Segments of Business

Commencing in the first quarter of 2019, a new segment reporting structure was implemented, and we report our financial results in three reportable segments on a retrospective basis: U.S. Pharmaceutical and Specialty Solutions, European Pharmaceutical Solutions and Medical-Surgical Solutions. All remaining operating segments and business activities that are not significant enough to require separate reportable segment disclosure are included in Other also on a retrospective basis. 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 revenues and operating profit before interest expense and income taxes. Assets by operating segment are not reviewed by management for the purpose of assessing performance or allocating resources.

Our U.S. Pharmaceutical and Specialty Solutions segment distributes pharmaceutical and other healthcare-related products and also provides pharmaceutical solutions to pharmaceutical manufacturers in the United States.

Our European Pharmaceutical Solutions segment provides distribution and services to wholesale, institutional and retail customers and serves patients and consumers in 13 European countries through our own pharmacies and participating pharmacies that operate under brand partnership and franchise arrangements.

Our Medical-Surgical Solutions segment distributes medical-surgical supplies and provides logistics and other services to healthcare providers in the United States.

Other primarily consists of the following:


•	McKesson Canada which distributes pharmaceutical and medical products and operates Rexall Health retail pharmacies;


•	McKesson Prescription Technology Solutions which provides innovative technologies that support retail pharmacies; and


•	Our 70% equity ownership interest in a joint venture, Change Healthcare, which is accounted for by us using the equity investment method of accounting.

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)	2018			2017			2018			2017
Revenues
U.S. Pharmaceutical and Specialty Solutions ⁽¹⁾	$	44,279		$	41,969		$	126,866		$	122,854
European Pharmaceutical Solutions ⁽¹⁾	6,911			6,989			20,485			20,144
Medical-Surgical Solutions ⁽¹⁾	2,012			1,693			5,663			4,886
Other	3,006			2,966			8,876			8,845
Total Revenues	$	56,208		$	53,617		$	161,890		$	156,729

Operating profit ⁽⁸⁾
U.S. Pharmaceutical and Specialty Solutions ⁽²⁾	$	671		$	565		$	1,824		$	1,750
European Pharmaceutical Solutions ⁽³⁾	26			16			(524		)	(496		)
Medical-Surgical Solutions	136			123			334			349
Other ^{(4) (5) (6)}	74			180			283			271
Total	907			884			1,917			1,874
Corporate Expenses, Net ⁽⁷⁾	(190		)	(120		)	(480		)	(337		)
Interest Expense	(67		)	(67		)	(194		)	(204		)
Income from Continuing Operations Before Income Taxes	$	650		$	697		$	1,243		$	1,333

Revenues, net by geographic area
United States	$	46,523		$	43,849		$	133,186		$	128,517
Foreign	9,685			9,768			28,704			28,212
Total Revenues	$	56,208		$	53,617		$	161,890		$	156,729


(1)	Revenues derived from services represent less than 1% of our U.S. Pharmaceutical and Specialty Solutions segment’s total revenues, less than 10% of our European Pharmaceutical Solutions segment’s total revenues and less than 1% of our Medical-Surgical Solutions segment’s total revenues.

(2)

Our U.S. Pharmaceutical and Specialty Solutions segment’s operating profit for the third quarter and first nine months of 2019 includes $21 million and $64 million, and for the third quarter and first nine months of 2018 includes $2 million and $5 million pre-tax credits related to our last-in, first-out (“LIFO”) method of accounting for inventories. The higher LIFO inventory credits for the third quarter and first nine months of 2019 were primarily due to lower full year expectations for the net price increases compared to the same periods a year ago. Operating profit for the third quarter and first nine months of 2019 also includes $104 million and $139 million of cash receipts for our share of antitrust legal settlements and a $60 million pre-tax charge related to a customer bankruptcy. In addition, operating profit for the first nine months of 2018 includes a pre-tax gain of $43 million ($26 million after-tax) recognized from the 2018 second quarter sale of an equity investment.

(3)

European Pharmaceutical Solutions segment’s operating profit for the first nine months of 2019 includes non-cash goodwill impairment charges (pre-tax and after-tax) of $570 million. European Pharmaceutical Solutions segment’s operating profit for the first nine months of 2018 includes pre-tax charges of $242 million ($202 million after-tax) primarily related to the impairment of certain long-lived assets and employee severance for our U.K. retail businesses as well as the previously discussed non-cash goodwill impairment charge (pre-tax and after-tax) of $350 million.

(4)

Operating profit for Other for the third quarter and first nine months of 2019 includes goodwill and long-lived asset impairment charges of $56 million (pre-tax and after-tax) recognized for our Rexall Health retail business. The first nine months of 2019 operating profit for Other include pre-tax restructuring and asset impairment charges of $89 million ($83 million after-tax) primarily associated with the closure of retail pharmacy stores within our Canadian business. The first nine months of 2019 includes a pre-tax and after-tax gain from escrow settlement of $97 million representing certain indemnity and other claims related to our 2017 third quarter acquisition of Rexall Health. In addition, operating profit for the third quarter and first nine months of 2019 includes a pre-tax gain of $56 million ($41 million after-tax) recognized from the 2019 third quarter sale of an equity investment.

(5)

Operating profit for Other for the first nine months of 2019 includes a pre-tax credit of $90 million ($66 million after-tax) representing the derecognition of the TRA liability payable to the shareholders of Change. Operating profit for Other also includes our proportionate share of loss from Change Healthcare of $50 million and $162 million for the third quarter and first nine months of 2019, and $90 million and $271 million for the third quarter and first nine months of 2018.

(6)

Operating profit for Other for the third quarter and first nine months of 2018 includes a pre-tax gain of $109 million ($30 million after-tax) from the 2018 third quarter sale of our EIS business and a pre-tax credit of $46 million ($30 million after-tax) representing a reduction in our TRA liability. Additionally, operating profit for Other for the first nine months of 2018 includes a pre-tax gain of $37 million ($22 million after-tax) from the Healthcare Technology Net Asset Exchange related to the final net working capital and other adjustments.


(7)	Corporate expenses, net, for the third quarter and first nine months of 2019 include a pre-tax restructuring charge of $31 million ($23 million after-tax) related to our corporate headquarters relocation announced during the third quarter of 2019.


(8)	Segment operating profit includes gross profit, net of operating expenses, as well as other income, net, for our operating segments.