Segment Information

We currently report our operations in two operating segments: McKesson Distribution Solutions and McKesson Technology Solutions. The factors for determining the reportable segments included the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities. We evaluate the performance of our operating segments on a number of measures, including operating profit before interest expense, income taxes and results from discontinued operations.

Financial information relating to our reportable operating segments and reconciliations to the condensed consolidated totals is as follows:



	Quarter Ended December 31,						Nine Months Ended December 31,
(In millions)	2017			2016			2017			2016
Revenues
Distribution Solutions ⁽¹⁾
North America pharmaceutical distribution and services	$	44,935		$	41,685		$	131,459		$	124,271
International pharmaceutical distribution and services	6,989			6,193			20,144			18,794
Medical-Surgical distribution and services	1,693			1,558			4,886			4,657
Total Distribution Solutions	53,617			49,436			156,489			147,722

Technology Solutions- products and services ⁽²⁾	—			694			240			2,098
Total Revenues	$	53,617		$	50,130		$	156,729		$	149,820

Operating profit
Distribution Solutions ^{(3) (4)}	$	819		$	813		$	1,920		$	2,592
Technology Solutions ^{(5) (6)}	65			132			(46		)	126
Total	884			945			1,874			2,718
Corporate Expenses, Net	(120		)	(91		)	(337		)	(270		)
Interest Expense	(67		)	(74		)	(204		)	(231		)
Income from Continuing Operations Before Income Taxes	$	697		$	780		$	1,333		$	2,217


(1)	Revenues derived from services represent less than 2% of this segment’s total revenues.


(2)	2018 revenues for the Technology Solutions segment only include the results of our EIS business. Effective April 1, 2017, our RHP business was transitioned from the Technology Solutions segment to the Distribution Solutions segment. The third quarter and first nine months of 2017 included the majority of our Core MTS Business which was contributed to Change Healthcare on March 1, 2017.

(3)

Distribution Solutions operating profit for the third quarter and first nine months of 2018 include pre-tax credits of $2 million and $5 million, and for the third quarter and first nine months of 2017 include pre-tax credits of $155 million and $151 million related to our LIFO method of accounting for inventories. LIFO credits were higher in 2017 compared to 2018 primarily due to changes made to full year expectations for net price increases during the third quarter of 2017 and changes in estimated year end inventory levels. Additionally, the first nine months of 2017 included $144 million of net cash proceeds representing our share of net settlements of antitrust class action lawsuits against drug manufacturers.

(4)

Operating profit for our Distribution Solutions segment for the first nine months of 2018 includes a pre-tax gain of $43 million recognized from the 2018 second quarter sale of an equity investment. The first nine months of 2018 included a pre-tax non-cash charge of $189 million primarily to impair certain long-lived assets for our U.K. retail business, as well as non-cash pre-tax goodwill impairment charges of $350 million for the McKesson Europe reporting unit.

(5)

Operating profit for our Technology Solutions segment for the third quarter and first nine months of 2018 includes a pre-tax gain of $109 million from the 2018 third quarter sale of our EIS business, a pre-tax credit of $46 million representing a reduction in our TRA liability and our proportionate share of loss from Change Healthcare of $90 million and $271 million. Additionally, operating profit for the first nine months of 2018 includes a pre-tax gain of $37 million from the Healthcare Technology Net Asset Exchange related to the final net working capital and other adjustments.


(6)	The first nine months of 2017 include a non-cash pre-tax goodwill impairment charge of $290 million for the EIS reporting unit within our Technology Solutions segment.

As previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, on January 2, 2018, the Executive Vice President and Group President who was our segment manager of the Distribution Solutions segment retired from the Company. As a result, the Company’s chief operating decision maker is currently evaluating our management and operating structure. We anticipate this evaluation will result in a change in our existing operating segment structure, commencing with our first quarter of 2019.