☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
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.)
|
(Title of each class)
|
(Trading Symbol)
|
(Name of each exchange on which registered)
|
Common stock, $0.01 par value
|
MCK
|
New York Stock Exchange
|
Large accelerated filer
|
|
☒
|
|
Accelerated filer
|
|
☐
|
Non-accelerated filer
|
|
☐
|
|
Smaller reporting company
|
|
☐
|
|
|
|
|
Emerging growth company
|
|
☐
|
|
Item
|
Page
|
|
|
|
|
|
|
|
|
|
1.
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
2.
|
||
|
|
|
3.
|
||
|
|
|
4.
|
||
|
|
|
|
|
|
|
|
|
1.
|
||
|
|
|
1A.
|
||
|
|
|
2.
|
||
|
|
|
3.
|
||
|
|
|
4.
|
||
|
|
|
5.
|
||
|
|
|
6.
|
||
|
|
|
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues
|
$
|
57,616
|
|
|
$
|
53,075
|
|
|
$
|
113,344
|
|
|
$
|
105,682
|
|
Cost of Sales
|
(54,749
|
)
|
|
(50,271
|
)
|
|
(107,690
|
)
|
|
(100,099
|
)
|
||||
Gross Profit
|
2,867
|
|
|
2,804
|
|
|
5,654
|
|
|
5,583
|
|
||||
Operating Expenses
|
(2,196
|
)
|
|
(2,033
|
)
|
|
(4,326
|
)
|
|
(4,063
|
)
|
||||
Goodwill Impairment Charges
|
—
|
|
|
—
|
|
|
—
|
|
|
(570
|
)
|
||||
Restructuring, Impairment and Related Charges
|
(45
|
)
|
|
(82
|
)
|
|
(68
|
)
|
|
(178
|
)
|
||||
Total Operating Expenses
|
(2,241
|
)
|
|
(2,115
|
)
|
|
(4,394
|
)
|
|
(4,811
|
)
|
||||
Operating Income
|
626
|
|
|
689
|
|
|
1,260
|
|
|
772
|
|
||||
Other Income (Expense), Net
|
(78
|
)
|
|
20
|
|
|
(41
|
)
|
|
60
|
|
||||
Equity Earnings and Charges from Investment in Change Healthcare Joint Venture
|
(1,454
|
)
|
|
(56
|
)
|
|
(1,450
|
)
|
|
(112
|
)
|
||||
Interest Expense
|
(64
|
)
|
|
(66
|
)
|
|
(120
|
)
|
|
(127
|
)
|
||||
Income (Loss) from Continuing Operations Before Income Taxes
|
(970
|
)
|
|
587
|
|
|
(351
|
)
|
|
593
|
|
||||
Income Tax Benefit (Expense)
|
294
|
|
|
(35
|
)
|
|
158
|
|
|
(122
|
)
|
||||
Income (Loss) from Continuing Operations
|
(676
|
)
|
|
552
|
|
|
(193
|
)
|
|
471
|
|
||||
Income (Loss) from Discontinued Operations, Net of Tax
|
(1
|
)
|
|
1
|
|
|
(7
|
)
|
|
2
|
|
||||
Net Income (Loss)
|
(677
|
)
|
|
553
|
|
|
(200
|
)
|
|
473
|
|
||||
Net Income Attributable to Noncontrolling Interests
|
(53
|
)
|
|
(54
|
)
|
|
(107
|
)
|
|
(112
|
)
|
||||
Net Income (Loss) Attributable to McKesson Corporation
|
$
|
(730
|
)
|
|
$
|
499
|
|
|
$
|
(307
|
)
|
|
$
|
361
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings (Loss) Per Common Share Attributable to McKesson Corporation
|
|
|
|
|
|
|
|
||||||||
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(3.99
|
)
|
|
$
|
2.51
|
|
|
$
|
(1.62
|
)
|
|
$
|
1.79
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
(0.03
|
)
|
|
0.01
|
|
||||
Total
|
$
|
(3.99
|
)
|
|
$
|
2.51
|
|
|
$
|
(1.65
|
)
|
|
$
|
1.80
|
|
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(3.99
|
)
|
|
$
|
2.52
|
|
|
$
|
(1.62
|
)
|
|
$
|
1.80
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
(0.03
|
)
|
|
0.01
|
|
||||
Total
|
$
|
(3.99
|
)
|
|
$
|
2.52
|
|
|
$
|
(1.65
|
)
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted Average Common Shares
|
|
|
|
|
|
|
|
||||||||
Diluted
|
183
|
|
|
199
|
|
|
185
|
|
|
201
|
|
||||
Basic
|
183
|
|
|
198
|
|
|
185
|
|
|
200
|
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net Income (Loss)
|
$
|
(677
|
)
|
|
$
|
553
|
|
|
$
|
(200
|
)
|
|
$
|
473
|
|
|
|
|
|
|
|
|
|
||||||||
Other Comprehensive Income (Loss), Net of Tax
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
(32
|
)
|
|
26
|
|
|
12
|
|
|
(103
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Unrealized gains on cash flow hedges
|
13
|
|
|
2
|
|
|
25
|
|
|
2
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Changes in retirement-related benefit plans
|
75
|
|
|
4
|
|
|
96
|
|
|
12
|
|
||||
Other Comprehensive Income (Loss), Net of Tax
|
56
|
|
|
32
|
|
|
133
|
|
|
(89
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive Income (Loss)
|
(621
|
)
|
|
585
|
|
|
(67
|
)
|
|
384
|
|
||||
Comprehensive Income Attributable to Noncontrolling Interests
|
(35
|
)
|
|
(47
|
)
|
|
(95
|
)
|
|
(68
|
)
|
||||
Comprehensive Income (Loss) Attributable to McKesson Corporation
|
$
|
(656
|
)
|
|
$
|
538
|
|
|
$
|
(162
|
)
|
|
$
|
316
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Other Capital
|
|
Retained Earnings
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Treasury
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Common Shares
|
|
Amount
|
||||||||||||||||||||||||||||||
Balances, June 30, 2019
|
271
|
|
|
$
|
3
|
|
|
$
|
6,483
|
|
|
$
|
(1
|
)
|
|
$
|
12,770
|
|
|
$
|
(1,778
|
)
|
|
(86
|
)
|
|
$
|
(9,603
|
)
|
|
$
|
194
|
|
|
$
|
8,068
|
|
Issuance of shares under employee plans
|
1
|
|
|
—
|
|
|
56
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
(37
|
)
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74
|
|
||||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(730
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42
|
|
|
(688
|
)
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(750
|
)
|
|
—
|
|
|
(750
|
)
|
||||||||
Cash dividends declared, $0.41 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
10
|
|
||||||||
Balances, September 30, 2019
|
272
|
|
|
$
|
3
|
|
|
$
|
6,573
|
|
|
$
|
(2
|
)
|
|
$
|
11,965
|
|
|
$
|
(1,704
|
)
|
|
(92
|
)
|
|
$
|
(10,353
|
)
|
|
$
|
210
|
|
|
$
|
6,692
|
|
|
Six Months Ended September 30, 2019
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Other Capital
|
|
Retained Earnings
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Treasury
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Common Shares
|
|
Amount
|
||||||||||||||||||||||||||||||
Balances, March 31, 2019
|
271
|
|
|
$
|
3
|
|
|
$
|
6,435
|
|
|
$
|
(2
|
)
|
|
$
|
12,409
|
|
|
$
|
(1,849
|
)
|
|
(81
|
)
|
|
$
|
(8,902
|
)
|
|
$
|
193
|
|
|
$
|
8,287
|
|
Opening Retained Earnings Adjustments: Adoption of New Accounting Standards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
||||||||
Balances, April 1, 2019
|
271
|
|
|
3
|
|
|
6,435
|
|
|
(2
|
)
|
|
12,420
|
|
|
(1,849
|
)
|
|
(81
|
)
|
|
(8,902
|
)
|
|
193
|
|
|
8,298
|
|
||||||||
Issuance of shares under employee plans
|
1
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
61
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(76
|
)
|
|
(76
|
)
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
||||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(307
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
(222
|
)
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
(1,434
|
)
|
|
—
|
|
|
(1,434
|
)
|
||||||||
Cash dividends declared, $0.80 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(148
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(148
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
||||||||
Balances, September 30, 2019
|
272
|
|
|
$
|
3
|
|
|
$
|
6,573
|
|
|
$
|
(2
|
)
|
|
$
|
11,965
|
|
|
$
|
(1,704
|
)
|
|
(92
|
)
|
|
$
|
(10,353
|
)
|
|
$
|
210
|
|
|
$
|
6,692
|
|
|
Three Months Ended September 30, 2018
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Other Capital
|
|
Retained Earnings
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Treasury
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Common Shares
|
|
Amount
|
||||||||||||||||||||||||||||||
Balances, June 30, 2018
|
275
|
|
|
$
|
3
|
|
|
$
|
6,372
|
|
|
$
|
(1
|
)
|
|
$
|
12,932
|
|
|
$
|
(1,801
|
)
|
|
(76
|
)
|
|
$
|
(8,098
|
)
|
|
$
|
240
|
|
|
$
|
9,647
|
|
Issuance of shares under employee plans
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42
|
)
|
|
(42
|
)
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
499
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43
|
|
|
542
|
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(580
|
)
|
|
—
|
|
|
(580
|
)
|
||||||||
Cash dividends declared, $0.39 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(78
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(78
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
(34
|
)
|
||||||||
Balances, September 30, 2018
|
275
|
|
|
$
|
3
|
|
|
$
|
6,411
|
|
|
$
|
(2
|
)
|
|
$
|
13,354
|
|
|
$
|
(1,762
|
)
|
|
(80
|
)
|
|
$
|
(8,678
|
)
|
|
$
|
208
|
|
|
$
|
9,534
|
|
|
Six Months Ended September 30, 2018
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Other Capital
|
|
Retained Earnings
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Treasury
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Common Shares
|
|
Amount
|
||||||||||||||||||||||||||||||
Balances, March 31, 2018
|
275
|
|
|
$
|
3
|
|
|
$
|
6,188
|
|
|
$
|
(1
|
)
|
|
$
|
12,986
|
|
|
$
|
(1,717
|
)
|
|
(73
|
)
|
|
$
|
(7,655
|
)
|
|
$
|
253
|
|
|
$
|
10,057
|
|
Opening Retained Earnings Adjustments: Adoption of New Accounting Standards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
154
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
154
|
|
||||||||
Balances, April 1, 2018
|
275
|
|
|
3
|
|
|
6,188
|
|
|
(1
|
)
|
|
13,140
|
|
|
(1,717
|
)
|
|
(73
|
)
|
|
(7,655
|
)
|
|
253
|
|
|
10,211
|
|
||||||||
Issuance of shares under employee plans
|
—
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
27
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
49
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
49
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(106
|
)
|
|
(106
|
)
|
||||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
361
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
89
|
|
|
450
|
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
135
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
(1,012
|
)
|
|
—
|
|
|
(877
|
)
|
||||||||
Cash dividends declared, $0.73 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(147
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(147
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|
(28
|
)
|
||||||||
Balances, September 30, 2018
|
275
|
|
|
$
|
3
|
|
|
$
|
6,411
|
|
|
$
|
(2
|
)
|
|
$
|
13,354
|
|
|
$
|
(1,762
|
)
|
|
(80
|
)
|
|
$
|
(8,678
|
)
|
|
$
|
208
|
|
|
$
|
9,534
|
|
|
Six Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
Operating Activities
|
|
|
|
||||
Net income (loss)
|
$
|
(200
|
)
|
|
$
|
473
|
|
Adjustments to reconcile to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
463
|
|
|
475
|
|
||
Goodwill and other asset impairment charges
|
12
|
|
|
611
|
|
||
Deferred taxes
|
(380
|
)
|
|
60
|
|
||
Credits associated with last-in, first-out inventory method
|
(48
|
)
|
|
(43
|
)
|
||
Equity earnings and charges from investment in Change Healthcare Joint Venture
|
1,450
|
|
|
112
|
|
||
Non-cash operating lease expense
|
180
|
|
|
—
|
|
||
Other non-cash items
|
144
|
|
|
(138
|
)
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
||||
Receivables
|
(866
|
)
|
|
(1,705
|
)
|
||
Inventories
|
331
|
|
|
(398
|
)
|
||
Drafts and accounts payable
|
(1,203
|
)
|
|
1,197
|
|
||
Taxes
|
70
|
|
|
(99
|
)
|
||
Operating lease liabilities
|
(189
|
)
|
|
—
|
|
||
Other
|
77
|
|
|
(227
|
)
|
||
Net cash provided by (used in) operating activities
|
(159
|
)
|
|
318
|
|
||
|
|
|
|
||||
Investing Activities
|
|
|
|
||||
Payments for property, plant and equipment
|
(126
|
)
|
|
(178
|
)
|
||
Capitalized software expenditures
|
(58
|
)
|
|
(70
|
)
|
||
Acquisitions, net of cash, cash equivalents and restricted cash acquired
|
(95
|
)
|
|
(840
|
)
|
||
Other
|
(6
|
)
|
|
105
|
|
||
Net cash used in investing activities
|
(285
|
)
|
|
(983
|
)
|
||
|
|
|
|
||||
Financing Activities
|
|
|
|
||||
Proceeds from short-term borrowings
|
8,670
|
|
|
19,735
|
|
||
Repayments of short-term borrowings
|
(8,122
|
)
|
|
(18,342
|
)
|
||
Common stock transactions:
|
|
|
|
||||
Issuances
|
78
|
|
|
38
|
|
||
Share repurchases, including shares surrendered for tax withholding
|
(1,452
|
)
|
|
(888
|
)
|
||
Dividends paid
|
(148
|
)
|
|
(139
|
)
|
||
Other
|
(229
|
)
|
|
(206
|
)
|
||
Net cash provided by (used in) financing activities
|
(1,203
|
)
|
|
198
|
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
22
|
|
|
(87
|
)
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(1,625
|
)
|
|
(554
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
2,981
|
|
|
2,672
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
1,356
|
|
|
$
|
2,118
|
|
1.
|
Significant Accounting Policies
|
3.
|
Restructuring, Impairment and Related Charges
|
|
Quarter Ended September 30, 2019
|
||||||||||||||||||||||
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Corporate
|
|
Total
|
||||||||||||
Severance and employee-related costs, net
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
10
|
|
|
$
|
17
|
|
Exit and other-related costs (1)
|
—
|
|
|
4
|
|
|
2
|
|
|
—
|
|
|
13
|
|
|
19
|
|
||||||
Asset impairments and accelerated depreciation
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
7
|
|
||||||
Total
|
$
|
2
|
|
|
$
|
10
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
27
|
|
|
$
|
43
|
|
|
Six Months Ended September 30, 2019
|
||||||||||||||||||||||
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Corporate
|
|
Total
|
||||||||||||
Severance and employee-related costs, net
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
16
|
|
|
$
|
21
|
|
Exit and other-related costs (1)
|
—
|
|
|
5
|
|
|
4
|
|
|
1
|
|
|
23
|
|
|
33
|
|
||||||
Asset impairments and accelerated depreciation
|
—
|
|
|
6
|
|
|
1
|
|
|
—
|
|
|
5
|
|
|
12
|
|
||||||
Total
|
$
|
1
|
|
|
$
|
13
|
|
|
$
|
6
|
|
|
$
|
2
|
|
|
$
|
44
|
|
|
$
|
66
|
|
(1)
|
Exit and other-related costs primarily include project consulting fees.
|
|
Quarter Ended September 30, 2018
|
||||||||||||||||||
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Corporate
|
|
Total
|
||||||||||
Severance and employee-related costs, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
10
|
|
Exit and other-related costs (1)
|
5
|
|
|
5
|
|
|
35
|
|
|
18
|
|
|
63
|
|
|||||
Asset impairments and accelerated depreciation
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|||||
Total
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
42
|
|
|
$
|
22
|
|
|
$
|
75
|
|
|
Six Months Ended September 30, 2018
|
||||||||||||||||||
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Corporate
|
|
Total
|
||||||||||
Severance and employee-related costs, net
|
$
|
3
|
|
|
$
|
10
|
|
|
$
|
7
|
|
|
$
|
4
|
|
|
$
|
24
|
|
Exit and other-related costs (1)
|
6
|
|
|
7
|
|
|
56
|
|
|
29
|
|
|
98
|
|
|||||
Asset impairments and accelerated depreciation
|
4
|
|
|
1
|
|
|
17
|
|
|
—
|
|
|
22
|
|
|||||
Total
|
$
|
13
|
|
|
$
|
18
|
|
|
$
|
80
|
|
|
$
|
33
|
|
|
$
|
144
|
|
(1)
|
Exit and other-related costs primarily include lease exit costs associated with closures of retail pharmacy stores within our Canadian business as well as project consulting fees.
|
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Corporate
|
|
Total
|
||||||||||||
Balance, March 31, 2019 (1)
|
$
|
31
|
|
|
$
|
38
|
|
|
$
|
15
|
|
|
$
|
29
|
|
|
$
|
37
|
|
|
$
|
150
|
|
Restructuring, impairment and related charges
|
1
|
|
|
13
|
|
|
6
|
|
|
2
|
|
|
44
|
|
|
66
|
|
||||||
Non-cash charges
|
—
|
|
|
(6
|
)
|
|
(1
|
)
|
|
—
|
|
|
(5
|
)
|
|
(12
|
)
|
||||||
Cash payments
|
(3
|
)
|
|
(10
|
)
|
|
(1
|
)
|
|
(14
|
)
|
|
(22
|
)
|
|
(50
|
)
|
||||||
Other
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(7
|
)
|
|
(5
|
)
|
|
(13
|
)
|
||||||
Balance, September 30, 2019 (2)
|
$
|
29
|
|
|
$
|
34
|
|
|
$
|
19
|
|
|
$
|
10
|
|
|
$
|
49
|
|
|
$
|
141
|
|
(1)
|
As of March 31, 2019, the total reserve balance was $150 million of which $117 million was recorded in other accrued liabilities and $33 million was recorded in other noncurrent liabilities.
|
(2)
|
As of September 30, 2019, the total reserve balance was $141 million of which $119 million was recorded in other accrued liabilities and $22 million was recorded in other noncurrent liabilities.
|
6.
|
Income Taxes
|
7.
|
Redeemable Noncontrolling Interests and Noncontrolling Interests
|
(In millions)
|
Noncontrolling Interests
|
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, June 30, 2019
|
$
|
194
|
|
|
$
|
1,399
|
|
Net income attributable to noncontrolling interests
|
42
|
|
|
11
|
|
||
Other comprehensive loss
|
—
|
|
|
(18
|
)
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(11
|
)
|
||
Payments to noncontrolling interests
|
(37
|
)
|
|
—
|
|
||
Other
|
11
|
|
|
3
|
|
||
Balance, September 30, 2019
|
$
|
210
|
|
|
$
|
1,384
|
|
(In millions)
|
Noncontrolling Interests
|
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, March 31, 2019
|
$
|
193
|
|
|
$
|
1,393
|
|
Net income attributable to noncontrolling interests
|
85
|
|
|
22
|
|
||
Other comprehensive loss
|
—
|
|
|
(12
|
)
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(22
|
)
|
||
Payments to noncontrolling interests
|
(76
|
)
|
|
—
|
|
||
Other
|
8
|
|
|
3
|
|
||
Balance, September 30, 2019
|
$
|
210
|
|
|
$
|
1,384
|
|
(In millions)
|
Noncontrolling Interests
|
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, June 30, 2018
|
$
|
240
|
|
|
$
|
1,422
|
|
Net income attributable to noncontrolling interests
|
43
|
|
|
11
|
|
||
Other comprehensive loss
|
—
|
|
|
(7
|
)
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(11
|
)
|
||
Payments to noncontrolling interests
|
(42
|
)
|
|
—
|
|
||
Other
|
(33
|
)
|
|
—
|
|
||
Balance, September 30, 2018
|
$
|
208
|
|
|
$
|
1,415
|
|
(In millions)
|
Noncontrolling Interests
|
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, March 31, 2018
|
$
|
253
|
|
|
$
|
1,459
|
|
Net income attributable to noncontrolling interests
|
89
|
|
|
23
|
|
||
Other comprehensive loss
|
—
|
|
|
(44
|
)
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(23
|
)
|
||
Payments to noncontrolling interests
|
(106
|
)
|
|
—
|
|
||
Other
|
(28
|
)
|
|
—
|
|
||
Balance, September 30, 2018
|
$
|
208
|
|
|
$
|
1,415
|
|
8.
|
Earnings Per Common Share
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
(In millions, except per share amounts)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Income (Loss) from continuing operations
|
$
|
(676
|
)
|
|
$
|
552
|
|
|
$
|
(193
|
)
|
|
$
|
471
|
|
Net income attributable to noncontrolling interests
|
(53
|
)
|
|
(54
|
)
|
|
(107
|
)
|
|
(112
|
)
|
||||
Income (Loss) from continuing operations attributable to McKesson
|
(729
|
)
|
|
498
|
|
|
(300
|
)
|
|
359
|
|
||||
Income (Loss) from discontinued operations, net of tax
|
(1
|
)
|
|
1
|
|
|
(7
|
)
|
|
2
|
|
||||
Net income (loss) attributable to McKesson
|
$
|
(730
|
)
|
|
$
|
499
|
|
|
$
|
(307
|
)
|
|
$
|
361
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
183
|
|
|
198
|
|
|
185
|
|
|
200
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Restricted stock units
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Diluted
|
183
|
|
|
199
|
|
|
185
|
|
|
201
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings (Loss) per common share attributable to McKesson: (1)
|
|
|
|
|
|
|
|
||||||||
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(3.99
|
)
|
|
$
|
2.51
|
|
|
$
|
(1.62
|
)
|
|
$
|
1.79
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
(0.03
|
)
|
|
0.01
|
|
||||
Total
|
$
|
(3.99
|
)
|
|
$
|
2.51
|
|
|
$
|
(1.65
|
)
|
|
$
|
1.80
|
|
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(3.99
|
)
|
|
$
|
2.52
|
|
|
$
|
(1.62
|
)
|
|
$
|
1.80
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
(0.03
|
)
|
|
0.01
|
|
||||
Total
|
$
|
(3.99
|
)
|
|
$
|
2.52
|
|
|
$
|
(1.65
|
)
|
|
$
|
1.81
|
|
(1)
|
Certain computations may reflect rounding adjustments.
|
9.
|
Goodwill and Intangible Assets, Net
|
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Total
|
||||||||||
Balance, March 31, 2019
|
$
|
4,078
|
|
|
$
|
—
|
|
|
$
|
2,451
|
|
|
$
|
2,829
|
|
|
$
|
9,358
|
|
Goodwill acquired
|
—
|
|
|
54
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|||||
Acquisition accounting, transfers and other adjustments
|
—
|
|
|
4
|
|
|
7
|
|
|
—
|
|
|
11
|
|
|||||
Foreign currency translation adjustments, net
|
(18
|
)
|
|
(1
|
)
|
|
—
|
|
|
4
|
|
|
(15
|
)
|
|||||
Balance, September 30, 2019
|
$
|
4,060
|
|
|
$
|
57
|
|
|
$
|
2,458
|
|
|
$
|
2,833
|
|
|
$
|
9,408
|
|
|
September 30, 2019
|
|
March 31, 2019
|
||||||||||||||||||||||
(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
|
11
|
|
$
|
3,787
|
|
|
$
|
(1,913
|
)
|
|
$
|
1,874
|
|
|
$
|
3,818
|
|
|
$
|
(1,801
|
)
|
|
$
|
2,017
|
|
Service agreements
|
11
|
|
1,019
|
|
|
(461
|
)
|
|
558
|
|
|
1,017
|
|
|
(430
|
)
|
|
587
|
|
||||||
Pharmacy licenses
|
25
|
|
530
|
|
|
(208
|
)
|
|
322
|
|
|
513
|
|
|
(209
|
)
|
|
304
|
|
||||||
Trademarks and trade names
|
13
|
|
852
|
|
|
(251
|
)
|
|
601
|
|
|
887
|
|
|
(232
|
)
|
|
655
|
|
||||||
Technology
|
4
|
|
178
|
|
|
(108
|
)
|
|
70
|
|
|
141
|
|
|
(94
|
)
|
|
47
|
|
||||||
Other
|
5
|
|
275
|
|
|
(211
|
)
|
|
64
|
|
|
288
|
|
|
(209
|
)
|
|
79
|
|
||||||
Total
|
|
|
$
|
6,641
|
|
|
$
|
(3,152
|
)
|
|
$
|
3,489
|
|
|
$
|
6,664
|
|
|
$
|
(2,975
|
)
|
|
$
|
3,689
|
|
10.
|
Debt and Financing Activities
|
11.
|
Leases
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||
(In millions)
|
2019
|
|
2019
|
||||
Short-term lease cost
|
$
|
7
|
|
|
$
|
15
|
|
Operating lease cost
|
113
|
|
|
228
|
|
||
|
|
|
|
||||
Finance lease cost:
|
|
|
|
||||
Amortization of right-of-use assets
|
3
|
|
|
5
|
|
||
Interest on lease liabilities
|
1
|
|
|
2
|
|
||
Total finance lease cost
|
4
|
|
|
7
|
|
||
|
|
|
|
||||
Variable lease cost (1)
|
31
|
|
|
62
|
|
||
Sublease income
|
(6
|
)
|
|
(14
|
)
|
||
Total lease cost (2)
|
$
|
149
|
|
|
$
|
298
|
|
(1)
|
These amounts include payments for maintenance, taxes, payments affected by the consumer price index and other similar metrics and payments contingent on usage.
|
(2)
|
These amounts were primarily recorded within operating expenses in the accompanying condensed consolidated statement of operations.
|
|
Six Months Ended September 30,
|
||
(In millions)
|
2019
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows from operating leases
|
$
|
(189
|
)
|
Operating cash flows from finance leases
|
(2
|
)
|
|
Financing cash flows from finance leases
|
(12
|
)
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
||
Operating leases (1)
|
$
|
2,331
|
|
Finance leases
|
151
|
|
(In millions)
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
||||||
The remainder of 2020
|
$
|
206
|
|
|
$
|
8
|
|
|
$
|
214
|
|
2021
|
418
|
|
|
17
|
|
|
435
|
|
|||
2022
|
355
|
|
|
17
|
|
|
372
|
|
|||
2023
|
296
|
|
|
16
|
|
|
312
|
|
|||
2024
|
242
|
|
|
15
|
|
|
257
|
|
|||
Thereafter
|
901
|
|
|
125
|
|
|
1,026
|
|
|||
Total lease payments (1)
|
$
|
2,418
|
|
|
$
|
198
|
|
|
$
|
2,616
|
|
Less imputed interest
|
(293
|
)
|
|
(42
|
)
|
|
(335
|
)
|
|||
Present value of lease liabilities
|
$
|
2,125
|
|
|
$
|
156
|
|
|
$
|
2,281
|
|
(1)
|
Total lease payments have not been reduced by minimum sublease income of $170 million due under future noncancelable subleases.
|
(In millions)
|
Noncancelable Operating
Leases
|
||
2020
|
$
|
454
|
|
2021
|
397
|
|
|
2022
|
343
|
|
|
2023
|
290
|
|
|
2024
|
236
|
|
|
Thereafter
|
936
|
|
|
Total minimum lease payments (1) (2)
|
$
|
2,656
|
|
(1)
|
Amount includes future minimum lease payments for the sale-leaseback transaction of $49 million.
|
(2)
|
Total minimum lease payments have not been reduced by minimum sublease income of $133 million due under future noncancelable subleases.
|
12.
|
Pension Benefits
|
13.
|
Hedging Activities
|
|
Balance Sheet
Caption
|
September 30, 2019
|
|
March 31, 2019
|
||||||||||||||||
|
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
|
$
|
17
|
|
$
|
—
|
|
$
|
81
|
|
|
$
|
17
|
|
$
|
—
|
|
$
|
81
|
|
Cross-currency swaps (current)
|
Prepaid expenses and other/Other accrued liabilities
|
49
|
|
12
|
|
355
|
|
|
—
|
|
18
|
|
—
|
|
||||||
Cross-currency swaps (non-current)
|
Other Noncurrent Assets/Liabilities
|
68
|
|
5
|
|
4,237
|
|
|
91
|
|
33
|
|
5,283
|
|
||||||
Total
|
|
$
|
134
|
|
$
|
17
|
|
|
|
$
|
108
|
|
$
|
51
|
|
|
||||
Derivatives not designated for hedge accounting
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts (current)
|
Prepaid expenses and other
|
$
|
—
|
|
$
|
—
|
|
$
|
21
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
14
|
|
Foreign exchange contracts (current)
|
Other accrued liabilities
|
—
|
|
—
|
|
23
|
|
|
—
|
|
—
|
|
14
|
|
||||||
Total
|
|
$
|
—
|
|
$
|
—
|
|
|
|
$
|
—
|
|
$
|
—
|
|
|
14.
|
Fair Value Measurements
|
15.
|
Commitments and Contingent Liabilities
|
16.
|
Stockholders’ Equity
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
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)
|
$
|
(114
|
)
|
|
$
|
5
|
|
|
$
|
(44
|
)
|
|
$
|
(268
|
)
|
Reclassified to income statement, net of income tax expense of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
(114
|
)
|
|
5
|
|
|
(44
|
)
|
|
(268
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Unrealized gains on net investment hedges arising during period, net of income tax expense of $29, $7, $20 and $58 (4)
|
82
|
|
|
21
|
|
|
56
|
|
|
165
|
|
||||
Reclassified to income statement, net of income tax expense of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
82
|
|
|
21
|
|
|
56
|
|
|
165
|
|
||||
Unrealized gains on cash flow hedges
|
|
|
|
|
|
|
|
||||||||
Unrealized gains on cash flow hedges arising during period, net of income tax expense of $4, nil, $10 and nil
|
13
|
|
|
2
|
|
|
25
|
|
|
2
|
|
||||
Reclassified to income statement, net of income tax expense of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
13
|
|
|
2
|
|
|
25
|
|
|
2
|
|
||||
Changes in retirement-related benefit plans (5)
|
|
|
|
|
|
|
|
||||||||
Net actuarial gain and prior service cost arising during the period, net of income tax benefit of $2, nil, $1 and nil
|
(9
|
)
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
||||
Amortization of actuarial loss, prior service cost and transition obligation, net of income tax expense of nil, $2, nil and $2 (6)
|
1
|
|
|
3
|
|
|
2
|
|
|
4
|
|
||||
Foreign currency translation adjustments and other, net of income tax expense of nil, nil, nil and nil
|
5
|
|
|
1
|
|
|
7
|
|
|
8
|
|
||||
Reclassified to income statement, net of income tax expense of $27, nil, $32 and nil (7)
|
78
|
|
|
—
|
|
|
90
|
|
|
—
|
|
||||
|
75
|
|
|
4
|
|
|
96
|
|
|
12
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of tax
|
$
|
56
|
|
|
$
|
32
|
|
|
$
|
133
|
|
|
$
|
(89
|
)
|
(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 2020 and 2019.
|
(2)
|
During the second quarter and first six months of 2020, 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, 2019 to September 30, 2019. 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.
|
(3)
|
The second quarter and first six months of 2020 includes net foreign currency translation losses of $19 million and $13 million and the second quarter and first six months of 2019 includes net foreign currency translation losses of $7 million and $46 million attributable to redeemable noncontrolling interests.
|
(4)
|
The second quarter and first six months of 2020 include foreign currency gains of $91 million and $67 million on the net investment hedges from the €1.95 billion Euro-denominated notes and £450 million British pound sterling-denominated notes and gain of $20 million and $9 million on the net investment hedges from the cross-currency swaps. 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 cross-currency swaps.
|
(5)
|
The second quarter and first six months of 2020 include net actuarial gains of $1 million and the second quarter and first six months of 2019 include net actuarial gains of nil and 2 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.
|
(7)
|
The second quarter and first six months of 2020 reflect a reclassification of losses upon the termination of the Plan from accumulated other comprehensive loss to other income (expense), net in our condensed consolidated statement of operations.
|
|
Foreign Currency Translation Adjustments
|
|
|
|
|
|
|
||||||||||||
(In millions)
|
Foreign Currency Translation Adjustments, Net of Tax
|
|
Unrealized Gains 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, 2019
|
$
|
(1,564
|
)
|
|
$
|
27
|
|
|
$
|
(25
|
)
|
|
$
|
(216
|
)
|
|
$
|
(1,778
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive income (loss) before reclassifications
|
(114
|
)
|
|
82
|
|
|
13
|
|
|
(4
|
)
|
|
(23
|
)
|
|||||
Amounts reclassified to earnings and other
|
—
|
|
|
—
|
|
|
—
|
|
|
79
|
|
|
79
|
|
|||||
Other comprehensive income (loss)
|
(114
|
)
|
|
82
|
|
|
13
|
|
|
75
|
|
|
56
|
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(18
|
)
|
|||||
Other comprehensive income (loss) attributable to McKesson
|
(95
|
)
|
|
82
|
|
|
13
|
|
|
74
|
|
|
74
|
|
|||||
Balance at September 30, 2019
|
$
|
(1,659
|
)
|
|
$
|
109
|
|
|
$
|
(12
|
)
|
|
$
|
(142
|
)
|
|
$
|
(1,704
|
)
|
|
Foreign Currency Translation Adjustments
|
|
|
|
|
|
|
||||||||||||
(In millions)
|
Foreign Currency Translation Adjustments, Net of Tax
|
|
Unrealized Gains 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, 2019
|
$
|
(1,628
|
)
|
|
$
|
53
|
|
|
$
|
(37
|
)
|
|
$
|
(237
|
)
|
|
$
|
(1,849
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive income (loss) before reclassifications
|
(44
|
)
|
|
56
|
|
|
25
|
|
|
4
|
|
|
41
|
|
|||||
Amounts reclassified to earnings and other
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
92
|
|
|||||
Other comprehensive income (loss)
|
(44
|
)
|
|
56
|
|
|
25
|
|
|
96
|
|
|
133
|
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(12
|
)
|
|||||
Other comprehensive income (loss) attributable to McKesson
|
(31
|
)
|
|
56
|
|
|
25
|
|
|
95
|
|
|
145
|
|
|||||
Balance at September 30, 2019
|
$
|
(1,659
|
)
|
|
$
|
109
|
|
|
$
|
(12
|
)
|
|
$
|
(142
|
)
|
|
$
|
(1,704
|
)
|
|
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 and other
|
—
|
|
|
—
|
|
|
—
|
|
|
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 investment in Change Healthcare JV
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
U.S. Pharmaceutical and Specialty Solutions (1)
|
$
|
45,979
|
|
|
$
|
41,610
|
|
|
$
|
90,144
|
|
|
$
|
82,587
|
|
European Pharmaceutical Solutions (1)
|
6,598
|
|
|
6,639
|
|
|
13,308
|
|
|
13,574
|
|
||||
Medical-Surgical Solutions (1)
|
2,056
|
|
|
1,948
|
|
|
3,959
|
|
|
3,651
|
|
||||
Other
|
2,983
|
|
|
2,878
|
|
|
5,933
|
|
|
5,870
|
|
||||
Total Revenues
|
$
|
57,616
|
|
|
$
|
53,075
|
|
|
$
|
113,344
|
|
|
$
|
105,682
|
|
|
|
|
|
|
|
|
|
||||||||
Operating profit (loss) (2)
|
|
|
|
|
|
|
|
||||||||
U.S. Pharmaceutical and Specialty Solutions (3)
|
$
|
639
|
|
|
$
|
610
|
|
|
$
|
1,218
|
|
|
$
|
1,153
|
|
European Pharmaceutical Solutions (4)
|
1
|
|
|
10
|
|
|
6
|
|
|
(550
|
)
|
||||
Medical-Surgical Solutions
|
129
|
|
|
105
|
|
|
254
|
|
|
198
|
|
||||
Other (5) (6)
|
(1,311
|
)
|
|
95
|
|
|
(1,170
|
)
|
|
209
|
|
||||
Total
|
(542
|
)
|
|
820
|
|
|
308
|
|
|
1,010
|
|
||||
Corporate Expenses, Net (7)
|
(364
|
)
|
|
(167
|
)
|
|
(539
|
)
|
|
(290
|
)
|
||||
Interest Expense
|
(64
|
)
|
|
(66
|
)
|
|
(120
|
)
|
|
(127
|
)
|
||||
Income (Loss) from Continuing Operations Before Income Taxes
|
$
|
(970
|
)
|
|
$
|
587
|
|
|
$
|
(351
|
)
|
|
$
|
593
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues, net by geographic area
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
48,292
|
|
|
$
|
43,774
|
|
|
$
|
94,614
|
|
|
$
|
86,664
|
|
Foreign
|
9,324
|
|
|
9,301
|
|
|
18,730
|
|
|
19,018
|
|
||||
Total Revenues
|
$
|
57,616
|
|
|
$
|
53,075
|
|
|
$
|
113,344
|
|
|
$
|
105,682
|
|
(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 2% of our Medical-Surgical Solutions segment’s total revenues.
|
(2)
|
Segment operating profit (loss) includes gross profit, net of operating expenses, as well as other income (expense), net, for our operating segments.
|
(3)
|
Our U.S. Pharmaceutical and Specialty Solutions segment’s operating profit for the second quarter and first six months of 2020 includes $33 million and $48 million, and for the second quarter and first six months of 2019 includes $22 million and $43 million pre-tax credits related to our last-in, first-out (“LIFO”) method of accounting for inventories. Operating profit for the first six months of 2019 also includes $35 million of cash receipts for our share of antitrust legal settlements.
|
(4)
|
European Pharmaceutical Solutions segment’s operating profit for the first six months of 2019 includes non-cash goodwill impairment charges of $570 million (pre-tax and after-tax).
|
(5)
|
Operating profit (loss) for Other for the second quarter and first six months of 2019 includes pre-tax restructuring, impairment and related charges of $42 million and $80 million primarily associated with the closure of retail pharmacy stores within our Canadian business. The first six months of 2019 include escrow settlement gain of $97 million (pre-tax and after-tax) representing certain indemnity and other claims related to our 2017 third quarter acquisition of Rexall Health.
|
(6)
|
Operating profit (loss) for Other for the second quarter and first six months of 2020 includes pre-tax impairment charge of $1,157 million and a pre-tax dilution loss of $246 million associated with our investment in Change Healthcare JV. Operating profit (loss) for Other for the second quarter and first six months of 2019 includes a pre-tax credit of $90 million representing the derecognition of the TRA liability payable to the shareholders of Change Healthcare Inc. Operating profit (loss) for Other also includes our proportionate share of loss from Change Healthcare JV of $51 million and $47 million for the second quarter and first six months of 2020 and $56 million and $112 million for the second quarter and first six months of 2019.
|
(7)
|
Corporate expenses, net, for the second quarter and first six months of 2020 include pre-tax settlement charges of $105 million and $122 million from the termination of our defined benefit pension plan and a settlement charge of $82 million (pre-tax and after-tax) related to opioid claims. The second quarter and first six months of 2020 includes $36 million and $72 million, and for the second quarter and first six months of 2019 includes $43 million and $59 million pre-tax charges of opioid-related costs, primarily litigation expenses.
|
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,
|
|
|
|
||||||||||||||
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|||||||||||||
Revenues
|
$
|
57,616
|
|
|
$
|
53,075
|
|
|
9
|
|
%
|
|
$
|
113,344
|
|
|
$
|
105,682
|
|
|
7
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross Profit
|
$
|
2,867
|
|
|
$
|
2,804
|
|
|
2
|
|
|
|
$
|
5,654
|
|
|
$
|
5,583
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross Profit Margin
|
4.98
|
|
%
|
5.28
|
|
%
|
(30
|
)
|
bp
|
|
4.99
|
|
%
|
5.28
|
|
%
|
(29
|
)
|
bp
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Expenses
|
$
|
(2,196
|
)
|
|
$
|
(2,033
|
)
|
|
8
|
|
%
|
|
$
|
(4,326
|
)
|
|
$
|
(4,063
|
)
|
|
6
|
|
%
|
Goodwill Impairment Charges
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(570
|
)
|
|
(100
|
)
|
|
||||
Restructuring, Impairment and Related Charges
|
(45
|
)
|
|
(82
|
)
|
|
(45
|
)
|
|
|
(68
|
)
|
|
(178
|
)
|
|
(62
|
)
|
|
||||
Total Operating Expenses
|
$
|
(2,241
|
)
|
|
$
|
(2,115
|
)
|
|
6
|
|
%
|
|
$
|
(4,394
|
)
|
|
$
|
(4,811
|
)
|
|
(9
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Expenses as a Percentage of Revenues
|
3.89
|
|
%
|
3.98
|
|
%
|
(9
|
)
|
bp
|
|
3.88
|
|
%
|
4.55
|
|
%
|
(67
|
)
|
bp
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other Income (Expense), Net
|
$
|
(78
|
)
|
|
$
|
20
|
|
|
(490
|
)
|
%
|
|
$
|
(41
|
)
|
|
$
|
60
|
|
|
(168
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity Earnings and Charges from Investment in Change Healthcare Joint Venture
|
(1,454
|
)
|
|
(56
|
)
|
|
NM
|
|
|
|
(1,450
|
)
|
|
(112
|
)
|
|
NM
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest Expense
|
(64
|
)
|
|
(66
|
)
|
|
(3
|
)
|
|
|
(120
|
)
|
|
(127
|
)
|
|
(6
|
)
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (Loss) from Continuing Operations Before Income Taxes
|
(970
|
)
|
|
587
|
|
|
(265
|
)
|
|
|
(351
|
)
|
|
593
|
|
|
(159
|
)
|
|
||||
Income Tax Benefit (Expense)
|
294
|
|
|
(35
|
)
|
|
(940
|
)
|
|
|
158
|
|
|
(122
|
)
|
|
(230
|
)
|
|
||||
Income (Loss) from Continuing Operations
|
(676
|
)
|
|
552
|
|
|
(222
|
)
|
|
|
(193
|
)
|
|
471
|
|
|
(141
|
)
|
|
||||
Income (Loss) from Discontinued Operations, Net of Tax
|
(1
|
)
|
|
1
|
|
|
(200
|
)
|
|
|
(7
|
)
|
|
2
|
|
|
(450
|
)
|
|
||||
Net Income (Loss)
|
(677
|
)
|
|
553
|
|
|
(222
|
)
|
|
|
(200
|
)
|
|
473
|
|
|
(142
|
)
|
|
||||
Net Income Attributable to Noncontrolling Interests
|
(53
|
)
|
|
(54
|
)
|
|
(2
|
)
|
|
|
(107
|
)
|
|
(112
|
)
|
|
(4
|
)
|
|
||||
Net Income (Loss) Attributable to McKesson Corporation
|
$
|
(730
|
)
|
|
$
|
499
|
|
|
(246
|
)
|
%
|
|
$
|
(307
|
)
|
|
$
|
361
|
|
|
(185
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted Earnings (Loss) Per Common Share Attributable to McKesson Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing Operations
|
$
|
(3.99
|
)
|
|
$
|
2.51
|
|
|
(259
|
)
|
%
|
|
$
|
(1.62
|
)
|
|
$
|
1.79
|
|
|
(191
|
)
|
%
|
Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(0.03
|
)
|
|
0.01
|
|
|
(400
|
)
|
|
||||
Total
|
$
|
(3.99
|
)
|
|
$
|
2.51
|
|
|
(259
|
)
|
%
|
|
$
|
(1.65
|
)
|
|
$
|
1.80
|
|
|
(192
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted Average Diluted Common Shares
|
183
|
|
|
199
|
|
|
(8
|
)
|
%
|
|
185
|
|
|
201
|
|
|
(8
|
)
|
%
|
•
|
2019 first quarter goodwill impairment charges of $570 million (pre-tax and after-tax) for our European Pharmaceutical Solutions segment. Refer to Financial Note 4, “Goodwill Impairment Charges,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q for more information;
|
•
|
2019 first quarter gain from an escrow settlement of $97 million (pre-tax and after-tax) representing certain indemnity and other claims related to our third quarter 2017 acquisition of Rexall Health;
|
•
|
2019 second quarter pre-tax credit of $90 million related to the derecognition of a payable to the shareholders of Change Healthcare, Inc.;
|
•
|
2020 second quarter charge of $82 million (pre-tax and after-tax) in connection with an agreement reached in principle to settle all opioid-related claims filed by two Ohio counties, as further discussed below;
|
•
|
Opioid-related pre-tax expenses of $36 million and $34 million in the second quarters of 2020 and 2019, and $72 million and $76 million in the first half of 2020 and 2019, primarily related to litigation expenses; and
|
•
|
Lower restructuring, impairment and related charges and favorable effects of foreign currency exchange fluctuations for the second quarter and first half of 2020
|
|
Quarter Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Operating Expenses
|
|
|
|
|
|
|
|
||||||||
Integration related expenses
|
$
|
16
|
|
|
$
|
35
|
|
|
$
|
33
|
|
|
$
|
51
|
|
Restructuring, severance and relocation
|
—
|
|
|
1
|
|
|
—
|
|
|
4
|
|
||||
Transaction closing expenses
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
||||
Other Expenses (1)
|
266
|
|
|
26
|
|
|
293
|
|
|
58
|
|
||||
Transaction-Related Expenses and Adjustments
|
$
|
282
|
|
|
$
|
63
|
|
|
$
|
326
|
|
|
$
|
115
|
|
(1)
|
Includes our proportionate share of transaction and integration expenses incurred by Change Healthcare JV, excluding certain fair value adjustments, which were recorded within equity earnings and charges from investment in Change Healthcare joint venture. The second quarter and first half of 2020 includes a pre-tax dilution loss of $246 million as a result of the Change Healthcare JV investment ownership dilution from approximately 70% to approximately 58.5%.
|
|
Quarter Ended September 30,
|
|
|
|
Six Months Ended September 30,
|
|
|
|
||||||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
Change
|
2019
|
|
2018
|
|
Change
|
||||||||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
45,979
|
|
|
$
|
41,610
|
|
|
10
|
|
%
|
$
|
90,144
|
|
|
$
|
82,587
|
|
|
9
|
|
%
|
European Pharmaceutical Solutions
|
6,598
|
|
|
6,639
|
|
|
(1
|
)
|
|
13,308
|
|
|
13,574
|
|
|
(2
|
)
|
|
||||
Medical-Surgical Solutions
|
2,056
|
|
|
1,948
|
|
|
6
|
|
|
3,959
|
|
|
3,651
|
|
|
8
|
|
|
||||
Other
|
2,983
|
|
|
2,878
|
|
|
4
|
|
|
5,933
|
|
|
5,870
|
|
|
1
|
|
|
||||
Total Revenues
|
$
|
57,616
|
|
|
$
|
53,075
|
|
|
9
|
|
%
|
$
|
113,344
|
|
|
$
|
105,682
|
|
|
7
|
|
%
|
|
Quarter Ended September 30,
|
|
|
|
|
Six Months Ended September 30,
|
|
|
|
||||||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Segment Operating Profit (Loss) (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
639
|
|
|
$
|
610
|
|
|
5
|
|
%
|
|
$
|
1,218
|
|
|
$
|
1,153
|
|
|
6
|
|
%
|
European Pharmaceutical Solutions (2)
|
1
|
|
|
10
|
|
|
(90
|
)
|
|
|
6
|
|
|
(550
|
)
|
|
101
|
|
|
||||
Medical-Surgical Solutions
|
129
|
|
|
105
|
|
|
23
|
|
|
|
254
|
|
|
198
|
|
|
28
|
|
|
||||
Other (3)
|
(1,311
|
)
|
|
95
|
|
|
NM
|
|
|
|
(1,170
|
)
|
|
209
|
|
|
(660
|
)
|
|
||||
Subtotal
|
(542
|
)
|
|
820
|
|
|
(166
|
)
|
|
|
308
|
|
|
1,010
|
|
|
(70
|
)
|
|
||||
Corporate Expenses, Net (4)
|
(364
|
)
|
|
(167
|
)
|
|
118
|
|
|
|
(539
|
)
|
|
(290
|
)
|
|
86
|
|
|
||||
Interest Expense
|
(64
|
)
|
|
(66
|
)
|
|
(3
|
)
|
|
|
(120
|
)
|
|
(127
|
)
|
|
(6
|
)
|
|
||||
Income (Loss) from Continuing Operations Before Income Taxes
|
$
|
(970
|
)
|
|
$
|
587
|
|
|
(265
|
)
|
%
|
|
$
|
(351
|
)
|
|
$
|
593
|
|
|
(159
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Segment Operating Profit (Loss) Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Pharmaceutical and Specialty Solutions
|
1.39
|
|
%
|
1.47
|
|
%
|
(8
|
)
|
bp
|
|
1.35
|
|
%
|
1.40
|
|
%
|
(5
|
)
|
bp
|
||||
European Pharmaceutical Solutions
|
0.02
|
|
|
0.15
|
|
|
(13
|
)
|
|
|
0.05
|
|
|
(4.05
|
)
|
|
410
|
|
|
||||
Medical-Surgical Solutions
|
6.27
|
|
|
5.39
|
|
|
88
|
|
|
|
6.42
|
|
|
5.42
|
|
|
100
|
|
|
(1)
|
Segment operating profit (loss) includes gross profit, net of operating expenses, as well as other income (expenses), net, for our operating segments.
|
(2)
|
Operating loss of our European Pharmaceutical Solutions segment for the first half of 2019 includes a goodwill impairment charge of $570 million.
|
(3)
|
Operating loss for Other in the second quarter and first half of 2020 includes an impairment charge of $1,157 million and a dilution loss of $246 million related to our investment in Change Healthcare JV.
|
(4)
|
Corporate expenses, net for the second quarter and first half of 2020 includes pension settlement charges of $105 million and $122 million and a settlement charge of $82 million related to opioid claims.
|
(Dollars in millions)
|
September 30, 2019
|
|
March 31, 2019
|
|
||||
Cash, cash equivalents and restricted cash
|
$
|
1,356
|
|
|
$
|
2,981
|
|
|
Working capital
|
208
|
|
|
839
|
|
|
||
Debt to capital ratio (1)
|
50.0
|
|
%
|
43.3
|
|
%
|
||
Return on McKesson stockholders’ equity (2)
|
(7.7
|
)
|
|
0.4
|
|
|
(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 (loss) 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 could have a material adverse impact on our results of operations.
|
•
|
Our foreign operations subject us to a number of operating, economic, political and regulatory risks that may have a material adverse impact on our financial position and results of operations.
|
•
|
Changes in the Canadian healthcare industry and regulatory environment could have a material adverse impact on our results of operations.
|
•
|
General European economic conditions together with austerity measures taken by certain European governments could have a material adverse impact on our results of operations.
|
•
|
Changes in the European regulatory environment with respect to privacy and data protection regulations could have a material adverse impact on our results of operations.
|
•
|
Our results of operations, which are stated in U.S. dollars, could be adversely impacted by fluctuations in foreign currency exchange rates.
|
•
|
Our business could be hindered if we are unable to complete and integrate acquisitions successfully.
|
•
|
Our results of operations are impacted by our investment in Change Healthcare JV.
|
•
|
Our business and results of operations could be impacted if we fail to manage and complete divestitures and distributions.
|
•
|
We are subject to legal and regulatory proceedings that could have a material adverse impact on our financial position and results of operations.
|
•
|
Competition and industry consolidation may erode our profit.
|
•
|
A material reduction in purchases or the loss of a large customer or group purchasing organization, as well as substantial defaults in payments by a large customer or group purchasing organization, could have a material adverse impact on our financial position and results of operations.
|
•
|
Contracts with foreign and domestic government entities and their agencies pose additional risks relating to future funding and compliance.
|
•
|
Our future results could be materially affected by public health issues whether occurring in the United States or abroad.
|
•
|
We rely on sophisticated computer systems to perform our business operations and elements of those systems are from time to time subject to cybersecurity incidents, such as malware and ransomware attacks, unauthorized access, system failures, user errors and disruptions. Although we, our customers, our strategic partners and our external service providers use a variety of security measures to protect our and their computer systems, a failure or compromise of our, our customers’, our strategic partners’ or our external service providers’ computer systems from a cyberattack, disaster, or malfunction may result in material adverse operational and financial consequences.
|
•
|
We could experience losses or liability not covered by insurance.
|
•
|
Proprietary protections may not be adequate, and products may be found to infringe the rights of third parties.
|
•
|
System errors or failures of our products or services to conform to specifications cause unforeseen liabilities or injury, harm our reputation and have a material adverse impact on our results of operations.
|
•
|
Various risks could interrupt customers’ access to their data residing in our service centers, exposing us to significant costs.
|
•
|
We may be required to record a significant charge to earnings if our goodwill, intangible and other long-lived assets, or investments become further impaired.
|
•
|
Tax legislation initiatives or challenges to our tax positions could have a material adverse impact on our results of operations.
|
•
|
Volatility and disruption to the global capital and credit markets may adversely affect our ability to access credit, our cost of credit and the financial soundness of our customers and suppliers.
|
•
|
Changes in accounting standards issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies may adversely affect our consolidated financial statements.
|
•
|
We could face significant liability if we withdraw from participation in one or more multiemployer pension plans in which we participate, or if one or more multiemployer plans in which we participate is underfunded.
|
•
|
We may not realize the expected benefits from our restructuring and business process initiatives.
|
•
|
We may experience difficulties with outsourcing and similar third-party relationships.
|
•
|
We may face risks associated with our retail expansion.
|
•
|
We may be unable to keep existing retail store locations or open new retail locations in desirable places, which could materially adversely affect our results of operations.
|
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, 2019 – July 31, 2019
|
—
|
$
|
—
|
|
—
|
$
|
2,785
|
August 1, 2019 – August 31, 2019
|
5.2
|
|
144.28
|
|
5.2
|
|
2,035
|
September 1, 2019 – September 30, 2019
|
—
|
|
—
|
|
—
|
|
2,035
|
Total
|
5.2
|
|
|
|
5.2
|
|
|
(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
Number
|
Description
|
10.01
|
|
|
|
10.1†
|
|
|
|
10.2†
|
|
|
|
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, 2019, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) related Financial Notes.
|
†
|
Management contract or compensation plan or arrangement in which directors and/or executive officers are eligible to participate.
|
††
|
Furnished herewith.
|
|
|
|
MCKESSON CORPORATION
|
|
|
|
|
Date:
|
October 30, 2019
|
|
/s/ Britt J. Vitalone
|
|
|
|
Britt J. Vitalone
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
MCKESSON CORPORATION
|
|
|
|
|
Date:
|
October 30, 2019
|
|
/s/ Sundeep G. Reddy
|
|
|
|
Sundeep G. Reddy
|
|
|
|
Senior Vice President and Controller
|
|
|
|
A.
|
PURPOSE
|
1
|
|
B.
|
ERISA PLAN
|
1
|
|
C.
|
PARTICIPATION
|
1
|
|
D.
|
AMOUNTS OF DEFERRAL
|
4
|
|
E.
|
PAYMENT OF DEFERRED COMPENSATION
|
5
|
|
F.
|
SOURCE OF PAYMENT
|
8
|
|
G.
|
MISCELLANEOUS
|
9
|
|
H.
|
ADMINISTRATION OF THE PLAN
|
10
|
|
I.
|
AMENDMENT OR TERMINATION OF THE PLAN
|
10
|
|
J.
|
CLAIMS AND APPEALS
|
10
|
|
K.
|
DEFINITIONS
|
12
|
|
L.
|
SUCCESSORS
|
15
|
|
M.
|
EXECUTION
|
15
|
|
|
i
|
|
A.
|
PURPOSE
|
B.
|
ERISA PLAN
|
C.
|
PARTICIPATION
|
D.
|
AMOUNTS OF DEFERRAL
|
E.
|
PAYMENT OF DEFERRED COMPENSATION
|
F.
|
SOURCE OF PAYMENT
|
G.
|
MISCELLANEOUS
|
H.
|
ADMINISTRATION OF THE PLAN
|
I.
|
AMENDMENT OR TERMINATION OF THE PLAN
|
J.
|
CLAIMS AND APPEALS
|
K.
|
DEFINITIONS
|
L.
|
SUCCESSORS
|
M.
|
EXECUTION
|
By:
|
/s/ Jorge L. Figueredo
|
|
Name: Jorge L. Figueredo
Title: Executive Vice President, Human Resources
|
|
|
|
A.
|
PURPOSE
|
1
|
|
B.
|
ERISA PLAN
|
1
|
|
C.
|
PARTICIPATION
|
2
|
|
D.
|
AMOUNTS OF DEFERRAL
|
3
|
|
E.
|
COMPANY CONTRIBUTIONS
|
4
|
|
F.
|
PAYMENT OF DEFERRED COMPENSATION
|
5
|
|
G.
|
BENEFICIARY DESIGNATION
|
9
|
|
H.
|
SOURCE OF PAYMENT
|
9
|
|
I.
|
MISCELLANEOUS
|
10
|
|
J.
|
ADMINISTRATION OF THE PLAN
|
11
|
|
K.
|
AMENDMENT OR TERMINATION OF THE PLAN
|
11
|
|
L.
|
CLAIMS AND APPEALS
|
11
|
|
M.
|
DEFINITIONS
|
13
|
|
N.
|
SUCCESSORS
|
16
|
|
O.
|
EXECUTION
|
17
|
|
|
|
|
|
APPENDIX A EXAMPLE OF DEFERRALS UNDER PLAN
|
A-1
|
|
|
i
|
|
A.
|
PURPOSE
|
1.
|
This Plan is established to allow certain executives of the Company to elect to defer compensation which cannot be deferred under the McKesson Corporation 401(k) Retirement Savings Plan (“401(k) Plan”) because of limitations of tax laws and to provide for a Monthly Company Match and an Additional Company Match on those deferrals at a rate equivalent to the 401(k) Plan’s “Matching Employer Contribution” and “Additional Matching Employer Contribution.”
|
2.
|
This Plan is the successor plan to the Supplemental PSIP, as in effect on December 31, 2004 (the “Prior Plan”). Effective December 31, 2004, the Prior Plan was frozen and no new deferrals shall be made to it nor shall any matching contributions be allocated or vested under it after such date; provided, however, that any deferrals that were made to the Prior Plan or matching contributions that were allocated and vested under the Prior Plan before January 1, 2005 shall continue to be governed by the terms and conditions of the Prior Plan as in effect on December 31, 2004.
|
3.
|
Any deferrals made to or matching contributions that were allocated or vested under the Prior Plan after December 31, 2004 are deemed to have been made or allocated under this Plan and all such deferrals and matching contributions shall be governed by the terms and conditions of this Plan as it may be amended from time to time.
|
4.
|
This Plan is intended to comply with the requirements of Code Section 409A.
|
5.
|
Capitalized terms used in this Plan shall have the meaning set forth in Section M hereof.
|
B.
|
ERISA PLAN
|
|
1
|
|
C.
|
PARTICIPATION
|
1.
|
Eligibility to Participate. The Administrator may, at his or her discretion, and at any time, and from time to time, select executives of an Employer who may elect to participate in this Plan (“Eligible Executives”). Selection of Eligible Executives may be evidenced by the terms of the executive’s employment contract with the Company, or by inclusion among the persons specified in writing by the Administrator. The Administrator may, at its discretion, and at any time, and from time to time, provide that executives previously designated as Eligible Executives are no longer Eligible Executives. If the Administrator determines that an executive is no longer an Eligible Executive, he or she shall remain a Participant in the Plan until all amounts credited to his or her Account prior to such determination are paid out under the terms of the Plan (or until death, if earlier).
|
2.
|
Election to Participate by Eligible Executives and Deferral Election. Each Eligible Executive may become a Participant in the Plan by electing to defer Compensation, or by the Company crediting a Discretionary Contribution to an Account on behalf of an Eligible Executive, in accordance with the terms of this Plan. An election to defer shall be in writing and shall be made at the time and in the form specified by the Administrator. On electing to defer Compensation (or by accepting a Discretionary Contribution credited by the Company to an Account on behalf of an Eligible Executive) under this Plan, the Eligible Executive shall be deemed to accept all other terms and conditions of this Plan.
|
(a)
|
Timing of Elections. All elections to defer amounts under this Plan shall be irrevocable and shall be made pursuant to an election executed and filed with the Administrator before the amounts so deferred are earned. An election to defer Compensation shall be made prior to the beginning of the Plan Year in which it is earned and shall become irrevocable on the December 31 preceding such Plan Year.
|
(b)
|
Newly Eligible Executive Elections. However, if an executive becomes an Eligible Executive after the beginning of a Plan Year, he or she may make an election to defer Compensation for that Plan Year no later than 30 days after the date he or she becomes an Eligible Executive, which election shall become irrevocable at the end of the 30-day period or an earlier date that the Administrator prescribed; provided, however, such election shall apply only to Compensation earned after the election becomes irrevocable or at such later time the Administrator prescribes.
|
|
2
|
|
(c)
|
Modification of Elections. An election filed in accordance with the provisions of the preceding paragraphs (a) and (b) shall be applicable to the Plan Year with respect to which it is made and shall continue for subsequent Plan Years until suspended or modified in a writing delivered by the Participant to the Administrator, as described in this paragraph (c). An election to suspend further deferrals or to increase or decrease the amount deferred under the Plan shall apply only to Compensation otherwise payable to the Participant after the end of the Plan Year in which the election is delivered to the Administrator and such election shall become irrevocable on the date that the Administrator prescribes, but in no event later than December 31 of the Plan Year in which such election is made.
|
3.
|
Relation to Other Plans.
|
(a)
|
Other Plans. An Eligible Executive may participate in this Plan and may also participate in DCAP III or any successor plan. No amounts may be deferred under this Plan which have been deferred under any other plan of the Company and the Administrator may modify or render invalid a Participant’s election prior to such election becoming irrevocable to accommodate deferrals made under other plan(s).
|
(b)
|
Effect on Other Plans. For all other benefit programs maintained by the Company, amounts deferred by an Eligible Executive under this Plan may result in a reduction of benefits payable under the Social Security Act, the McKesson Corporation Retirement Plan, the 401(k) Plan and the McKesson Corporation Executive Benefit Retirement Plan.
|
D.
|
AMOUNTS OF DEFERRAL
|
1.
|
401(k) Plan Supplement. This Plan allows an Eligible Executive to defer Compensation, and receive credit for a Monthly Company Match and Additional Company Match, to the extent that such deferrals (and corresponding Monthly Company Match and Additional Company Match) cannot be made under the 401(k) Plan because of the limitations in Code Section 401(a)(17) (limiting the amount of annual compensation to be taken into account under the 401(k) Plan to $280,000 in 2019, as adjusted from time to time under the Code).
|
2.
|
Amount of Deferrals. As illustrated in Appendix A, an Eligible Executive may elect to defer under this Plan up to an amount equal to (a) minus (b), where:
|
(a)
|
is the maximum rate of deferral for “Basic Contributions” under the 401(k) Plan multiplied by the Eligible Executive’s Compensation, and
|
(b)
|
is the maximum amount that the Eligible Executive is able to defer as a “Basic Contribution” under the 401(k) Plan, taking into account the limits of Code Section 401(a)(17).
|
|
3
|
|
E.
|
COMPANY CONTRIBUTIONS
|
1.
|
Company Match.
|
(a)
|
Eligibility.
|
(i)
|
Monthly Company Match. A Monthly Company Match shall be credited, with respect to each calendar month, to the Accounts of Eligible Executives who actually defer Compensation under this Plan for such calendar month.
|
(ii)
|
Additional Company Match. An Additional Company Match may be credited, with respect to each 401(k) Plan plan year, to the Accounts of Eligible Executives who actually defer Compensation under this Plan.
|
(b)
|
Amount of Match.
|
(i)
|
Monthly Company Match. The amount of the Monthly Company Match to be credited to the Account of an Eligible Executive for any calendar month shall be a percentage of the Eligible Executive’s deferrals under this Plan for the calendar month. This percentage shall be the same percentage as the “Matching Employer Contribution” (as defined in the 401(k) Plan) percentage that would have been credited to the Eligible Executive’s 401(k) Plan account if the Eligible Executive’s deferrals under this Plan had been made under the 401(k) Plan. In determining this amount, the Administrator shall take into account the different “Matching Employer Contribution” rates that may apply.
|
(ii)
|
Additional Company Match. The amount of the Additional Company Match to be credited to the Account of an Eligible Executive for any 401(k) Plan plan year shall be a percentage of the Eligible Executive’s deferrals under this Plan for the 401(k) Plan plan year. This percentage shall be the same percentage as the “Additional Matching Employer Contribution” (as defined in the 401(k) Plan) percentage that would have been credited to the Eligible Executive’s 401(k) Plan account if the Eligible Executive’s deferrals under this Plan had been made under the 401(k) Plan. In determining this amount, the Administrator shall take into account the different “Additional Matching Employer Contribution” rates that may apply.
|
|
4
|
|
2.
|
Discretionary Contribution. The Compensation Committee shall have the sole discretion to determine an amount credited to an Eligible Executive’s Account as a “Discretionary Contribution.” A Discretionary Contribution may be subject to such terms or conditions, including but not limited to vesting, as the Compensation Committee may specify in its discretion at the time the Discretionary Contribution is credited to a Participant’s Account. Except with respect to the Company’s executive officers, the Compensation Committee may delegate its authority under this Section E.2 to the Administrator.
|
F.
|
PAYMENT OF DEFERRED COMPENSATION
|
1.
|
Book Account and Interest Credit. Both Compensation deferred by a Participant and any Monthly Company Match, Additional Company Match or vested Discretionary Contribution for the benefit of a Participant shall be credited to a separate bookkeeping account maintained for such Participant (the “Account”). Interest or earnings shall be credited to each Account for each Plan Year at a rate (i) determined by reference to the return choice(s) selected by the Participant from among the alternatives that are selected and made available by the Plan Administrator from time to time (the “Investment Alternatives”), which alternatives will consist of all or a subset of the investment alternatives available under the 401(k) Plan from time to time, excluding the 401(k) Plan’s brokerage window or (ii) if no such Investment Alternative has been chosen, the default rate of 120% of the long-term applicable federal rate, compounding monthly, applicable for the end of the immediately preceding year ((i) or (ii) as applicable, the “Declared Rate”). Notwithstanding the foregoing, if a Change in Control occurs, for the two calendar years immediately following the year in which the Change in Control occurs, Participants shall continue to be able to select from among the Investment Alternatives, or other return choices, in each case, that are substantially similar to the Investment Alternatives in effect immediately prior to the Change in Control. Interest or earnings on each Account balance shall be compounded daily on each business day within the Plan Year to yield the Declared Rate for the Plan Year. Interest or earnings shall be credited to each Account as of the end of each business day.
|
2.
|
Vesting.
|
(a)
|
A Participant shall be 100% vested at all times in the value of the Participant’s elective deferrals and earnings thereon credited to the Participant’s Account.
|
|
5
|
|
(b)
|
A Participant shall vest in the amounts of Monthly Company Match and the Additional Company Match and earnings thereon credited to the Participant’s Account at the same time and in the same manner as if these amounts were “Matching Employer Contributions” or “Additional Matching Employer Contributions” under the 401(k) Plan and as if the rules of the 401(k) Plan concerning vesting applied to such amounts. For this purpose, any Monthly Company Match shall be deemed to be credited to an Account as of the last day of the calendar month with respect to which such Monthly Company Match is determined and any Additional Company Match shall be deemed to be credited to an Account as of the March 31 with respect to which such Company Match is determined. Any amounts that would be forfeited under the rules of the 401(k) Plan applicable to “Matching Employer Contributions” or “Additional Matching Employer Contributions” under the 401(k) Plan shall be forfeited hereunder. Any forfeiture under this Plan of any portion of the Monthly Company Match or the Additional Company Match credited to a Participant’s Account shall eliminate any obligation of the Company to pay the forfeited amount hereunder.
|
(c)
|
Unless the Compensation Committee determines otherwise, a Participant’s Discretionary Contribution will be forfeited at the time of Participant’s Separation from Service for any reason, if such Participant has not satisfied the applicable terms and conditions, including vesting requirements, that the Compensation Committee imposed on the Discretionary Contribution under Section E.2. Any forfeiture under this Plan of any portion of the Discretionary Contribution credited to a Participant’s Account shall eliminate any obligation of the Company to pay the forfeited amount hereunder.
|
3.
|
Election of Methods of Payment. A Participant shall elect in writing, and file with the Administrator, a method of payment of benefits under this Plan from the following methods based upon the nature of the Payment Event. This election must be made no later than the later of (i) December 31, 2007 or (ii) 30 days after the date the Participant first becomes an Eligible Executive.
|
|
6
|
|
(a)
|
Retirement or Disability. If the Payment Event is due to the Participant’s Retirement or Disability, the Participant may choose one of the following payment methods:
|
(i)
|
Payment of the vested amounts credited to the Participant’s Account in any specified number of approximately equal annual installments, not in excess of the number of whole years remaining of the Participant’s life expectancy, determined as of his or her Retirement or Disability and based upon the mortality tables then in use under the McKesson Corporation Retirement Plan, the first installment to be paid at a designated interval following the Payment Event. For purposes of the Plan, installment payments shall be treated as a single distribution under Code Section 409A.
|
(ii)
|
Payment of the vested amounts credited to the Participant’s Account in a single lump sum upon the occurrence of the Retirement or Disability.
|
(iii)
|
If a Participant does not make any election with respect to the payment of the Participant’s Account, then such benefit shall be payable in a lump sum upon the occurrence of Participant’s Retirement or Disability, whichever is applicable.
|
(b)
|
Death. Each Participant shall make an election of the manner in which any amount remaining in the Participant’s Account at the time of the Participant’s death shall be paid to his or her Beneficiary if such Participant has not yet received or begun receiving a distribution under the Plan. At the election of the Participant, benefits shall be paid in a lump sum or in up to ten annual installments; provided, however, if a Participant is in-pay status at the time of death, distribution of the Account, or portion of the Account, that is in-pay shall continue to be distributed to the Beneficiary as Participant elected to receive such distribution. A Beneficiary may not elect to accelerate, change the form of the payments pursuant to the Participant’s election, or further defer the payment of the Participant’s Account as described in Section F.4.
|
(c)
|
Separation from Service Not Due to Retirement or Death. If the Payment Event occurs as a result of the Participant’s Separation from Service, and such separation is not due to the Participant’s death or Retirement, payment of the vested amounts credited to the Participant’s Account shall be made in a single lump sum upon the occurrence of the Participant’s Separation from Service, subject to Section 5.
|
|
7
|
|
4.
|
Subsequent Change in Form of Payment. Once an election is made as to the form of payment upon a Payment Event, a Participant may alter the form of payment of amounts deferred under the Plan by a writing filed with the Administrator; provided that such alteration is made at least one year prior to the earliest Payment Event and does not provide for the receipt of such amounts earlier than five years from the previously scheduled Payment Event. A change to the form of a distribution may be modified or revoked until one year prior to the time a distribution is originally scheduled to be made, at which time such change shall become irrevocable. The last valid election accepted by the Administrator shall govern the payout. A change to the form of distribution may be modified or revoked until 12 months prior to the earliest scheduled Payment Event, at which time any such modification or revocation shall become irrevocable. The last valid election accepted by the Administrator shall govern the form of payment.
|
5.
|
Deminimis Cashout. Notwithstanding the Participant’s election, the Administrator in its sole discretion may distribute an Account to a Participant or a Beneficiary in a single payment if the value of the Account, and any other plan or arrangement with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan under Treasury Regulation section 1.409A-1(c)(2), is less than the Code Section 402(g)(1)(B) limit.
|
6.
|
Special Distribution Election on or before December 31, 2006. Participants who are identified by the Compensation Committee, in its sole discretion, may make a special distribution election to receive a distribution of their Account in calendar year 2007 or later; provided that the distribution election is made at least twelve months in advance of the newly elected distribution date (and the previously scheduled distribution date, if any) and the election is made no later than December 31, 2006. An election made pursuant to this Section F.6 shall be subject to any special administrative rules imposed by the Compensation Committee including rules intended to comply with Code Section 409A. No election under this Section F.6 shall (i) change the payment date of any distribution otherwise scheduled to be paid in 2006 or cause a payment to be paid in 2006, or (ii) be permitted after December 31, 2006.
|
|
8
|
|
7.
|
Date Payment Occurs. Payment shall be made or commence not later than ninety (90) days following the date the earliest Payment Event occurs. Notwithstanding the foregoing, a distribution scheduled to be made upon Separation from Service to a Participant who is identified as a Specified Employee as of the date he or she Separates from Service shall be delayed for a minimum of six months following the Participant’s Separation from Service. Any payment that otherwise would have been made pursuant to this Section F during such six-month period, if any, shall be paid on the first day of the seventh month following the Participant’s Separation from Service. The identification of a Participant as a Specified Employee shall be made by the Administrator in his or her sole discretion in accordance with Section M.28 of the Plan and Code Sections 416(i) and 409A and the regulations promulgated thereunder.
|
8.
|
Prohibition on Acceleration. Notwithstanding any other provision of the Plan to the contrary, no distribution will be made from the Plan that would constitute an impermissible acceleration of payment as defined in Code Section 409A(a)(3) and the regulations promulgated thereunder.
|
G.
|
BENEFICIARY DESIGNATION
|
H.
|
SOURCE OF PAYMENT
|
|
9
|
|
I.
|
MISCELLANEOUS
|
1.
|
Withholding. Each Participant and Beneficiary shall make appropriate arrangements with McKesson for the satisfaction of any federal, state, or local income tax withholding requirements and Social Security or other employment tax requirements applicable to the payment of benefits under this Plan. If no other arrangements are made, McKesson may provide, at its discretion, for such withholding and tax payments as may be required.
|
2.
|
No Assignment. Except as otherwise provided in this Section I.2 or by applicable law, the benefits provided under this Plan may not be alienated, assigned, transferred, pledged, or hypothecated by any person, at any time. These benefits shall be exempt from the claims of creditors or other claimants and from all orders, decrees, levies, garnishments or executions.
|
3.
|
Applicable Law; Severability. The Plan hereby created shall be construed, administered, and governed in all respects in accordance with ERISA and the laws of the State of Texas to the extent that the latter are not preempted by ERISA. If any provision of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereunder shall continue to be effective.
|
4.
|
No Right to Continued Employment, Etc. Neither the establishment or maintenance of the Plan nor the crediting of any amount to any Participant’s Account, nor the designation of an executive as an Eligible Executive, shall confer upon any individual any right to be continued as an employee of an Employer or shall affect the right of an Employer to terminate any executive’s employment or change any terms of any executive’s employment at any time.
|
|
10
|
|
J.
|
ADMINISTRATION OF THE PLAN
|
1.
|
In General. The Plan Administrator shall be the Company’s Employee Benefits Management Committee. If any of the members of the Employee Benefits Management Committee is a Participant, any discretionary action taken as Plan Administrator which directly affects such member of the Employee Benefits Management Committee as a Participant shall be specifically approved by the Compensation Committee; provided that the Plan Administrator shall at all times have the authority to specify the Investment Alternatives from time to time. The Plan Administrator shall have the authority and responsibility to interpret the Plan and shall adopt such rules and regulations for carrying out the Plan as it may deem necessary or appropriate. Decisions of the Plan Administrator or Compensation Committee shall be final and binding on all parties who have or claim any interest in the Plan. The Plan Administrator or Compensation Committee shall have the authority to delegate its authority under the Plan to an officer or group of officers of McKesson.
|
2.
|
Elections and Notices. All elections and notices made under this Plan shall be in writing and filed with the Administrator at the time and in the manner specified by him or her.
|
K.
|
AMENDMENT OR TERMINATION OF THE PLAN
|
1.
|
Amendment. The Compensation Committee may at any time, and from time to time, amend the Plan; provided that the Plan Administrator may also amend the Plan for any administrative or any other change that would be required under applicable law and that does not affect benefits under the Plan. Unless otherwise specified, such action shall be prospective only and shall not adversely affect the rights of any Participant or Beneficiary to any benefit previously earned under the Plan.
|
2.
|
Termination. The Board in its discretion may at any time terminate the Plan in accordance with Treasury Regulation section 1.409A-3(j)(4)(ix).
|
L.
|
CLAIMS AND APPEALS
|
1.
|
Informal Resolution of Questions. Any Participant or Beneficiary who has questions or concerns about his or her benefits under the Plan is encouraged to communicate with the Human Resources Department of McKesson. If this discussion does not give the Participant or Beneficiary satisfactory results, a formal claim for benefits may be made in accordance with the procedures of this Section L.
|
|
11
|
|
2.
|
Formal Benefits Claim – Review by Executive Vice President, Chief Human Resources Officer. A Participant or Beneficiary may make a written request for review of any matter concerning his or her benefits under this Plan. The claim must be addressed to the Executive Vice President, Chief Human Resources Officer, McKesson Corporation, 6555 State Hwy 161, Irving, Texas, 75039. The Executive Vice President, Chief Human Resources Officer or his or her delegate (“CHRO”) shall decide the action to be taken with respect to any such request and may require additional information if necessary to process the request. The CHRO shall review the request and shall issue his or her decision, in writing, no later than 90 days after the date the request is received, unless the circumstances require an extension of time. If such an extension is required, written notice of the extension shall be furnished to the person making the request within the initial 90-day period, and the notice shall state the circumstances requiring the extension and the date by which the CHRO expects to reach a decision on the request. In no event shall the extension exceed a period of 90 days from the end of the initial period.
|
3.
|
Notice of Denied Request. If the CHRO denies a request in whole or in part, he or she shall provide the person making the request with written notice of the denial within the period specified in Section L.2. The notice shall set forth the specific reason for the denial, reference to the specific Plan provisions upon which the denial is based, a description of any additional material or information necessary to perfect the request, an explanation of why such information is required, and an explanation of the Plan's appeal procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.
|
4.
|
Appeal to CHRO.
|
(a)
|
A person whose request has been denied in whole or in part (or such person's authorized representative) may file an appeal of the decision in writing with the CHRO within 60 days of receipt of the notification of denial. The appeal must be addressed to: Executive Vice President, Chief Human Resources Officer, McKesson Corporation, 6555 State Hwy 161, Irving, Texas, 75039. The CHRO, for good cause shown, may extend the period during which the appeal may be filed for another 60 days. The appellant and/or his or her authorized representative shall be permitted to submit written comments, documents, records and other information relating to the claim for benefits. Upon request and free of charge, the applicant should be provided reasonable access to and copies of, all documents, records or other information relevant to the appellant's claim.
|
|
12
|
|
(b)
|
The CHRO's review shall take into account all comments, documents, records and other information submitted by the appellant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The CHRO shall not be restricted in his or her review to those provisions of the Plan cited in the original denial of the claim.
|
(c)
|
The CHRO shall issue a written decision within a reasonable period of time but not later than 60 days after receipt of the appeal, unless special circumstances require an extension of time for processing, in which case the written decision shall be issued as soon as possible, but not later than 120 days after receipt of an appeal. If such an extension is required, written notice shall be furnished to the appellant within the initial 60-day period. This notice shall state the circumstances requiring the extension and the date by which the CHRO expects to reach a decision on the appeal.
|
(d)
|
If the decision on the appeal denies the claim in whole or in part, written notice shall be furnished to the appellant. Such notice shall state the reason(s) for the denial, including references to specific Plan provisions upon which the denial was based. The notice shall state that the appellant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim for benefits. The notice shall describe any voluntary appeal procedures offered by the Plan and the appellant's right to obtain the information about such procedures. The notice shall also include a statement of the appellant's right to bring an action under Section 502(a) of ERISA.
|
(e)
|
The decision of the CHRO on the appeal shall be final, conclusive and binding upon all persons and shall be given the maximum possible deference allowed by law.
|
5.
|
Exhaustion of Remedies. No legal or equitable action for benefits under the Plan shall be brought unless and until the claimant has submitted a written claim for benefits in accordance with Section L.2, has been notified that the claim is denied in accordance with Section L.3, has filed a written request for a review of the claim in accordance with Section L.4, and has been notified in writing that the CHRO has affirmed the denial of the claim in accordance with Section L.4.
|
M.
|
DEFINITIONS
|
2.
|
“Account” shall mean the “Account” specified in Section F.l.
|
|
13
|
|
3.
|
“Additional Company Match” shall mean, with respect to any Plan Year, the amount credited to the Account of an Eligible Executive in accordance with Section E.l(a)(ii).
|
4.
|
“Administrator” shall mean the person specified in Section J.1.
|
5.
|
“Beneficiary” shall mean the person or entity described by Section G.
|
6.
|
“Board” shall mean the Board of Directors of McKesson.
|
7.
|
“Code” shall mean the Internal Revenue Code of 1986, as amended.
|
8.
|
“Company” shall mean McKesson and any affiliate that would be considered a service recipient for purposes of Treasury Regulation section 1.409A-1(g).
|
9.
|
“Compensation” shall mean “Compensation” as defined in Section 15.17 of the 401(k) Plan; provided, however, that Compensation for purposes of this Plan shall be determined without regard to the limit of Code Section 401(a)(17).
|
10.
|
“Compensation Committee” shall mean the Compensation Committee of the Board.
|
11.
|
“DCAP III” shall mean the McKesson Corporation Deferred Compensation Administration Plan III and predecessor or successor plans, if applicable.
|
12.
|
“Disability” shall mean that an individual is determined to be totally disabled by the Social Security Administration.
|
13.
|
“Discretionary Contribution” shall mean a Company contribution to a Participant’s Account made in the Compensation Committee’s discretion pursuant to Section E.2.
|
14.
|
“Eligible Executive” shall mean an employee of the Employer, or its affiliate or subsidiary, who is eligible to participate in this Plan under Section C.
|
15.
|
“Employer” shall mean McKesson and any other affiliate that would be considered a service recipient or employer for purposes of Treasury Regulation section 1.409A-1(h)(3).
|
16.
|
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
|
17.
|
“Identification Date” shall mean each December 31.
|
18.
|
“McKesson” shall mean McKesson Corporation, a Delaware corporation.
|
|
14
|
|
19.
|
“Monthly Company Match” shall mean, with respect to a calendar month, the amount credited to the Account of an Eligible Executive in accordance with Section E.1(a)(i).
|
20.
|
“Participant” shall be any Eligible Executive or former Eligible Executive for whom amounts are credited to an Account under this Plan. Upon a Participant’s death his or her Beneficiary shall be a Participant until all amounts are paid out of the decedent-Participant’s Account.
|
21.
|
“Payment Event” shall mean the earliest of the following: Retirement, death, Separation from Service other than due to Retirement or death, or Disability.
|
22.
|
“Plan” shall mean the McKesson Corporation Supplemental Retirement Savings Plan.
|
23.
|
“Plan Year” shall mean the calendar year.
|
24.
|
“Prior Plan” shall mean the McKesson Corporation Supplemental PSIP.
|
25.
|
“Retirement” shall mean Separation from Service from the Employer after the date on which the Participant has attained age 50 and has at least five Years of Service.
|
26.
|
“Separation from Service” shall mean termination of employment with the Employer, except in the event of death or Disability, as provided under Treasury Regulation section 1.409A-1(h)(1)(ii). A Participant shall be deemed to have had a Separation from Service if the Participant’s service with the Employer is reduced to an annual rate that is equal to or less than twenty percent of the services rendered, on average, during the immediately preceding three years of service with the Employer (or if providing service to the Employer less than three years, such lesser period).
|
27.
|
“Service” shall mean an Eligible Executive’s employment with the Company, commencing with the first day of such employment and ending on the day the Eligible Executive has a Separation from Service.
|
28.
|
“Specified Employee” shall mean a Participant who, on an Identification Date, is:
|
(a)
|
An officer of the Company having annual compensation greater than the compensation limit in Section 416(i)(1)(A)(i) of the Code, provided that no more than fifty officers of the Company shall be determined to be Specified Employees as of any Identification Date;
|
(b)
|
A five percent owner of the Company; or
|
(c)
|
A one percent owner of the Company having annual compensation from the Company of more than $150,000.
|
|
15
|
|
29.
|
“Year of Service” shall mean a period of 365 aggregate days of Service (including holidays, weekends and other non-working days).
|
|
16
|
|
By:
|
/s/ Jorge L. Figueredo
|
|
Name: Jorge L. Figueredo
Title: Executive Vice President, Human Resources
|
|
17
|
|
|
A-1
|
|
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 30, 2019
|
|
/s/ Brian S. Tyler
|
|
|
|
Brian S. Tyler
|
|
|
|
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 30, 2019
|
|
/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/ Brian S. Tyler
|
|
|
Brian S. Tyler
|
|
|
Chief Executive Officer
|
|
|
October 30, 2019
|
|
|
|
|
|
/s/ Britt J. Vitalone
|
|
|
Britt J. Vitalone
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
October 30, 2019
|
|
|
|
|
|