
|
)
|
63
|
|
|
||||
Restructuring and Asset Impairment Charges
|
(82
|
)
|
|
(236
|
)
|
(65
|
)
|
|
|
(178
|
)
|
|
(236
|
)
|
(25
|
)
|
|
||||
Total Operating Expenses
|
(2,115
|
)
|
|
(2,595
|
)
|
(18
|
)
|
%
|
|
(4,811
|
)
|
|
(4,522
|
)
|
6
|
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Expenses as a Percentage of Revenues
|
3.98
|
|
|
4.98
|
|
(100
|
)
|
bp
|
|
4.55
|
|
|
4.39
|
|
16
|
|
bp
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other Income, Net
|
20
|
|
|
69
|
|
(71
|
)
|
%
|
|
60
|
|
|
82
|
|
(27
|
)
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss from Equity Method Investment in Change Healthcare
|
(56
|
)
|
|
(61
|
)
|
(8
|
)
|
|
|
(112
|
)
|
|
(181
|
)
|
(38
|
)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest Expense
|
(66
|
)
|
|
(69
|
)
|
(4
|
)
|
|
|
(127
|
)
|
|
(137
|
)
|
(7
|
)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from Continuing Operations Before Income Taxes
|
587
|
|
|
178
|
|
230
|
|
|
|
593
|
|
|
636
|
|
(7
|
)
|
|
||||
Income Tax Expense
|
(35
|
)
|
|
(122
|
)
|
(71
|
)
|
|
|
(122
|
)
|
|
(217
|
)
|
(44
|
)
|
|
||||
Income from Continuing Operations
|
552
|
|
|
56
|
|
886
|
|
|
|
471
|
|
|
419
|
|
12
|
|
|
||||
Income from Discontinued Operations, Net of Tax
|
1
|
|
|
—
|
|
NM
|
|
|
|
2
|
|
|
2
|
|
-
|
|
|
||||
Net Income
|
553
|
|
|
56
|
|
888
|
|
|
|
473
|
|
|
421
|
|
12
|
|
|
||||
Net Income Attributable to Noncontrolling Interests
|
(54
|
)
|
|
(55
|
)
|
(2
|
)
|
%
|
|
(112
|
)
|
|
(111
|
)
|
1
|
|
|
||||
Net Income Attributable to McKesson Corporation
|
$
|
499
|
|
|
$
|
1
|
|
NM
|
|
|
|
$
|
361
|
|
|
$
|
310
|
|
16
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted Earnings Per Common Share Attributable to McKesson Corporation
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing Operations
|
$
|
2.51
|
|
|
$
|
0.01
|
|
NM
|
|
|
|
$
|
1.79
|
|
|
$
|
1.46
|
|
23
|
|
%
|
Discontinued Operations
|
—
|
|
|
—
|
|
-
|
|
%
|
|
0.01
|
|
|
0.01
|
|
-
|
|
|
||||
Total
|
$
|
2.51
|
|
|
$
|
0.01
|
|
NM
|
|
|
|
$
|
1.80
|
|
|
$
|
1.47
|
|
22
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted Average Diluted Common Shares
|
199
|
|
|
210
|
|
(5
|
)
|
%
|
|
201
|
|
|
211
|
|
(5
|
)
|
%
|
•
|
A pre-tax credit of
$90 million
(
$66 million
after-tax) for the second quarter and first half of 2019 related to the derecognition of a payable to the shareholders of Change Healthcare Holdings, Inc. (“Change”), as further described below;
|
•
|
Pre-tax restructuring and asset impairment charges of
$82 million
(
$67 million
after-tax) for the second quarter of 2019 and
$178 million
(
$152 million
after-tax) for the first half of 2019, primarily representing exit-related costs, asset impairment charges and employee severance related to the preliminary phase of our multi-year strategic growth initiative, as further discussed below;
|
•
|
Non-cash goodwill impairment charges of
$570 million
(pre-tax and after-tax) for the first quarter of 2019 related to our two reporting units within the European Pharmaceutical Solutions segment, as further described below;
|
•
|
Gain from an escrow settlement of
$97 million
(pre-tax and after-tax) recognized in the first quarter of 2019 representing certain indemnity and other claims related to our third quarter 2017 acquisition of Rexall Health;
|
•
|
Higher operating expenses due to our business acquisitions for the second quarter and first half of 2019; and
|
•
|
Higher opioid-related costs primarily related to litigation expenses and other-related costs for the second quarter and first half of 2019, as further described below.
|
•
|
Non-cash goodwill impairment charges of
$350 million
(pre-tax and after-tax) for the second quarter and first half of 2018 related to our McKesson Europe AG (“McKesson Europe”) reporting unit, within our former (prior to the 2019 first quarter realignment in our operating segment structure) Distribution Solutions segment, as further described below;
|
•
|
Pre-tax restructuring and asset impairment charges of
$236 million
(
$197 million
after-tax) for the second quarter and first half of 2018, primarily representing asset impairment charges, exit-related costs and employee severance related to McKesson Europe’s U.K. retail business; and
|
•
|
A pre-tax gain of
$37 million
(
$22 million
after-tax) for the first half of 2018, which was recognized in the first quarter of 2018 upon the finalization of net working capital and other adjustments related to the fourth quarter 2017 contribution of the majority of our McKesson Technology Solutions businesses (“Core MTS Business”) to the Change Healthcare joint venture.
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
(Dollars in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Operating Expenses
|
|
|
|
|
|
|
|
||||||||
Integration related expenses
|
$
|
35
|
|
|
$
|
4
|
|
|
$
|
51
|
|
|
$
|
13
|
|
Restructuring, severance and relocation
|
1
|
|
|
1
|
|
|
4
|
|
|
6
|
|
||||
Transaction closing expenses
|
1
|
|
|
1
|
|
|
2
|
|
|
13
|
|
||||
Gain on Healthcare Technology Net Asset Exchange
|
—
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
||||
Other Expenses
(1)
|
26
|
|
|
8
|
|
|
58
|
|
|
57
|
|
||||
Acquisition-Related Expenses and Adjustments
|
$
|
63
|
|
|
$
|
14
|
|
|
$
|
115
|
|
|
$
|
52
|
|
(1)
|
Includes our proportionate share of transaction and integration expenses incurred by Change Healthcare, excluding certain fair value adjustments, which was recorded within “Loss from Equity Method Investment in Change Healthcare”.
|
|
Quarter Ended September 30,
|
|
|
|
|
Six Months Ended September 30,
|
|
|
||||||||||||||
(Dollars in millions)
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
Change
|
||||||||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
41,610
|
|
|
$
|
40,603
|
|
|
2
|
|
%
|
|
$
|
82,587
|
|
|
$
|
80,885
|
|
2
|
|
%
|
European Pharmaceutical Solutions
|
6,639
|
|
|
6,773
|
|
|
(2
|
)
|
|
|
13,574
|
|
|
13,155
|
|
3
|
|
|
||||
Medical-Surgical Solutions
|
1,948
|
|
|
1,660
|
|
|
17
|
|
|
|
3,651
|
|
|
3,193
|
|
14
|
|
|
||||
Other
|
2,878
|
|
|
3,025
|
|
|
(5
|
)
|
|
|
5,870
|
|
|
5,879
|
|
-
|
|
|
||||
Total Revenues
|
$
|
53,075
|
|
|
$
|
52,061
|
|
|
2
|
|
%
|
|
$
|
105,682
|
|
|
$
|
103,112
|
|
2
|
|
%
|
|
Quarter Ended September 30,
|
|
|
|
|
Six Months Ended September 30,
|
|
|
|
||||||||||||||
(Dollars in millions)
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
||||||||||||
Segment Operating Profit
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
610
|
|
|
$
|
710
|
|
|
(14
|
)
|
%
|
|
$
|
1,153
|
|
|
$
|
1,185
|
|
|
(3
|
)
|
%
|
European Pharmaceutical Solutions
|
10
|
|
|
(547
|
)
|
|
102
|
|
|
|
(550
|
)
|
|
(512
|
)
|
|
(7
|
)
|
|
||||
Medical-Surgical Solutions
|
105
|
|
|
118
|
|
|
(11
|
)
|
|
|
198
|
|
|
226
|
|
|
(12
|
)
|
|
||||
Other
(2)
|
95
|
|
|
74
|
|
|
28
|
|
|
|
209
|
|
|
91
|
|
|
130
|
|
|
||||
Subtotal
|
820
|
|
|
355
|
|
|
131
|
|
|
|
1,010
|
|
|
990
|
|
|
2
|
|
|
||||
Corporate Expenses, Net
(3)
|
(167
|
)
|
|
(108
|
)
|
|
55
|
|
|
|
(290
|
)
|
|
(217
|
)
|
|
34
|
|
|
||||
Interest Expense
|
(66
|
)
|
|
(69
|
)
|
|
(4
|
)
|
|
|
(127
|
)
|
|
(137
|
)
|
|
(7
|
)
|
|
||||
Income from Continuing Operations Before Income Taxes
|
$
|
587
|
|
|
$
|
178
|
|
|
230
|
|
%
|
|
$
|
593
|
|
|
$
|
636
|
|
|
(7
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Segment Operating Profit Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Pharmaceutical and Specialty Solutions
|
1.47
|
|
%
|
1.75
|
|
%
|
(28
|
)
|
bp
|
|
1.40
|
|
%
|
1.47
|
|
%
|
(7
|
)
|
bp
|
||||
European Pharmaceutical Solutions
|
0.15
|
|
|
(8.08
|
)
|
|
823
|
|
|
|
(4.05
|
)
|
|
(3.89
|
)
|
|
(16
|
)
|
|
||||
Medical-Surgical Solutions
|
5.39
|
|
|
7.11
|
|
|
(172
|
)
|
|
|
5.42
|
|
|
7.08
|
|
|
(166
|
)
|
|
(1)
|
Segment operating profit includes gross profit, net of operating expenses, as well as other income, net, for our operating segments.
|
(2)
|
Operating profit for Other for the first half of 2019 includes the escrow settlement gain of
$97 million
representing certain indemnity and other claims related to our third quarter 2017 acquisition of Rexall Health. Operating profit for Other for the second quarter and first half of 2019 includes a pre-tax credit of
$90 million
resulting from the derecognition of a TRA liability payable to the shareholders of Change, as well as pre-tax restructuring and asset impairment charges of
$42 million
and
$80 million
primarily for our Canadian business.
|
(3)
|
Corporate expenses, net, for the second quarter and first half of 2019 include a pre-tax charge of
$43 million
and
$59 million
representing opioid-related costs.
|
(Dollars in millions)
|
September 30, 2018
|
|
March 31, 2018
|
|
||||
Cash, cash equivalents and restricted cash
|
$
|
2,118
|
|
|
$
|
2,672
|
|
|
Working capital
|
(319
|
)
|
|
451
|
|
|
||
Debt to capital ratio
(1)
|
45.0
|
|
%
|
40.6
|
|
%
|
||
Return on McKesson stockholders’ equity
(2)
|
1.1
|
|
|
0.6
|
|
|
(1)
|
Ratio is computed as total debt divided by the sum of total debt and McKesson stockholders’ equity, which excludes noncontrolling and redeemable noncontrolling interests and accumulated other comprehensive income (loss).
|
(2)
|
Ratio is computed as net income attributable to McKesson Corporation for the last four quarters, divided by a five-quarter average of McKesson stockholders’ equity, which excludes noncontrolling and redeemable noncontrolling interests.
|
▪
|
changes in the U.S. and European healthcare industry and regulatory environments;
|
▪
|
foreign operations subject us to a number of operating, economic, political and regulatory risks;
|
▪
|
changes in the Canadian healthcare industry and regulatory environment;
|
▪
|
general European economic conditions together with austerity measures taken by certain European governments;
|
▪
|
changes in the European regulatory environment with respect to privacy and data protection regulations;
|
▪
|
foreign currency fluctuations;
|
▪
|
the Company’s ability to successfully identify, consummate, finance and integrate strategic acquisitions;
|
▪
|
failure for the Company’s investment in Change Healthcare to perform;
|
▪
|
the Company’s ability to manage and complete divestitures;
|
▪
|
material adverse resolution of pending legal and regulatory proceedings;
|
▪
|
competition;
|
▪
|
substantial defaults in payments or a material reduction in purchases by, or the loss of, a large customer or group purchasing organization;
|
▪
|
the loss of government contracts as a result of compliance or funding challenges;
|
▪
|
public health issues in the United States or abroad;
|
▪
|
cyberattack, disaster, or malfunction to computer systems;
|
▪
|
the adequacy of insurance to cover property loss or liability claims;
|
▪
|
the Company’s proprietary products and services may not be adequately protected, and its products and solutions may be found to infringe on the rights of others;
|
▪
|
system errors or failure of our technology products and solutions to conform to specifications;
|
▪
|
disaster or other event causing interruption of customer access to the data residing in our service centers;
|
▪
|
changes in circumstances that could impair our goodwill or intangible assets;
|
▪
|
new or revised tax legislation or challenges to our tax positions;
|
▪
|
general economic conditions, including changes in the financial markets that may affect the availability and cost of credit to the Company, its customers or suppliers;
|
▪
|
changes in accounting principles generally accepted in the United States of America;
|
▪
|
withdrawal from participation in one or more multiemployer pension plans or if such plans are reported to have underfunded liabilities;
|
▪
|
expected benefits from our restructuring and business process initiatives;
|
▪
|
difficulties with outsourcing and similar third-party relationships;
|
▪
|
new challenges associated with our retail expansion; and
|
▪
|
inability to keep existing retail store locations or open new retail locations in desirable places.
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk.
|
Item 4.
|
Controls and Procedures.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
|
Share Repurchases
(1)
|
||||||
(In millions, except price per share)
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid Per Share
|
|
Total Number of
Shares Purchased
As Part of Publicly
Announced
Program
|
|
Approximate
Dollar Value of
Shares that May
Yet Be Purchased Under the Programs
|
July 1, 2018 – July 31, 2018
|
—
|
$
|
—
|
|
—
|
$
|
4,799
|
August 1, 2018 – August 31, 2018
|
3.8
|
|
127.29
|
|
3.8
|
|
4,319
|
September 1, 2018 – September 30, 2018
|
0.8
|
|
127.88
|
|
0.8
|
|
4,219
|
Total
|
4.6
|
|
|
|
4.6
|
|
|
(1)
|
This table does not include shares tendered to satisfy the exercise price in connection with cashless exercises of employee stock options or shares tendered to satisfy tax withholding obligations in connection with employee equity awards.
|
Item 3.
|
Defaults Upon Senior Securities.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits.
|
Exhibit
Nu
mber
|
Description
|
10.1*
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32†
|
|
|
|
101
|
The following materials from the McKesson Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related Financial Notes.
|
*
|
Management contract or compensation plan or arrangement in which directors and/or executive officers are eligible to participate.
|
†
|
Furnished herewith.
|
|
|
|
M
C
K
ESSON
C
ORPORATION
|
|
|
|
|
Date:
|
October 25, 2018
|
|
/s/ Britt J. Vitalone
|
|
|
|
Britt J. Vitalone
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
M
C
K
ESSON
C
ORPORATION
|
|
|
|
|
Date:
|
October 25, 2018
|
|
/s/ Sundeep G. Reddy
|
|
|
|
Sundeep G. Reddy
|
|
|
|
Senior Vice President and Controller
|
|
|
Page
|
|
1
|
1
|
|
|
2
|
1
|
|
|
3
|
1
|
|
|
4
|
1
|
|
|
5
|
2
|
|
|
6
|
4
|
|
|
7
|
4
|
|
|
8
|
5
|
|
|
9
|
5
|
|
|
10
|
5
|
|
|
11
|
5
|
|
|
12
|
5
|
|
|
13
|
5
|
|
|
14
|
5
|
|
|
15
|
5
|
|
|
16
|
6
|
|
|
17
|
6
|
|
|
i
|
|
1.
|
NAME AND PURPOSE.
|
2.
|
ADMINISTRATION OF THE PLAN.
|
3.
|
ELIGIBILITY.
|
4.
|
CALCULATION OF AWARDS.
|
Officer
|
Percentage
|
Chief executive officer
|
40%
|
The four highest compensated officers
(other than the CEO) |
15% each
|
Total
|
100%
|
5.
|
PAYMENT OF AWARDS.
|
6.
|
CHANGE IN CONTROL.
|
7.
|
TRANSFERABILITY.
|
8.
|
RECOUPMENT.
|
9.
|
WITHHOLDING TAXES.
|
10.
|
FUNDING.
|
11.
|
AMENDMENT.
|
12.
|
TERMINATION.
|
13.
|
GOVERNING LAW.
|
14.
|
NOTICES.
|
15.
|
SEVERABILITY.
|
16.
|
SUCCESSOR OF THE COMPANY.
|
17.
|
EXECUTION.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of McKesson Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
October 25, 2018
|
|
/s/ John H. Hammergren
|
|
|
|
John H. Hammergren
|
|
|
|
Chairman of the Board, President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of McKesson Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
October 25, 2018
|
|
/s/ Britt J. Vitalone
|
|
|
|
Britt J. Vitalone
|
|
|
|
Executive Vice President and Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ John H. Hammergren
|
|
|
John H. Hammergren
|
|
|
Chairman of the Board, President and Chief Executive Officer
|
|
|
October 25, 2018
|
|
|
|
|
|
/s/ Britt J. Vitalone
|
|
|
Britt J. Vitalone
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
October 25, 2018
|
|
|
|
|
|