☒
|
ANNUAL 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
|
0.625% Notes due 2021
|
MCK21A
|
New York Stock Exchange
|
1.500% Notes due 2025
|
MCK25
|
New York Stock Exchange
|
1.625% Notes due 2026
|
MCK26
|
New York Stock Exchange
|
3.125% Notes due 2029
|
MCK29
|
New York Stock Exchange
|
Large accelerated filer
|
|
☒
|
|
Accelerated filer
|
|
☐
|
Non-accelerated filer
|
|
☐
|
|
Smaller reporting company
|
|
☐
|
|
|
|
|
Emerging growth company
|
|
☐
|
|
Item
|
Page
|
|
|
|
|
|
|
|
|
|
1.
|
||
|
|
|
1A.
|
||
|
|
|
1B.
|
||
|
|
|
2.
|
||
|
|
|
3.
|
||
|
|
|
4.
|
||
|
|
|
|
||
|
|
|
|
|
|
|
|
|
5.
|
||
|
|
|
6.
|
||
|
|
|
7.
|
||
|
|
|
7A.
|
||
|
|
|
8.
|
||
|
|
|
9.
|
||
|
|
|
9A.
|
||
|
|
|
9B.
|
||
|
|
|
|
|
|
|
|
|
10.
|
||
|
|
|
11.
|
||
|
|
|
12.
|
||
|
|
|
13.
|
||
|
|
|
14.
|
||
|
|
|
|
|
|
|
|
|
15.
|
||
|
|
|
16.
|
||
|
|
|
|
Item 1.
|
Business.
|
•
|
McKesson Canada which provides better, safer care by delivering vital medicines, supplies and information technologies throughout Canada and operates Rexall Health retail pharmacies;
|
•
|
McKesson Prescription Technology Solutions (“MRxTS”) which provides innovative technological and connectivity solutions to pharmaceutical companies, retail pharmacies, health systems, clinics and payers across the healthcare industry; and
|
•
|
Our investment in the Change Healthcare joint venture, which was separated from the Company in the fourth quarter of 2020 as discussed in more detail below.
|
•
|
Central FillSM - Prescription refill service that enables pharmacies to more quickly refill prescriptions remotely, more accurately and at a lower cost, while reducing inventory levels and improving customer service.
|
•
|
Redistribution Centers - Two facilities totaling over 830,000 square feet that offer access to inventory for single source warehouse purchasing, including pharmaceuticals and biologics. These distribution centers also provide the foundation for a two-tiered distribution network that supports best-in-class direct store delivery.
|
•
|
McKesson SynerGx® - Generic pharmaceutical purchasing program and inventory management that helps pharmacies maximize their cost savings with a broad selection of generic drugs, competitive pricing and one-stop shopping.
|
•
|
Inventory Management - An integrated solution comprising forecasting software and automated replenishment technologies that reduce inventory-carrying costs.
|
•
|
ExpressRx Track™ - Pharmacy automation solution featuring state-of-the-art robotics, upgraded imaging and expanded vial capabilities, and industry-leading speed and accuracy in a small footprint.
|
•
|
Health Mart® - Health Mart® is a national network of more than 5,000 independently-owned pharmacies and is one of the industry’s most comprehensive pharmacy franchise programs. Health Mart® provides franchisees support for managed care contracting, branding and local marketing solutions, the Health Mart private label line of products, merchandising solutions and programs for enhanced patient support.
|
•
|
Health Mart Atlas® - Comprehensive managed care and reconciliation assistance services that help independent pharmacies save time, access competitive reimbursement rates and improve cash flow.
|
•
|
McKesson Reimbursement AdvantageSM (“MRA”) - MRA is one of the industry’s most comprehensive reimbursement optimization packages, comprising financial services (automated claim resubmission), analytic services and customer care.
|
•
|
McKesson OneStop Generics® - Generic pharmaceutical purchasing program that helps pharmacies maximize their cost savings with a broad selection of generic drugs, competitive pricing and one-stop shopping.
|
•
|
Sunmark® - Complete line of more than 600 products that provide retail independent pharmacies with value-priced alternatives to national brands.
|
•
|
FrontEdge™ - Strategic planning, merchandising and price maintenance program that helps independent pharmacies maximize store profitability.
|
•
|
McKesson Sponsored Clinical Services (SCS) Network - Access to patient-support services that allow pharmacists to earn service fees and to develop stronger patient relationships.
|
•
|
McKesson RxOwnership Program - Assist independent pharmacist owners with the opportunity to remain independent via succession planning and business operation loans.
|
•
|
Fulfill-RxSM - Ordering and inventory management system that empowers hospitals to optimize the often complicated processes related to unit-based cabinet replenishment and inventory management.
|
•
|
Asset Management - Award-winning inventory optimization and purchasing management program that helps institutional providers lower costs while ensuring product availability.
|
•
|
SKY Packaging - Blister, Unit of Use and Unit dose packaging containing the most widely prescribed dosages and strengths in generic oral-solid medications. SKY Packaging enables acute care, long-term care and institutional pharmacies to provide cost-effective, uniform packaging.
|
•
|
McKesson Plasma and Biologics - A full portfolio of plasma-derivatives and biologic products.
|
•
|
McKesson OneStop Generics® - Described above.
|
Item 1A.
|
Risk Factors
|
Item 1B.
|
Unresolved Staff Comments.
|
Item 2.
|
Properties.
|
Item 3.
|
Legal Proceedings.
|
Item 4.
|
Mine Safety Disclosures.
|
Name
|
|
Age
|
|
Position with Registrant and Business Experience
|
|
|
|
|
|
Brian S. Tyler
|
|
53
|
|
Chief Executive Officer since April 2019; President and Chief Operating Officer from August 2018 to March 2019; Chairman of the Management Board of McKesson Europe AG from 2017 to 2018; President and Chief Operating Officer, McKesson Europe from 2016 to 2017; President of North America Distribution and Services from 2015 to 2016; Executive Vice President, Corporate Strategy and Business Development from 2012 to 2015; and a director since April 2019. Service with the Company - 23 years.
|
|
|
|
|
|
Britt J. Vitalone
|
|
51
|
|
Executive Vice President and Chief Financial Officer since January 2018; Senior Vice President and Chief Financial Officer, U.S. Pharmaceutical from July 2014 to December 2017; Senior Vice President and Chief Financial Officer, U.S. Pharmaceutical and Specialty Health from October 2017 to December 2017; Senior Vice President of Corporate Finance and M&A Finance from March 2012 to June 2014. Service with the Company - 14 years.
|
|
|
|
|
|
Tracy Faber
|
|
50
|
|
Executive Vice President and Chief Human Resources Officer since October 2019. Previously, Senior Vice President of Human Resources. Service with the Company - 9 years.
|
|
|
|
|
|
Nancy Flores
|
|
53
|
|
Executive Vice President, Chief Information Officer and Chief Technology Officer since January 2020; Chief Information Officer, Johnson Controls from 2018 to July 2019. Corporate Officer and Vice President of Business and Technology Services, Abbott Laboratories from 1996 to 2018. Service with the Company - less than 1 year.
|
|
|
|
|
|
Lori A. Schechter
|
|
58
|
|
Executive Vice President, Chief Legal Officer and General Counsel since June 2014; Associate General Counsel from January 2012 to June 2014; Litigation Partner, Morrison & Foerster LLP from 1995 to December 2011. Service with the Company - 8 years.
|
Item 5.
|
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
(a)
|
Market Information: The principal market on which our common stock is traded is the New York Stock Exchange (“NYSE”) under the trading symbol of “MCK”.
|
(b)
|
Holders: The number of record holders of our common stock at March 31, 2020 was approximately 5,034.
|
(c)
|
Dividends: In July 2019, our quarterly dividend was raised from $0.39 to $0.41 per common share for dividends declared on or after such date by the Board. We declared regular cash dividends of $1.62 and $1.51 per share in the years ended March 31, 2020 and 2019.
|
(d)
|
Securities Authorized for Issuance under Equity Compensation Plans: Information relating to this item is provided under Part III, Item 12, to this Annual Report on Form 10-K.
|
(e)
|
Share Repurchase Plans: Stock repurchases may be made from time to time in open market transactions, privately negotiated transactions, through accelerated share repurchase (“ASR”) programs, or by any combination of such methods. The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including our stock price, corporate and regulatory requirements, restrictions under our debt obligations and other market and economic conditions.
|
|
Share Repurchases (1)
|
||||||||||||
(In millions, except price per share)
|
Total
Number of Shares
Purchased (2)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Programs (2)
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
|
||||||
January 1, 2020 - January 31, 2020
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,535
|
|
February 1, 2020 - February 29, 2020
|
—
|
|
|
—
|
|
|
—
|
|
|
1,535
|
|
||
March 1, 2020 - March 31, 2020
|
15.4
|
|
|
—
|
|
|
15.4
|
|
|
1,535
|
|
||
Total
|
15.4
|
|
|
|
|
15.4
|
|
|
|
|
(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.
|
(2)
|
On March 9, 2020, we completed the previously announced separation (“Split-off”) of our interest in the Change Healthcare JV. In connection with the Split-off, we distributed all 176.0 million outstanding shares of common stock of our wholly owned subsidiary, PF2 SpinCo, Inc. (“SpinCo”), which held all of McKesson’s interests in the Change Healthcare JV, to participating holders of our common stock in exchange for 15.4 million shares of McKesson stock which now are held as treasury stock on our consolidated balance sheet. Refer to Financial Note 22, “Stockholders' Equity,” to the accompanying consolidated financial statements included in this Annual Report on Form 10-K for more information.
|
(f)
|
Stock Price Performance Graph*: The following graph compares the cumulative total stockholder return on our common stock for the periods indicated with the Standard & Poor’s 500 Index and the S&P 500 Health Care Index. The S&P 500 Health Care Index was selected as a comparator because it is generally available to investors and broadly used by other companies in the same industry.
|
Item 6.
|
Selected Financial Data.
|
|
As of and for the Years Ended March 31,
|
|||||||||||||||||||
(In millions, except per share data and ratios)
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
||||||||||
Operating Results
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
|
$
|
231,051
|
|
|
$
|
214,319
|
|
|
$
|
208,357
|
|
|
$
|
198,533
|
|
|
$
|
190,884
|
|
Percent change
|
|
7.8
|
%
|
|
2.9
|
%
|
|
4.9
|
%
|
|
4.0
|
%
|
|
6.6
|
%
|
|||||
Gross profit
|
|
$
|
12,023
|
|
|
$
|
11,754
|
|
|
$
|
11,184
|
|
|
$
|
11,271
|
|
|
$
|
11,416
|
|
Percent change
|
|
2.3
|
%
|
|
5.1
|
%
|
|
(0.8
|
)%
|
|
(1.3
|
)%
|
|
—
|
%
|
|||||
Income from continuing operations before income taxes (1)
|
|
$
|
1,144
|
|
|
$
|
610
|
|
|
$
|
239
|
|
|
$
|
6,861
|
|
|
$
|
3,250
|
|
Income (Loss) after income taxes
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations (1)
|
|
1,126
|
|
|
254
|
|
|
292
|
|
|
5,277
|
|
|
2,342
|
|
|||||
Discontinued operations
|
|
(6
|
)
|
|
1
|
|
|
5
|
|
|
(124
|
)
|
|
(32
|
)
|
|||||
Net income
|
|
1,120
|
|
|
255
|
|
|
297
|
|
|
5,153
|
|
|
2,310
|
|
|||||
Net income attributable to noncontrolling interests (2)
|
|
(220
|
)
|
|
(221
|
)
|
|
(230
|
)
|
|
(83
|
)
|
|
(52
|
)
|
|||||
Net income attributable to McKesson Corporation (1)
|
|
900
|
|
|
34
|
|
|
67
|
|
|
5,070
|
|
|
2,258
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Position
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Working capital
|
|
$
|
(402
|
)
|
|
$
|
839
|
|
|
$
|
451
|
|
|
$
|
1,336
|
|
|
$
|
3,366
|
|
Days sales outstanding for: (3)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Customer receivables
|
|
26
|
|
|
26
|
|
|
25
|
|
|
27
|
|
|
28
|
|
|||||
Inventories
|
|
27
|
|
|
31
|
|
|
30
|
|
|
30
|
|
|
32
|
|
|||||
Drafts and accounts payable
|
|
61
|
|
|
62
|
|
|
60
|
|
|
61
|
|
|
59
|
|
|||||
Total assets
|
|
$
|
61,247
|
|
|
$
|
59,672
|
|
|
$
|
60,381
|
|
|
$
|
60,969
|
|
|
$
|
56,523
|
|
Total debt, including finance lease obligations (4)
|
|
7,387
|
|
|
7,595
|
|
|
7,880
|
|
|
8,545
|
|
|
8,114
|
|
|||||
Total McKesson stockholders’ equity (5)
|
|
5,092
|
|
|
8,094
|
|
|
9,804
|
|
|
11,095
|
|
|
8,924
|
|
|||||
Payments for property, plant and equipment
|
|
362
|
|
|
426
|
|
|
405
|
|
|
404
|
|
|
488
|
|
|||||
Acquisitions, net of cash, cash equivalents and restricted cash acquired
|
|
133
|
|
|
905
|
|
|
2,893
|
|
|
4,212
|
|
|
40
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common Share Information
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common shares outstanding at year-end
|
|
162
|
|
|
190
|
|
|
202
|
|
|
211
|
|
|
225
|
|
|||||
Shares on which earnings per common share were based
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted
|
|
182
|
|
|
197
|
|
|
209
|
|
|
223
|
|
|
233
|
|
|||||
Basic
|
|
181
|
|
|
196
|
|
|
208
|
|
|
221
|
|
|
230
|
|
|||||
Diluted earnings (loss) per common share attributable to McKesson Corporation (5)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
$
|
4.99
|
|
|
$
|
0.17
|
|
|
$
|
0.30
|
|
|
$
|
23.28
|
|
|
$
|
9.84
|
|
Discontinued operations
|
|
(0.04
|
)
|
|
—
|
|
|
0.02
|
|
|
(0.55
|
)
|
|
(0.14
|
)
|
|||||
Total
|
|
4.95
|
|
|
0.17
|
|
|
0.32
|
|
|
22.73
|
|
|
9.70
|
|
|||||
Cash dividends declared
|
|
294
|
|
|
298
|
|
|
270
|
|
|
249
|
|
|
249
|
|
|||||
Cash dividends declared per common share
|
|
1.62
|
|
|
1.51
|
|
|
1.30
|
|
|
1.12
|
|
|
1.08
|
|
|||||
Book value per common share (6) (7)
|
|
31.43
|
|
|
42.60
|
|
|
48.53
|
|
|
52.58
|
|
|
39.66
|
|
|||||
Market value per common share - year-end
|
|
135.26
|
|
|
117.06
|
|
|
140.87
|
|
|
148.26
|
|
|
157.25
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Debt to capital ratio (8)
|
|
52.1
|
%
|
|
43.3
|
%
|
|
40.6
|
%
|
|
39.2
|
%
|
|
43.6
|
%
|
|||||
Average McKesson stockholders’ equity (9)
|
|
$
|
6,743
|
|
|
$
|
9,163
|
|
|
$
|
11,016
|
|
|
$
|
9,282
|
|
|
$
|
8,688
|
|
Return on McKesson stockholders’ equity (10)
|
|
13.3
|
%
|
|
0.4
|
%
|
|
0.6
|
%
|
|
54.6
|
%
|
|
26.0
|
%
|
(1)
|
2020 includes a pre-tax other-than-temporary impairment charge of $1.2 billion ($864 million after-tax) and a pre-tax dilution loss of $246 million ($184 million after-tax) related to our investment in the Change Healthcare Joint Venture, charges of $275 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 an estimated gain of $414 million relating to the split-off of its investment in the Change Healthcare Joint Venture. 2019 includes pre-tax goodwill impairment charges of $1.8 billion (pre-tax and after-tax) primarily for our two reporting units within our European Pharmaceutical Solutions segment. 2018 includes total goodwill impairment charges of $1.7 billion (pre-tax and after-tax) for our European Pharmaceutical Solutions segment and Other. The goodwill impairment charges are generally not deductible for income tax purposes. 2020, 2019 and 2018 also include asset impairment charges of $82 million ($66 million after tax), $210 million ($172 million after-tax) and $446 million ($410 million after-tax) primarily for our U.K. retail businesses. 2017 includes a pre-tax gain of $3.9 billion ($3.0 billion after-tax) from the contribution of the majority of our Core MTS Business in connection with the Healthcare Technology Net Asset Exchange as discussed in Financial Note 2, “Investment in Change Healthcare Joint Venture.”
|
(2)
|
Includes annual recurring compensation McKesson is obligated to pay to the noncontrolling shareholders of McKesson Europe. 2020, 2019, 2018 and 2017 include net income attributable to third-party equity interests in our consolidated entities including Vantage Oncology Holdings, LLC and ClarusONE Sourcing Services LLP, which was formed in 2017.
|
(3)
|
Based on year-end balances and sales or cost of sales for the last 90 days of the year.
|
(4)
|
Total debt includes finance lease obligations for 2020. Prior to the adoption of the amended lease guidance in 2020, these were capital lease obligations. Refer to Financial Note 1 , “Significant Accounting Policies,” for additional information.
|
(5)
|
Excludes noncontrolling and redeemable noncontrolling interests.
|
(6)
|
Certain computations may reflect rounding adjustments.
|
(7)
|
Represents McKesson stockholders’ equity divided by year-end common shares outstanding.
|
(8)
|
Ratio is computed as total debt divided by the sum of total debt and McKesson stockholders’ equity excluding accumulated other comprehensive income (loss).
|
(9)
|
Represents a five-quarter average of McKesson stockholders’ equity.
|
(10)
|
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.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
•
|
Revenues of $231.1 billion, reflecting an 8% increase from the prior year driven primarily by market growth in our U.S. Pharmaceutical and Specialty Solutions segment, including branded pharmaceutical price increases and higher volumes from retail national account customers;
|
•
|
Gross profit increased 2% from the prior year primarily driven by market growth in our Medical-Surgical Solutions segment;
|
•
|
On October 21, 2019, we disclosed an opioid-related litigation settlement with two Ohio counties and recorded a related charge of $82 million in total operating expenses;
|
•
|
On December 12, 2019, McKesson and Walgreens Boots Alliance announced an agreement to create a joint venture that is expected to combine their respective pharmaceutical wholesale businesses in Germany. As a result of this agreement, we recognized fair value remeasurement charges of $275 million in total operating expenses within our European Pharmaceutical Solutions segment;
|
•
|
On March 10, 2020, we completed the previously announced separation of our investment in Change Healthcare JV and recognized an estimated gain of $414 million related to this transaction. We no longer hold an interest in any securities of Change Healthcare JV or Change Healthcare, Inc. (“Change”) following the separation. During the second quarter of 2020, we recorded an other-than-temporary-impairment (“OTTI”) charge of $1.2 billion and a dilution loss of $246 million related to our investment in Change Healthcare JV;
|
•
|
Diluted earnings per common share from continuing operations attributable to McKesson Corporation in 2020 of $4.99 reflects the aforementioned items and a lower share count compared to the prior year driven largely by share repurchases; and
|
•
|
We returned $2.2 billion of cash to shareholders through $1.9 billion of common stock repurchases and $294 million of dividend payments.
|
(Dollars in millions, except per share data and ratios)
|
Years Ended March 31,
|
|
Change
|
|||||||||||||||
2020
|
|
2019
|
|
2018
|
|
2020
|
2019
|
|||||||||||
Revenues
|
$
|
231,051
|
|
|
$
|
214,319
|
|
|
$
|
208,357
|
|
|
8
|
|
%
|
3
|
|
%
|
Gross Profit
|
12,023
|
|
|
11,754
|
|
|
11,184
|
|
|
2
|
|
|
5
|
|
|
|||
Gross Profit Margin
|
5.20
|
|
%
|
5.48
|
|
%
|
5.37
|
|
%
|
(28
|
)
|
bp
|
11
|
|
bp
|
|||
Total Operating Expenses
|
$
|
(9,534
|
)
|
|
$
|
(10,868
|
)
|
|
$
|
(10,422
|
)
|
|
(12
|
)
|
%
|
4
|
|
%
|
Total Operating Expenses as a Percentage of Revenues
|
4.13
|
|
%
|
5.07
|
|
%
|
5.00
|
|
%
|
(94
|
)
|
bp
|
7
|
|
bp
|
|||
Other Income, Net
|
$
|
12
|
|
|
$
|
182
|
|
|
$
|
130
|
|
|
(93
|
)
|
%
|
40
|
|
%
|
Equity Earnings and Charges from Investment in Change Healthcare Joint Venture
|
(1,108
|
)
|
|
(194
|
)
|
|
(248
|
)
|
|
471
|
|
|
(22
|
)
|
|
|||
Loss on Debt Extinguishment
|
—
|
|
|
—
|
|
|
(122
|
)
|
|
NM
|
|
|
(100
|
)
|
|
|||
Interest Expense
|
(249
|
)
|
|
(264
|
)
|
|
(283
|
)
|
|
(6
|
)
|
|
(7
|
)
|
|
|||
Income from Continuing Operations Before Income Taxes
|
1,144
|
|
|
610
|
|
|
239
|
|
|
88
|
|
|
155
|
|
|
|||
Income Tax (Expense) Benefit
|
(18
|
)
|
|
(356
|
)
|
|
53
|
|
|
(95
|
)
|
|
(772
|
)
|
|
|||
Income from Continuing Operations
|
1,126
|
|
|
254
|
|
|
292
|
|
|
343
|
|
|
(13
|
)
|
|
|||
Income (Loss) from Discontinued Operations, Net of Tax
|
(6
|
)
|
|
1
|
|
|
5
|
|
|
(700
|
)
|
|
(80
|
)
|
|
|||
Net Income
|
1,120
|
|
|
255
|
|
|
297
|
|
|
339
|
|
|
(14
|
)
|
|
|||
Net Income Attributable to Noncontrolling Interests
|
(220
|
)
|
|
(221
|
)
|
|
(230
|
)
|
|
-
|
|
|
(4
|
)
|
|
|||
Net Income Attributable to McKesson Corporation
|
$
|
900
|
|
|
$
|
34
|
|
|
$
|
67
|
|
|
NM
|
|
|
(49
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted Earnings (Loss) Per Common Share Attributable to McKesson Corporation
|
|
|
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
4.99
|
|
|
$
|
0.17
|
|
|
$
|
0.30
|
|
|
NM
|
|
|
(43
|
)
|
%
|
Discontinued operations
|
(0.04
|
)
|
|
—
|
|
|
0.02
|
|
|
NM
|
|
|
(100
|
)
|
|
|||
Total
|
$
|
4.95
|
|
|
$
|
0.17
|
|
|
$
|
0.32
|
|
|
NM
|
|
|
(47
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted Average Diluted Common Shares
|
182
|
|
|
197
|
|
|
209
|
|
|
(8
|
)
|
%
|
(6
|
)
|
%
|
•
|
Selling, distribution and administrative expenses (“SD&A”) includes charges of $275 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 consolidated financial statements included in this Annual Report on Form 10-K for more information;
|
•
|
SD&A includes opioid-related expenses of $232 million, primarily litigation and related expenses, including the second quarter settlement charge of $82 million recorded in connection with an agreement executed in December 2019 to settle all opioid-related claims filed by two Ohio counties;
|
•
|
Restructuring, impairment and related charges includes long-lived asset impairment charges of $112 million, primarily for our U.K. business (mainly pharmacy licenses) and Rexall Health retail business (“Rexall Health”) in Other (mainly customer relationships), and the remaining $156 million primarily represents employee severance and exit-related costs related to our 2019 restructuring initiatives, as further discussed below; and
|
•
|
Total operating expenses includes higher SD&A due to our business acquisitions and to support business growth, as well as our technology initiatives, partially offset by favorable effects of foreign currency exchange fluctuations.
|
•
|
Goodwill impairment charges of $1.8 billion in our Retail Pharmacy (“RP”, formerly “Consumer Solutions”) and Pharmaceutical Distribution (“PD”, formerly “Pharmacy Solutions”) reporting units within the European Pharmaceutical Solutions segment. Of these impairment charges, $238 million was recognized upon the 2019 first quarter segment changes, which resulted in two new reporting units. The remaining charges primarily were due to declines in the reporting units’ estimated future cash flows and the selection of higher discount rates. These impairment charges generally were not deductible for income tax purposes. The declines in estimated future cash flows primarily were attributed to additional government reimbursement reductions and competitive pressures within the U.K. The risk of successfully achieving certain business initiatives was the primary factor in the use of a higher discount rate. At March 31, 2019, both RP and PD reporting units had no remaining goodwill balances;
|
•
|
Restructuring, impairment and related charges primarily includes employee severance and exit-related costs of $331 million for our 2019 restructuring initiatives, as further discussed below and long-lived asset impairment charges of $245 million primarily for our U.K. business (mainly pharmacy licenses) driven by additional government reimbursement reductions and competitive pressures in the U.K.; and
|
•
|
SD&A includes opioid-related costs of $151 million primarily related to litigation expenses and increased expenses due to our business acquisitions and to support growth, partially offset by a gain from an escrow settlement of $97 million representing certain indemnity and other claims related to our 2017 acquisition of Rexall Health and a credit of $90 million for the derecognition of a liability related to the tax receivable agreement (“TRA”) payable to the shareholders of Change.
|
•
|
Goodwill impairment charges of $1.3 billion for the European Pharmaceutical Solutions segment and $455 million for Rexall Health. There were no tax benefits associated with these goodwill impairment charges. The impairments for Europe were triggered primarily by government reimbursement reductions in our retail business in the U.K. and a more competitive environment in France. The impairments for Rexall Health were primarily driven by significant generics reimbursement reductions across Canada and minimum wage increases in multiple provinces. At March 31, 2018, Rexall Health had no remaining goodwill related to our acquisition of Rexall Health;
|
•
|
Restructuring, impairment and related charges primarily includes long-lived asset impairment charges of $446 million due to the declines in estimated future cash flows in our European business including those declines in our U.K. retail business driven by government reimbursement reductions. In addition, we recorded employee severance and lease exit costs of $74 million for our 2018 restructuring plan in our McKesson Europe business. The plan was substantially completed in 2020;
|
•
|
SD&A includes a charitable contribution expense of $100 million to a public benefit California foundation (the “Foundation”);
|
•
|
SD&A includes increased expenses due to our business acquisitions, partially offset by a gain from sale of business of $109 million related to the sale of our EIS business within Other.
|
|
Years Ended March 31,
|
|
Change
|
||||||||||||||
(Dollars in millions)
|
2020
|
|
2019
|
|
2018
|
|
2020
|
2019
|
|||||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
183,341
|
|
|
$
|
167,763
|
|
|
$
|
162,587
|
|
|
9
|
%
|
3
|
|
%
|
European Pharmaceutical Solutions
|
27,390
|
|
|
27,242
|
|
|
27,320
|
|
|
1
|
|
—
|
|
|
|||
Medical-Surgical Solutions
|
8,305
|
|
|
7,618
|
|
|
6,611
|
|
|
9
|
|
15
|
|
|
|||
Other
|
12,015
|
|
|
11,696
|
|
|
11,839
|
|
|
3
|
|
(1
|
)
|
|
|||
Total Revenues
|
$
|
231,051
|
|
|
$
|
214,319
|
|
|
$
|
208,357
|
|
|
8
|
%
|
3
|
|
%
|
|
Years Ended March 31,
|
|
Change
|
|||||||||||||||
(Dollars in millions, except ratios)
|
2020
|
|
2019
|
|
2018
|
|
2020
|
2019
|
||||||||||
Segment Operating Profit (Loss) (1)
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
2,767
|
|
|
$
|
2,697
|
|
|
$
|
2,535
|
|
|
3
|
|
%
|
6
|
|
%
|
European Pharmaceutical Solutions (2)
|
(261
|
)
|
|
(1,978
|
)
|
|
(1,681
|
)
|
|
(87
|
)
|
|
18
|
|
|
|||
Medical-Surgical Solutions
|
499
|
|
|
455
|
|
|
461
|
|
|
10
|
|
|
(1
|
)
|
|
|||
Other (3)
|
(595
|
)
|
|
394
|
|
|
(107
|
)
|
|
(251
|
)
|
|
468
|
|
|
|||
Subtotal
|
2,410
|
|
|
1,568
|
|
|
1,208
|
|
|
54
|
|
|
30
|
|
|
|||
Corporate Expenses, Net (4)
|
(1,017
|
)
|
|
(694
|
)
|
|
(564
|
)
|
|
47
|
|
|
23
|
|
|
|||
Loss on Debt Extinguishment
|
—
|
|
|
—
|
|
|
(122
|
)
|
|
NM
|
|
|
(100
|
)
|
|
|||
Interest Expense
|
(249
|
)
|
|
(264
|
)
|
|
(283
|
)
|
|
(6
|
)
|
|
(7
|
)
|
|
|||
Income from Continuing Operations Before Income Taxes
|
$
|
1,144
|
|
|
$
|
610
|
|
|
$
|
239
|
|
|
88
|
|
%
|
155
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Segment Operating Profit (Loss) Margin
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. Pharmaceutical and Specialty Solutions
|
1.51
|
|
%
|
1.61
|
|
%
|
1.56
|
|
%
|
(10
|
)
|
bp
|
5
|
|
bp
|
|||
European Pharmaceutical Solutions
|
(0.95
|
)
|
|
(7.26
|
)
|
|
(6.15
|
)
|
|
631
|
|
|
(111
|
)
|
|
|||
Medical-Surgical Solutions
|
6.01
|
|
|
5.97
|
|
|
6.97
|
|
|
4
|
|
|
(100
|
)
|
|
(1)
|
Segment operating profit (loss) includes gross profit, net of operating expenses, as well as other income (expense), net, for our reportable segments and Other.
|
(2)
|
Operating loss of our European Pharmaceutical Solutions segment for the year ended March 31, 2020 includes charges of $275 million to remeasure to fair value the assets and liabilities of our German wholesale business to be contributed to a joint venture as well as long-lived asset impairment charges of $82 million. This segment’s operating loss for the years ended March 31, 2019 and 2018 include goodwill impairment charges of $1.8 billion and $1.3 billion as well as long-lived asset impairment charges of $210 million and $446 million.
|
(3)
|
Operating loss for Other for the year ended March 31, 2020 includes an impairment charge of $1.2 billion and a dilution loss of $246 million related to our investment in Change Healthcare JV, partially offset by an estimated gain of $414 million related to the completed separation of our interest in Change Healthcare JV during the fourth quarter of 2020.
|
(4)
|
Corporate expenses, net for the year ended March 31, 2020 includes a pension settlement charge of $122 million and a settlement charge of $82 million related to opioid claims.
|
•
|
OTTI charge of $1.2 billion and the dilution loss of $246 million related to our investment in Change Healthcare JV both recognized in the second quarter of 2020, partially offset by an estimated gain of $414 million related to the completed separation of our interest in Change Healthcare JV during the fourth quarter of 2020;
|
•
|
Long-lived asset impairment charges of $30 million recognized for Rexall Health; and
|
•
|
Market growth in our MRxTS and Canadian businesses.
|
•
|
Market growth in our MRxTS business;
|
•
|
Lower operating profit due to the 2018 sale of our EIS business;
|
•
|
Gain from an escrow settlement of $97 million related to our 2017 acquisition of Rexall Health;
|
•
|
Credit of $90 million for the derecognition of a liability related to the TRA payable to the shareholders of Change;
|
•
|
Higher restructuring and asset impairment charges related to closures of our retail pharmacy stores in Canada;
|
•
|
Lower amount of our proportionate share of losses from our equity method investment in Change Healthcare JV during 2019;
|
•
|
Goodwill and long-lived asset impairment charges of $56 million recognized for Rexall Health;
|
•
|
Gain of $56 million from the divestiture of an equity investment; and
|
•
|
Government imposed generic price cuts in Canada.
|
•
|
Lower operating profit due to the 2017 contribution of the Core MTS Business to the Change Healthcare JV;
|
•
|
Goodwill charges of $455 million and long-lived asset impairment charges of $33 million recognized for Rexall Health;
|
•
|
Market growth in our MRxTS business;
|
•
|
Our proportionate share of losses from our equity method investment in Change Healthcare JV during 2018;
|
•
|
$109 million gain from the sale of our EIS business in 2018;
|
•
|
$46 million credit representing a reduction of our TRA liability related to the adoption of the 2017 Tax Act; and
|
•
|
Gain of $37 million resulting from the finalization of net working capital and other adjustments related to the contribution of the Core MTS Business to Change Healthcare JV.
|
|
Years Ended March 31,
|
|
Change
|
||||||||||||||||
(Dollars in millions)
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
||||||||||
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating activities
|
$
|
4,374
|
|
|
$
|
4,036
|
|
|
$
|
4,345
|
|
|
$
|
338
|
|
|
$
|
(309
|
)
|
Investing activities
|
(579
|
)
|
|
(1,381
|
)
|
|
(2,993
|
)
|
|
802
|
|
|
1,612
|
|
|||||
Financing activities
|
(2,734
|
)
|
|
(2,227
|
)
|
|
(3,084
|
)
|
|
(507
|
)
|
|
857
|
|
|||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(19
|
)
|
|
(119
|
)
|
|
150
|
|
|
100
|
|
|
(269
|
)
|
|||||
Net change in cash, cash equivalents and restricted cash
|
$
|
1,042
|
|
|
$
|
309
|
|
|
$
|
(1,582
|
)
|
|
$
|
733
|
|
|
$
|
1,891
|
|
|
Years Ended March 31,
|
||||||||||
(In millions, except per share data)
|
2020
|
|
2019
|
|
2018
|
||||||
Number of shares repurchased (1)
|
13.9
|
|
|
13.5
|
|
|
10.5
|
|
|||
Average price paid per share
|
$
|
138.94
|
|
|
$
|
130.72
|
|
|
$
|
151.06
|
|
Total value of shares repurchased (1)
|
$
|
1,934
|
|
|
$
|
1,627
|
|
|
$
|
1,650
|
|
(1)
|
Excludes shares surrendered for tax withholding and shares related to the Company’s Split-off of the Change Healthcare JV described above.
|
|
March 31,
|
|||||||||||||
(Dollars in millions, except ratios)
|
2020
|
|
2019
|
|
2018
|
|||||||||
Cash, cash equivalents and restricted cash
|
$
|
4,023
|
|
|
|
$
|
2,981
|
|
|
|
$
|
2,672
|
|
|
Working capital
|
(402
|
)
|
|
|
839
|
|
|
|
451
|
|
|
|||
Debt to capital ratio (1)
|
52.1
|
|
%
|
|
43.3
|
|
%
|
|
40.6
|
|
%
|
|||
Return on McKesson stockholders’ equity (2)
|
13.3
|
|
%
|
|
0.4
|
|
%
|
|
0.6
|
|
%
|
(1)
|
Ratio is computed as total debt divided by the sum of total debt and McKesson stockholders’ equity, which excludes noncontrolling and redeemable noncontrolling interests and accumulated other comprehensive income (loss).
|
(2)
|
Ratio is computed as net income attributable to McKesson Corporation for the last four quarters, divided by a five-quarter average of McKesson stockholders’ equity, which excludes noncontrolling and redeemable noncontrolling interests.
|
|
|
|
Years
|
||||||||||||||||
(In millions)
|
Total
|
|
Within 1
|
|
Over 1 to 3
|
|
Over 3 to 5
|
|
After 5
|
||||||||||
On balance sheet
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt (1)
|
$
|
7,387
|
|
|
$
|
1,052
|
|
|
$
|
1,517
|
|
|
$
|
1,128
|
|
|
$
|
3,690
|
|
Operating lease obligations (2)
|
2,274
|
|
|
398
|
|
|
681
|
|
|
465
|
|
|
730
|
|
|||||
Other (3)
|
284
|
|
|
39
|
|
|
64
|
|
|
50
|
|
|
131
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Off balance sheet
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest on borrowings (4)
|
1,824
|
|
|
228
|
|
|
384
|
|
|
298
|
|
|
914
|
|
|||||
Purchase obligations (5)
|
6,964
|
|
|
6,889
|
|
|
48
|
|
|
27
|
|
|
—
|
|
|||||
Other (6)
|
403
|
|
|
222
|
|
|
30
|
|
|
42
|
|
|
109
|
|
|||||
Total
|
$
|
19,136
|
|
|
$
|
8,828
|
|
|
$
|
2,724
|
|
|
$
|
2,010
|
|
|
$
|
5,574
|
|
(1)
|
Represents maturities of the Company’s long-term obligations including an immaterial amount of finance lease obligations.
|
(2)
|
Represents undiscounted minimum operating lease obligations under non-cancelable operating leases having an initial remaining term over one year and is not adjusted for imputed interest. Refer to Financial Note 13, “Leases” to the consolidated financial statements appearing in this Annual Report on Form 10-K for more information.
|
(3)
|
Includes our estimated benefit payments for the unfunded benefit plans and minimum funding requirements for the pension plans.
|
(4)
|
Primarily represents interest that will become due on our fixed rate long-term debt obligations.
|
(5)
|
A purchase obligation is defined as an arrangement to purchase goods or services that is enforceable and legally binding on the Company. These obligations primarily relate to inventory purchases and capital commitments.
|
(6)
|
Includes agreements under which we have guaranteed the repurchase of our customers’ inventory and our customers’ debt in the event these customers are unable to meet their obligations to those financial institutions.
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data.
|
|
Page
|
Consolidated Financial Statements:
|
|
|
/s/ Brian S. Tyler
|
Brian S. Tyler
|
Chief Executive Officer
|
(Principal Executive Officer)
|
|
/s/ Britt J. Vitalone
|
Britt J. Vitalone
|
Executive Vice President and Chief Financial Officer
|
(Principal Financial Officer)
|
•
|
We tested the effectiveness of internal controls related to management’s review of litigation and claims involving the distribution of controlled substances, and approval of the accounting treatment and related disclosures based on the most recent facts and circumstances.
|
•
|
We inquired of the Company’s internal and external legal counsel to understand the basis for the Company’s conclusion that any potential loss from the litigation and claims involving the distribution of controlled substances, including through broad resolution via settlement, is neither probable nor reasonably estimable as of March 31, 2020. In addition, we requested and received a written response from internal and external legal counsel as it relates to litigation and claims involving the distribution of controlled substances.
|
•
|
We evaluated management’s analysis of litigation and claims involving the distribution of controlled substances, read Board of Directors meeting minutes, including relevant sub-committee meeting minutes, and compared to responses from internal and external counsel. As part of our procedures, we also performed public domain searches for evidence contrary to management’s analysis.
|
•
|
We compared the Company's assessment of this matter to relevant history of similar legal contingencies that have been settled or otherwise resolved to evaluate the consistency of the Company's assessment of litigation and claims involving the distribution of controlled substances at March 31, 2020.
|
•
|
We consulted with our auditing and accounting experts to assist in our evaluation of the case facts and the Company’s related accounting treatment for the litigation and claims involving the distribution of controlled substances.
|
•
|
We evaluated any events subsequent to March 31, 2020 that might impact our evaluation of litigation and claims involving the distribution of controlled substances, including any related accrual or disclosure.
|
•
|
We obtained written representations from executives and internal counsel of the Company.
|
•
|
We read the Company’s related disclosures and evaluated them for consistency with our testing.
|
•
|
We tested the effectiveness of internal controls related to management’s goodwill impairment evaluation, including those related to the selection of a discount rate and consideration of an unsystematic risk premium.
|
•
|
We evaluated management’s ability to accurately forecast operating results for the McKesson Canada reporting unit by comparing actual results to management’s historical forecasts, in order to consider the reasonableness and adequacy of management’s selected unsystematic risk premium.
|
•
|
As part of our assessment of the unsystematic risk premium, we evaluated the reasonableness of strategic plans expected to be implemented during the forecast period by comparing the forecasts to:
|
◦
|
Actual results of historical strategic plans
|
◦
|
Internal communications to management and the Board of Directors
|
•
|
With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate, including the unsystematic risk premium, by developing a range of independent estimates, testing the mathematical accuracy of the calculation and comparing to the discount rate selected by management.
|
•
|
We tested the effectiveness of controls over management’s evaluation of the Split-Off and Merger as tax free for U.S. Federal income tax.
|
•
|
We inspected the opinion from the Company’s outside legal counsel and external tax advisor that management utilized in forming their conclusions on U.S. Federal taxability of the Split-off and Merger, including certain interpretations of the Code and related statutes.
|
•
|
We inspected meeting minutes of the Board of Directors and its committees, income tax filings, support from external advisors, historical financial results of the Company and the Joint Venture, and contracts associated with the Split-off and Merger for corroborating or contradictory evidence.
|
•
|
We obtained written representations from management concerning management’s intent associated with future transactions that could affect U.S. Federal taxability and we obtained representations made by Change management that it does not intend to cause any transactions that could affect the Company’s U.S. Federal taxability.
|
•
|
We assessed the key facts in the opinion from the Company’s outside legal counsel and tax advisor detailing the requirements under the Code and specifying how such requirements were met.
|
•
|
With the assistance of our income tax specialists, we evaluated management’s conclusion that the requirements were met to qualify the Split-Off and Merger as tax free for U.S. Federal income tax purposes.
|
|
/s/ Deloitte & Touche LLP
|
Dallas, Texas
|
May 22nd, 2020
|
|
Years Ended March 31,
|
||||||||||
|
2020
|
|
2019
|
|
2018
|
||||||
Revenues
|
$
|
231,051
|
|
|
$
|
214,319
|
|
|
$
|
208,357
|
|
Cost of Sales
|
(219,028
|
)
|
|
(202,565
|
)
|
|
(197,173
|
)
|
|||
Gross Profit
|
12,023
|
|
|
11,754
|
|
|
11,184
|
|
|||
Operating Expenses
|
|
|
|
|
|
||||||
Selling, distribution and administrative expenses
|
(9,168
|
)
|
|
(8,403
|
)
|
|
(8,138
|
)
|
|||
Research and development
|
(96
|
)
|
|
(71
|
)
|
|
(125
|
)
|
|||
Goodwill impairment charges
|
(2
|
)
|
|
(1,797
|
)
|
|
(1,738
|
)
|
|||
Restructuring, impairment and related charges
|
(268
|
)
|
|
(597
|
)
|
|
(567
|
)
|
|||
Gain from sale of business
|
—
|
|
|
—
|
|
|
109
|
|
|||
Gain on healthcare technology net asset exchange, net
|
—
|
|
|
—
|
|
|
37
|
|
|||
Total Operating Expenses
|
(9,534
|
)
|
|
(10,868
|
)
|
|
(10,422
|
)
|
|||
Operating Income
|
2,489
|
|
|
886
|
|
|
762
|
|
|||
Other Income, Net
|
12
|
|
|
182
|
|
|
130
|
|
|||
Equity Earnings and Charges from Investment in Change Healthcare Joint Venture
|
(1,108
|
)
|
|
(194
|
)
|
|
(248
|
)
|
|||
Loss on Debt Extinguishment
|
—
|
|
|
—
|
|
|
(122
|
)
|
|||
Interest Expense
|
(249
|
)
|
|
(264
|
)
|
|
(283
|
)
|
|||
Income from Continuing Operations Before Income Taxes
|
1,144
|
|
|
610
|
|
|
239
|
|
|||
Income Tax (Expense) Benefit
|
(18
|
)
|
|
(356
|
)
|
|
53
|
|
|||
Income from Continuing Operations
|
1,126
|
|
|
254
|
|
|
292
|
|
|||
Income (Loss) from Discontinued Operations, Net of Tax
|
(6
|
)
|
|
1
|
|
|
5
|
|
|||
Net Income
|
1,120
|
|
|
255
|
|
|
297
|
|
|||
Net Income Attributable to Noncontrolling Interests
|
(220
|
)
|
|
(221
|
)
|
|
(230
|
)
|
|||
Net Income Attributable to McKesson Corporation
|
$
|
900
|
|
|
$
|
34
|
|
|
$
|
67
|
|
|
|
|
|
|
|
||||||
Earnings (Loss) Per Common Share Attributable to
McKesson Corporation
|
|
|
|
|
|
||||||
Diluted
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
4.99
|
|
|
$
|
0.17
|
|
|
$
|
0.30
|
|
Discontinued operations
|
(0.04
|
)
|
|
—
|
|
|
0.02
|
|
|||
Total
|
$
|
4.95
|
|
|
$
|
0.17
|
|
|
$
|
0.32
|
|
Basic
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
5.01
|
|
|
$
|
0.17
|
|
|
$
|
0.30
|
|
Discontinued operations
|
(0.03
|
)
|
|
—
|
|
|
0.02
|
|
|||
Total
|
$
|
4.98
|
|
|
$
|
0.17
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
||||||
Weighted Average Common Shares
|
|
|
|
|
|
||||||
Diluted
|
182
|
|
|
197
|
|
|
209
|
|
|||
Basic
|
181
|
|
|
196
|
|
|
208
|
|
|
Years Ended March 31,
|
||||||||||
|
2020
|
|
2019
|
|
2018
|
||||||
Net Income
|
$
|
1,120
|
|
|
$
|
255
|
|
|
$
|
297
|
|
|
|
|
|
|
|
||||||
Other Comprehensive Income (Loss), Net of Tax
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
(66
|
)
|
|
(190
|
)
|
|
624
|
|
|||
Unrealized gains (losses) on cash flow hedges
|
86
|
|
|
24
|
|
|
(30
|
)
|
|||
Changes in retirement-related benefit plans
|
129
|
|
|
(32
|
)
|
|
15
|
|
|||
Other Comprehensive Income (Loss), Net of Tax
|
149
|
|
|
(198
|
)
|
|
609
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive Income
|
1,269
|
|
|
57
|
|
|
906
|
|
|||
Comprehensive Income Attributable to Noncontrolling Interests
|
(223
|
)
|
|
(155
|
)
|
|
(415
|
)
|
|||
Comprehensive Income (Loss) Attributable to McKesson Corporation
|
$
|
1,046
|
|
|
$
|
(98
|
)
|
|
$
|
491
|
|
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
ASSETS
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,015
|
|
|
$
|
2,981
|
|
Receivables, net
|
19,950
|
|
|
18,246
|
|
||
Inventories, net
|
16,734
|
|
|
16,709
|
|
||
Assets held for sale
|
906
|
|
|
—
|
|
||
Prepaid expenses and other
|
617
|
|
|
529
|
|
||
Total Current Assets
|
42,222
|
|
|
38,465
|
|
||
Property, Plant and Equipment, Net
|
2,365
|
|
|
2,548
|
|
||
Operating Lease Right-of-Use Assets
|
1,886
|
|
|
—
|
|
||
Goodwill
|
9,360
|
|
|
9,358
|
|
||
Intangible Assets, Net
|
3,156
|
|
|
3,689
|
|
||
Investment in Change Healthcare Joint Venture
|
—
|
|
|
3,513
|
|
||
Other Noncurrent Assets
|
2,258
|
|
|
2,099
|
|
||
Total Assets
|
$
|
61,247
|
|
|
$
|
59,672
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Drafts and accounts payable
|
$
|
37,195
|
|
|
$
|
33,853
|
|
Current portion of long-term debt
|
1,052
|
|
|
330
|
|
||
Current portion of operating lease liabilities
|
354
|
|
|
—
|
|
||
Liabilities held for sale
|
683
|
|
|
—
|
|
||
Other accrued liabilities
|
3,340
|
|
|
3,443
|
|
||
Total Current Liabilities
|
42,624
|
|
|
37,626
|
|
||
Long-Term Debt
|
6,335
|
|
|
7,265
|
|
||
Long-Term Deferred Tax Liabilities
|
2,255
|
|
|
2,998
|
|
||
Long-Term Operating Lease Liabilities
|
1,660
|
|
|
—
|
|
||
Other Noncurrent Liabilities
|
1,662
|
|
|
2,103
|
|
||
Commitments and Contingent Liabilities (Note 21)
|
|
|
|
||||
Redeemable Noncontrolling Interests
|
1,402
|
|
|
1,393
|
|
||
McKesson Corporation Stockholders’ Equity
|
|
|
|
||||
Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value, 800 shares authorized at March 31, 2020 and 2019, 272 and 271 shares issued at March 31, 2020 and 2019
|
2
|
|
|
3
|
|
||
Additional Paid-in Capital
|
6,663
|
|
|
6,435
|
|
||
Retained Earnings
|
13,022
|
|
|
12,409
|
|
||
Accumulated Other Comprehensive Loss
|
(1,703
|
)
|
|
(1,849
|
)
|
||
Other
|
—
|
|
|
(2
|
)
|
||
Treasury Stock, at Cost, 110 and 81 shares at March 31, 2020 and 2019
|
(12,892
|
)
|
|
(8,902
|
)
|
||
Total McKesson Corporation Stockholders’ Equity
|
5,092
|
|
|
8,094
|
|
||
Noncontrolling Interests
|
217
|
|
|
193
|
|
||
Total Equity
|
5,309
|
|
|
8,287
|
|
||
Total Liabilities, Redeemable Noncontrolling Interests and Equity
|
$
|
61,247
|
|
|
$
|
59,672
|
|
|
McKesson Corporation Stockholders’ Equity
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
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, 2017
|
273
|
|
|
$
|
3
|
|
|
$
|
6,028
|
|
|
$
|
(2
|
)
|
|
$
|
13,189
|
|
|
$
|
(2,141
|
)
|
|
(62
|
)
|
|
$
|
(5,982
|
)
|
|
$
|
178
|
|
|
$
|
11,273
|
|
Issuance of shares under employee plans
|
2
|
|
|
—
|
|
|
126
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(59
|
)
|
|
—
|
|
|
67
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(98
|
)
|
|
(98
|
)
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
424
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
424
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
187
|
|
|
254
|
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(36
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
(1,614
|
)
|
|
—
|
|
|
(1,650
|
)
|
||||||||
Exercise of put right by noncontrolling shareholders of McKesson Europe
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||||
Cash dividends declared, $1.30 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(270
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(270
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(13
|
)
|
||||||||
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
|
|
|
—
|
|
|
75
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
63
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
92
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(184
|
)
|
|
(184
|
)
|
||||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
176
|
|
|
210
|
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
(1,777
|
)
|
|
—
|
|
|
(1,627
|
)
|
||||||||
Retirement of common stock
|
(5
|
)
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
(472
|
)
|
|
—
|
|
|
5
|
|
|
542
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends declared, $1.51 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(298
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(298
|
)
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52
|
)
|
|
(48
|
)
|
||||||||
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
|
|
|
—
|
|
|
113
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
93
|
|
||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
115
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
115
|
|
||||||||
Payments to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(154
|
)
|
|
(154
|
)
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
146
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
146
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
900
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
178
|
|
|
1,078
|
|
||||||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(1,934
|
)
|
|
—
|
|
|
(1,934
|
)
|
||||||||
Change Healthcare share exchange
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
(2,036
|
)
|
|
—
|
|
|
(2,036
|
)
|
||||||||
Cash dividends declared, $1.62 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(294
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(294
|
)
|
||||||||
Other
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
2
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||||
Balances, March 31, 2020
|
272
|
|
|
$
|
2
|
|
|
$
|
6,663
|
|
|
$
|
—
|
|
|
$
|
13,022
|
|
|
$
|
(1,703
|
)
|
|
(110
|
)
|
|
$
|
(12,892
|
)
|
|
$
|
217
|
|
|
$
|
5,309
|
|
|
Years Ended March 31,
|
||||||||||
|
2020
|
|
2019
|
|
2018
|
||||||
Operating Activities
|
|
|
|
|
|
||||||
Net income
|
$
|
1,120
|
|
|
$
|
255
|
|
|
$
|
297
|
|
Adjustments to reconcile to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation
|
321
|
|
|
317
|
|
|
303
|
|
|||
Amortization
|
601
|
|
|
632
|
|
|
648
|
|
|||
Gain on Healthcare Technology Net Asset Exchange, net
|
—
|
|
|
—
|
|
|
(37
|
)
|
|||
Goodwill and other asset impairment charges
|
139
|
|
|
2,079
|
|
|
2,217
|
|
|||
Equity earnings and charges from investment in Change Healthcare Joint Venture
|
1,084
|
|
|
194
|
|
|
248
|
|
|||
Deferred taxes
|
(342
|
)
|
|
189
|
|
|
(868
|
)
|
|||
Credits associated with last-in, first-out inventory method
|
(252
|
)
|
|
(210
|
)
|
|
(99
|
)
|
|||
Non-cash operating lease expense
|
366
|
|
|
—
|
|
|
—
|
|
|||
Loss (gain) from sales of businesses and investments
|
33
|
|
|
(86
|
)
|
|
(169
|
)
|
|||
Other non-cash items
|
615
|
|
|
52
|
|
|
67
|
|
|||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||||||
Receivables
|
(2,494
|
)
|
|
(967
|
)
|
|
1,175
|
|
|||
Inventories
|
(376
|
)
|
|
(368
|
)
|
|
(458
|
)
|
|||
Drafts and accounts payable
|
3,952
|
|
|
1,976
|
|
|
271
|
|
|||
Operating lease liabilities
|
(377
|
)
|
|
—
|
|
|
—
|
|
|||
Taxes
|
(8
|
)
|
|
(95
|
)
|
|
671
|
|
|||
Other
|
(8
|
)
|
|
68
|
|
|
79
|
|
|||
Net cash provided by operating activities
|
4,374
|
|
|
4,036
|
|
|
4,345
|
|
|||
|
|
|
|
|
|
||||||
Investing Activities
|
|
|
|
|
|
||||||
Payments for property, plant and equipment
|
(362
|
)
|
|
(426
|
)
|
|
(405
|
)
|
|||
Capitalized software expenditures
|
(144
|
)
|
|
(131
|
)
|
|
(175
|
)
|
|||
Acquisitions, net of cash, cash equivalents and restricted cash acquired
|
(133
|
)
|
|
(905
|
)
|
|
(2,893
|
)
|
|||
Proceeds from sale of businesses and investments, net
|
37
|
|
|
101
|
|
|
374
|
|
|||
Payments received on Healthcare Technology Net Asset Exchange, net
|
—
|
|
|
—
|
|
|
126
|
|
|||
Other
|
23
|
|
|
(20
|
)
|
|
(20
|
)
|
|||
Net cash used in investing activities
|
(579
|
)
|
|
(1,381
|
)
|
|
(2,993
|
)
|
|||
|
|
|
|
|
|
||||||
Financing Activities
|
|
|
|
|
|
||||||
Proceeds from short-term borrowings
|
21,437
|
|
|
37,265
|
|
|
20,542
|
|
|||
Repayments of short-term borrowings
|
(21,437
|
)
|
|
(37,268
|
)
|
|
(20,725
|
)
|
|||
Proceeds from issuances of long-term debt
|
—
|
|
|
1,099
|
|
|
1,522
|
|
|||
Repayments of long-term debt
|
(298
|
)
|
|
(1,112
|
)
|
|
(2,287
|
)
|
|||
Payments for debt extinguishments
|
—
|
|
|
—
|
|
|
(112
|
)
|
|||
Common stock transactions:
|
|
|
|
|
|
|
|||||
Issuances
|
113
|
|
|
75
|
|
|
132
|
|
|||
Share repurchases, including shares surrendered for tax withholding
|
(1,954
|
)
|
|
(1,639
|
)
|
|
(1,709
|
)
|
|||
Dividends paid
|
(294
|
)
|
|
(292
|
)
|
|
(262
|
)
|
|||
Other
|
(301
|
)
|
|
(355
|
)
|
|
(185
|
)
|
|||
Net cash used in financing activities
|
(2,734
|
)
|
|
(2,227
|
)
|
|
(3,084
|
)
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(19
|
)
|
|
(119
|
)
|
|
150
|
|
|||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
1,042
|
|
|
309
|
|
|
(1,582
|
)
|
|||
Cash, cash equivalents and restricted cash at beginning of year
|
2,981
|
|
|
2,672
|
|
|
4,254
|
|
|||
Cash, cash equivalents and restricted cash at end of year
|
$
|
4,023
|
|
|
$
|
2,981
|
|
|
$
|
2,672
|
|
|
|
|
|
|
|
||||||
Supplemental Cash Flow Information
|
|
|
|
|
|
||||||
Cash paid for:
|
|
|
|
|
|
||||||
Interest, net
|
$
|
235
|
|
|
$
|
383
|
|
|
$
|
298
|
|
Income taxes, net of refunds
|
$
|
368
|
|
|
$
|
262
|
|
|
$
|
144
|
|
1.
|
Significant Accounting Policies
|
2.
|
Investment in Change Healthcare Joint Venture
|
(In millions)
|
March 31, 2020
|
||
Assets
|
|
||
Current Assets
|
|
||
Receivables, net
|
$
|
548
|
|
Inventories, net
|
478
|
|
|
Long-term assets
|
88
|
|
|
Remeasurement of assets of business held for sale to fair value less cost to sell (1)
|
(272
|
)
|
|
Total Assets held for sale
|
$
|
842
|
|
|
|
||
Liabilities
|
|
||
Current Liabilities
|
|
||
Drafts and accounts payable
|
$
|
450
|
|
Other accrued liabilities
|
40
|
|
|
Long-term liabilities
|
166
|
|
|
Total Liabilities held for sale
|
$
|
656
|
|
(1)
|
Includes the effect of approximately $3 million of cumulative foreign currency translation adjustment.
|
|
Year Ended March 31, 2020
|
||||||||||||||||||||||
(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
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
33
|
|
|
$
|
40
|
|
Exit and other-related costs (1)
|
—
|
|
|
11
|
|
|
19
|
|
|
1
|
|
|
44
|
|
|
75
|
|
||||||
Asset impairments and accelerated depreciation
|
—
|
|
|
5
|
|
|
1
|
|
|
—
|
|
|
10
|
|
|
16
|
|
||||||
Total
|
$
|
3
|
|
|
$
|
17
|
|
|
$
|
22
|
|
|
$
|
2
|
|
|
$
|
87
|
|
|
$
|
131
|
|
(1)
|
Exit and other-related costs primarily include project consulting fees.
|
(1)
|
Exit and other-related costs primarily include lease and other contract exit costs associated with closures of facilities and retail pharmacy stores 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 charges recognized
|
3
|
|
|
17
|
|
|
22
|
|
|
2
|
|
|
87
|
|
|
131
|
|
||||||
Non-cash charges
|
—
|
|
|
(5
|
)
|
|
(1
|
)
|
|
—
|
|
|
(10
|
)
|
|
(16
|
)
|
||||||
Cash payments
|
(13
|
)
|
|
(26
|
)
|
|
(16
|
)
|
|
(20
|
)
|
|
(61
|
)
|
|
(136
|
)
|
||||||
Other
|
1
|
|
|
—
|
|
|
(2
|
)
|
|
(4
|
)
|
|
(14
|
)
|
|
(19
|
)
|
||||||
Balance, March 31, 2020 (2)
|
$
|
22
|
|
|
$
|
24
|
|
|
$
|
18
|
|
|
$
|
7
|
|
|
$
|
39
|
|
|
$
|
110
|
|
(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 March 31, 2020, the total reserve balance was $110 million of which $99 million was recorded in other accrued liabilities and $11 million was recorded in other noncurrent liabilities.
|
5.
|
Business Acquisitions and Divestitures
|
(In millions)
|
Amounts Previously Recognized as of Acquisition Date (Provisional as Adjusted) (1)
|
|
FY20 Measurement Period Adjustments
|
|
Amounts Recognized as of the Acquisition Date (2)
|
||||||||
Receivables
|
$
|
113
|
|
|
$
|
(1
|
)
|
|
$
|
112
|
|
||
Other current assets, net of cash and cash equivalents acquired
|
72
|
|
|
(1
|
)
|
|
71
|
|
|||||
Goodwill
|
381
|
|
|
7
|
|
|
388
|
|
|||||
Intangible assets
|
326
|
|
|
—
|
|
|
326
|
|
|||||
Other long-term assets
|
55
|
|
|
1
|
|
|
56
|
|
|||||
Current liabilities
|
(72
|
)
|
|
—
|
|
|
(72
|
)
|
|||||
Other long-term liabilities
|
(91
|
)
|
|
(6
|
)
|
|
(97
|
)
|
|||||
Net assets acquired, net of cash and cash equivalents
|
$
|
784
|
|
|
$
|
—
|
|
|
$
|
784
|
|
(1)
|
Provisional amounts as of March 31, 2019.
|
(2)
|
Final amounts as of May 31, 2019.
|
6.
|
Share-Based Compensation
|
|
Years Ended March 31,
|
||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
||||||
Restricted stock unit awards (1)
|
$
|
104
|
|
|
$
|
75
|
|
|
$
|
46
|
|
Stock options
|
7
|
|
|
12
|
|
|
14
|
|
|||
Employee stock purchase plan
|
8
|
|
|
8
|
|
|
9
|
|
|||
Share-based compensation expense
|
119
|
|
|
95
|
|
|
69
|
|
|||
Tax benefit for share-based compensation expense (2)
|
(18
|
)
|
|
(12
|
)
|
|
(28
|
)
|
|||
Share-based compensation expense, net of tax
|
$
|
101
|
|
|
$
|
83
|
|
|
$
|
41
|
|
(1)
|
Includes compensation expense recognized for RSUs, PSUs and PeRSUs.
|
(2)
|
Income tax benefit is computed using the tax rates of applicable tax jurisdictions. Additionally, a portion of pre-tax compensation expense is not tax-deductible. Income tax expense for 2020 and 2019 included discrete income tax expense of $2 million and $4 million. 2018 included a discrete income tax benefit of $8 million related to the adoption of the amended accounting guidance on share-based compensation.
|
|
Years Ended March 31,
|
|||||||
|
2020
|
|
2019
|
|
2018
|
|||
Expected stock price volatility
|
30
|
%
|
|
31
|
%
|
|
29
|
%
|
Expected dividend yield
|
1.3
|
%
|
|
0.9
|
%
|
|
0.8
|
%
|
Risk-free interest rate
|
2.2
|
%
|
|
2.6
|
%
|
|
1.5
|
%
|
Expected life (in years)
|
3
|
|
|
3
|
|
|
3
|
|
|
Years Ended March 31,
|
||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
||||||
Total fair value of shares vested
|
$
|
67
|
|
|
$
|
59
|
|
|
$
|
156
|
|
Total compensation cost, net of estimated forfeitures, related to nonvested restricted stock unit awards not yet recognized, pre-tax
|
$
|
155
|
|
|
$
|
119
|
|
|
$
|
97
|
|
Weighted-average period in years over which restricted stock unit award cost is expected to be recognized
|
3
|
|
|
2
|
|
|
2
|
|
|
|
Years Ended March 31,
|
||||
|
|
2019
|
|
2018
|
||
Expected stock price volatility (2)
|
|
26
|
%
|
|
25
|
%
|
Expected dividend yield (3)
|
|
0.9
|
%
|
|
0.8
|
%
|
Risk-free interest rate (4)
|
|
2.8
|
%
|
|
1.7
|
%
|
Expected life (in years) (5)
|
|
4.6
|
|
|
4.5
|
|
(1)
|
The Company did not grant any stock options during the year ended March 31, 2020.
|
(2)
|
The computation of expected volatility was based on a combination of the historical volatility of the Company’s common stock and implied market volatility. The Company believes this market-based input provides a reasonable estimate of its future stock price movements and is consistent with employee stock option valuation considerations.
|
(3)
|
Expected dividend yield is based on historical experience and investors’ current expectations.
|
(4)
|
The risk-free interest rate for periods within the expected life of the option is based on the constant maturity U.S. Treasury rate in effect at the grant date.
|
(5)
|
The expected life of the options is based primarily on historical employee stock option exercises and other behavioral data and reflects the impact of changes in the contractual life of current option grants compared to the Company’s historical grants.
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||||||
Range of Exercise
Prices
|
|
Number of
Options
Outstanding
at Year End
(In millions)
|
|
Weighted-
Average
Remaining
Contractual
Life (Years)
|
|
Weighted-
Average
Exercise Price
|
|
Number of
Options
Exercisable at
Year End
(In millions)
|
|
Weighted-
Average
Exercise Price
|
||||||||||
$
|
118.41
|
|
–
|
$178.13
|
|
1
|
|
|
4
|
|
$
|
148.36
|
|
|
—
|
|
|
$
|
148.62
|
|
178.14
|
|
–
|
237.86
|
|
1
|
|
|
2
|
|
198.25
|
|
|
1
|
|
|
199.88
|
|
|||
|
|
|
|
2
|
|
|
|
|
|
|
1
|
|
|
|
(In millions, except per share data)
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term (Years)
|
|
Aggregate
Intrinsic
Value (2)
|
||||
Outstanding, March 31, 2019
|
3
|
|
$
|
166.72
|
|
|
3
|
|
$
|
4
|
|
Granted
|
—
|
|
—
|
|
|
|
|
|
|||
Cancelled
|
—
|
|
171.39
|
|
|
|
|
|
|||
Exercised
|
(1)
|
|
113.34
|
|
|
|
|
|
|||
Outstanding, March 31, 2020
|
2
|
|
$
|
180.48
|
|
|
3
|
|
$
|
1
|
|
Vested and expected to vest (1)
|
2
|
|
$
|
180.52
|
|
|
3
|
|
$
|
1
|
|
Vested and exercisable, March 31, 2020
|
2
|
|
189.28
|
|
|
2
|
|
1
|
|
(1)
|
The number of options expected to vest takes into account an estimate of expected forfeitures.
|
(2)
|
The intrinsic value is calculated as the difference between the period-end market price of the Company’s common stock and the exercise price of “in-the-money” options.
|
|
Years Ended March 31,
|
||||||||||
(In millions, except per share data)
|
2020
|
|
2019
|
|
2018
|
||||||
Weighted-average grant date fair value per stock option
|
$
|
—
|
|
|
$
|
34.98
|
|
|
$
|
34.24
|
|
Aggregate intrinsic value on exercise
|
$
|
17
|
|
|
$
|
16
|
|
|
$
|
60
|
|
Cash received upon exercise
|
$
|
66
|
|
|
$
|
29
|
|
|
$
|
77
|
|
Tax benefits realized related to exercise
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
22
|
|
Total fair value of stock options vested
|
$
|
16
|
|
|
$
|
16
|
|
|
$
|
20
|
|
Total compensation cost, net of estimated forfeitures, related to unvested stock options not yet recognized, pre-tax
|
$
|
6
|
|
|
$
|
15
|
|
|
$
|
15
|
|
Weighted-average period in years over which stock option compensation cost is expected to be recognized
|
2
|
|
|
2
|
|
|
2
|
|
7.
|
Other Income, Net
|
|
Years Ended March 31,
|
||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
||||||
Interest income
|
$
|
49
|
|
|
$
|
39
|
|
|
$
|
48
|
|
Equity in earnings, net (1)
|
36
|
|
|
43
|
|
|
32
|
|
|||
Gain from sale of equity investment (2)
|
—
|
|
|
56
|
|
|
43
|
|
|||
Actuarial losses from pension plans (3)
|
(127
|
)
|
|
—
|
|
|
—
|
|
|||
Other, net
|
54
|
|
|
44
|
|
|
7
|
|
|||
Total
|
$
|
12
|
|
|
$
|
182
|
|
|
$
|
130
|
|
(1)
|
Primarily recorded within the Company’s European Pharmaceutical Solutions segment.
|
(2)
|
Amount represented a pre-tax gain from the sale of an equity investment to a third party included in Other during 2019 and in our U.S. Pharmaceutical and Specialty Solutions segment during 2018.
|
(3)
|
Includes $116 million from the termination of the U.S. defined benefit pension plan and $11 million related to a settlement from the executive benefit retirement plan for a recently retired executive. Refer to Financial Note 17, “Pension Benefits.”
|
8.
|
Income Taxes
|
|
Years Ended March 31,
|
||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
||||||
Income from continuing operations before income taxes
|
|
|
|
|
|
||||||
U.S.
|
$
|
216
|
|
|
$
|
1,512
|
|
|
$
|
1,175
|
|
Foreign
|
928
|
|
|
(902
|
)
|
|
(936
|
)
|
|||
Total income from continuing operations before income taxes
|
$
|
1,144
|
|
|
$
|
610
|
|
|
$
|
239
|
|
|
Years Ended March 31,
|
||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
||||||
Current
|
|
|
|
|
|
||||||
Federal
|
$
|
170
|
|
|
$
|
(20
|
)
|
|
$
|
577
|
|
State
|
48
|
|
|
35
|
|
|
33
|
|
|||
Foreign
|
142
|
|
|
152
|
|
|
205
|
|
|||
Total current
|
360
|
|
|
167
|
|
|
815
|
|
|||
|
|
|
|
|
|
||||||
Deferred
|
|
|
|
|
|
||||||
Federal
|
(204
|
)
|
|
223
|
|
|
(767
|
)
|
|||
State
|
(105
|
)
|
|
44
|
|
|
17
|
|
|||
Foreign
|
(33
|
)
|
|
(78
|
)
|
|
(118
|
)
|
|||
Total deferred
|
(342
|
)
|
|
189
|
|
|
(868
|
)
|
|||
Income tax expense (benefit)
|
$
|
18
|
|
|
$
|
356
|
|
|
$
|
(53
|
)
|
|
Years Ended March 31,
|
||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
||||||
Income tax expense at federal statutory rate
|
$
|
240
|
|
|
$
|
128
|
|
|
$
|
75
|
|
State income taxes, net of federal tax benefit
|
(41
|
)
|
|
70
|
|
|
50
|
|
|||
Tax effect of foreign operations
|
(81
|
)
|
|
(86
|
)
|
|
(146
|
)
|
|||
Unrecognized tax benefits and settlements
|
(7
|
)
|
|
20
|
|
|
454
|
|
|||
Non-deductible goodwill
|
7
|
|
|
357
|
|
|
585
|
|
|||
Share-based compensation
|
2
|
|
|
4
|
|
|
(8
|
)
|
|||
Net tax benefit on intellectual property transfer
|
—
|
|
|
(42
|
)
|
|
(178
|
)
|
|||
Tax-free gain on investment exit (1)
|
(87
|
)
|
|
—
|
|
|
—
|
|
|||
Impact of change in U.S. tax rate on temporary differences
|
—
|
|
|
(81
|
)
|
|
(1,324
|
)
|
|||
Transition tax on foreign earnings
|
—
|
|
|
(5
|
)
|
|
457
|
|
|||
Capital loss carryback
|
(19
|
)
|
|
—
|
|
|
—
|
|
|||
Other, net (2)
|
4
|
|
|
(9
|
)
|
|
(18
|
)
|
|||
Income tax expense (benefit)
|
$
|
18
|
|
|
$
|
356
|
|
|
$
|
(53
|
)
|
(1)
|
Refer to Financial Note 2, “Investment in Change Healthcare Joint Venture,” for additional information regarding the separation of the Change Healthcare JV.
|
(2)
|
The Company’s effective tax rates were impacted by other favorable U.S. federal permanent differences including research and development credits of $7 million, $7 million and $11 million in 2020, 2019 and 2018.
|
|
March 31,
|
||||||
(In millions)
|
2020
|
|
2019
|
||||
Assets
|
|
|
|
||||
Receivable allowances
|
$
|
72
|
|
|
$
|
70
|
|
Compensation and benefit related accruals
|
331
|
|
|
377
|
|
||
Net operating loss and credit carryforwards
|
828
|
|
|
885
|
|
||
Lease obligations
|
482
|
|
|
—
|
|
||
Other
|
109
|
|
|
216
|
|
||
Subtotal
|
1,822
|
|
|
1,548
|
|
||
Less: valuation allowance
|
(833
|
)
|
|
(870
|
)
|
||
Total assets
|
989
|
|
|
678
|
|
||
Liabilities
|
|
|
|
||||
Inventory valuation and other assets
|
(1,947
|
)
|
|
(2,016
|
)
|
||
Fixed assets and systems development costs
|
(202
|
)
|
|
(170
|
)
|
||
Intangibles
|
(531
|
)
|
|
(513
|
)
|
||
Change Healthcare equity investment
|
—
|
|
|
(885
|
)
|
||
Lease right-of-use assets
|
(449
|
)
|
|
—
|
|
||
Other
|
(56
|
)
|
|
(34
|
)
|
||
Total liabilities
|
(3,185
|
)
|
|
(3,618
|
)
|
||
Net deferred tax liability
|
$
|
(2,196
|
)
|
|
$
|
(2,940
|
)
|
|
|
|
|
||||
Long-term deferred tax asset
|
$
|
59
|
|
|
$
|
58
|
|
Long-term deferred tax liability
|
(2,255
|
)
|
|
(2,998
|
)
|
||
Net deferred tax liability
|
$
|
(2,196
|
)
|
|
$
|
(2,940
|
)
|
|
Years Ended March 31,
|
||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
||||||
Unrecognized tax benefits at beginning of period
|
$
|
1,052
|
|
|
$
|
1,183
|
|
|
$
|
486
|
|
Additions based on tax positions related to prior years
|
20
|
|
|
78
|
|
|
47
|
|
|||
Reductions based on tax positions related to prior years
|
(168
|
)
|
|
(234
|
)
|
|
(124
|
)
|
|||
Additions based on tax positions related to current year
|
82
|
|
|
68
|
|
|
778
|
|
|||
Reductions based on settlements
|
(8
|
)
|
|
(13
|
)
|
|
(7
|
)
|
|||
Reductions based on the lapse of the applicable statutes of limitations
|
(13
|
)
|
|
(25
|
)
|
|
—
|
|
|||
Exchange rate fluctuations
|
(7
|
)
|
|
(5
|
)
|
|
3
|
|
|||
Unrecognized tax benefits at end of period
|
$
|
958
|
|
|
$
|
1,052
|
|
|
$
|
1,183
|
|
(In millions)
|
Noncontrolling
Interests
|
|
Redeemable
Noncontrolling
Interests
|
||||
Balance, March 31, 2018
|
$
|
253
|
|
|
$
|
1,459
|
|
Net income attributable to noncontrolling interests
|
176
|
|
|
45
|
|
||
Other comprehensive loss
|
—
|
|
|
(66
|
)
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(45
|
)
|
||
Payments to noncontrolling interests
|
(184
|
)
|
|
—
|
|
||
Other
|
(52
|
)
|
|
—
|
|
||
Balance, March 31, 2019
|
193
|
|
|
1,393
|
|
||
Net income attributable to noncontrolling interests
|
178
|
|
|
42
|
|
||
Other comprehensive income
|
—
|
|
|
3
|
|
||
Reclassification of recurring compensation to other accrued liabilities
|
—
|
|
|
(42
|
)
|
||
Payments to noncontrolling interests
|
(154
|
)
|
|
—
|
|
||
Other
|
—
|
|
|
6
|
|
||
Balance, March 31, 2020
|
$
|
217
|
|
|
$
|
1,402
|
|
10.
|
Earnings per Common Share
|
|
Years Ended March 31,
|
||||||||||
(In millions, except per share amounts)
|
2020
|
|
2019
|
|
2018
|
||||||
Income from continuing operations
|
$
|
1,126
|
|
|
$
|
254
|
|
|
$
|
292
|
|
Net income attributable to noncontrolling interests
|
(220
|
)
|
|
(221
|
)
|
|
(230
|
)
|
|||
Income from continuing operations attributable to McKesson
|
906
|
|
|
33
|
|
|
62
|
|
|||
Income (loss) from discontinued operations, net of tax
|
(6
|
)
|
|
1
|
|
|
5
|
|
|||
Net income attributable to McKesson
|
$
|
900
|
|
|
$
|
34
|
|
|
$
|
67
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
181
|
|
|
196
|
|
|
208
|
|
|||
Effect of dilutive securities:
|
|
|
|
|
|
||||||
Restricted stock units
|
1
|
|
|
1
|
|
|
1
|
|
|||
Diluted
|
182
|
|
|
197
|
|
|
209
|
|
|||
|
|
|
|
|
|
||||||
Earnings (loss) per common share attributable to McKesson: (1)
|
|
|
|
|
|
||||||
Diluted
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
4.99
|
|
|
$
|
0.17
|
|
|
$
|
0.30
|
|
Discontinued operations
|
(0.04
|
)
|
|
—
|
|
|
0.02
|
|
|||
Total
|
$
|
4.95
|
|
|
$
|
0.17
|
|
|
$
|
0.32
|
|
Basic
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
5.01
|
|
|
$
|
0.17
|
|
|
$
|
0.30
|
|
Discontinued operations
|
(0.03
|
)
|
|
—
|
|
|
0.02
|
|
|||
Total
|
$
|
4.98
|
|
|
$
|
0.17
|
|
|
$
|
0.32
|
|
(1)
|
Certain computations may reflect rounding adjustments.
|
|
March 31,
|
||||||
(In millions)
|
2020
|
|
2019
|
||||
Customer accounts
|
$
|
17,201
|
|
|
$
|
14,941
|
|
Other
|
3,014
|
|
|
3,584
|
|
||
Total
|
20,215
|
|
|
18,525
|
|
||
Allowances
|
(265
|
)
|
|
(279
|
)
|
||
Net
|
$
|
19,950
|
|
|
$
|
18,246
|
|
|
March 31,
|
||||||
(In millions)
|
2020
|
|
2019
|
||||
Land
|
$
|
151
|
|
|
$
|
172
|
|
Building, machinery, equipment and other
|
4,043
|
|
|
4,154
|
|
||
Total property, plant and equipment
|
4,194
|
|
|
4,326
|
|
||
Accumulated depreciation
|
(1,829
|
)
|
|
(1,778
|
)
|
||
Property, plant and equipment, net
|
$
|
2,365
|
|
|
$
|
2,548
|
|
13.
|
Leases
|
(In millions, except lease term and discount rate)
|
March 31, 2020
|
||
Operating leases
|
|
||
Operating Lease Right-of-Use Assets
|
$
|
1,886
|
|
|
|
||
Current portion of operating lease liabilities
|
$
|
354
|
|
Long-Term Operating Lease Liabilities
|
1,660
|
|
|
Total operating lease liabilities
|
$
|
2,014
|
|
|
|
||
Finance Leases
|
|
||
Property, Plant and Equipment, net
|
$
|
180
|
|
|
|
||
Current portion of long-term debt
|
$
|
15
|
|
Long-Term Debt
|
151
|
|
|
Total finance lease liabilities
|
$
|
166
|
|
|
|
||
Weighted Average Remaining Lease Term (Years)
|
|
||
Operating leases
|
7.7
|
|
|
Finance leases
|
12.1
|
|
|
|
|
||
Weighted Average Discount Rate
|
|
||
Operating leases
|
3.03
|
%
|
|
Finance leases
|
2.86
|
%
|
(In millions)
|
Year Ended
March 31, 2020
|
||
Short-term lease cost
|
$
|
29
|
|
Operating lease cost
|
459
|
|
|
|
|
||
Finance lease cost:
|
|
||
Amortization of right-of-use assets
|
14
|
|
|
Interest on lease liabilities
|
5
|
|
|
Total finance lease cost
|
19
|
|
|
|
|
||
Variable lease cost (1)
|
125
|
|
|
Sublease income
|
(33
|
)
|
|
Total lease cost (2)
|
$
|
599
|
|
(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 in operating expenses in the consolidated statement of operations.
|
(In millions)
|
Year Ended
March 31, 2020
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows from operating leases
|
$
|
(377
|
)
|
Operating cash flows from finance leases
|
(3
|
)
|
|
Financing cash flows from finance leases
|
(18
|
)
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
||
Operating leases (1)
|
$
|
2,378
|
|
Finance leases
|
166
|
|
(In millions)
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
||||||
2021
|
$
|
398
|
|
|
$
|
19
|
|
|
$
|
417
|
|
2022
|
371
|
|
|
19
|
|
|
390
|
|
|||
2023
|
310
|
|
|
18
|
|
|
328
|
|
|||
2024
|
252
|
|
|
17
|
|
|
269
|
|
|||
2025
|
213
|
|
|
16
|
|
|
229
|
|
|||
Thereafter
|
730
|
|
|
110
|
|
|
840
|
|
|||
Total lease payments (1)
|
2,274
|
|
|
199
|
|
|
2,473
|
|
|||
Less imputed interest
|
(260
|
)
|
|
(33
|
)
|
|
(293
|
)
|
|||
Present value of lease liabilities
|
$
|
2,014
|
|
|
$
|
166
|
|
|
$
|
2,180
|
|
(1)
|
Total lease payments have not been reduced by minimum sublease income of $178 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.
|
(In millions)
|
U.S. Pharmaceutical and Specialty Solutions
|
|
European Pharmaceutical Solutions
|
|
Medical-Surgical Solutions
|
|
Other
|
|
Total
|
||||||||||
Balance, March 31, 2018
|
$
|
4,110
|
|
|
$
|
1,850
|
|
|
$
|
2,070
|
|
|
$
|
2,894
|
|
|
$
|
10,924
|
|
Goodwill acquired
|
17
|
|
|
52
|
|
|
360
|
|
|
13
|
|
|
442
|
|
|||||
Acquisition accounting, transfers and other adjustments
|
13
|
|
|
(5
|
)
|
|
21
|
|
|
6
|
|
|
35
|
|
|||||
Impairment charges
|
—
|
|
|
(1,776
|
)
|
|
—
|
|
|
(21
|
)
|
|
(1,797
|
)
|
|||||
Foreign currency translation adjustments, net
|
(62
|
)
|
|
(121
|
)
|
|
—
|
|
|
(63
|
)
|
|
(246
|
)
|
|||||
Balance, March 31, 2019
|
4,078
|
|
|
—
|
|
|
2,451
|
|
|
2,829
|
|
|
9,358
|
|
|||||
Goodwill acquired
|
—
|
|
|
62
|
|
|
—
|
|
|
14
|
|
|
76
|
|
|||||
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
|
(11
|
)
|
|
(3
|
)
|
|
—
|
|
|
(64
|
)
|
|
(78
|
)
|
|||||
Balance, March 31, 2020
|
$
|
4,067
|
|
|
$
|
63
|
|
|
$
|
2,453
|
|
|
$
|
2,777
|
|
|
$
|
9,360
|
|
(In millions, except rates)
|
|
|
|
|
|
|
|
|
|
||||||
Quarter Ended
|
|
Reporting Unit
|
|
Segment
|
|
Discount Rate
|
|
Terminal Growth Rate
|
|
Goodwill Impairment
|
(1)
|
||||
June 2018
|
|
PD
|
|
European Pharmaceutical Solutions
|
|
8.0
|
%
|
|
1.25
|
%
|
|
$
|
238
|
|
(2)
|
June 2018
|
|
RP
|
|
European Pharmaceutical Solutions
|
|
8.5
|
%
|
|
1.25
|
%
|
|
251
|
|
(3)
|
|
June 2018
|
|
PD
|
|
European Pharmaceutical Solutions
|
|
8.0
|
%
|
|
1.25
|
%
|
|
81
|
|
(3)
|
|
March 2019
|
|
RP
|
|
European Pharmaceutical Solutions
|
|
10.0
|
%
|
|
1.25
|
%
|
|
465
|
|
(4)
|
|
March 2019
|
|
PD
|
|
European Pharmaceutical Solutions
|
|
9.0
|
%
|
|
1.25
|
%
|
|
741
|
|
(4)
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
1,776
|
|
|
(1)
|
Represents pre-tax and after-tax amounts, except for an aggregate $20 million of tax charges related to the March 2019 Retail Pharmacy impairment. Total goodwill impairment for 2019 also includes $21 million related to the Company’s Rexall Health business within Other recorded in the third quarter of 2019.
|
(2)
|
Prior to implementing its new segment reporting structure in the first quarter of 2019, the Company’s European operations were considered a single reporting unit. Following the change in reportable segments, its European Pharmaceutical Solutions segment was divided into two distinct reporting units, Retail Pharmacy (“RP”), formerly Consumer Solutions, and Pharmaceutical Distribution (“PD”), formerly Pharmacy Solutions, for the purposes of goodwill impairment testing. This change required performance of a goodwill impairment test for these two new reporting units which resulted in a goodwill impairment charge as PD’s estimated fair value was lower than its reassigned carrying value.
|
(3)
|
Both RP and PD projected a decline in the estimated future cash flows primarily triggered by additional U.K. government actions which were announced on June 29, 2018. An interim goodwill impairment test for these reporting units identified that their carrying values exceeded their estimated fair value and resulted in an impairment charge.
|
(4)
|
As a result of the annual goodwill impairment test, the carrying values of the PD and RP reporting units exceeded their estimated fair value which required the Company to record impairment charges for the reporting units. These additional impairments were primarily due to declines in the reporting units’ estimated future cash flows and the selection of higher discount rates. The declines in estimated future cash flows were primarily attributed to additional government reimbursement reductions and competitive pressures within the U.K. The risk of successfully achieving certain business initiatives was the primary factor in the use of a higher discount rate. As of March 31, 2019 the entire remaining goodwill balances of both reporting units were impaired.
|
(In millions, except rates)
|
|
|
|
|
|
|
|
|
|
||||||
Quarter Ended
|
|
Reporting Unit
|
|
Segment (3)
|
|
Discount Rate
|
|
Terminal Growth Rate
|
|
Goodwill Impairment
|
(1)
|
||||
September 2017
|
|
McKesson Europe (2)
|
|
European Pharmaceutical Solutions
|
|
7.5
|
%
|
|
1.25
|
%
|
|
$
|
350
|
|
(4)
|
March 2018
|
|
McKesson Europe
|
|
European Pharmaceutical Solutions
|
|
8.0
|
%
|
|
1.25
|
%
|
|
933
|
|
(5)
|
|
March 2018
|
|
Rexall
|
|
Other
|
|
10.0
|
%
|
|
2.00
|
%
|
|
455
|
|
(6)
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
1,738
|
|
|
(1)
|
Represents pre-tax and after-tax amounts.
|
(2)
|
This reporting unit was divided into two reporting units in the first quarter of 2019 upon a change in segment reporting structure. See above for more information.
|
(3)
|
The impairment charges recorded in 2018 were attributable to the former McKesson Distribution Solutions segment. The segment reporting structure which included McKesson Distribution Solutions was reorganized in the first quarter of 2019. The segments presented above for 2018 reflect the revised segment reporting structure.
|
(4)
|
The reporting unit projected a decline in its estimated future cash flows primarily triggered by government reimbursement reductions in its retail business in the U.K. Accordingly, the Company performed an interim one-step goodwill impairment test prior to its annual impairment test. As a result, the Company determined that the carrying value of this reporting unit exceeded its estimated fair value and recorded a goodwill impairment charge.
|
(5)
|
As a result of the Company’s annual impairment test, it was determined that the carrying value of the reporting unit further exceeded its estimated fair value and recorded a goodwill impairment charge. This reporting unit had a further decline in its estimated future cash flows driven by weakening script growth outlook in the Company’s U.K. business and by a more competitive environment in France.
|
(6)
|
As a result of the Company’s annual impairment test, it was determined that the carrying value of the reporting unit exceeded its estimated fair value and recorded a goodwill impairment charge. The impairment was the result of a decline in estimated future cash flows primarily driven by significant generics reimbursement reductions across Canada and minimum wage increases in multiple provinces which could only be partially mitigated through the business’ cost saving efforts. As of March 31, 2018, the entire remaining goodwill balance related to the Company’s acquisition of Rexall Health was impaired.
|
|
March 31, 2020
|
|
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
|
|
$
|
3,650
|
|
|
$
|
(1,950
|
)
|
|
$
|
1,700
|
|
|
$
|
3,818
|
|
|
$
|
(1,801
|
)
|
|
$
|
2,017
|
|
Service agreements
|
10
|
|
994
|
|
|
(480
|
)
|
|
514
|
|
|
1,017
|
|
|
(430
|
)
|
|
587
|
|
||||||
Pharmacy licenses
|
26
|
|
492
|
|
|
(232
|
)
|
|
260
|
|
|
513
|
|
|
(209
|
)
|
|
304
|
|
||||||
Trademarks and trade names
|
13
|
|
808
|
|
|
(242
|
)
|
|
566
|
|
|
887
|
|
|
(232
|
)
|
|
655
|
|
||||||
Technology
|
3
|
|
175
|
|
|
(111
|
)
|
|
64
|
|
|
141
|
|
|
(94
|
)
|
|
47
|
|
||||||
Other
|
5
|
|
273
|
|
|
(221
|
)
|
|
52
|
|
|
288
|
|
|
(209
|
)
|
|
79
|
|
||||||
Total
|
|
|
$
|
6,392
|
|
|
$
|
(3,236
|
)
|
|
$
|
3,156
|
|
|
$
|
6,664
|
|
|
$
|
(2,975
|
)
|
|
$
|
3,689
|
|
15.
|
Debt and Financing Activities
|
|
March 31,
|
||||||
(In millions)
|
2020
|
|
2019
|
||||
U.S. Dollar notes (1) (2)
|
|
|
|
||||
3.65% Notes due November 30, 2020
|
$
|
700
|
|
|
$
|
700
|
|
4.75% Notes due March 1, 2021
|
323
|
|
|
323
|
|
||
2.70% Notes due December 15, 2022
|
400
|
|
|
400
|
|
||
2.85% Notes due March 15, 2023
|
400
|
|
|
400
|
|
||
3.80% Notes due March 15, 2024
|
1,100
|
|
|
1,100
|
|
||
7.65% Debentures due March 1, 2027
|
167
|
|
|
167
|
|
||
3.95% Notes due February 16, 2028
|
600
|
|
|
600
|
|
||
4.75% Notes due May 30, 2029
|
400
|
|
|
400
|
|
||
6.00% Notes due March 1, 2041
|
282
|
|
|
282
|
|
||
4.88% Notes due March 15, 2044
|
411
|
|
|
411
|
|
||
Foreign currency notes (1) (3)
|
|
|
|
||||
Floating Rate Euro Notes due February 12, 2020 (4)
|
—
|
|
|
280
|
|
||
0.63% Euro Notes due August 17, 2021
|
662
|
|
|
673
|
|
||
1.50% Euro Notes due November 17, 2025
|
659
|
|
|
670
|
|
||
1.63% Euro Notes due October 30, 2026
|
552
|
|
|
560
|
|
||
3.13% Sterling Notes due February 17, 2029
|
557
|
|
|
586
|
|
||
|
|
|
|
||||
Lease and other obligations
|
174
|
|
|
43
|
|
||
Total debt
|
7,387
|
|
|
7,595
|
|
||
Less: Current portion
|
1,052
|
|
|
330
|
|
||
Total long-term debt
|
$
|
6,335
|
|
|
$
|
7,265
|
|
(1)
|
These notes are unsecured and unsubordinated obligations of the Company.
|
(2)
|
Interest on these notes is payable semi-annually.
|
(3)
|
Interest on these foreign currency notes is payable annually, except the 2020 Floating Rate Euro Notes.
|
(4)
|
Interest on these notes is payable quarterly.
|
17.
|
Pension Benefits
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||||||||||
|
Years Ended March 31,
|
|
Years Ended March 31,
|
||||||||||||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
||||||||||||
Service cost - benefits earned during the year
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
16
|
|
|
$
|
15
|
|
|
$
|
15
|
|
Interest cost on projected benefit obligation
|
6
|
|
|
14
|
|
|
14
|
|
|
19
|
|
|
21
|
|
|
22
|
|
||||||
Expected return on assets
|
(4
|
)
|
|
(16
|
)
|
|
(19
|
)
|
|
(22
|
)
|
|
(23
|
)
|
|
(26
|
)
|
||||||
Amortization of unrecognized actuarial loss and prior service costs
|
2
|
|
|
5
|
|
|
6
|
|
|
6
|
|
|
4
|
|
|
5
|
|
||||||
Curtailment/settlement loss
|
127
|
|
|
4
|
|
|
2
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Net periodic pension expense
|
$
|
131
|
|
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
19
|
|
|
$
|
18
|
|
|
$
|
17
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||
|
Years Ended March 31,
|
|
Years Ended March 31,
|
||||||||||||
(In millions)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Change in benefit obligations
|
|
|
|
|
|
|
|
||||||||
Benefit obligation at beginning of period (1)
|
$
|
439
|
|
|
$
|
485
|
|
|
$
|
990
|
|
|
$
|
1,035
|
|
Service cost
|
—
|
|
|
—
|
|
|
16
|
|
|
15
|
|
||||
Interest cost
|
6
|
|
|
14
|
|
|
19
|
|
|
21
|
|
||||
Actuarial loss (gain)
|
20
|
|
|
4
|
|
|
(36
|
)
|
|
35
|
|
||||
Benefits paid
|
(179
|
)
|
|
(64
|
)
|
|
(43
|
)
|
|
(36
|
)
|
||||
Annuity Premium Transfer
|
(276
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Expenses paid
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
Acquisitions
|
—
|
|
|
—
|
|
|
2
|
|
|
1
|
|
||||
Foreign exchange impact and other
|
—
|
|
|
—
|
|
|
(52
|
)
|
|
(80
|
)
|
||||
Benefit obligation at end of period (1)
|
$
|
10
|
|
|
$
|
439
|
|
|
$
|
896
|
|
|
$
|
990
|
|
|
|
|
|
|
|
|
|
||||||||
Change in plan assets
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at beginning of period
|
$
|
322
|
|
|
$
|
335
|
|
|
$
|
642
|
|
|
$
|
687
|
|
Actual return on plan assets
|
27
|
|
|
12
|
|
|
3
|
|
|
18
|
|
||||
Employer and participant contributions
|
116
|
|
|
39
|
|
|
28
|
|
|
23
|
|
||||
Benefits paid
|
(179
|
)
|
|
(64
|
)
|
|
(43
|
)
|
|
(36
|
)
|
||||
Annuity Premium Transfer
|
(276
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Expenses paid
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Foreign exchange impact and other
|
(10
|
)
|
|
—
|
|
|
(35
|
)
|
|
(49
|
)
|
||||
Fair value of plan assets at end of period
|
$
|
—
|
|
|
$
|
322
|
|
|
$
|
594
|
|
|
$
|
642
|
|
|
|
|
|
|
|
|
|
||||||||
Funded status at end of period
|
$
|
(10
|
)
|
|
$
|
(117
|
)
|
|
$
|
(302
|
)
|
|
$
|
(348
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts recognized on the balance sheet
|
|
|
|
|
|
|
|
||||||||
Assets
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
49
|
|
|
$
|
20
|
|
Current liabilities (2)
|
(1
|
)
|
|
(115
|
)
|
|
(162
|
)
|
|
(13
|
)
|
||||
Long-term liabilities
|
(9
|
)
|
|
(9
|
)
|
|
(189
|
)
|
|
(355
|
)
|
||||
Total
|
$
|
(10
|
)
|
|
$
|
(117
|
)
|
|
$
|
(302
|
)
|
|
$
|
(348
|
)
|
(1)
|
The benefit obligation is the projected benefit obligation.
|
(2)
|
Current liabilities includes $151 million reclassified from long-term liabilities to assets held for sale in 2020 in conjunction with the Company’s German wholesale business to be contributed to a joint venture as discussed in Financial Note 3, “Held for Sale”.
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||
|
March 31,
|
|
March 31,
|
||||||||||||
(In millions)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Projected benefit obligation
|
$
|
10
|
|
|
$
|
439
|
|
|
$
|
896
|
|
|
$
|
990
|
|
Accumulated benefit obligation
|
10
|
|
|
439
|
|
|
856
|
|
|
949
|
|
||||
Fair value of plan assets
|
—
|
|
|
322
|
|
|
594
|
|
|
642
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||
|
March 31,
|
|
March 31,
|
||||||||||||
(In millions)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net actuarial loss
|
$
|
1
|
|
|
$
|
133
|
|
|
$
|
149
|
|
|
$
|
186
|
|
Prior service credit
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(4
|
)
|
||||
Total
|
$
|
1
|
|
|
$
|
133
|
|
|
$
|
146
|
|
|
$
|
182
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||||||||||
|
Years Ended March 31,
|
|
Years Ended March 31,
|
||||||||||||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
||||||||||||
Net actuarial loss (gain)
|
$
|
(3
|
)
|
|
$
|
8
|
|
|
$
|
(15
|
)
|
|
$
|
(24
|
)
|
|
$
|
42
|
|
|
$
|
(11
|
)
|
Prior service credit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net actuarial loss
|
(129
|
)
|
|
(9
|
)
|
|
(8
|
)
|
|
(6
|
)
|
|
(5
|
)
|
|
(6
|
)
|
||||||
Prior service credit (cost)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign exchange impact and other
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(12
|
)
|
|
19
|
|
||||||
Total recognized in other comprehensive loss (income)
|
$
|
(132
|
)
|
|
$
|
(1
|
)
|
|
$
|
(23
|
)
|
|
$
|
(36
|
)
|
|
$
|
25
|
|
|
$
|
—
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||
|
Years Ended March 31,
|
|
Years Ended March 31,
|
||||||||
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
Net periodic pension expense
|
|
|
|
|
|
|
|
|
|
|
|
Discount rates
|
3.66%
|
|
3.83%
|
|
3.55%
|
|
2.03%
|
|
2.35%
|
|
2.34%
|
Rate of increase in compensation
|
N/A (1)
|
|
N/A (1)
|
|
4.00
|
|
2.93
|
|
3.13
|
|
2.72
|
Expected long-term rate of return on plan assets
|
4.00
|
|
5.25
|
|
6.25
|
|
3.01
|
|
3.71
|
|
4.03
|
Benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
Discount rates
|
3.08%
|
|
3.65%
|
|
3.69%
|
|
2.03%
|
|
2.13%
|
|
2.35%
|
Rate of increase in compensation
|
N/A (1)
|
|
N/A (1)
|
|
N/A (1)
|
|
2.93
|
|
3.18
|
|
2.59
|
(1)
|
This assumption is no longer needed in actuarial valuations as U.S. plans are frozen or have fixed benefits for the remaining active participants.
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||||||||||||||||||
|
March 31, 2020
|
|
March 31, 2020
|
||||||||||||||||||||||||||||
(In millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Common and preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Equity commingled funds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53
|
|
|
75
|
|
|
—
|
|
|
128
|
|
||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Government securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
139
|
|
|
—
|
|
|
145
|
|
||||||||
Corporate bonds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
17
|
|
|
—
|
|
|
31
|
|
||||||||
Mortgage-backed securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Asset-backed securities and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Fixed income commingled funds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
107
|
|
|
101
|
|
|
—
|
|
|
208
|
|
||||||||
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Real estate funds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
2
|
|
|
3
|
|
|
8
|
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
19
|
|
||||||||
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
215
|
|
|
$
|
334
|
|
|
$
|
3
|
|
|
$
|
552
|
|
Assets held at NAV practical expedient (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Equity commingled funds
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
8
|
|
||||||||||||||
Fixed income commingled funds
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Real estate funds
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Other
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
34
|
|
||||||||||||||
Total plan assets
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
$
|
594
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
||||||||||||||||||||||||||||
|
March 31, 2019
|
|
March 31, 2019
|
||||||||||||||||||||||||||||
(In millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Cash and cash equivalents
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Common and preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Equity commingled funds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
82
|
|
|
—
|
|
|
144
|
|
||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Government securities
|
—
|
|
|
33
|
|
|
—
|
|
|
33
|
|
|
4
|
|
|
135
|
|
|
—
|
|
|
139
|
|
||||||||
Corporate bonds
|
—
|
|
|
273
|
|
|
—
|
|
|
273
|
|
|
8
|
|
|
18
|
|
|
—
|
|
|
26
|
|
||||||||
Mortgage-backed securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Asset-backed securities and other
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Fixed income commingled funds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125
|
|
|
110
|
|
|
6
|
|
|
241
|
|
||||||||
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Real estate funds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
3
|
|
|
—
|
|
|
5
|
|
||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
3
|
|
|
24
|
|
||||||||
Total
|
$
|
11
|
|
|
$
|
311
|
|
|
$
|
—
|
|
|
$
|
322
|
|
|
$
|
228
|
|
|
$
|
348
|
|
|
$
|
9
|
|
|
$
|
585
|
|
Assets held at NAV practical expedient (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Equity commingled funds
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
8
|
|
||||||||||||||
Fixed income commingled funds
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Real estate funds
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Other
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
49
|
|
||||||||||||||
Total plan assets
|
|
|
|
|
|
|
|
|
|
$
|
322
|
|
|
|
|
|
|
|
|
|
|
|
$
|
642
|
|
(1)
|
Equity commingled funds, fixed income commingled funds, real estate funds and other investments for which fair value is measured using the NAV per share as a practical expedient are not leveled within the fair value hierarchy and are included as a reconciling item to total investments.
|
|
Balance Sheet
Caption
|
March 31, 2020
|
|
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
|
|
Cross-currency swaps (current)
|
Prepaid expenses and other/Other accrued liabilities
|
112
|
|
19
|
|
1,279
|
|
|
—
|
|
18
|
|
—
|
|
||||||
Cross-currency swaps (non-current)
|
Other Noncurrent Assets/Liabilities
|
182
|
|
—
|
|
3,313
|
|
|
91
|
|
33
|
|
5,283
|
|
||||||
Total
|
|
$
|
294
|
|
$
|
19
|
|
|
|
$
|
108
|
|
$
|
51
|
|
|
||||
Derivatives not designated for hedge accounting
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts (current)
|
Prepaid expenses and other
|
$
|
2
|
|
$
|
—
|
|
$
|
24
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
14
|
|
Foreign exchange contracts (current)
|
Other accrued liabilities
|
—
|
|
—
|
|
5
|
|
|
—
|
|
—
|
|
14
|
|
||||||
Total
|
|
$
|
2
|
|
$
|
—
|
|
|
|
$
|
—
|
|
$
|
—
|
|
|
19.
|
Fair Value Measurements
|
20.
|
Financial Guarantees and Warranties
|
21.
|
Commitments and Contingent Liabilities
|
22.
|
Stockholders' Equity
|
|
Share Repurchases (1)
|
||||||||||
(In millions, except price per share data)
|
|
Total
Number of
Shares
Purchased (2) (3)
|
|
Average Price
Paid Per Share
|
|
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the
Programs
|
|||||
Balance, March 31, 2017
|
|
|
|
|
|
$
|
2,746
|
|
|||
Shares repurchased
|
|
10.5
|
|
|
$
|
151.06
|
|
|
(1,650
|
)
|
|
Balance, March 31, 2018
|
|
|
|
|
|
1,096
|
|
||||
Shares repurchase plans authorized
|
|
|
|
|
|
|
|||||
May 2018
|
|
|
|
|
|
4,000
|
|
||||
Shares repurchased
|
|
13.5
|
|
|
$
|
130.72
|
|
|
(1,627
|
)
|
|
Balance, March 31, 2019
|
|
|
|
|
|
3,469
|
|
||||
Shares repurchased
|
|
13.9
|
|
|
$
|
138.94
|
|
|
(1,934
|
)
|
|
Balance, March 31, 2020
|
|
|
|
|
|
$
|
1,535
|
|
(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. It also excludes shares related to the Company’s Split-off of the Change Healthcare JV as described below.
|
(2)
|
All of the shares purchased were part of the publicly announced programs.
|
(3)
|
The number of shares purchased reflects rounding adjustments.
|
|
Years Ended March 31,
|
||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
||||||
Foreign currency translation adjustments:(1)
|
|
|
|
|
|
||||||
Foreign currency translation adjustments arising during period, net of income tax expense of nil, nil and nil (2) (3)
|
$
|
(151
|
)
|
|
$
|
(431
|
)
|
|
$
|
804
|
|
Reclassified to income statement, net of income tax expense of nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
(151
|
)
|
|
(431
|
)
|
|
804
|
|
|||
Unrealized gains (losses) on net investment hedges (4)
|
|
|
|
|
|
||||||
Unrealized gains (losses) on net investment hedges arising during period, net of income tax (expense) benefit of ($30), ($71), and $95
|
85
|
|
|
241
|
|
|
(180
|
)
|
|||
Reclassified to income statement, net of income tax expense of nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
85
|
|
|
241
|
|
|
(180
|
)
|
|||
Unrealized gains (losses) on cash flow hedges:
|
|
|
|
|
|
||||||
Unrealized gains (losses) on cash flow hedges arising during period, net of income tax (expense) benefit of ($12), ($4), and $9
|
86
|
|
|
24
|
|
|
(30
|
)
|
|||
Reclassified to income statement, net of income tax expense of nil, nil and nil
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
86
|
|
|
24
|
|
|
(30
|
)
|
|||
Changes in retirement-related benefit plans:
|
|
|
|
|
|
||||||
Net actuarial gain (loss) and prior service credit (cost) arising during the period, net of income tax (expense) benefit of ($8), $5, and ($2) (5)
|
27
|
|
|
(51
|
)
|
|
25
|
|
|||
Amortization of actuarial loss, prior service cost and transition obligation, net of income tax (expense) benefit of $1, nil, and ($2) (6)
|
2
|
|
|
9
|
|
|
5
|
|
|||
Foreign currency translation adjustments and other, net of income tax expense of nil, nil and nil
|
6
|
|
|
10
|
|
|
(15
|
)
|
|||
Reclassified to income statement, net of income tax expense of ($33), nil and
nil (7) |
94
|
|
|
—
|
|
|
—
|
|
|||
|
129
|
|
|
(32
|
)
|
|
15
|
|
|||
|
|
|
|
|
|
||||||
Other Comprehensive Income (Loss), net of tax
|
$
|
149
|
|
|
$
|
(198
|
)
|
|
$
|
609
|
|
(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.
|
(2)
|
The 2020 net foreign currency translation losses of $151 million were primarily due to the weakening of the Euro and Canadian dollar against the U.S. dollar, partially offset by the strengthening of the British pound sterling from April 1, 2019 to March 31, 2020. The 2019 net foreign currency translation losses of $431 million were primarily due to the weakening of the Euro, British pound sterling and Canadian dollar against the U.S. dollar from April 1, 2018 to March 31, 2019. The 2018 net foreign currency translation gains of $804 million were primarily due to the strengthening of the Euro, British pound sterling and Canadian dollar against the U.S. dollar from April 1, 2017 to March 31, 2018.
|
(3)
|
2020 and 2018 include net foreign currency translation gains of $1 million and $189 million and 2019 includes net foreign currency translation losses of $61 million attributable to noncontrolling and redeemable noncontrolling interests.
|
(4)
|
2020, 2019 and 2018 include foreign currency gains of $39 million and $259 million and losses of $268 million on the net investment hedges from the Euro and British pound sterling-denominated notes. 2020, 2019 and 2018 also include foreign currency gains of $76 million and $53 million and losses of $7 million on the net investment hedges from the cross-currency swaps.
|
(5)
|
The 2020 net actuarial gain of $2 million and 2019 and 2018 net actuarial losses of $5 million and $4 million were attributable to noncontrolling and redeemable noncontrolling interests.
|
(6)
|
Pre-tax amount was reclassified into cost of sales and operating expenses in the consolidated statements of operations. The related tax expense was reclassified into income tax expense in the consolidated statements of operations.
|
(7)
|
Primarily reflects a reclassification of losses in 2020 upon the termination of the Plan from accumulated other comprehensive loss to other income (expense), net in the Company’s 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 March 31, 2018
|
$
|
(1,258
|
)
|
|
$
|
(188
|
)
|
|
$
|
(61
|
)
|
|
$
|
(210
|
)
|
|
$
|
(1,717
|
)
|
Other comprehensive income (loss) before reclassifications
|
(431
|
)
|
|
241
|
|
|
24
|
|
|
(41
|
)
|
|
(207
|
)
|
|||||
Amounts reclassified to earnings and
other
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
|||||
Other comprehensive income (loss)
|
(431
|
)
|
|
241
|
|
|
24
|
|
|
(32
|
)
|
|
(198
|
)
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
(61
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(66
|
)
|
|||||
Other comprehensive income (loss) attributable to McKesson
|
(370
|
)
|
|
241
|
|
|
24
|
|
|
(27
|
)
|
|
(132
|
)
|
|||||
Balance at March 31, 2019
|
(1,628
|
)
|
|
53
|
|
|
(37
|
)
|
|
(237
|
)
|
|
(1,849
|
)
|
|||||
Other comprehensive income (loss) before reclassifications
|
(151
|
)
|
|
85
|
|
|
86
|
|
|
33
|
|
|
53
|
|
|||||
Amounts reclassified to earnings and other
|
—
|
|
|
—
|
|
|
—
|
|
|
96
|
|
|
96
|
|
|||||
Other comprehensive income (loss)
|
(151
|
)
|
|
85
|
|
|
86
|
|
|
129
|
|
|
149
|
|
|||||
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests
|
1
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
3
|
|
|||||
Other comprehensive income (loss) attributable to McKesson
|
(152
|
)
|
|
85
|
|
|
86
|
|
|
127
|
|
|
146
|
|
|||||
Balance at March 31, 2020
|
$
|
(1,780
|
)
|
|
$
|
138
|
|
|
$
|
49
|
|
|
$
|
(110
|
)
|
|
$
|
(1,703
|
)
|
23.
|
Related Party Balances and Transactions
|
24.
|
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 the Change Healthcare JV which was split-off from the Company in the fourth quarter of 2020.
|
|
Years Ended March 31,
|
||||||||||
(In millions)
|
2020
|
|
2019
|
|
2018
|
||||||
Revenues
|
|
|
|
|
|
||||||
U.S. Pharmaceutical and Specialty Solutions (1)
|
$
|
183,341
|
|
|
$
|
167,763
|
|
|
$
|
162,587
|
|
European Pharmaceutical Solutions (1)
|
27,390
|
|
|
27,242
|
|
|
27,320
|
|
|||
Medical-Surgical Solutions (1)
|
8,305
|
|
|
7,618
|
|
|
6,611
|
|
|||
Other
|
12,015
|
|
|
11,696
|
|
|
11,839
|
|
|||
Total Revenues
|
$
|
231,051
|
|
|
$
|
214,319
|
|
|
$
|
208,357
|
|
|
|
|
|
|
|
||||||
Operating profit (loss) (2)
|
|
|
|
|
|
||||||
U.S. Pharmaceutical and Specialty Solutions (3)
|
$
|
2,767
|
|
|
$
|
2,697
|
|
|
$
|
2,535
|
|
European Pharmaceutical Solutions (4)
|
(261
|
)
|
|
(1,978
|
)
|
|
(1,681
|
)
|
|||
Medical-Surgical Solutions
|
499
|
|
|
455
|
|
|
461
|
|
|||
Other (5) (6) (7) (8)
|
(595
|
)
|
|
394
|
|
|
(107
|
)
|
|||
Total
|
2,410
|
|
|
1,568
|
|
|
1,208
|
|
|||
Corporate Expenses, Net (9)
|
(1,017
|
)
|
|
(694
|
)
|
|
(564
|
)
|
|||
Loss on Debt Extinguishment
|
—
|
|
|
—
|
|
|
(122
|
)
|
|||
Interest Expense
|
(249
|
)
|
|
(264
|
)
|
|
(283
|
)
|
|||
Income from Continuing Operations Before Income Taxes
|
$
|
1,144
|
|
|
$
|
610
|
|
|
$
|
239
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization (10)
|
|
|
|
|
|
||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
228
|
|
|
$
|
238
|
|
|
$
|
210
|
|
European Pharmaceutical Solutions
|
235
|
|
|
257
|
|
|
296
|
|
|||
Medical-Surgical Solutions
|
136
|
|
|
118
|
|
|
97
|
|
|||
Other
|
187
|
|
|
214
|
|
|
237
|
|
|||
Corporate
|
136
|
|
|
122
|
|
|
111
|
|
|||
Total
|
$
|
922
|
|
|
$
|
949
|
|
|
$
|
951
|
|
|
|
|
|
|
|
||||||
Expenditures for long-lived assets (11)
|
|
|
|
|
|
||||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
94
|
|
|
$
|
88
|
|
|
$
|
126
|
|
European Pharmaceutical Solutions
|
95
|
|
|
85
|
|
|
104
|
|
|||
Medical-Surgical Solutions
|
36
|
|
|
110
|
|
|
34
|
|
|||
Other
|
61
|
|
|
68
|
|
|
42
|
|
|||
Corporate
|
76
|
|
|
75
|
|
|
99
|
|
|||
Total
|
$
|
362
|
|
|
$
|
426
|
|
|
$
|
405
|
|
|
|
|
|
|
|
||||||
Revenues, net by geographic area
|
|
|
|
|
|
|
|
|
|||
United States
|
$
|
192,709
|
|
|
$
|
176,296
|
|
|
$
|
169,943
|
|
Foreign
|
38,342
|
|
|
38,023
|
|
|
38,414
|
|
|||
Total Revenues
|
$
|
231,051
|
|
|
$
|
214,319
|
|
|
$
|
208,357
|
|
(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 2020, 2019 and 2018 includes pre-tax credits of $252 million, $210 million and $99 million ($186 million, $156 million and $64 million after-tax) related to the LIFO method of accounting for inventories. Operating profit for 2020, 2019 and 2018 also includes $22 million, $202 million and $144 million of cash receipts for the Company’s share of antitrust legal settlements. In addition, operating profit for 2019 includes a pre-tax charge of $61 million ($45 million after-tax) related to a customer bankruptcy and 2018 includes a pre-tax gain of $43 million ($26 million after-tax) from the sale of an equity investment.
|
(4)
|
European Pharmaceutical Solutions segment’s operating loss for 2020 includes a charge of $275 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 for 2020, 2019 and 2018 also includes pre-tax long-lived asset impairment charges of $82 million, $210 million and $446 million ($66 million, $172 million and $410 million after-tax). Operating loss for 2019 and 2018 includes pre-tax goodwill impairment charges of $1.8 billion and $1.3 billion (pre-tax and after-tax).
|
(5)
|
Operating loss for Other for 2020 includes a pre-tax impairment charge of $1.2 billion ($864 million after-tax) and a pre-tax dilution loss of $246 million ($184 million after-tax) associated with the Company’s investment in the Change Healthcare JV, along with an estimated gain of $414 million (pre-tax and after-tax) related to the split-off of the Change Healthcare JV.
|
(6)
|
Operating profit (loss) for Other for 2020, 2019 and 2018 includes pre-tax goodwill and long-lived asset impairment charges of $32 million, $56 million and $488 million (pre-tax and after-tax) recognized for the Company’s Rexall Health retail business. The 2019 operating profit for Other also includes a pre-tax gain from an escrow settlement of $97 million (pre-tax and after-tax) representing certain indemnity and other claims related to the Company’s 2017 acquisition of Rexall Health. In addition, operating profit for 2019 includes pre-tax restructuring and asset impairment charges of $91 million ($86 million after-tax), primarily associated with lease and other exit-related costs and a pre-tax gain of $56 million ($41 million after-tax) recognized from the sale of an equity investment.
|
(7)
|
Operating profit for Other for 2019 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. Operating profit (loss) for Other also includes the Company’s proportionate share of loss from the Change Healthcare JV of $119 million, $194 million and $248 million for 2020, 2019 and 2018.
|
(8)
|
Operating loss for Other for 2018 includes a pre-tax gain of $109 million ($30 million after-tax) from the sale of the Company’s EIS business and a pre-tax credit of $46 million ($30 million after-tax) representing a reduction in its TRA liability.
|
(9)
|
Corporate expenses, net, for 2020 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. Corporate expenses, net, for 2019 include pre-tax restructuring and asset impairment charges of $94 million ($70 million after-tax) primarily associated with employee severance and other exit-related costs.
|
(10)
|
Amounts primarily consist of amortization of acquired intangible assets purchased in connection with business acquisitions and capitalized software for internal use.
|
(11)
|
Long-lived assets consist of property, plant and equipment.
|
|
March 31,
|
||||||
(In millions)
|
2020
|
|
2019
|
||||
Segment assets
|
|
|
|
||||
U.S. Pharmaceutical and Specialty Solutions
|
$
|
34,927
|
|
|
$
|
32,310
|
|
European Pharmaceutical Solutions
|
9,499
|
|
|
7,829
|
|
||
Medical-Surgical Solutions
|
5,395
|
|
|
5,260
|
|
||
Other
|
7,944
|
|
|
11,006
|
|
||
Corporate
|
3,482
|
|
|
3,267
|
|
||
Total
|
$
|
61,247
|
|
|
$
|
59,672
|
|
|
|
|
|
||||
Property, plant and equipment, net
|
|
|
|
|
|
||
United States
|
$
|
1,642
|
|
|
$
|
1,698
|
|
Foreign
|
723
|
|
|
850
|
|
||
Total
|
$
|
2,365
|
|
|
$
|
2,548
|
|
25.
|
Quarterly Financial Information (Unaudited)
|
(In millions, except per share amounts)
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
||||||||
Fiscal 2020
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
55,728
|
|
|
$
|
57,616
|
|
|
$
|
59,172
|
|
|
$
|
58,535
|
|
Gross Profit (1)
|
2,787
|
|
|
2,867
|
|
|
3,033
|
|
|
3,336
|
|
||||
Income (Loss) After Income Taxes:
|
|
|
|
|
|
|
|
||||||||
Continuing operations (1) (2) (3) (4) (5) (6)
|
$
|
483
|
|
|
$
|
(676
|
)
|
|
$
|
247
|
|
|
$
|
1,072
|
|
Discontinued operations
|
(6
|
)
|
|
(1
|
)
|
|
(5
|
)
|
|
6
|
|
||||
Net Income (Loss)
|
$
|
477
|
|
|
$
|
(677
|
)
|
|
$
|
242
|
|
|
$
|
1,078
|
|
Net Income (Loss) Attributable to McKesson Corporation
|
$
|
423
|
|
|
$
|
(730
|
)
|
|
$
|
186
|
|
|
$
|
1,021
|
|
Earnings (loss) Per Common Share Attributable
to McKesson Corporation (7)
|
|
|
|
|
|
|
|
||||||||
Diluted (8)
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
2.27
|
|
|
$
|
(3.99
|
)
|
|
$
|
1.06
|
|
|
$
|
5.82
|
|
Discontinued operations
|
(0.03
|
)
|
|
—
|
|
|
(0.03
|
)
|
|
0.03
|
|
||||
Total
|
$
|
2.24
|
|
|
$
|
(3.99
|
)
|
|
$
|
1.03
|
|
|
$
|
5.85
|
|
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
2.28
|
|
|
$
|
(3.99
|
)
|
|
$
|
1.06
|
|
|
$
|
5.86
|
|
Discontinued operations
|
(0.03
|
)
|
|
—
|
|
|
(0.02
|
)
|
|
0.03
|
|
||||
Total
|
$
|
2.25
|
|
|
$
|
(3.99
|
)
|
|
$
|
1.04
|
|
|
$
|
5.89
|
|
(1)
|
Gross profit for the first, second, third and fourth quarters of 2020 includes pre-tax credits of $15 million, $33 million, $66 million and $138 million ($11 million, $25 million, $49 million and $101 million after-tax) related to the LIFO method of accounting for inventories.
|
(2)
|
Financial results for the fourth quarter of 2020 include an estimated gain of $414 million (pre-tax and after-tax) related to the split-off of the Change Healthcare JV. Financial results for the second quarter of 2020 include a pre-tax impairment charge of $1.2 billion ($864 million after-tax) and pre-tax dilution loss of $246 million ($184 million after-tax) associated with the Company’s investment in the Change Healthcare JV.
|
(3)
|
Financial results for the third quarter of 2020 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, pre-tax long-lived asset impairment charges of $64 million ($53 million after-tax) within the Company’s European Pharmaceutical Solutions segment, 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.
|
(4)
|
Financial results for the first, second, third and fourth quarters of 2020 include the Company’s proportionate share of income from the Change Healthcare JV of $4 million and losses of $51 million, $28 million and $44 million.
|
(5)
|
Financial results for the second quarter of 2020 includes a pre-tax settlement charge of $105 million ($78 million after-tax) for the termination of the Company’s defined benefit pension plan.
|
(6)
|
Financial results for the second quarter of 2020 includes a pre-tax settlement charge of $82 million ($61 million after-tax) related to opioids claims.
|
(7)
|
Certain computations may reflect rounding adjustments.
|
(8)
|
As a result of the Company’s reported net loss for the second quarter of 2020, potentially dilutive securities were excluded from the per share computations for that quarter due to their antidilutive effect.
|
(In millions, except per share amounts)
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
||||||||
Fiscal 2019
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
52,607
|
|
|
$
|
53,075
|
|
|
$
|
56,208
|
|
|
$
|
52,429
|
|
Gross Profit (1) (2)
|
2,779
|
|
|
2,804
|
|
|
2,970
|
|
|
3,201
|
|
||||
Income (Loss) after Income Taxes:
|
|
|
|
|
|
|
|
||||||||
Continuing operations (1) (2) (3) (4) (5) (6) (7)
|
$
|
(81
|
)
|
|
$
|
552
|
|
|
$
|
527
|
|
|
$
|
(744
|
)
|
Discontinued operations
|
1
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
||||
Net Income (Loss)
|
$
|
(80
|
)
|
|
$
|
553
|
|
|
$
|
526
|
|
|
$
|
(744
|
)
|
Net Income (Loss) Attributable to McKesson Corporation
|
$
|
(138
|
)
|
|
$
|
499
|
|
|
$
|
469
|
|
|
$
|
(796
|
)
|
Earnings (Loss) Per Common Share Attributable
to McKesson Corporation (8)
|
|
|
|
|
|
|
|
||||||||
Diluted (9)
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(0.69
|
)
|
|
$
|
2.51
|
|
|
$
|
2.41
|
|
|
$
|
(4.17
|
)
|
Discontinued operations
|
0.01
|
|
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
||||
Total
|
$
|
(0.68
|
)
|
|
$
|
2.51
|
|
|
$
|
2.40
|
|
|
$
|
(4.17
|
)
|
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
(0.69
|
)
|
|
$
|
2.52
|
|
|
$
|
2.42
|
|
|
$
|
(4.17
|
)
|
Discontinued operations
|
0.01
|
|
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
||||
Total
|
$
|
(0.68
|
)
|
|
$
|
2.52
|
|
|
$
|
2.41
|
|
|
$
|
(4.17
|
)
|
(1)
|
Gross profit for the first, second, third and fourth quarters of 2019 includes pre-tax credits of $21 million, $22 million, $21 million and $146 million ($15 million, $17 million, $15 million and $109 million after-tax) related to the LIFO method of accounting for inventories.
|
(2)
|
Gross profit for the first, third and fourth quarters of 2019 includes $35 million, $104 million, and $63 million of cash receipts for the Company’s share of antitrust legal settlements.
|
(3)
|
Financial results for the first and fourth quarters of 2019 include goodwill impairment charges of $570 million and $1.2 billion (both pre-tax and after-tax) within the Company’s two reporting units within the European Pharmaceutical Solutions segment.
|
(4)
|
Financial results for the first and fourth quarters of 2019 include pre-tax asset impairment charges of $20 million ($16 million after-tax) and $190 million ($156 million after-tax) primarily for the Company’s U.K. retail business. Financial results for the third quarter of 2019 include asset impairment charges of $35 million (pre-tax and after-tax) for the Company’s Rexall Health retail business.
|
(5)
|
Financial results for the first, second, third and fourth quarters of 2019 include the Company’s proportionate share of loss from the Change Healthcare JV of $56 million, $56 million, $50 million and $32 million.
|
(6)
|
Financial results for the first quarter of 2019 include a gain from an escrow settlement of $97 million (pre-tax and after-tax) representing certain indemnity and other claims related to the Company’s 2017 acquisition of Rexall Health.
|
(7)
|
Financial results for the second quarter of 2019 include a pre-tax credit of $90 million ($66 million after-tax) for the derecognition of the TRA liability payable to the shareholders of Change.
|
(8)
|
Certain computations may reflect rounding adjustments.
|
(9)
|
As a result of the Company’s reported net loss for the first and fourth quarters of 2019, potentially dilutive securities were excluded from the per share computations for those quarters due to their antidilutive effect.
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|
Item 9A.
|
Controls and Procedures.
|
Item 9B.
|
Other Information.
|
Item 10.
|
Directors, Executive Officers and Corporate Governance.
|
Item 11.
|
Executive Compensation.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
Plan Category
(In millions, except per share amounts)
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights (1)
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
|
|||
Equity compensation plans approved by
security holders
|
4.8 (2)
|
|
$
|
180.48
|
|
|
23.1 (3)
|
|
Equity compensation plans not approved by
security holders
|
—
|
|
$
|
—
|
|
|
—
|
|
(1)
|
The weighted-average exercise price set forth in this column is calculated excluding outstanding restricted stock unit (“RSU”) awards, since recipients are not required to pay an exercise price to receive the shares subject to these awards.
|
(2)
|
Represents option and RSU awards outstanding under the following plans: (i) 1997 Non-Employee Directors’ Equity Compensation and Deferral Plan; (ii) the 2005 Stock Plan; and (iii) the 2013 Stock Plan.
|
(3)
|
Represents 2,640,734 shares available for purchase under the 2000 Employee Stock Purchase Plan and 20,423,484 shares available for grant under the 2013 Stock Plan.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence.
|
Item 14.
|
Principal Accounting Fees and Services.
|
Item 15.
|
Exhibits and Financial Statement Schedule.
|
|
Page
|
(a)(1) Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)(2) Financial Statement Schedule
|
|
|
|
|
|
All other schedules not included have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the financial statements, financial notes or supplementary financial information.
|
|
|
|
|
|
Item 16.
|
Form 10-K Summary
|
|
|
|
Additions
|
|
|
|
|
||||||||||||
Description
|
Balance at Beginning of Year
|
|
Charged to Costs and Expenses
|
|
Charged to Other Accounts (3)
|
|
Deductions From Allowance Accounts (1)
|
|
Balance at End of
Year (2)
|
||||||||||
Year Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
||||||||||
Allowances for doubtful
accounts
|
$
|
273
|
|
|
$
|
91
|
|
|
$
|
(19
|
)
|
|
$
|
(93
|
)
|
|
$
|
252
|
|
Other allowances
|
24
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
30
|
|
|||||
|
$
|
297
|
|
|
$
|
91
|
|
|
$
|
(19
|
)
|
|
$
|
(87
|
)
|
|
$
|
282
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
Allowances for doubtful
accounts
|
$
|
187
|
|
|
$
|
132
|
|
|
$
|
(1
|
)
|
|
$
|
(45
|
)
|
|
$
|
273
|
|
Other allowances
|
39
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
24
|
|
|||||
|
$
|
226
|
|
|
$
|
132
|
|
|
$
|
(16
|
)
|
|
$
|
(45
|
)
|
|
$
|
297
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year Ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
||||||||||
Allowances for doubtful
accounts
|
$
|
243
|
|
|
$
|
44
|
|
|
$
|
13
|
|
|
$
|
(113
|
)
|
|
$
|
187
|
|
Other allowances
|
42
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
39
|
|
|||||
|
$
|
285
|
|
|
$
|
44
|
|
|
$
|
10
|
|
|
$
|
(113
|
)
|
|
$
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
||||||
(1)
|
Deductions:
|
|
|
|
|
|
|
||||||
|
Written off
|
|
$
|
(93
|
)
|
|
$
|
(45
|
)
|
|
$
|
(113
|
)
|
|
Credited to other accounts
|
|
6
|
|
|
—
|
|
|
—
|
|
|||
|
Total
|
|
$
|
(87
|
)
|
|
$
|
(45
|
)
|
|
$
|
(113
|
)
|
|
|
|
|
|
|
|
|
||||||
(2)
|
Amounts shown as deductions from current and non-current receivables (current allowances are $265 million, $279 million and $216 million at March 31, 2020, 2019 and 2018)
|
|
$
|
282
|
|
|
$
|
297
|
|
|
$
|
226
|
|
|
|
|
|
|
|
|
|
||||||
(3)
|
Primarily represents reclassifications to other balance sheet accounts.
|
|
|
|
|
|
|
•
|
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
•
|
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
|
•
|
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
|
|
|
Incorporated by Reference
|
|||
Exhibit Number
|
Description
|
Form
|
File Number
|
Exhibit
|
Filing Date
|
4.4
|
8-K
|
1-13252
|
4.2
|
February 28, 2011
|
|
4.5
|
8-K
|
1-13252
|
4.1
|
December 4, 2012
|
|
4.6
|
8-K
|
1-13252
|
4.2
|
December 4, 2012
|
|
4.7
|
8-K
|
1-13252
|
4.2
|
March 8, 2013
|
|
4.8
|
8-K
|
1-13252
|
4.2
|
March 10, 2014
|
|
4.9
|
8-K
|
1-13252
|
4.1
|
February 17, 2017
|
|
4.10
|
8-K
|
1-13252
|
4.1
|
February 13, 2018
|
|
4.11
|
8-K
|
1-13252
|
4.1
|
February 21, 2018
|
|
4.12
|
8-K
|
1-13252
|
4.1
|
November 30, 2018
|
|
4.13†
|
—
|
—
|
—
|
—
|
|
10.1*
|
10-K
|
1-13252
|
10.4
|
June 10, 2004
|
|
10.2*
|
10-K
|
1-13252
|
10.6
|
June 6, 2003
|
|
10.3*
|
10-Q
|
1-13252
|
10.2
|
October 30, 2019
|
|
10.4*
|
10-K
|
1-13252
|
10.7
|
May 7, 2008
|
|
10.5*
|
10-Q
|
1-13252
|
10.1
|
October 30, 2019
|
|
10.6*
|
8-K
|
1-13252
|
10.1
|
January 25, 2010
|
|
10.7*
|
10-K
|
1-13252
|
10.11
|
May 7, 2013
|
|
10.8*†
|
—
|
—
|
—
|
—
|
|
10.9*
|
8-K
|
1-13252
|
10.1
|
July 31, 2015
|
|
10.10*
|
10-Q
|
1-13252
|
10.1
|
July 29, 2015
|
|
|
Incorporated by Reference
|
|||
Exhibit Number
|
Description
|
Form
|
File Number
|
Exhibit
|
Filing Date
|
10.11*
|
10-Q
|
1-13252
|
10.1
|
October 25, 2018
|
|
10.12*
|
10-K
|
1-13252
|
10.14
|
May 5, 2016
|
|
10.13*
|
10-Q
|
1-13252
|
10.4
|
July 30, 2010
|
|
10.14*
|
10-Q
|
1-13252
|
10.2
|
July 26, 2012
|
|
10.15*
|
8-K
|
1-13252
|
10.1
|
August 2, 2013
|
|
10.16*†
|
—
|
—
|
—
|
—
|
|
10.17
|
8-K
|
1-13252
|
10.1
|
March 7, 2017
|
|
10.18
|
10-K
|
1-13252
|
10.19
|
May 5, 2016
|
|
10.19
|
8-K
|
1-13252
|
10.1
|
October 23, 2015
|
|
10.20
|
8-K
|
1-3252
|
10.1
|
February 5, 2014
|
|
10.21
|
10-Q
|
1-13252
|
10.1
|
October 30, 2019
|
|
|
Incorporated by Reference
|
|||
Exhibit Number
|
Description
|
Form
|
File Number
|
Exhibit
|
Filing Date
|
10.22*
|
10-K
|
1-13252
|
10.27
|
May 4, 2010
|
|
10.23
|
8-K
|
1-13252
|
—
|
March 23, 2020
|
|
10.24
|
8-K
|
1-13252
|
10.1
|
March 13, 2020
|
|
21†
|
—
|
—
|
—
|
—
|
|
23†
|
—
|
—
|
—
|
—
|
|
31.1†
|
—
|
—
|
—
|
—
|
|
31.2†
|
—
|
—
|
—
|
—
|
|
32††
|
—
|
—
|
—
|
—
|
|
101†
|
The following materials from the McKesson Corporation Annual Report on Form 10-K for the fiscal year ended March 31, 2020, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) related Financial Notes.
|
—
|
—
|
—
|
—
|
104†
|
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).
|
—
|
—
|
—
|
—
|
*
|
Management contract or compensation plan or arrangement in which directors and/or executive officers are eligible to participate.
|
†
|
Filed herewith.
|
††
|
Furnished herewith.
|
|
|
|
MCKESSON CORPORATION
|
|
|
|
|
Date: May 22, 2020
|
|
/s/ Britt J. Vitalone
|
|
|
|
|
Britt J. Vitalone
|
|
|
|
Executive Vice President and Chief Financial Officer
|
/s/ Brian S. Tyler
|
|
/s/ Marie L. Knowles
|
Brian S. Tyler
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
Marie L. Knowles, Director
|
|
|
|
/s/ Britt J. Vitalone
|
|
/s/ Bradley E. Lerman
|
Britt J. Vitalone
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
Bradley E. Lerman, Director
|
|
|
|
/s/ Sundeep G. Reddy
|
|
/s/ Maria Martinez
|
Sundeep G. Reddy
Senior Vice President and Controller
(Principal Accounting Officer)
|
|
Maria Martinez, Director
|
|
|
|
/s/ Dominic J. Caruso
|
|
/s/ Edward A. Mueller
|
Dominic J. Caruso, Director
|
|
Edward A. Mueller, Director
|
|
|
|
/s/ N. Anthony Coles
|
|
/s/ Susan R. Salka
|
N. Anthony Coles, M.D., Director
|
|
Susan R. Salka, Director
|
|
|
|
/s/ M. Christine Jacobs
|
|
/s/ Kenneth E. Washington
|
M. Christine Jacobs, Director
|
|
Kenneth E. Washington, Director
|
|
|
|
/s/ Donald R. Knauss
|
|
|
Donald R. Knauss, Director
|
|
|
|
|
|
Date: May 22, 2020
|
|
|
|
(1)
|
such transaction is approved by our board of directors prior to the date the interested stockholder obtains such status,
|
|
(2)
|
upon consummation of such transaction, the “interested stockholder” beneficially owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by (a) persons who are directors and also officers and (b) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or
|
|
(3)
|
the “business combination” is approved by our board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66-2/3% of the outstanding voting stock which is not owned by the “interested stockholder.”
|
|
•
|
|
failure to pay interest for 30 days after the date payment on any debt security of such series is due and payable; provided that an extension of an interest payment period by the Company in accordance with the terms of the debt securities shall not constitute a failure to pay interest;
|
|
•
|
|
failure to pay principal or premium, if any, on any debt security of such series when due, either at maturity, upon any redemption, by declaration or otherwise;
|
|
•
|
|
failure to perform any other covenant in the Indenture or the debt securities of such series (“other covenants”) for 90 days after notice that performance was required;
|
|
•
|
|
events in bankruptcy, insolvency or reorganization of the Company; or
|
|
•
|
|
any other Event of Default provided in the applicable resolution of our board of directors or the officers’ certificate or supplemental Indenture under which we issue such series of debt securities.
|
|
•
|
|
the holder has previously given to the Trustee written notice of default and continuance of that default;
|
|
•
|
|
the holders of at least 25% in principal amount of the outstanding debt securities of the affected series have requested that the Trustee institute the action;
|
|
•
|
|
the requesting holders have offered the Trustee security or indemnity reasonably satisfactory to it for expenses and liabilities that may be incurred by bringing the action;
|
|
•
|
|
the Trustee has not instituted the action within 60 days of the request; and
|
|
•
|
|
the Trustee has not received inconsistent direction by the holders of a majority in principal amount of the outstanding debt securities of the affected series.
|
|
•
|
|
secure any debt securities;
|
|
•
|
|
evidence the assumption by a successor corporation of our obligations;
|
|
•
|
|
add covenants for the protection of the holders of debt securities;
|
|
•
|
|
cure any ambiguity or correct any inconsistency in the Indenture;
|
|
•
|
|
establish the forms or terms of debt securities of any series; and
|
|
•
|
|
evidence and provide for the acceptance of appointment by a successor Trustee.
|
|
•
|
|
extend the final maturity of any debt security;
|
|
•
|
|
reduce the principal amount or premium, if any;
|
|
•
|
|
reduce the rate or extend the time of payment of interest;
|
|
•
|
|
reduce any amount payable on redemption;
|
|
•
|
|
change the currency in which the principal (other than as may be provided otherwise with respect to a series), premium, if any, or interest is payable;
|
|
•
|
|
reduce the amount of the principal of any debt security issued with an original issue discount that is payable upon acceleration or provable in bankruptcy;
|
|
•
|
|
modify any of the subordination provisions or the definition of senior indebtedness applicable to any Subordinated Securities in a manner adverse to the holders of those securities;
|
|
•
|
|
alter provisions of the Indenture relating to the debt securities not denominated in U.S. dollars;
|
|
•
|
|
impair the right to institute suit for the enforcement of any payment on any debt security when due; or
|
|
•
|
|
reduce the percentage of holders of debt securities of any series whose consent is required for any modification of the Indenture.
|
|
•
|
|
liens on assets of any corporation existing at the time such corporation becomes a Consolidated Subsidiary;
|
|
•
|
|
liens on assets existing at the time of acquisition thereof, or to secure the payment of the purchase price of such assets, or to secure indebtedness incurred or guaranteed by us or a Consolidated Subsidiary for the purpose of financing the purchase price of such assets or improvements or construction thereon, which indebtedness is incurred or guaranteed prior to, at the time of or within 360 days after such acquisition, or in the case of real property, completion of such improvement or construction or commencement of full operation of such property, whichever is later;
|
|
•
|
|
liens securing indebtedness owed by any Consolidated Subsidiary to us or another wholly owned Subsidiary;
|
|
•
|
|
liens on any assets of a corporation existing at the time such corporation is merged into or consolidated with us or a Subsidiary or at the time of a purchase, lease or other acquisition of the assets of the corporation or firm as an entirety or substantially as an entirety by us or a Subsidiary;
|
|
•
|
|
liens on any assets of ours or a Consolidated Subsidiary in favor of the United States of America or any state thereof, or in favor of any other country, or political subdivision thereof, to secure certain payments pursuant to any contract or statute or to secure any indebtedness incurred or guaranteed for the purpose of financing all or any part of the purchase price, or, in the case of real property, the cost of construction, of the assets subject to such liens, including, but not limited to, liens incurred in connection with pollution control, industrial revenue or similar financing;
|
|
•
|
|
any extension, renewal or replacement, or successive extensions, renewals or replacements, in whole or in part, of any lien referred to in the foregoing;
|
|
•
|
|
certain statutory liens or other similar liens arising in the ordinary course of our or a Consolidated Subsidiary’s business, or certain liens arising out of government contracts;
|
|
•
|
|
certain pledges, deposits or liens made or arising under the worker’s compensation or similar legislation or in certain other circumstances;
|
|
•
|
|
certain liens in connection with legal proceedings, including certain liens arising out of judgments or awards;
|
|
•
|
|
liens for certain taxes or assessments, landlord’s liens and liens and charges incidental to the conduct of the business or the ownership of our assets or those of a Consolidated Subsidiary, which were not incurred in connection with the borrowing of money and which do not, in our opinion, materially impair the use of such assets in the operation of our business or that of such Consolidated Subsidiary or the value of such assets for the purposes thereof;
|
|
•
|
|
liens relating to accounts receivable of ours or any of our Subsidiaries which have been sold, assigned or otherwise transferred to another Person in a transaction classified as a sale of accounts receivable in accordance with accounting principles generally accepted in the United States of America, to the extent the sale by us or the applicable Subsidiary is deemed to give rise to a lien in favor of the purchaser thereof in such accounts receivable or the proceeds thereof; or
|
|
•
|
|
liens on any assets of ours or any of our Subsidiaries (including Receivables Subsidiaries) incurred in connection with a Qualified Receivables Transaction.
|
1.
|
ADOPTION AND PURPOSE OF POLICY.
|
2.
|
CHANGE IN CONTROL BENEFITS.
|
3.
|
FORM OF BENEFIT.
|
4.
|
EFFECT OF DEATH OF EMPLOYEE.
|
5.
|
AMENDMENT AND TERMINATION.
|
6.
|
ADMINISTRATION AND FIDUCIARIES.
|
7.
|
CLAIMS AND APPEAL PROCEDURES.
|
8.
|
GENERAL PROVISIONS.
|
9.
|
DEFINITIONS.
|
10.
|
EXECUTION.
|
I.
|
INTRODUCTION
|
II.
|
RESTRICTED STOCK UNITS
|
III.
|
MISCELLANEOUS
|
I.
|
INTRODUCTION
|
II.
|
OPTIONS
|
III.
|
RESTRICTED STOCK
|
IV.
|
RESTRICTED STOCK UNITS
|
V.
|
PERFORMANCE STOCK UNITS
|
VI.
|
SPECIAL FORFEITURE AND REPAYMENT RULES
|
VII.
|
CHANGE IN CONTROL
|
VIII.
|
MISCELLANEOUS
|
IX.
|
DEFINITIONS
|
I.
|
INTRODUCTION
|
II.
|
OPTIONS
|
III.
|
RESTRICTED STOCK
|
IV.
|
RESTRICTED STOCK UNITS
|
V.
|
PERFORMANCE STOCK UnitS
|
VI.
|
SPECIAL FORFEITURE AND REPAYMENT RULES
|
VII.
|
CHANGE IN CONTROL
|
VIII.
|
MISCELLANEOUS
|
IX.
|
DEFINITIONS
|
I.
|
INTRODUCTION
|
II.
|
OPTIONS
|
III.
|
RESTRICTED STOCK
|
IV.
|
RESTRICTED STOCK UNITS
|
V.
|
PERFORMANCE STOCK UNITS
|
VI.
|
SPECIAL FORFEITURE AND REPAYMENT RULES
|
VII.
|
CHANGE IN CONTROL
|
VIII.
|
MISCELLANEOUS
|
IX.
|
DEFINITIONS
|
I.
|
INTRODUCTION; GRANT DATE
|
II.
|
PERFORMANCE STOCK UNITS
|
III.
|
THREE-YEAR RESTRICTED STOCK UNITS
|
IV.
|
SPECIAL FORFEITURE AND REPAYMENT RULES
|
V.
|
CHANGE IN CONTROL
|
VI.
|
PARTICIPANT RIGHTs; MISCELLANEOUS
|
VII.
|
DEFINITIONS
|
Grantee Name:
|
|
Number of RSUs Granted:
|
|
Date of Grant:
|
|
1.
|
I agree to receive copies of the stockholder information, including copies of any annual report, proxy and Form 10-K, from the Investor Resources section of the McKesson website at www.mckesson.com; and
|
2.
|
I also acknowledge that copies of the Plan, Plan prospectus, Plan information and stockholder information are available upon written or telephonic request to the Corporate Secretary (1-800-826-9360); and
|
3.
|
I have access to the Company’s web site; and
|
4.
|
I consent to receiving electronically a copy of the documents set forth above and attachments to this Notice; and
|
5.
|
The Plan and ST&Cs are incorporated by reference to this Notice; and
|
6.
|
The Company recommends that the Grantee consult with a tax advisor prior to accepting or vesting of this grant of RSUs; and
|
7.
|
I accept ALL the terms and conditions as set forth in the Plan and the ST&Cs applicable to this grant of RSUs.
|
By:
|
|
|
|
|
|
|
|
Brian S. Tyler
|
|
Grantee Signature
|
Date
|
Chief Executive Officer
|
|
|
|
McKesson Corporation
|
|
|
|
Grantee Name:
|
|
Number of RSUs Granted:
|
|
Date of Grant:
|
|
Vesting Schedule:
|
Please see Appendix
|
1.
|
I agree to receive copies of the Plan, the Plan prospectus and other Plan information, including information prepared to comply with the laws outside the United States, from the Company’s website and stockholder information, including copies of any annual report, proxy and Form 10-K, from the Investor Resources section of the McKesson website at www.mckesson.com; and
|
2.
|
I also acknowledge that copies of the Plan, Plan prospectus, Plan information and stockholder information are available upon written or telephonic request to the Corporate Secretary (1-800-826-9360); and
|
3.
|
I have access to the Company’s web site; and
|
4.
|
I consent to receiving electronically a copy of the documents set forth above and attachments to this Notice; and
|
5.
|
The Plan (including the Recoupment Policy and Stock Ownership Policy) and ST&Cs are incorporated by reference to this Notice; and
|
6.
|
The Company recommends that the Grantee consult with a tax advisor prior to accepting or vesting of this grant of RSUs; and
|
7.
|
I accept ALL the terms and conditions as set forth in the Plan and ST&Cs applicable to this grant of RSUs.
|
|
|
|
|
|
|
|
|
Brian S. Tyler
|
|
Grantee Signature
|
Date
|
Chief Executive Officer
|
|
|
|
McKesson Corporation
|
|
|
|
Grantee Name:
|
|
Target PSUs Granted:
|
|
Date of Grant:
|
|
Performance Period:
|
FY 2020 - FY 2022
|
8.
|
I agree to receive copies of the Plan, the Plan prospectus and other Plan information, including information prepared to comply with the laws outside the United States, from the Company’s website and stockholder information, including copies of any annual report, proxy and Form 10-K, from the Investor Resources section of the McKesson website at www.mckesson.com; and
|
9.
|
I also acknowledge that copies of the Plan, Plan prospectus, Plan information and stockholder information are available upon written or telephonic request to the Corporate Secretary (1-800-826-9360); and
|
10.
|
I have access to the Company’s web site; and
|
11.
|
I consent to receiving electronically a copy of the documents set forth above and attachments to this Notice; and
|
12.
|
The Plan (including the Recoupment Policy and Stock Ownership Policy) and ST&Cs are incorporated by reference to this Notice; and
|
13.
|
I should consult with a tax advisor prior to accepting this grant of PSUs or taking any other action with respect to this grant of PSUs; and
|
14.
|
I accept ALL the terms and conditions as set forth in the Plan and ST&Cs applicable to this grant of PSUs.
|
|
|
|
|
|
|
|
|
Brian S. Tyler
|
|
Grantee Signature
|
Date
|
Chief Executive Officer
|
|
|
|
McKesson Corporation
|
|
|
|
|
JURISDICTION
OF
ORGANIZATION
|
ClarusONE Sourcing Services LLP
|
United Kingdom
|
McKesson Europe AG
|
Germany
|
McKesson International Bermuda IP5A Limited
|
Bermuda
|
McKesson Medical-Surgical Inc.
|
United States
|
McKesson Medical-Surgical Supply Chain Services LLC
|
United States
|
McKesson Sourcing Services Inc.
|
United States
|
McKesson Specialty Care Distribution LLC
|
United States
|
McKesson Strategic Services Limited
|
United Kingdom
|
McKesson UK Finance I Limited
|
United Kingdom
|
McKesson US Finance Corporation
|
United States
|
Northstar Healthcare Holdings Unlimited Company
|
Ireland
|
US Oncology Holdings, Inc.
|
United States
|
|
/s/ Deloitte & Touche LLP
|
Dallas, Texas
|
May 22, 2020
|
1.
|
I have reviewed this annual report on Form 10-K 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: May 22, 2020
|
|
/s/ Brian S. Tyler
|
|
|
|
|
Brian S. Tyler
|
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K 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: May 22, 2020
|
|
/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
|
|
|
May 22, 2020
|
|
|
|
|
|
/s/ Britt J. Vitalone
|
|
|
Britt J. Vitalone
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
May 22, 2020
|
|
|
|
|
|