☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
Delaware
|
|
94-3207296
|
(State or other jurisdiction
of incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
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(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
|
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☒
|
|
Accelerated filer
|
|
☐
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Non-accelerated filer
|
|
☐
|
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Smaller reporting company
|
|
☐
|
|
|
|
|
Emerging growth company
|
|
☐
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Item
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Page
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1.
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2.
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3.
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4.
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1.
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1A.
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2.
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3.
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4.
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5.
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6.
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Item 1.
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Condensed Consolidated Financial Statements
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues
|
$
|
59,172
|
|
|
$
|
56,208
|
|
|
$
|
172,516
|
|
|
$
|
161,890
|
|
Cost of Sales
|
(56,139
|
)
|
|
(53,238
|
)
|
|
(163,829
|
)
|
|
(153,337
|
)
|
||||
Gross Profit
|
3,033
|
|
|
2,970
|
|
|
8,687
|
|
|
8,553
|
|
||||
Operating Expenses
|
(2,535
|
)
|
|
(2,156
|
)
|
|
(6,861
|
)
|
|
(6,219
|
)
|
||||
Goodwill Impairment Charges
|
(2
|
)
|
|
(21
|
)
|
|
(2
|
)
|
|
(591
|
)
|
||||
Restructuring, Impairment and Related Charges
|
(136
|
)
|
|
(110
|
)
|
|
(204
|
)
|
|
(288
|
)
|
||||
Total Operating Expenses
|
(2,673
|
)
|
|
(2,287
|
)
|
|
(7,067
|
)
|
|
(7,098
|
)
|
||||
Operating Income
|
360
|
|
|
683
|
|
|
1,620
|
|
|
1,455
|
|
||||
Other Income (Expense), Net
|
26
|
|
|
84
|
|
|
(15
|
)
|
|
144
|
|
||||
Equity Earnings and Charges from Investment in Change Healthcare Joint Venture
|
(28
|
)
|
|
(50
|
)
|
|
(1,478
|
)
|
|
(162
|
)
|
||||
Interest Expense
|
(64
|
)
|
|
(67
|
)
|
|
(184
|
)
|
|
(194
|
)
|
||||
Income (Loss) from Continuing Operations Before Income Taxes
|
294
|
|
|
650
|
|
|
(57
|
)
|
|
1,243
|
|
||||
Income Tax Benefit (Expense)
|
(47
|
)
|
|
(123
|
)
|
|
111
|
|
|
(245
|
)
|
||||
Income from Continuing Operations
|
247
|
|
|
527
|
|
|
54
|
|
|
998
|
|
||||
Income (Loss) from Discontinued Operations, Net of Tax
|
(5
|
)
|
|
(1
|
)
|
|
(12
|
)
|
|
1
|
|
||||
Net Income
|
242
|
|
|
526
|
|
|
42
|
|
|
999
|
|
||||
Net Income Attributable to Noncontrolling Interests
|
(56
|
)
|
|
(57
|
)
|
|
(163
|
)
|
|
(169
|
)
|
||||
Net Income (Loss) Attributable to McKesson Corporation
|
$
|
186
|
|
|
$
|
469
|
|
|
$
|
(121
|
)
|
|
$
|
830
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings (Loss) Per Common Share Attributable to McKesson Corporation
|
|
|
|
|
|
|
|
||||||||
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.06
|
|
|
$
|
2.41
|
|
|
$
|
(0.60
|
)
|
|
$
|
4.17
|
|
Discontinued operations
|
(0.03
|
)
|
|
(0.01
|
)
|
|
(0.06
|
)
|
|
0.01
|
|
||||
Total
|
$
|
1.03
|
|
|
$
|
2.40
|
|
|
$
|
(0.66
|
)
|
|
$
|
4.18
|
|
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.06
|
|
|
$
|
2.42
|
|
|
$
|
(0.60
|
)
|
|
$
|
4.19
|
|
Discontinued operations
|
(0.02
|
)
|
|
(0.01
|
)
|
|
(0.06
|
)
|
|
—
|
|
||||
Total
|
$
|
1.04
|
|
|
$
|
2.41
|
|
|
$
|
(0.66
|
)
|
|
$
|
4.19
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted Average Common Shares
|
|
|
|
|
|
|
|
||||||||
Diluted
|
180
|
|
|
195
|
|
|
183
|
|
|
199
|
|
||||
Basic
|
179
|
|
|
194
|
|
|
183
|
|
|
198
|
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net Income
|
$
|
242
|
|
|
$
|
526
|
|
|
$
|
42
|
|
|
$
|
999
|
|
|
|
|
|
|
|
|
|
||||||||
Other Comprehensive Income (Loss), Net of Tax
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
43
|
|
|
(113
|
)
|
|
55
|
|
|
(216
|
)
|
||||
Unrealized gains on cash flow hedges
|
8
|
|
|
35
|
|
|
33
|
|
|
37
|
|
||||
Changes in retirement-related benefit plans
|
—
|
|
|
3
|
|
|
96
|
|
|
15
|
|
||||
Other Comprehensive Income (Loss), Net of Tax
|
51
|
|
|
(75
|
)
|
|
184
|
|
|
(164
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive Income
|
293
|
|
|
451
|
|
|
226
|
|
|
835
|
|
||||
Comprehensive Income Attributable to Noncontrolling Interests
|
(66
|
)
|
|
(46
|
)
|
|
(161
|
)
|
|
(114
|
)
|
||||
Comprehensive Income Attributable to McKesson Corporation
|
$
|
227
|
|
|
$
|
405
|
|
|
$
|
65
|
|
|
$
|
721
|
|
|
Three Months Ended December 31, 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, September 30, 2019
|
272
|
|
|
$
|
3
|
|
|
$
|
6,573
|
|
|
$
|
(2
|
)
|
|
$
|
11,965
|
|
|
$
|
(1,704
|
)
|
|
(92
|
)
|
|
$
|
(10,353
|
)
|
|
$
|
210
|
|
|
$
|
6,692
|
|
Issuance of shares under employee plans
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
(39
|
)
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
186
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
231
|
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(500
|
)
|
|
—
|
|
|
(500
|
)
|
||||||||
Cash dividends declared, $0.41 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(8
|
)
|
||||||||
Balances, December 31, 2019
|
272
|
|
|
$
|
3
|
|
|
$
|
6,614
|
|
|
$
|
(2
|
)
|
|
$
|
12,075
|
|
|
$
|
(1,663
|
)
|
|
(95
|
)
|
|
$
|
(10,853
|
)
|
|
$
|
211
|
|
|
$
|
6,385
|
|
|
Nine Months Ended December 31, 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
|
|
|
—
|
|
|
89
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
72
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
90
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
90
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(115
|
)
|
|
(115
|
)
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
186
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
186
|
|
||||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(121
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130
|
|
|
9
|
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(1,934
|
)
|
|
—
|
|
|
(1,934
|
)
|
||||||||
Cash dividends declared, $1.21 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(221
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(221
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||||||
Balances, December 31, 2019
|
272
|
|
|
$
|
3
|
|
|
$
|
6,614
|
|
|
$
|
(2
|
)
|
|
$
|
12,075
|
|
|
$
|
(1,663
|
)
|
|
(95
|
)
|
|
$
|
(10,853
|
)
|
|
$
|
211
|
|
|
$
|
6,385
|
|
|
Three Months Ended December 31, 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, September 30, 2018
|
275
|
|
|
$
|
3
|
|
|
$
|
6,411
|
|
|
$
|
(2
|
)
|
|
$
|
13,354
|
|
|
$
|
(1,762
|
)
|
|
(80
|
)
|
|
$
|
(8,678
|
)
|
|
$
|
208
|
|
|
$
|
9,534
|
|
Issuance of shares under employee plans
|
1
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
(37
|
)
|
||||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(64
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(64
|
)
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
469
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|
515
|
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(450
|
)
|
|
—
|
|
|
(500
|
)
|
||||||||
Retirement of common stock
|
(5
|
)
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
(472
|
)
|
|
—
|
|
|
4
|
|
|
541
|
|
|
—
|
|
|
(1
|
)
|
||||||||
Cash dividends declared, $0.39 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
(13
|
)
|
||||||||
Balances, December 31, 2018
|
271
|
|
|
$
|
3
|
|
|
$
|
6,321
|
|
|
$
|
(2
|
)
|
|
$
|
13,276
|
|
|
$
|
(1,826
|
)
|
|
(79
|
)
|
|
$
|
(8,587
|
)
|
|
$
|
204
|
|
|
$
|
9,389
|
|
|
Nine Months Ended December 31, 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
|
1
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
35
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
71
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(143
|
)
|
|
(143
|
)
|
||||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(109
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(109
|
)
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
830
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
135
|
|
|
965
|
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
(1,462
|
)
|
|
—
|
|
|
(1,377
|
)
|
||||||||
Retirement of common stock
|
(5
|
)
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
(472
|
)
|
|
—
|
|
|
4
|
|
|
541
|
|
|
—
|
|
|
(1
|
)
|
||||||||
Cash dividends declared, $1.12 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(222
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(222
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(41
|
)
|
|
(41
|
)
|
||||||||
Balances, December 31, 2018
|
271
|
|
|
$
|
3
|
|
|
$
|
6,321
|
|
|
$
|
(2
|
)
|
|
$
|
13,276
|
|
|
$
|
(1,826
|
)
|
|
(79
|
)
|
|
$
|
(8,587
|
)
|
|
$
|
204
|
|
|
$
|
9,389
|
|
|
Nine Months Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
42
|
|
|
$
|
999
|
|
Adjustments to reconcile to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
691
|
|
|
714
|
|
||
Goodwill and other asset impairment charges
|
113
|
|
|
671
|
|
||
Deferred taxes
|
(387
|
)
|
|
170
|
|
||
Credits associated with last-in, first-out inventory method
|
(114
|
)
|
|
(64
|
)
|
||
Equity earnings and charges from investment in Change Healthcare Joint Venture
|
1,478
|
|
|
162
|
|
||
Non-cash operating lease expense
|
276
|
|
|
—
|
|
||
Other non-cash items
|
542
|
|
|
(95
|
)
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
||||
Receivables
|
(1,044
|
)
|
|
(1,543
|
)
|
||
Inventories
|
(689
|
)
|
|
(756
|
)
|
||
Drafts and accounts payable
|
(929
|
)
|
|
175
|
|
||
Taxes
|
11
|
|
|
(131
|
)
|
||
Operating lease liabilities
|
(287
|
)
|
|
—
|
|
||
Other
|
17
|
|
|
(161
|
)
|
||
Net cash provided by (used in) operating activities
|
(280
|
)
|
|
141
|
|
||
|
|
|
|
||||
Investing Activities
|
|
|
|
||||
Payments for property, plant and equipment
|
(242
|
)
|
|
(309
|
)
|
||
Capitalized software expenditures
|
(96
|
)
|
|
(96
|
)
|
||
Acquisitions, net of cash, cash equivalents and restricted cash acquired
|
(97
|
)
|
|
(866
|
)
|
||
Other
|
26
|
|
|
120
|
|
||
Net cash used in investing activities
|
(409
|
)
|
|
(1,151
|
)
|
||
|
|
|
|
||||
Financing Activities
|
|
|
|
||||
Proceeds from short-term borrowings
|
15,852
|
|
|
30,392
|
|
||
Repayments of short-term borrowings
|
(13,743
|
)
|
|
(29,346
|
)
|
||
Proceeds from issuances of long-term debt
|
—
|
|
|
1,099
|
|
||
Common stock transactions:
|
|
|
|
||||
Issuances
|
89
|
|
|
46
|
|
||
Share repurchases, including shares surrendered for tax withholding
|
(1,951
|
)
|
|
(1,388
|
)
|
||
Dividends paid
|
(222
|
)
|
|
(216
|
)
|
||
Other
|
(279
|
)
|
|
(270
|
)
|
||
Net cash provided by (used in) financing activities
|
(254
|
)
|
|
317
|
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
27
|
|
|
(130
|
)
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(916
|
)
|
|
(823
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
2,981
|
|
|
2,672
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
2,065
|
|
|
$
|
1,849
|
|
1.
|
Significant Accounting Policies
|
(In millions)
|
December 31, 2019
|
||
Assets
|
|
||
Current Assets
|
|
||
Receivables, net
|
$
|
473
|
|
Inventories, net
|
540
|
|
|
Long-term assets
|
85
|
|
|
Remeasurement of assets of business held for sale to fair value less cost to sell (1)
|
(285
|
)
|
|
Total Assets held for sale
|
$
|
813
|
|
|
|
||
Liabilities
|
|
||
Current Liabilities
|
|
||
Drafts and accounts payable
|
$
|
247
|
|
Other accrued liabilities
|
37
|
|
|
Long-term liabilities
|
169
|
|
|
Total Liabilities held for sale
|
$
|
453
|
|
(1)
|
Includes the effect of approximately $3 million of cumulative foreign currency translation adjustment.
|
4.
|
Restructuring, Impairment and Related Charges
|
|
Three Months Ended December 31, 2019
|
||||||||||||||||||||||
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Corporate
|
|
Total
|
||||||||||||
Severance and employee-related costs, net
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
12
|
|
Exit and other-related costs (1)
|
—
|
|
|
2
|
|
|
5
|
|
|
—
|
|
|
13
|
|
|
20
|
|
||||||
Asset impairments and accelerated depreciation
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
5
|
|
||||||
Total
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
37
|
|
|
Nine Months Ended December 31, 2019
|
||||||||||||||||||||||
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Corporate
|
|
Total
|
||||||||||||
Severance and employee-related costs, net
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
23
|
|
|
$
|
33
|
|
Exit and other-related costs (1)
|
—
|
|
|
7
|
|
|
9
|
|
|
1
|
|
|
36
|
|
|
53
|
|
||||||
Asset impairments and accelerated depreciation
|
—
|
|
|
8
|
|
|
1
|
|
|
—
|
|
|
8
|
|
|
17
|
|
||||||
Total
|
$
|
4
|
|
|
$
|
18
|
|
|
$
|
12
|
|
|
$
|
2
|
|
|
$
|
67
|
|
|
$
|
103
|
|
(1)
|
Exit and other-related costs primarily include project consulting fees.
|
|
Three Months Ended December 31, 2018
|
||||||||||||||||||||||
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Corporate
|
|
Total
|
||||||||||||
Severance and employee-related costs, net
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
32
|
|
|
$
|
42
|
|
Exit and other-related costs (1)
|
1
|
|
|
4
|
|
|
5
|
|
|
—
|
|
|
16
|
|
|
26
|
|
||||||
Asset impairments and accelerated depreciation
|
2
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||
Total
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
6
|
|
|
$
|
9
|
|
|
$
|
48
|
|
|
$
|
71
|
|
|
Nine Months Ended December 31, 2018
|
||||||||||||||||||||||
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Corporate
|
|
Total
|
||||||||||||
Severance and employee-related costs, net
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
16
|
|
|
$
|
36
|
|
|
$
|
66
|
|
Exit and other-related costs (1)
|
7
|
|
|
4
|
|
|
12
|
|
|
56
|
|
|
45
|
|
|
124
|
|
||||||
Asset impairments and accelerated depreciation
|
6
|
|
|
—
|
|
|
2
|
|
|
17
|
|
|
—
|
|
|
25
|
|
||||||
Total
|
$
|
17
|
|
|
$
|
4
|
|
|
$
|
24
|
|
|
$
|
89
|
|
|
$
|
81
|
|
|
$
|
215
|
|
(1)
|
Exit and other-related costs primarily include lease exit costs associated with closures of retail pharmacy stores within the Company’s 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
|
4
|
|
|
18
|
|
|
12
|
|
|
2
|
|
|
67
|
|
|
103
|
|
||||||
Non-cash charges
|
—
|
|
|
(8
|
)
|
|
(1
|
)
|
|
—
|
|
|
(8
|
)
|
|
(17
|
)
|
||||||
Cash payments
|
(6
|
)
|
|
(13
|
)
|
|
(8
|
)
|
|
(16
|
)
|
|
(43
|
)
|
|
(86
|
)
|
||||||
Other
|
(1
|
)
|
|
(4
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|
(6
|
)
|
|
(18
|
)
|
||||||
Balance, December 31, 2019 (2)
|
$
|
28
|
|
|
$
|
31
|
|
|
$
|
16
|
|
|
$
|
10
|
|
|
$
|
47
|
|
|
$
|
132
|
|
(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 December 31, 2019, the total reserve balance was $132 million of which $110 million was recorded in other accrued liabilities and $22 million was recorded in other noncurrent liabilities.
|
8.
|
Redeemable Noncontrolling Interests and Noncontrolling Interests
|
(In millions)
|
Noncontrolling Interests
|
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, September 30, 2019
|
$
|
210
|
|
|
$
|
1,384
|
|
Net income attributable to noncontrolling interests
|
45
|
|
|
11
|
|
||
Other comprehensive income
|
—
|
|
|
10
|
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(11
|
)
|
||
Payments to noncontrolling interests
|
(39
|
)
|
|
—
|
|
||
Other
|
(5
|
)
|
|
3
|
|
||
Balance, December 31, 2019
|
$
|
211
|
|
|
$
|
1,397
|
|
(In millions)
|
Noncontrolling Interests
|
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, March 31, 2019
|
$
|
193
|
|
|
$
|
1,393
|
|
Net income attributable to noncontrolling interests
|
130
|
|
|
33
|
|
||
Other comprehensive loss
|
—
|
|
|
(2
|
)
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(33
|
)
|
||
Payments to noncontrolling interests
|
(115
|
)
|
|
—
|
|
||
Other
|
3
|
|
|
6
|
|
||
Balance, December 31, 2019
|
$
|
211
|
|
|
$
|
1,397
|
|
(In millions)
|
Noncontrolling Interests
|
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, September 30, 2018
|
$
|
208
|
|
|
$
|
1,415
|
|
Net income attributable to noncontrolling interests
|
46
|
|
|
11
|
|
||
Other comprehensive loss
|
—
|
|
|
(11
|
)
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(11
|
)
|
||
Payments to noncontrolling interests
|
(37
|
)
|
|
—
|
|
||
Other
|
(13
|
)
|
|
—
|
|
||
Balance, December 31, 2018
|
$
|
204
|
|
|
$
|
1,404
|
|
(In millions)
|
Noncontrolling Interests
|
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, March 31, 2018
|
$
|
253
|
|
|
$
|
1,459
|
|
Net income attributable to noncontrolling interests
|
135
|
|
|
34
|
|
||
Other comprehensive loss
|
—
|
|
|
(55
|
)
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(34
|
)
|
||
Payments to noncontrolling interests
|
(143
|
)
|
|
—
|
|
||
Other
|
(41
|
)
|
|
—
|
|
||
Balance, December 31, 2018
|
$
|
204
|
|
|
$
|
1,404
|
|
9.
|
Earnings Per Common Share
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||||||
(In millions, except per share amounts)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Income from continuing operations
|
$
|
247
|
|
|
$
|
527
|
|
|
$
|
54
|
|
|
$
|
998
|
|
Net income attributable to noncontrolling interests
|
(56
|
)
|
|
(57
|
)
|
|
(163
|
)
|
|
(169
|
)
|
||||
Income (Loss) from continuing operations attributable to McKesson
|
191
|
|
|
470
|
|
|
(109
|
)
|
|
829
|
|
||||
Income (Loss) from discontinued operations, net of tax
|
(5
|
)
|
|
(1
|
)
|
|
(12
|
)
|
|
1
|
|
||||
Net income (Loss) attributable to McKesson
|
$
|
186
|
|
|
$
|
469
|
|
|
$
|
(121
|
)
|
|
$
|
830
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
179
|
|
|
194
|
|
|
183
|
|
|
198
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Restricted stock units
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Diluted
|
180
|
|
|
195
|
|
|
183
|
|
|
199
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings (Loss) per common share attributable to McKesson: (1)
|
|
|
|
|
|
|
|
||||||||
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.06
|
|
|
$
|
2.41
|
|
|
$
|
(0.60
|
)
|
|
$
|
4.17
|
|
Discontinued operations
|
(0.03
|
)
|
|
(0.01
|
)
|
|
(0.06
|
)
|
|
0.01
|
|
||||
Total
|
$
|
1.03
|
|
|
$
|
2.40
|
|
|
$
|
(0.66
|
)
|
|
$
|
4.18
|
|
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.06
|
|
|
$
|
2.42
|
|
|
$
|
(0.60
|
)
|
|
$
|
4.19
|
|
Discontinued operations
|
(0.02
|
)
|
|
(0.01
|
)
|
|
(0.06
|
)
|
|
—
|
|
||||
Total
|
$
|
1.04
|
|
|
$
|
2.41
|
|
|
$
|
(0.66
|
)
|
|
$
|
4.19
|
|
(1)
|
Certain computations may reflect rounding adjustments.
|
10.
|
Goodwill and Intangible Assets, Net
|
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Total
|
||||||||||
Balance, March 31, 2019
|
$
|
4,078
|
|
|
$
|
—
|
|
|
$
|
2,451
|
|
|
$
|
2,829
|
|
|
$
|
9,358
|
|
Goodwill acquired
|
—
|
|
|
56
|
|
|
—
|
|
|
—
|
|
|
56
|
|
|||||
Acquisition accounting, transfers and other adjustments
|
1
|
|
|
4
|
|
|
7
|
|
|
—
|
|
|
12
|
|
|||||
Other changes/disposals
|
(1
|
)
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(6
|
)
|
|||||
Impairment charges
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|||||
Foreign currency translation adjustments, net
|
—
|
|
|
3
|
|
|
—
|
|
|
35
|
|
|
38
|
|
|||||
Balance, December 31, 2019
|
$
|
4,078
|
|
|
$
|
63
|
|
|
$
|
2,453
|
|
|
$
|
2,862
|
|
|
$
|
9,456
|
|
|
December 31, 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
|
|
$
|
3,602
|
|
|
$
|
(1,792
|
)
|
|
$
|
1,810
|
|
|
$
|
3,818
|
|
|
$
|
(1,801
|
)
|
|
$
|
2,017
|
|
Service agreements
|
10
|
|
1,023
|
|
|
(479
|
)
|
|
544
|
|
|
1,017
|
|
|
(430
|
)
|
|
587
|
|
||||||
Pharmacy licenses
|
26
|
|
517
|
|
|
(229
|
)
|
|
288
|
|
|
513
|
|
|
(209
|
)
|
|
304
|
|
||||||
Trademarks and trade names
|
13
|
|
833
|
|
|
(235
|
)
|
|
598
|
|
|
887
|
|
|
(232
|
)
|
|
655
|
|
||||||
Technology
|
4
|
|
173
|
|
|
(108
|
)
|
|
65
|
|
|
141
|
|
|
(94
|
)
|
|
47
|
|
||||||
Other
|
5
|
|
278
|
|
|
(219
|
)
|
|
59
|
|
|
288
|
|
|
(209
|
)
|
|
79
|
|
||||||
Total
|
|
|
$
|
6,426
|
|
|
$
|
(3,062
|
)
|
|
$
|
3,364
|
|
|
$
|
6,664
|
|
|
$
|
(2,975
|
)
|
|
$
|
3,689
|
|
11.
|
Debt and Financing Activities
|
12.
|
Leases
|
(In millions, except lease term and discount rate)
|
December 31, 2019
|
||
Operating leases
|
|
||
Operating Lease Right-of-Use Assets
|
$
|
2,013
|
|
|
|
||
Current portion of operating lease liabilities
|
$
|
365
|
|
Long-Term Operating Lease Liabilities
|
1,780
|
|
|
Total operating lease liabilities
|
$
|
2,145
|
|
|
|
||
Finance Leases
|
|
||
Property, Plant and Equipment, net
|
$
|
166
|
|
|
|
||
Current portion of long-term debt
|
$
|
13
|
|
Long-Term Debt
|
150
|
|
|
Total finance lease liabilities
|
$
|
163
|
|
|
|
||
Weighted Average Remaining Lease Term (Years)
|
|
||
Operating leases
|
8.1
|
|
|
Finance leases
|
11.5
|
|
|
|
|
||
Weighted Average Discount Rate
|
|
||
Operating leases
|
3.02
|
%
|
|
Finance leases
|
3.05
|
%
|
(In millions)
|
Three Months Ended December 31, 2019
|
|
Nine Months Ended December 31, 2019
|
||||
Short-term lease cost
|
$
|
7
|
|
|
$
|
22
|
|
Operating lease cost
|
117
|
|
|
345
|
|
||
|
|
|
|
||||
Finance lease cost:
|
|
|
|
||||
Amortization of right-of-use assets
|
4
|
|
|
9
|
|
||
Interest on lease liabilities
|
1
|
|
|
3
|
|
||
Total finance lease cost
|
5
|
|
|
12
|
|
||
|
|
|
|
||||
Variable lease cost (1)
|
31
|
|
|
93
|
|
||
Sublease income
|
(10
|
)
|
|
(24
|
)
|
||
Total lease cost (2)
|
$
|
150
|
|
|
$
|
448
|
|
(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 condensed consolidated statement of operations.
|
(In millions)
|
Nine Months Ended December 31, 2019
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows from operating leases
|
$
|
(287
|
)
|
Operating cash flows from finance leases
|
(3
|
)
|
|
Financing cash flows from finance leases
|
(17
|
)
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
||
Operating leases (1)
|
$
|
2,366
|
|
Finance leases
|
163
|
|
(In millions)
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
||||||
The remainder of 2020
|
$
|
99
|
|
|
$
|
2
|
|
|
$
|
101
|
|
2021
|
428
|
|
|
18
|
|
|
446
|
|
|||
2022
|
372
|
|
|
18
|
|
|
390
|
|
|||
2023
|
311
|
|
|
17
|
|
|
328
|
|
|||
2024
|
255
|
|
|
16
|
|
|
271
|
|
|||
Thereafter
|
969
|
|
|
125
|
|
|
1,094
|
|
|||
Total lease payments (1)
|
2,434
|
|
|
196
|
|
|
2,630
|
|
|||
Less imputed interest
|
(289
|
)
|
|
(33
|
)
|
|
(322
|
)
|
|||
Present value of lease liabilities
|
$
|
2,145
|
|
|
$
|
163
|
|
|
$
|
2,308
|
|
(1)
|
Total lease payments have not been reduced by minimum sublease income of $185 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.
|
13.
|
Pension Benefits
|
14.
|
Hedging Activities
|
|
Balance Sheet
Caption
|
December 31, 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
|
$
|
16
|
|
$
|
—
|
|
$
|
81
|
|
|
$
|
17
|
|
$
|
—
|
|
$
|
81
|
|
Cross-currency swaps (current)
|
Prepaid expenses and other/Other accrued liabilities
|
24
|
|
14
|
|
355
|
|
|
—
|
|
18
|
|
—
|
|
||||||
Cross-currency swaps (non-current)
|
Other Noncurrent Assets/Liabilities
|
59
|
|
39
|
|
4,237
|
|
|
91
|
|
33
|
|
5,283
|
|
||||||
Total
|
|
$
|
99
|
|
$
|
53
|
|
|
|
$
|
108
|
|
$
|
51
|
|
|
||||
Derivatives not designated for hedge accounting
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts (current)
|
Prepaid expenses and other
|
$
|
3
|
|
$
|
—
|
|
$
|
322
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
14
|
|
Foreign exchange contracts (current)
|
Other accrued liabilities
|
—
|
|
—
|
|
14
|
|
|
—
|
|
—
|
|
14
|
|
||||||
Total
|
|
$
|
3
|
|
$
|
—
|
|
|
|
$
|
—
|
|
$
|
—
|
|
|
15.
|
Fair Value Measurements
|
16.
|
Commitments and Contingent Liabilities
|
17.
|
Stockholders' Equity
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||||||
(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)
|
$
|
101
|
|
|
$
|
(188
|
)
|
|
$
|
57
|
|
|
$
|
(456
|
)
|
Reclassified to income statement, net of income tax expense of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
101
|
|
|
(188
|
)
|
|
57
|
|
|
(456
|
)
|
||||
Unrealized gains (losses) on net investment hedges
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses) on net investment hedges arising during period, net of income tax (expense) benefit of $21, ($27), $1 and ($85)(4)
|
(58
|
)
|
|
75
|
|
|
(2
|
)
|
|
240
|
|
||||
Reclassified to income statement, net of income tax expense of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
(58
|
)
|
|
75
|
|
|
(2
|
)
|
|
240
|
|
||||
Unrealized gains on cash flow hedges
|
|
|
|
|
|
|
|
||||||||
Unrealized gains on cash flow hedges arising during period, net of income tax (expense) benefit of $3, ($5), ($7) and ($5)
|
8
|
|
|
35
|
|
|
33
|
|
|
37
|
|
||||
Reclassified to income statement, net of income tax expense of nil, nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
8
|
|
|
35
|
|
|
33
|
|
|
37
|
|
||||
Changes in retirement-related benefit plans (5)
|
|
|
|
|
|
|
|
||||||||
Net actuarial loss and prior service cost arising during the period, net of income tax benefit of nil, nil, $1 and nil
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
||||
Amortization of actuarial (gain) loss, prior service cost and transition obligation, net of income tax (expense) benefit of nil, $1, nil and
($1) (6)
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
5
|
|
||||
Foreign currency translation adjustments and other, net of income tax expense of nil, nil, nil and nil
|
(6
|
)
|
|
2
|
|
|
1
|
|
|
10
|
|
||||
Reclassified to income statement, net of income tax expense of $3, nil, $35 and nil (7)
|
8
|
|
|
—
|
|
|
98
|
|
|
—
|
|
||||
|
—
|
|
|
3
|
|
|
96
|
|
|
15
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of tax
|
$
|
51
|
|
|
$
|
(75
|
)
|
|
$
|
184
|
|
|
$
|
(164
|
)
|
(1)
|
Foreign currency translation adjustments primarily result from the conversion of non-U.S. dollar financial statements of the Company’s foreign subsidiary, McKesson Europe, into the Company’s reporting currency, U.S. dollars, during the three and nine months ended December 31, 2019 and 2018.
|
(2)
|
During the three and nine months ended December 31, 2019, the net foreign currency translation gains were primarily due to the strengthening of the Euro and Canadian dollar against the U.S. dollar, partially offset by weakening of the British pound sterling from April 1, 2019 to December 31, 2019. During the three and nine months ended December 31, 2018, the net foreign currency translation losses were primarily due to the weakening of the Euro, the British pound sterling and Canadian dollar against the U.S. dollar from April 1, 2018 to December 31, 2018.
|
(3)
|
The three and nine months ended December 31, 2019 include net foreign currency translation gains of $12 million and losses of $1 million and the three and nine months ended December 31, 2018 include net foreign currency translation losses of $11 million and $57 million attributable to redeemable noncontrolling interests.
|
(4)
|
The three and nine months ended December 31, 2019 include foreign currency losses of $59 million and gains of $8 million on the net investment hedges from the €1.70 billion Euro-denominated notes and £450 million British pound sterling-denominated notes and losses of $20 million and $11 million on the net investment hedges from the cross-currency swaps. The three and nine months ended December 31, 2018 include foreign currency gains of $39 million and $223 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 $63 million and $102 million on the net investment hedges from cross-currency swaps.
|
(5)
|
The three and nine months ended December 31, 2019 include net actuarial losses of $2 million and $1 million and the three and nine months ended December 31, 2018 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 the Company’s condensed consolidated statements of operations. The related tax expense was reclassified into income tax expense in the Company’s condensed consolidated statements of operations.
|
(7)
|
The nine months ended December 31, 2019 primarily reflects a reclassification of losses in the second quarter of 2020 upon the termination of the Plan from accumulated other comprehensive loss to other income (expense), net in the Company’s condensed consolidated statement of operations.
|
|
Foreign Currency Translation Adjustments
|
|
|
|
|
|
|
||||||||||||
(In millions)
|
Foreign Currency Translation Adjustments, Net of Tax
|
|
Unrealized Gains (Losses) on Net Investment Hedges,
Net of Tax
|
|
Unrealized Gains (Losses) on Cash Flow Hedges,
Net of Tax
|
|
Unrealized Net Gains (Losses) and Other Components of Benefit Plans, Net of Tax
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||||||||
Balance at September 30, 2019
|
$
|
(1,659
|
)
|
|
$
|
109
|
|
|
$
|
(12
|
)
|
|
$
|
(142
|
)
|
|
$
|
(1,704
|
)
|
Other comprehensive income (loss) before reclassifications
|
101
|
|
|
(58
|
)
|
|
8
|
|
|
(6
|
)
|
|
45
|
|
|||||
Amounts reclassified to earnings and other
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
|||||
Other comprehensive income (loss)
|
101
|
|
|
(58
|
)
|
|
8
|
|
|
—
|
|
|
51
|
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
12
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
10
|
|
|||||
Other comprehensive income (loss) attributable to McKesson
|
89
|
|
|
(58
|
)
|
|
8
|
|
|
2
|
|
|
41
|
|
|||||
Balance at December 31, 2019
|
$
|
(1,570
|
)
|
|
$
|
51
|
|
|
$
|
(4
|
)
|
|
$
|
(140
|
)
|
|
$
|
(1,663
|
)
|
|
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, 2019
|
$
|
(1,628
|
)
|
|
$
|
53
|
|
|
$
|
(37
|
)
|
|
$
|
(237
|
)
|
|
$
|
(1,849
|
)
|
Other comprehensive income (loss) before reclassifications
|
57
|
|
|
(2
|
)
|
|
33
|
|
|
(2
|
)
|
|
86
|
|
|||||
Amounts reclassified to earnings and other
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
98
|
|
|||||
Other comprehensive income (loss)
|
57
|
|
|
(2
|
)
|
|
33
|
|
|
96
|
|
|
184
|
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
|||||
Other comprehensive income (loss) attributable to McKesson
|
58
|
|
|
(2
|
)
|
|
33
|
|
|
97
|
|
|
186
|
|
|||||
Balance at December 31, 2019
|
$
|
(1,570
|
)
|
|
$
|
51
|
|
|
$
|
(4
|
)
|
|
$
|
(140
|
)
|
|
$
|
(1,663
|
)
|
|
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 September 30, 2018
|
$
|
(1,480
|
)
|
|
$
|
(23
|
)
|
|
$
|
(59
|
)
|
|
$
|
(200
|
)
|
|
$
|
(1,762
|
)
|
Other comprehensive income (loss) before reclassifications
|
(188
|
)
|
|
75
|
|
|
35
|
|
|
2
|
|
|
(76
|
)
|
|||||
Amounts reclassified to earnings and other
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|||||
Other comprehensive income (loss)
|
(188
|
)
|
|
75
|
|
|
35
|
|
|
3
|
|
|
(75
|
)
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|||||
Other comprehensive income (loss) attributable to McKesson
|
(177
|
)
|
|
75
|
|
|
35
|
|
|
3
|
|
|
(64
|
)
|
|||||
Balance at December 31, 2018
|
$
|
(1,657
|
)
|
|
$
|
52
|
|
|
$
|
(24
|
)
|
|
$
|
(197
|
)
|
|
$
|
(1,826
|
)
|
|
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
|
(456
|
)
|
|
240
|
|
|
37
|
|
|
10
|
|
|
(169
|
)
|
|||||
Amounts reclassified to earnings and other
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|||||
Other comprehensive income (loss)
|
(456
|
)
|
|
240
|
|
|
37
|
|
|
15
|
|
|
(164
|
)
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
(57
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(55
|
)
|
|||||
Other comprehensive income (loss) attributable to McKesson
|
(399
|
)
|
|
240
|
|
|
37
|
|
|
13
|
|
|
(109
|
)
|
|||||
Balance at December 31, 2018
|
$
|
(1,657
|
)
|
|
$
|
52
|
|
|
$
|
(24
|
)
|
|
$
|
(197
|
)
|
|
$
|
(1,826
|
)
|
18.
|
Related Party Balances and Transactions
|
19.
|
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
|
•
|
the Company’s investment in Change Healthcare JV
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||||||
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
U.S. Pharmaceutical and Specialty Solutions (1)
|
$
|
46,923
|
|
|
$
|
44,279
|
|
|
$
|
137,067
|
|
|
$
|
126,866
|
|
European Pharmaceutical Solutions (1)
|
6,931
|
|
|
6,911
|
|
|
20,239
|
|
|
20,485
|
|
||||
Medical-Surgical Solutions (1)
|
2,141
|
|
|
2,012
|
|
|
6,100
|
|
|
5,663
|
|
||||
Other
|
3,177
|
|
|
3,006
|
|
|
9,110
|
|
|
8,876
|
|
||||
Total Revenues
|
$
|
59,172
|
|
|
$
|
56,208
|
|
|
$
|
172,516
|
|
|
$
|
161,890
|
|
|
|
|
|
|
|
|
|
||||||||
Operating profit (loss) (2)
|
|
|
|
|
|
|
|
||||||||
U.S. Pharmaceutical and Specialty Solutions (3)
|
$
|
687
|
|
|
$
|
671
|
|
|
$
|
1,905
|
|
|
$
|
1,824
|
|
European Pharmaceutical Solutions (4)
|
(303
|
)
|
|
26
|
|
|
(297
|
)
|
|
(524
|
)
|
||||
Medical-Surgical Solutions
|
124
|
|
|
136
|
|
|
378
|
|
|
334
|
|
||||
Other (5) (6)
|
61
|
|
|
74
|
|
|
(1,109
|
)
|
|
283
|
|
||||
Total
|
569
|
|
|
907
|
|
|
877
|
|
|
1,917
|
|
||||
Corporate Expenses, Net (7)
|
(211
|
)
|
|
(190
|
)
|
|
(750
|
)
|
|
(480
|
)
|
||||
Interest Expense
|
(64
|
)
|
|
(67
|
)
|
|
(184
|
)
|
|
(194
|
)
|
||||
Income (Loss) from Continuing Operations Before Income Taxes
|
$
|
294
|
|
|
$
|
650
|
|
|
$
|
(57
|
)
|
|
$
|
1,243
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues, net by geographic area
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
49,310
|
|
|
$
|
46,523
|
|
|
$
|
143,924
|
|
|
$
|
133,186
|
|
Foreign
|
9,862
|
|
|
9,685
|
|
|
28,592
|
|
|
28,704
|
|
||||
Total Revenues
|
$
|
59,172
|
|
|
$
|
56,208
|
|
|
$
|
172,516
|
|
|
$
|
161,890
|
|
(1)
|
Revenues from services represent less than 1% of the Company’s U.S. Pharmaceutical and Specialty Solutions segment’s total revenues, less than 10% of the Company’s European Pharmaceutical Solutions segment’s total revenues and less than 2% of the Company’s 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 the Company’s operating segments.
|
(3)
|
The Company’s U.S. Pharmaceutical and Specialty Solutions segment’s operating profit for the three and nine months ended December 31, 2019 includes pre-tax credits of $66 million and $114 million ($49 million and $84 million after-tax), and for the three and nine months ended December 31, 2018 includes pre-tax credits of $21 million and $64 million ($16 million and $47 million after-tax) related to the last-in, first-out (“LIFO”) method of accounting for inventories. Operating profit for the three and nine months ended December 31, 2018 also includes $104 million and $139 million of cash receipts for the Company’s share of antitrust legal settlements and a $60 million pre-tax charge related to a customer bankruptcy.
|
(4)
|
European Pharmaceutical Solutions segment’s operating loss for the three and nine months ended December 31, 2019 includes a charge of $282 million (pre-tax and after-tax) to remeasure to fair value the assets and liabilities of the Company’s German wholesale business to be contributed to a joint venture and long-lived asset impairment charges of $64 million ($53 million after-tax). European Pharmaceutical Solutions segment’s operating loss for the nine months ended December 31, 2018 includes non-cash goodwill impairment charges of $570 million (pre-tax and after-tax).
|
(5)
|
Operating loss for Other for the nine months ended December 31, 2019 includes a pre-tax impairment charge of $1.2 billion ($864 million after-tax), pre-tax dilution loss of $246 million associated with the Company’s investment in Change Healthcare JV, and goodwill and long-lived asset impairment charges of $32 million (pre-tax and after-tax) recognized for the Company’s Rexall Health retail business. Operating profit (loss) for Other also includes the Company’s proportionate share of loss from Change Healthcare JV of $28 million and $75 million for the three and nine months ended December 31, 2019 and $50 million and $162 million for the three and nine months ended December 31, 2018.
|
(6)
|
Operating profit for Other for the three and nine months ended December 31, 2018 includes goodwill and long-lived asset impairment charges of $56 million (pre-tax and after-tax) for the Company’s Rexall Health retail business and a pre-tax gain of $56 million ($41 million after-tax) for the 2019 third quarter sale of an equity investment. Operating profit for Other for the nine months ended December 31, 2018 includes a pre-tax credit of $90 million ($66 million after-tax) for the derecognition of the TRA liability payable to the shareholders of Change Healthcare Inc, an escrow settlement gain of $97 million (pre-tax and after-tax) for certain indemnity and other claims related to the Company’s 2017 third quarter acquisition of Rexall Health, and pre-tax restructuring and asset impairment charges of $89 million ($83 million after-tax) primarily associated with the closure of retail pharmacy stores within the Company’s Canadian business.
|
(7)
|
Corporate expenses, net, for the nine months ended December 31, 2019 include pre-tax settlement charges of $122 million ($90 million after-tax) for the termination of the Company’s defined benefit pension plan and a settlement charge of $82 million ($61 million after-tax) related to opioid claims. The three and nine months ended December 31, 2019 includes $36 million and $190 million of pre-tax charges of opioid-related costs, primarily litigation expenses. Corporate expenses, net, for the three and nine months ended December 31, 2018 include a pre-tax restructuring charge of $31 million ($23 million after-tax) related to the Company’s corporate headquarters relocation announced during the third quarter of 2019.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
(Dollars in millions, except per share data)
|
Three Months Ended December 31,
|
|
|
|
|
Nine Months Ended December 31,
|
|
|
|
||||||||||||||
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|||||||||||||
Revenues
|
$
|
59,172
|
|
|
$
|
56,208
|
|
|
5
|
|
%
|
|
$
|
172,516
|
|
|
$
|
161,890
|
|
|
7
|
|
%
|
Gross Profit
|
3,033
|
|
|
2,970
|
|
|
2
|
|
|
|
8,687
|
|
|
8,553
|
|
|
2
|
|
|
||||
Gross Profit Margin
|
5.13
|
|
%
|
5.28
|
|
%
|
(15
|
)
|
bp
|
|
5.04
|
|
%
|
5.28
|
|
%
|
(24
|
)
|
bp
|
||||
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating Expenses
|
$
|
(2,535
|
)
|
|
$
|
(2,156
|
)
|
|
18
|
|
%
|
|
$
|
(6,861
|
)
|
|
$
|
(6,219
|
)
|
|
10
|
|
%
|
Goodwill Impairment Charges
|
(2
|
)
|
|
(21
|
)
|
|
(90
|
)
|
|
|
(2
|
)
|
|
(591
|
)
|
|
(100
|
)
|
|
||||
Restructuring, Impairment and Related Charges
|
(136
|
)
|
|
(110
|
)
|
|
24
|
|
|
|
(204
|
)
|
|
(288
|
)
|
|
(29
|
)
|
|
||||
Total Operating Expenses
|
(2,673
|
)
|
|
(2,287
|
)
|
|
17
|
|
|
|
(7,067
|
)
|
|
(7,098
|
)
|
|
—
|
|
|
||||
Operating Expenses as a Percentage of Revenues
|
4.52
|
|
%
|
4.07
|
|
%
|
45
|
|
bp
|
|
4.10
|
|
%
|
4.38
|
|
%
|
(28
|
)
|
bp
|
||||
Other Income (Expense), Net
|
$
|
26
|
|
|
$
|
84
|
|
|
(69
|
)
|
%
|
|
$
|
(15
|
)
|
|
$
|
144
|
|
|
(110
|
)
|
%
|
Equity Earnings and Charges from Investment in Change Healthcare Joint Venture
|
(28
|
)
|
|
(50
|
)
|
|
(44
|
)
|
|
|
(1,478
|
)
|
|
(162
|
)
|
|
812
|
|
|
||||
Interest Expense
|
(64
|
)
|
|
(67
|
)
|
|
(4
|
)
|
|
|
(184
|
)
|
|
(194
|
)
|
|
(5
|
)
|
|
||||
Income (Loss) from Continuing Operations Before Income Taxes
|
294
|
|
|
650
|
|
|
(55
|
)
|
|
|
(57
|
)
|
|
1,243
|
|
|
(105
|
)
|
|
||||
Income Tax Benefit (Expense)
|
(47
|
)
|
|
(123
|
)
|
|
(62
|
)
|
|
|
111
|
|
|
(245
|
)
|
|
(145
|
)
|
|
||||
Income from Continuing Operations
|
247
|
|
|
527
|
|
|
(53
|
)
|
|
|
54
|
|
|
998
|
|
|
(95
|
)
|
|
||||
Income (Loss) from Discontinued Operations, Net of Tax
|
(5
|
)
|
|
(1
|
)
|
|
400
|
|
|
|
(12
|
)
|
|
1
|
|
|
NM
|
|
|
||||
Net Income
|
242
|
|
|
526
|
|
|
(54
|
)
|
|
|
42
|
|
|
999
|
|
|
(96
|
)
|
|
||||
Net Income Attributable to Noncontrolling Interests
|
(56
|
)
|
|
(57
|
)
|
|
(2
|
)
|
|
|
(163
|
)
|
|
(169
|
)
|
|
(4
|
)
|
|
||||
Net Income (Loss) Attributable to McKesson Corporation
|
$
|
186
|
|
|
$
|
469
|
|
|
(60
|
)
|
%
|
|
$
|
(121
|
)
|
|
$
|
830
|
|
|
(115
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted Earnings (Loss) Per Common Share Attributable to McKesson Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
$
|
1.06
|
|
|
$
|
2.41
|
|
|
(56
|
)
|
%
|
|
$
|
(0.60
|
)
|
|
$
|
4.17
|
|
|
(114
|
)
|
%
|
Discontinued operations
|
(0.03
|
)
|
|
(0.01
|
)
|
|
200
|
|
|
|
(0.06
|
)
|
|
0.01
|
|
|
(700
|
)
|
|
||||
Total
|
$
|
1.03
|
|
|
$
|
2.40
|
|
|
(57
|
)
|
%
|
|
$
|
(0.66
|
)
|
|
$
|
4.18
|
|
|
(116
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted Average Diluted Common Shares
|
180
|
|
|
195
|
|
|
(8
|
)
|
%
|
|
183
|
|
|
199
|
|
|
(8
|
)
|
%
|
•
|
2020 charge of $282 million to remeasure assets and liabilities held for sale to the lower of carrying value or fair value less costs to sell related to the expected contribution of the majority of our German wholesale business to create a joint venture in which McKesson will have a non-controlling interest within our European Pharmaceutical Solutions segment. Refer to Financial Note 3, “Held for Sale,” to the accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information;
|
•
|
restructuring, impairment and related charges of $136 million and $110 million for the three months ended December 31, 2019 and 2018. Refer to Financial Note 4, “Restructuring, Impairment and Related Charges,” to the accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information; and
|
•
|
opioid-related expenses of $36 million and $20 million for the three months ended December 31, 2019 and 2018, primarily related to litigation expenses.
|
•
|
2019 charge of $60 million related to a customer bankruptcy; and
|
•
|
2019 goodwill impairment charge of $21 million related to our Rexall Health reporting unit included in Other.
|
•
|
2019 first quarter goodwill impairment charge of $570 million for our European Pharmaceutical Solutions segment. Refer to Financial Note 5, “Goodwill Impairment Charges,” to the accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information;
|
•
|
restructuring, impairment and related charges of $204 million and $288 million for the nine months ended December 31, 2019 and 2018; and
|
•
|
favorable effects of foreign currency exchange fluctuations.
|
•
|
2019 first quarter gain from an escrow settlement of $97 million representing certain indemnity and other claims related to our third quarter 2017 acquisition of Rexall Health;
|
•
|
opioid-related expenses of $190 million and $96 million for the nine months ended December 31, 2019 and 2018, primarily related to litigation expenses, including the second quarter charge of $82 million recorded in connection with an agreement executed in December 2019 to settle all opioids related claims filed by two Ohio counties, as further discussed below; and
|
•
|
2019 second quarter credit of $90 million for the derecognition of a liability related to the tax receivable agreement (“TRA”) payable to the shareholders of Change Healthcare, Inc.
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Operating Expenses
|
|
|
|
|
|
|
|
||||||||
Integration related expenses
|
$
|
20
|
|
|
$
|
26
|
|
|
$
|
53
|
|
|
$
|
77
|
|
Restructuring, severance and relocation
|
1
|
|
|
—
|
|
|
1
|
|
|
4
|
|
||||
Transaction-related expenses (1)
|
303
|
|
|
1
|
|
|
303
|
|
|
3
|
|
||||
Other Expenses (2)
|
17
|
|
|
25
|
|
|
310
|
|
|
83
|
|
||||
Transaction-Related Expenses and Adjustments
|
$
|
341
|
|
|
$
|
52
|
|
|
$
|
667
|
|
|
$
|
167
|
|
(1)
|
The three and nine months ended December 31, 2019 includes a charge of $282 million to remeasure to fair value the assets and liabilities of our German wholesale business to be contributed to a joint venture.
|
(2)
|
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 nine months ended December 31, 2019 includes a dilution loss of $246 million as a result of the Change Healthcare JV investment ownership dilution from approximately 70% to approximately 58.5%.
|
|
Three Months Ended December 31,
|
|
|
|
Nine Months Ended December 31,
|
|
|
|
||||||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
Change
|
2019
|
|
2018
|
|
Change
|
||||||||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
46,923
|
|
|
$
|
44,279
|
|
|
6
|
|
%
|
$
|
137,067
|
|
|
$
|
126,866
|
|
|
8
|
|
%
|
European Pharmaceutical Solutions
|
6,931
|
|
|
6,911
|
|
|
—
|
|
|
20,239
|
|
|
20,485
|
|
|
(1
|
)
|
|
||||
Medical-Surgical Solutions
|
2,141
|
|
|
2,012
|
|
|
6
|
|
|
6,100
|
|
|
5,663
|
|
|
8
|
|
|
||||
Other
|
3,177
|
|
|
3,006
|
|
|
6
|
|
|
9,110
|
|
|
8,876
|
|
|
3
|
|
|
||||
Total Revenues
|
$
|
59,172
|
|
|
$
|
56,208
|
|
|
5
|
|
%
|
$
|
172,516
|
|
|
$
|
161,890
|
|
|
7
|
|
%
|
|
Three Months Ended December 31,
|
|
|
|
|
Nine Months Ended December 31,
|
|
|
|
||||||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
||||||||||||
Segment Operating Profit (Loss) (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
687
|
|
|
$
|
671
|
|
|
2
|
|
%
|
|
$
|
1,905
|
|
|
$
|
1,824
|
|
|
4
|
|
%
|
European Pharmaceutical Solutions (2)
|
(303
|
)
|
|
26
|
|
|
NM
|
|
|
|
(297
|
)
|
|
(524
|
)
|
|
(43
|
)
|
|
||||
Medical-Surgical Solutions
|
124
|
|
|
136
|
|
|
(9
|
)
|
|
|
378
|
|
|
334
|
|
|
13
|
|
|
||||
Other (3)
|
61
|
|
|
74
|
|
|
(18
|
)
|
|
|
(1,109
|
)
|
|
283
|
|
|
(492
|
)
|
|
||||
Subtotal
|
569
|
|
|
907
|
|
|
(37
|
)
|
|
|
877
|
|
|
1,917
|
|
|
(54
|
)
|
|
||||
Corporate Expenses, Net (4)
|
(211
|
)
|
|
(190
|
)
|
|
11
|
|
|
|
(750
|
)
|
|
(480
|
)
|
|
56
|
|
|
||||
Interest Expense
|
(64
|
)
|
|
(67
|
)
|
|
(4
|
)
|
|
|
(184
|
)
|
|
(194
|
)
|
|
(5
|
)
|
|
||||
Income (Loss) from Continuing Operations Before Income Taxes
|
$
|
294
|
|
|
$
|
650
|
|
|
(55
|
)
|
%
|
|
$
|
(57
|
)
|
|
$
|
1,243
|
|
|
(105
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Segment Operating Profit (Loss) Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Pharmaceutical and Specialty Solutions
|
1.46
|
|
%
|
1.52
|
|
%
|
(6
|
)
|
bp
|
|
1.39
|
|
%
|
1.44
|
|
%
|
(5
|
)
|
bp
|
||||
European Pharmaceutical Solutions
|
(4.37
|
)
|
|
0.38
|
|
|
(475
|
)
|
|
|
(1.47
|
)
|
|
(2.56
|
)
|
|
109
|
|
|
||||
Medical-Surgical Solutions
|
5.79
|
|
|
6.76
|
|
|
(97
|
)
|
|
|
6.20
|
|
|
5.90
|
|
|
30
|
|
|
(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 includes a charge of $282 million to remeasure to fair value the assets and liabilities of our German wholesale business to be contributed to a joint venture for the three and nine months ended December 31, 2019 and a goodwill impairment charge of $570 million for the nine months ended December 31, 2018.
|
(3)
|
Operating loss for Other for the nine months ended December 31, 2019 includes an impairment charge of $1.2 billion and a dilution loss of $246 million related to our investment in Change Healthcare JV.
|
(4)
|
Corporate expenses, net for the nine months ended December 31, 2019 includes a pension settlement charge of $122 million and a settlement charge of $82 million related to opioid claims.
|
•
|
2020 second quarter impairment charge of $1.2 billion and the dilution loss of $246 million related to our investment in Change Healthcare JV;
|
•
|
2019 first quarter gain from an escrow settlement of $97 million representing certain indemnity and other claims related to our third quarter 2017 acquisition of Rexall Health;
|
•
|
2019 second quarter credit of $90 million for the derecognition of a liability related to the TRA payable to the shareholders of Change Healthcare, Inc.;
|
•
|
2019 third quarter gain of $56 million recognized from the divestiture of an equity investment;
|
•
|
2019 third quarter goodwill impairment charge of $21 million recognized for our Rexall Health retail business; and
|
•
|
lower restructuring, impairment and related charges for our Canada business and growth in our MRxTS business for the nine months ended December 31, 2019.
|
|
Nine Months Ended December 31,
|
|
|
||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$ Change
|
||||||
Cash provided by (used in):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
(280
|
)
|
|
$
|
141
|
|
|
$
|
(421
|
)
|
Investing activities
|
(409
|
)
|
|
(1,151
|
)
|
|
742
|
|
|||
Financing activities
|
(254
|
)
|
|
317
|
|
|
(571
|
)
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
27
|
|
|
(130
|
)
|
|
157
|
|
|||
Net change in cash, cash equivalents and restricted cash
|
$
|
(916
|
)
|
|
$
|
(823
|
)
|
|
$
|
(93
|
)
|
(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. 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 foreign 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
|
October 1, 2019 – October 31, 2019
|
—
|
$
|
—
|
|
—
|
$
|
2,035
|
November 1, 2019 – November 30, 2019
|
3.4
|
|
148.39
|
|
3.4
|
|
1,535
|
December 1, 2019 – December 31, 2019
|
—
|
|
—
|
|
—
|
|
1,535
|
Total
|
3.4
|
|
|
|
3.4
|
|
|
(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
|
31.1
|
|
|
|
31.2
|
|
|
|
32††
|
|
|
|
101
|
The following materials from the McKesson Corporation Quarterly Report on Form 10-Q for the quarter ended December 31, 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.
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††
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Furnished herewith.
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MCKESSON CORPORATION
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Date:
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February 4, 2020
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/s/ Britt J. Vitalone
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Britt J. Vitalone
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Executive Vice President and Chief Financial Officer
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MCKESSON CORPORATION
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Date:
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February 4, 2020
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/s/ Sundeep G. Reddy
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Sundeep G. Reddy
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Senior Vice President and Controller
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1.
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I have reviewed this quarterly report on Form 10-Q of McKesson Corporation;
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2.
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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;
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3.
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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;
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4.
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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:
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a)
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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;
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b)
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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;
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c)
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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
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d)
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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
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5.
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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):
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a)
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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
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b)
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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.
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Date:
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February 4, 2020
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/s/ Brian S. Tyler
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Brian S. Tyler
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Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of McKesson Corporation;
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2.
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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;
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3.
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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;
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4.
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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:
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a)
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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;
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b)
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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;
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c)
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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
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d)
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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
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5.
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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):
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a)
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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
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b)
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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.
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Date:
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February 4, 2020
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/s/ Britt J. Vitalone
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Britt J. Vitalone
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Executive Vice President and Chief Financial Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Brian S. Tyler
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Brian S. Tyler
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Chief Executive Officer
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February 4, 2020
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/s/ Britt J. Vitalone
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Britt J. Vitalone
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Executive Vice President and Chief Financial Officer
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February 4, 2020
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