10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number: 1-13252

McKESSON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-3207296
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6555 State Hwy 161,

Irving, TX 75039

(Address of principal executive offices, including zip code)

(972) 446-4800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)
Common stock, $0.01 par value	MCK	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 

Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 184,904,125 shares of the issuer’s common stock were outstanding as of June 30, 2019.

McKESSON CORPORATION

TABLE OF CONTENTS

	Item	Page
	PART I—FINANCIAL INFORMATION
1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Statements of Operations Quarters Ended June 30, 2019 and 2018	3
	Condensed Consolidated Statements of Comprehensive Income Quarters Ended June 30, 2019 and 2018	4
	Condensed Consolidated Balance Sheets June 30, 2019 and March 31, 2019	5
	Condensed Consolidated Statements of Stockholders’ Equity Quarters Ended June 30, 2019 and 2018	6
	Condensed Consolidated Statements of Cash Flows Quarters Ended June 30, 2019 and 2018	7
	Financial Notes	8
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
3.	Quantitative and Qualitative Disclosures About Market Risk	46
4.	Controls and Procedures	46
	PART II—OTHER INFORMATION
1.	Legal Proceedings	46
1A.	Risk Factors	46
2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
3.	Defaults Upon Senior Securities	48
4.	Mine Safety Disclosures	48
5.	Other Information	48
6.	Exhibits	49
	Signatures	50

2

McKESSON CORPORATION

PART I—FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

	Quarter Ended June 30,
	2019			2018
Revenues	$	55,728		$	52,607
Cost of Sales	(52,941		)	(49,828		)
Gross Profit	2,787			2,779
Operating Expenses	(2,130		)	(2,127		)
Goodwill Impairment Charges	—			(570		)
Restructuring and Asset Impairment Charges	(23		)	(96		)
Gain from Escrow Settlement	—			97
Total Operating Expenses	(2,153		)	(2,696		)
Operating Income	634			83
Other Income, Net	37			40
Income (Loss) from Equity Method Investment in Change Healthcare Joint Venture	4			(56		)
Interest Expense	(56		)	(61		)
Income from Continuing Operations Before Income Taxes	619			6
Income Tax Expense	(136		)	(87		)
Income (Loss) from Continuing Operations	483			(81		)
Income (Loss) from Discontinued Operations, Net of Tax	(6		)	1
Net Income (Loss)	477			(80		)
Net Income Attributable to Noncontrolling Interests	(54		)	(58		)
Net Income (Loss) Attributable to McKesson Corporation	$	423		$	(138	)
Earnings (Loss) Per Common Share Attributable to McKesson Corporation
Diluted
Continuing operations	$	2.27		$	(0.69	)
Discontinued operations	(0.03		)	0.01
Total	$	2.24		$	(0.68	)
Basic
Continuing operations	$	2.28		$	(0.69	)
Discontinued operations	(0.03		)	0.01
Total	$	2.25		$	(0.68	)
Dividends Declared Per Common Share	$	0.39		$	0.34
Weighted Average Common Shares
Diluted	189			202
Basic	188			202

See Financial Notes

3

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Quarter Ended June 30,
	2019			2018
Net Income (Loss)	$	477		$	(80	)
Other Comprehensive Income (Loss), Net of Tax
Foreign currency translation adjustments	44			(129		)
Unrealized gains on cash flow hedges	12			—
Changes in retirement-related benefit plans	21			8
Other Comprehensive Income (Loss), Net of Tax	77			(121		)
Comprehensive Income (Loss)	554			(201		)
Comprehensive Income Attributable to Noncontrolling Interests	(60		)	(21		)
Comprehensive Income (Loss) Attributable to McKesson Corporation	$	494		$	(222	)

See Financial Notes

4

McKESSON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

(Unaudited)

	June 30, 2019			March 31, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	1,947		$	2,981
Receivables, net	19,287			18,246
Inventories, net	16,604			16,709
Prepaid expenses and other	590			529
Total Current Assets	38,428			38,465
Property, Plant and Equipment, Net	2,466			2,548
Operating Lease Right-of-Use Assets	2,031			—
Goodwill	9,441			9,358
Intangible Assets, Net	3,600			3,689
Equity Method Investment in Change Healthcare Joint Venture	3,617			3,513
Other Noncurrent Assets	2,097			2,099
Total Assets	$	61,680		$	59,672
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities
Drafts and accounts payable	$	34,021		$	33,853
Current portion of long-term debt	310			330
Current portion of operating lease liabilities	373			—
Other accrued liabilities	3,248			3,443
Total Current Liabilities	37,952			37,626
Long-Term Debt	7,382			7,265
Long-Term Deferred Tax Liabilities	3,058			2,998
Long-Term Operating Lease Liabilities	1,805			—
Other Noncurrent Liabilities	2,016			2,103
Redeemable Noncontrolling Interests	1,399			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 June 30, 2019 and March 31, 2019, 271 shares issued at June 30, 2019 and March 31, 2019	3			3
Additional Paid-in Capital	6,483			6,435
Retained Earnings	12,770			12,409
Accumulated Other Comprehensive Loss	(1,778		)	(1,849		)
Other	(1		)	(2		)
Treasury Shares, at Cost, 86 and 81 shares at June 30, 2019 and March 31, 2019	(9,603		)	(8,902		)
Total McKesson Corporation Stockholders’ Equity	7,874			8,094
Noncontrolling Interests	194			193
Total Equity	8,068			8,287
Total Liabilities, Redeemable Noncontrolling Interests and Equity	$	61,680		$	59,672

See Financial Notes

5

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except per share amounts)

(Unaudited)

	Quarter Ended June 30, 2019
	Common Stock			Additional Paid-in Capital		Other Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury					Noncontrolling Interests			Total Equity
	Shares	Amount													Common Shares		Amount
Balances, March 31, 2019	271	$	3	$	6,435	$	(2	)	$	12,409		$	(1,849	)	(81	)	$	(8,902	)	$	193		$	8,287
Opening Retained Earnings Adjustments: Adoption of New Accounting Standards									11														11
Balances, April 1, 2019	271	3		6,435		(2		)	12,420			(1,849		)	(81	)	(8,902		)	193			8,298
Issuance of shares under employee plans				22													(17		)				5
Share-based compensation				26																			26
Payments to noncontrolling interests																				(39		)	(39		)
Other comprehensive income												71											71
Net income									423											43			466
Repurchase of common stock															(5	)	(684		)				(684		)
Cash dividends declared, $0.39 per common share									(73		)												(73		)
Other						1														(3		)	(2		)
Balances, June 30, 2019	271	$	3	$	6,483	$	(1	)	$	12,770		$	(1,778	)	(86	)	$	(9,603	)	$	194		$	8,068

	Quarter Ended June 30, 2018
	Common Stock			Additional Paid-in Capital		Other Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury					Noncontrolling Interests			Total Equity
	Shares	Amount													Common Shares		Amount
Balances, March 31, 2018	275	$	3	$	6,188	$	(1	)	$	12,986		$	(1,717	)	(73	)	$	(7,655	)	$	253		$	10,057
Opening Retained Earnings Adjustments: Adoption of New Accounting Standards									154														154
Balances, April 1, 2018	275	3		6,188		(1		)	13,140			(1,717		)	(73	)	(7,655		)	253			10,211
Issuance of shares under employee plans				22													(11		)				11
Share-based compensation				25																			25
Payments to noncontrolling interests																				(64		)	(64		)
Other comprehensive loss												(84		)									(84		)
Net income (loss)									(138		)									46			(92		)
Repurchase of common stock				135											(3	)	(432		)				(297		)
Cash dividends declared, $0.34 per common share									(69		)												(69		)
Other				2					(1		)									5			6
Balances, June 30, 2018	275	$	3	$	6,372	$	(1	)	$	12,932		$	(1,801	)	(76	)	$	(8,098	)	$	240		$	9,647

See Financial Notes

6

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Quarter Ended June 30,
	2019			2018
Operating Activities
Net income (loss)	$	477		$	(80	)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization	229			235
Goodwill and other asset impairment charges	5			610
Deferred taxes	16			45
Credits associated with last-in, first-out inventory method	(15		)	(21		)
Loss (Income) from equity method investment in Change Healthcare Joint Venture	(4		)	56
Other non-cash items	121			(79		)
Changes in assets and liabilities, net of acquisitions:
Receivables	(1,061		)	(1,414		)
Inventories	145			(114		)
Drafts and accounts payable	127			32
Taxes	82			(61		)
Other	(173		)	(270		)
Net cash used in operating activities	(51		)	(1,061		)
Investing Activities
Payments for property, plant and equipment	(87		)	(101		)
Capitalized software expenditures	(24		)	(44		)
Acquisitions, net of cash, cash equivalents and restricted cash acquired	(46		)	(826		)
Other	28			96
Net cash used in investing activities	(129		)	(875		)
Financing Activities
Proceeds from short-term borrowings	2,610			9,036
Repayments of short-term borrowings	(2,610		)	(7,005		)
Common stock transactions:
Issuances	22			22
Share repurchases, including shares surrendered for tax withholding	(701		)	(307		)
Dividends paid	(75		)	(71		)
Other	(118		)	(134		)
Net cash provided by (used in) financing activities	(872		)	1,541
Effect of exchange rate changes on cash, cash equivalents and restricted cash	18			(78		)
Net decrease in cash, cash equivalents and restricted cash	(1,034		)	(473		)
Cash, cash equivalents and restricted cash at beginning of period	2,981			2,672
Cash, cash equivalents and restricted cash at end of period	$	1,947		$	2,199

See Financial Notes

7

McKESSON CORPORATION

FINANCIAL NOTES

(UNAUDITED)

1. Significant Accounting Policies

Nature of Operations: McKesson Corporation (“McKesson,” the “Company,” the “Registrant” or “we” and other similar pronouns), currently ranked 7^th on the FORTUNE 500, is a global leader in healthcare supply chain management solutions, retail pharmacy, healthcare technology, community oncology and specialty care. McKesson partners with life sciences companies, manufacturers, providers, pharmacies, governments and other healthcare organizations to help provide the right medicines, medical products and healthcare services to the right patients at the right time, safely and cost-effectively. We report our financial results in three reportable segments: 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. Refer to Financial Note 18, “Segments of Business,” for more information.

Basis of Presentation: The condensed consolidated financial statements of McKesson include the financial statements of all wholly-owned subsidiaries and controlled companies. For those consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocable to the noncontrolling interests is reported as “Net Income Attributable to Noncontrolling Interests” on the condensed consolidated statements of operations. All significant intercompany balances and transactions have been eliminated in consolidation including the intercompany portion of transactions with equity method investees.

We consider ourselves to control an entity if we have voting control over such entity. We also assess control through means other than voting rights (“variable interest entities” or “VIEs”) and determine which business entity is the primary beneficiary of the VIE. We consolidate VIEs when it is determined that we are the primary beneficiary of the VIE. Investments in business entities in which we do not have control, but have the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and disclosures normally included in the annual consolidated financial statements.

To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these financial statements and income and expenses during the reporting period. Actual amounts may differ from these estimated amounts. In our opinion, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented.

The results of operations for the quarter ended June 30, 2019 are not necessarily indicative of the results that may be expected for the entire year. These interim financial statements should be read in conjunction with the annual audited financial statements, accounting policies and financial notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 previously filed with the SEC on May 15, 2019 (“2019 Annual Report”).

The Company’s fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year shall mean the Company’s fiscal year.

Certain prior year amounts have been reclassified to conform to the current year presentation.

8

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Recently Adopted Accounting Pronouncements

Leases: In the first quarter of 2020, we adopted amended guidance for leases using the modified retrospective basis and recorded a cumulative-effect adjustment to the opening retained earnings on the date of adoption. Under the amended guidance, entities are required to recognize operating lease liabilities and operating lease right-of-use (“ROU”) assets on the balance sheet for all leases with terms longer than 12 months and to provide enhanced disclosures on key information of leasing arrangements.

We elected the transition package of practical expedients provided within the amended guidance, which eliminates the requirements to reassess lease identification, lease classification and initial direct costs for leases commenced before April 1, 2019. We also elected not to separate lease from non-lease components for all leases and to exclude short-term leases with an initial term of 12 months or less from our condensed consolidated balance sheets.

Upon adoption of this amended guidance, we recorded $2.2 billion of operating lease liabilities, $2.1 billion of operating lease ROU assets and a cumulative-effect adjustment of $69 million to the opening retained earnings. The adjustment to the opening retained earnings included impairment charges of $89 million, net of tax to the ROU assets primarily related to previously impaired long-lived assets at the retail pharmacies in our United Kingdom (“U.K.”) and Canadian businesses, partially offset by derecognition of existing deferred gain on our sale-leaseback transaction related to our former corporate headquarters building. The adoption of this amended guidance did not have a material impact on our condensed consolidated statements of operations and cash flows.

Refer to Financial Note 11, “Leases,” for more information.

Derivatives and Hedging:  In the first quarter of 2020, we prospectively adopted amended guidance that allows us to include the Secured Overnight Financing Rate Overnight Index Swap Rate as a benchmark interest rate for hedge accounting purposes. The adoption of this amended guidance did not have a material effect on our condensed consolidated financial statements.

Disclosure Update and Simplification: In the first quarter of 2020, we adopted amended guidance that simplifies certain disclosure requirements and expands the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. The adoption of this amended guidance had no effect on our condensed consolidated statements of operations, comprehensive income, balance sheets and cash flows. This amended guidance resulted in a disclosure of the interim condensed consolidated statements of stockholders’ equity.

Accumulated Other Comprehensive Income: In the first quarter of 2020, we adopted amended guidance that allows for a reclassification of only those amounts related to the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”) to retained earnings thereby eliminating the stranded tax effects. Previous guidance required that deferred tax liabilities and assets be adjusted for a change in tax laws with the effect included in income from continuing operations in the reporting period that includes the enactment date. We have elected not to reclassify the stranded tax effects within accumulated other comprehensive loss to retained earnings. The adoption of this amended guidance did not affect our condensed consolidated financial statements.

Premium Amortization of Purchased Callable Debt Securities: In the first quarter of 2020, we adopted amended guidance on a modified retrospective basis that shortens the amortization period for certain callable debt securities held at a premium. The amended guidance requires the premium of callable debt securities to be amortized to the earliest call date but does not require an accounting change for securities held at a discount as they would still be amortized to maturity. The adoption of this amended guidance did not affect our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Collaborative Arrangements: In November 2018, amended guidance was issued which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under revenue recognition guidance when the counterparty is a customer. The amended guidance precludes presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The amended guidance is effective for us in the first quarter of 2021 on a retrospective basis with a cumulative-effect adjustment to beginning retained earnings. We may elect to apply this amended guidance retrospectively either to all contracts or only to contracts that are not completed at the date of initial adoption. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our condensed consolidated financial statements.

9

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Intangibles - Goodwill and Other - Internal-Use Software: In August 2018, amended guidance was issued for a customer’s accounting for implementation and other upfront costs incurred in a cloud computing arrangement that is a service contract. The amended guidance aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs for a cloud computing arrangement that has a software license. The amended guidance is effective for us either on a retrospective or prospective basis commencing in the first quarter of 2021. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our condensed consolidated financial statements.

Compensation - Retirement Benefits - Defined Benefit Plans: In August 2018, amended guidance was issued for defined benefit pension or other postretirement plans. The amended guidance requires us to disclose the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates, and an explanation of reasons for significant gains and losses related to changes in the benefit obligation for the period. The amended guidance also requires us to remove disclosures on the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit costs over the next fiscal year. The amended guidance is effective for us on a retrospective basis commencing in the fiscal year ended March 31, 2021. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material effect on our condensed consolidated statements of operations, comprehensive income, balance sheets or cash flows. This amended guidance will result in changes in disclosures.

Fair Value Measurement: In August 2018, amended guidance was issued to remove, modify and add disclosure requirements on fair value measurements. The amended guidance removes disclosure requirements for transfers between Level 1 and Level 2 measurements and valuation processes for Level 3 measurements but adds new disclosure requirements including changes in unrealized gains or losses in other comprehensive income related to recurring Level 3 measurements. The amended guidance is effective for us commencing in the first quarter of 2021. Certain requirements will be applied prospectively while other changes will be applied retrospectively upon the effective date. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material effect on our condensed consolidated statements of operations, comprehensive income, balance sheets or cash flows. This amended guidance will result in changes in disclosures.

Financial Instruments - Credit Losses: In June 2016, amended guidance was issued, which will change the impairment model for most financial assets and require additional disclosures. The amended guidance requires financial assets that are measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of financial assets. The amended guidance also requires us to consider historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount in estimating credit losses. The guidance was further amended in May 2019 to provide an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. The amended guidance becomes effective for us commencing in the first quarter of 2021 and will be applied through a cumulative-effect adjustment to the opening retained earnings in the year of adoption. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our condensed consolidated financial statements.

2.    Equity Method Investment in Change Healthcare Joint Venture

In the fourth quarter of 2017, we contributed the majority of our McKesson Technology Solutions businesses to form a joint venture, Change Healthcare LLC (“Change Healthcare JV”), under a contribution agreement between McKesson and Change Healthcare Inc. and others, including shareholders of Change Healthcare Inc. In exchange for the contribution, we initially owned approximately 70% of the joint venture with the remaining equity ownership of approximately 30% held by Change Healthcare Inc. The Change Healthcare JV is jointly governed by McKesson and shareholders of Change Healthcare Inc. The initial investment in Change Healthcare JV represented the fair value of our 70% equity interest in the joint venture upon closing of the transaction.

We account for our investment in Change Healthcare JV using the equity method of accounting with a one-month reporting lag. The Company’s accounting policy is to disclose any intervening events of the joint venture in the lag period that could materially affect our condensed consolidated financial statements. Effective April 1, 2019, Change Healthcare JV adopted the amended revenue recognition guidance. In the first quarter of 2020, we recorded our proportionate share of the joint venture’s adoption impact of the amended revenue recognition guidance of approximately $80 million, net of tax to the opening retained earnings.

10

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

During the first quarters of 2020 and 2019, we recorded our proportionate share of income of $4 million and loss of $56 million from Change Healthcare JV. Our proportionate share of income or loss from this equity method investment includes integration expenses incurred by Change Healthcare JV and basis differences between the joint venture and McKesson including amortization of fair value adjustments primarily representing incremental intangible assets. These amounts were recorded under the caption, “Income (Loss) from Equity Method Investment in Change Healthcare Joint Venture,” in our condensed consolidated statements of operations.

At June 30, 2019 and March 31, 2019, our carrying value of this equity method investment was $3,617 million and $3,513 million. Our carrying value included equity method intangible assets and goodwill which caused our investment basis to exceed our proportionate share of the Change Healthcare JV’s book value of net assets by approximately $4,091 million and $4,158 million at June 30, 2019 and March 31, 2019.

Initial Public Offering by Change Healthcare Inc.

On June 27, 2019, common stock and certain other securities of Change Healthcare Inc. began trading on the NASDAQ (“IPO”). Change Healthcare Inc. is a holding company and does not own any material assets or have any operations other than through its interest in Change Healthcare JV.

On July 1, 2019, upon the completion of its IPO, Change Healthcare Inc. received net cash proceeds of approximately $888 million. Change Healthcare Inc. contributed the proceeds from its offering of common stock of $609 million to Change Healthcare JV in exchange for additional membership interests of Change Healthcare JV (“LLC Units”) at the equivalent of its offering price of $13 per share. The proceeds from the concurrent offering of other securities of $279 million were used by Change Healthcare Inc. to acquire certain securities of Change Healthcare JV that substantially mirror the terms of other securities included in the offering by Change Healthcare Inc. Change Healthcare JV, in return, used the majority of the IPO proceeds to repay a portion of the joint venture’s outstanding debt. As a result, McKesson’s equity interest in Change Healthcare JV diluted from approximately 70% to approximately 58.5% and Change Healthcare Inc. now owns approximately 41.5% of the outstanding LLC Units. Accordingly, in the second quarter of 2020, we expect to recognize a pre-tax dilution loss of approximately $246 million associated with our reduction of our ownership in the Change Healthcare JV. The loss represents the difference between our proportionate share of the IPO proceeds and the dilution effect on our investment’s carrying value. Effective with the second quarter of 2020, we will recognize our proportionate share in net income or loss based on our reduced share of equity interest in Change Healthcare JV, adjusted for the effect of basis differences and other items as applicable.

Subsequent to the IPO, we now have a publicly available indication of the value of our investment in Change Healthcare JV. The fair value that was derived from trading prices of Change Healthcare Inc.’s common stock was below the carrying value of our investment in Change Healthcare JV indicating a potential impairment. Accordingly, we evaluated our equity method investment for an other-than-temporary impairment (“OTTI”). We considered various factors in determining whether an OTTI has occurred, including the limited trading history available, our ability and intent to hold the investment until its fair value recovers, the implied EBITDA valuation multiples compared to public guideline companies, the joint venture’s ability to achieve milestones and any notable operational and strategic changes by the joint venture. After the evaluation, we determined that an OTTI has not occurred as of June 30, 2019 and as of the date of this Quarterly Report on Form 10-Q. However, we may be required to recognize an impairment loss in future reporting periods if and when a decline in fair value of our investment in Change Healthcare JV below the carrying value is determined to be other than temporary. Such determination will be based on the prevailing facts and circumstances at that time, including the reported results and disclosures of Change Healthcare Inc. as well as the market price of its common stock.

Related Party Transactions

In connection with the formation of Change Healthcare JV, McKesson, Change Healthcare JV and certain shareholders of Change Healthcare Inc. entered into various ancillary agreements, including transition services agreements (“TSA”), a transaction and advisory fee agreement (“Advisory Agreement”), a tax receivable agreement (“TRA”) and certain other agreements. Fees incurred or earned from TSA and Advisory Agreement were not material to us during the first quarters of 2020 and 2019. At June 30, 2019 and March 31, 2019, we had no outstanding payable balance to the shareholders of Change Healthcare Inc. under the TRA.

Revenues recognized, and expenses incurred under these agreements with Change Healthcare JV were not material during the first quarters of 2020 and 2019. At June 30, 2019 and March 31, 2019, receivables due from the joint venture were not material.

11

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Concurrent with the IPO, Change Healthcare Inc. appointed two of our current executive officers and our former chief executive officer to its Board of Directors. These appointments had no impact on the equity method of accounting we apply to our investment in Change Healthcare JV. There were no material transactions with Change Healthcare Inc.

3. Restructuring and Asset Impairment Charges

We recorded pre-tax restructuring and asset impairment charges of $23 million ($17 million after-tax) and $96 million ($85 million after-tax) during the first quarters of 2020 and 2019. These charges are included under the caption, “Restructuring and Asset Impairment Charges” within operating expenses in the accompanying condensed consolidated statements of operations.

Fiscal 2019 Initiatives

On April 25, 2018, the Company announced a strategic growth initiative intended to drive long-term incremental profit growth and to increase operational efficiency. The initiative consists of multiple growth priorities and plans to optimize the Company’s operating models and cost structures primarily through centralization, cost management and outsourcing of certain administrative functions.

As part of the growth initiative, we committed to implement certain actions including a reduction in workforce, facility consolidation and store closures. This set of the initiatives will be substantially completed by the end of 2020. We recorded pre-tax restructuring charges of $4 million ($3 million after-tax) during the first quarter of 2020. We expect to record total pre-tax charges of approximately $140 million to $180 million, of which $139 million of pre-tax charges were recorded to date. The charges primarily represent employee severance, exit-related costs and asset impairment charges. Estimated remaining charges primarily consist of exit-related costs.

As previously announced on November 30, 2018, the Company relocated its corporate headquarters, effective April 1, 2019, from San Francisco, California to Irving, Texas to improve efficiency, collaboration and cost competitiveness. We anticipate that the relocation will be completed by January 2021. As a result, during the first quarter of 2020, we recorded pre-tax charges of $8 million ($6 million after-tax) primarily representing employee retention expenses. We expect to record total pre-tax charges of approximately $80 million to $130 million, of which $41 million of pre-tax charges were recorded to date. Estimated remaining charges primarily consist of lease and other exit-related costs, and employee-related expenses, including retention.

During the fourth quarter of 2019, the Company committed to additional programs to continue our operating model and cost optimization efforts. We continue to implement centralization of certain functions and outsourcing through the expanded arrangement with a third-party vendor to achieve operational efficiency. The programs also include reorganization and consolidation of our business operations and related headcount reductions as well as the further closures of retail pharmacy stores in Europe and closure of other facilities. We anticipate these additional programs will be substantially completed by the end of 2021. During the first quarter of 2020, we recorded pre-tax charges of $11 million ($8 million after-tax) primarily representing project consulting fees. We expect to incur total pre-tax charges of approximately $300 million to $350 million for these programs, of which $174 million of pre-tax charges were recorded to date. Estimated remaining charges primarily consist of facility and other exit costs and employee-related costs.

Restructuring charges for our fiscal 2019 initiatives during the first quarter of 2020 consisted of the following:

(In millions)	U.S. Pharmaceutical and Specialty Solutions			European Pharmaceutical Solutions			Medical-Surgical Solutions		Other		Corporate		Total
Severance and employee-related costs, net	$	(1	)	$	(1	)	$	—	$	—	$	6	$	4
Exit and other-related costs (1)	—			1			2		1		10		14
Asset impairments and accelerated depreciation	—			3			1		—		1		5
Total	$	(1	)	$	3		$	3	$	1	$	17	$	23

(1) Exit and other-related costs primarily include project consulting fees.

12

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Restructuring charges for our fiscal 2019 initiatives during the first quarter of 2019 consisted of the following:

(In millions)	U.S. Pharmaceutical and Specialty Solutions		Medical-Surgical Solutions		Other		Corporate		Total
Severance and employee-related costs, net	$	3	$	10	$	1	$	—	$	14
Exit and other-related costs (1)	1		2		21		11		35
Asset impairments and accelerated depreciation	4		—		16		—		20
Total	$	8	$	12	$	38	$	11	$	69

(1) Exit and other-related costs primarily include lease exit costs associated with closures of retail pharmacy stores within our Canadian business as well as project consulting fees.

The following table summarizes the activity related to the restructuring liabilities associated with our fiscal 2019 initiatives for the first quarter of 2020:

(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	(1		)	3			3			1			17			23
Non-cash charges	—			(3		)	(1		)	—			(1		)	(5		)
Cash payments	(1		)	(7		)	—			(12		)	(7		)	(27		)
Other	—			1			—			(6		)	(3		)	(8		)
Balance, June 30, 2019 (2)	$	29		$	32		$	17		$	12		$	43		$	133

(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 June 30, 2019, the total reserve balance was $133 million of which $107 million was recorded in other accrued liabilities and $26 million was recorded in other noncurrent liabilities.

Other Plans

There were no material restructuring charges for other plans recorded during the first quarters of 2020 and 2019. The restructuring liabilities for other plans as of June 30, 2019 and March 31, 2019 were $60 million and $87 million.

Long-Lived Asset Impairments

During the first quarter of 2019, we performed an interim impairment test of long-lived assets primarily for our U.K. retail business due to the decline in the estimated future cash flows driven by additional U.K. government reimbursement reductions announced on June 29, 2018. As a result, we recognized a non-cash pre-tax charge of $20 million ($16 million after-tax) to impair the carrying value of certain intangible assets (primarily pharmacy licenses). We utilized a market approach for estimating the fair value of intangible assets. The fair value of the intangible assets is considered a Level 3 fair value measurement due to the significance of unobservable inputs developed using company specific information.

4.    Goodwill Impairment Charges

We evaluate goodwill for impairment on an annual basis as of January 1 each year and at an interim date, if indicators of potential impairment exist. Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or one level below an operating segment (also known as a component), for which discrete financial information is available and segment management regularly reviews the operating results of that reporting unit.

13

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

2020 First Quarter

In the first quarter of 2020, there was no goodwill impairment charge recorded.

2019 First Quarter

In the first quarter of 2019, we recorded non-cash goodwill impairment charges of $570 million (pre-tax and after-tax) for our two reporting units in the European Pharmaceutical Solutions segment. These charges were recorded under the caption, “Goodwill Impairment Charges” within operating expenses in the accompanying condensed consolidated statements of operations.

Prior to implementing the new segment reporting structure in the first quarter of 2019, our European operations were considered a single reporting unit. Following the change in reportable segments, our European Pharmaceutical Solutions segment was split into two distinct reporting units, Retail Pharmacy and Pharmaceutical Distribution (formerly known as “Consumer Solutions” and “Pharmacy Solutions”) for purposes of goodwill impairment testing. As a result, we were required to perform a goodwill impairment test for these two new reporting units upon the change in reportable segment. Consequently, we recorded a non-cash goodwill impairment charge of $238 million (pre-tax and after-tax) in the first quarter of 2019 primarily because the estimated fair value of the Pharmaceutical Distribution reporting unit was determined to be lower than its reassigned carrying value.

During the first quarter of 2019, both reporting units projected a decline in the estimated future cash flows primarily triggered by additional U.K. government actions which were announced on June 29, 2018. Accordingly, we performed an interim goodwill impairment test for these reporting units. As a result, we determined that the carrying values of these reporting units exceeded their estimated fair values and recorded non-cash goodwill impairment charges of $332 million (pre-tax and after-tax) primarily for our Retail Pharmacy reporting unit. The discount rate and terminal growth rate used for the Retail Pharmacy reporting unit in the first quarter 2019 impairment test were 8.5% and 1.25%. The discount rate and terminal growth rate used for the Pharmaceutical Distribution reporting unit in the first quarter 2019 impairment test were 8.0% and 1.25%. As previously disclosed in our 2019 Annual Report, we had impaired the entire remaining goodwill balances of both reporting units as of March 31, 2019.

Refer to Financial Note 14, “Fair Value Measurements,” for more information on nonrecurring fair value measurements.

5.    Business Combinations

2019 Acquisition

Medical Specialties Distributors LLC (“MSD”)

On June 1, 2018, we completed our acquisition of MSD for the net purchase consideration of $784 million, which was funded from cash on hand. MSD is a leading national distributor of infusion and medical-surgical supplies as well as a provider of biomedical services to alternate site and home health providers. The financial results of MSD have been included in our condensed consolidated statements of operations within our Medical-Surgical Solutions segment since the acquisition date.

The fair value of assets acquired and liabilities assumed as of the acquisition date were finalized upon completion of the measurement period in the first quarter of 2020. As of June 30, 2019, the final amounts of fair value recognized for the assets acquired and liabilities assumed as of the acquisition date, excluding goodwill and intangibles, were $239 million and $169 million. Approximately $388 million of the final purchase price allocation was assigned to goodwill, which reflects the expected future benefits of certain synergies and intangible assets that do not qualify for separate recognition. The final purchase price allocation included acquired identifiable intangibles of $326 million primarily representing customer relationships with a weighted average life of 18 years.

14

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

2018 Acquisition

CoverMyMeds LLC (“CMM”)

On April 3, 2017, we completed our acquisition of CMM for the net purchase consideration of $1.3 billion, which was funded from cash on hand. The fair value of assets acquired and liabilities assumed as of the acquisition date were finalized upon completion of the measurement period in the first quarter of 2019. The financial results of CMM have been included in our condensed consolidated statements of operations within Other since the acquisition date.

Pursuant to the agreement, McKesson paid additional contingent consideration of $69 million and $68 million for each of May 2019 and 2018. As of June 30, 2019 and March 31, 2019, the related liability was nil and $69 million.

2017 Acquisition

Rexall Health

In the third quarter of 2017, we completed our acquisition of Rexall Health which operated approximately 400 retail pharmacies in Canada, particularly in Ontario and Western Canada. The net cash purchase consideration of $2.9 billion Canadian dollars (approximately $2.1 billion) was funded from cash on hand. On May 23, 2018, as a result of resolving certain indemnity and other claims related to this acquisition, $125 million Canadian dollars (approximately $97 million) was released to us from an escrow account. The receipt of this cash was recorded as a settlement gain within operating expenses in our condensed consolidated statement of operations in the first quarter of 2019.

Other Acquisitions

During the first quarters of 2020 and 2019, we also completed several other small acquisitions within our operating segments. Financial results for our business acquisitions have been included in our condensed consolidated financial statements since their respective acquisition dates. Purchase prices for our business acquisitions have been allocated based on estimated fair values at the date of acquisition.

Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax purposes. However, if we acquire the assets of a company, the goodwill may be deductible for tax purposes.

6. Income Taxes

During the first quarters of 2020 and 2019, income tax expense related to continuing operations was $136 million and $87 million. During the first quarter of 2019, no tax benefits were recognized for the pre-tax goodwill impairment charges of $570 million related to our European Pharmaceutical Solutions segment given that these charges are not deductible for income tax purposes. Fluctuations in our reported income tax rates are primarily due to the prior year impact of nondeductible impairment charges as well as changes within our business mix of income and discrete items recognized in the quarter.

As of June 30, 2019, we had $1,071 million of unrecognized tax benefits, of which $887 million would reduce income tax expense and the effective tax rate, if recognized. During the next twelve months, we do not anticipate a significant increase or decrease to our unrecognized tax benefits based on the information currently available. However, this amount may change as we continue to have ongoing negotiations with various taxing authorities throughout the year.

We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. The IRS is currently examining our U.S. corporation income tax returns for 2013 through 2015. We are generally subject to audit by taxing authorities in various U.S. states and in foreign jurisdictions for fiscal years 2012 through the current fiscal year.

15

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

7. Redeemable Noncontrolling Interests and Noncontrolling Interests

Redeemable Noncontrolling Interests

Our redeemable noncontrolling interests relate to our consolidated subsidiary, McKesson Europe AG (“McKesson Europe”). Under the December 2014 domination and profit and loss transfer agreement (the “Domination Agreement”), the noncontrolling shareholders of McKesson Europe are entitled to receive an annual recurring compensation amount of €0.83 per share and a one-time guaranteed dividend for calendar year 2014 of €0.83 per share reduced accordingly for any dividend paid by McKesson Europe in relation to that year. As a result, we recorded a total attribution of net income to the noncontrolling shareholders of McKesson Europe of $11 million and $12 million during the first quarters of 2020 and 2019. All amounts were recorded in our condensed consolidated statements of operations within the caption, “Net Income Attributable to Noncontrolling Interests,” and the corresponding liability balance was recorded within other accrued liabilities on our condensed consolidated balance sheets.

Under the Domination Agreement, the noncontrolling shareholders of McKesson Europe have a right to put (“Put Right”) their noncontrolling shares at €22.99 per share increased annually for interest in the amount of 5 percentage points above a base rate published by the German Bundesbank semi-annually, less any compensation amount or guaranteed dividend already paid by McKesson with respect to the relevant time period (“Put Amount”). The exercise of the Put Right will reduce the balance of redeemable noncontrolling interests. During the first quarters of 2020 and 2019, there were no material exercises of the Put Right. The balance of redeemable noncontrolling interests is reported as the greater of its carrying value or its maximum redemption value at each reporting date. The redemption value is the Put Amount adjusted each period for exchange rate fluctuations. At June 30, 2019 and March 31, 2019, the carrying value of redeemable noncontrolling interests of $1.40 billion and $1.39 billion exceeded the maximum redemption value of $1.25 billion and $1.23 billion. At June 30, 2019 and March 31, 2019, we owned approximately 77% of McKesson Europe’s outstanding common shares.

Noncontrolling Interests

Noncontrolling interests represent third-party equity interests in our consolidated entities primarily related to ClarusONE and Vantage Oncology Holdings, LLC, which were $194 million and $193 million at June 30, 2019 and March 31, 2019 on our condensed consolidated balance sheets. During the first quarters of 2020 and 2019, we allocated a total of $43 million and $46 million of net income to noncontrolling interests.

Changes in redeemable noncontrolling interests and noncontrolling interests for the first quarter of 2020 were as follows:

(In millions)	Noncontrolling Interests			Redeemable Noncontrolling Interests
Balance, March 31, 2019	$	193		$	1,393
Net income attributable to noncontrolling interests	43			11
Other comprehensive income	—			6
Reclassification of recurring compensation to other accrued liabilities	—			(11		)
Payments to noncontrolling interests	(39		)	—
Other	(3		)	—
Balance, June 30, 2019	$	194		$	1,399

16

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Changes in redeemable noncontrolling interests and noncontrolling interests for the first quarter of 2019 were as follows:

(In millions)	Noncontrolling Interests			Redeemable Noncontrolling Interests
Balance, March 31, 2018	$	253		$	1,459
Net income attributable to noncontrolling interests	46			12
Other comprehensive income	—			(37		)
Reclassification of recurring compensation to other accrued liabilities	—			(12		)
Payments to noncontrolling interests	(64		)	—
Other	5			—
Balance, June 30, 2018	$	240		$	1,422

8. Earnings Per Common Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share are computed similarly to basic earnings per common share except that the former reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Diluted loss per share for the first quarter of 2019 was calculated by excluding potentially dilutive securities from the denominator of the share computation due to their anti-dilutive effects.

The computations for basic and diluted earnings or loss per common share are as follows:

	Quarter Ended June 30,
(In millions, except per share amounts)	2019			2018
Income (Loss) from continuing operations	$	483		$	(81	)
Net income attributable to noncontrolling interests	(54		)	(58		)
Income (Loss) from continuing operations attributable to McKesson	429			(139		)
Income (Loss) from discontinued operations, net of tax	(6		)	1
Net income (loss) attributable to McKesson	$	423		$	(138	)
Weighted average common shares outstanding:
Basic	188			202
Effect of dilutive securities:
Restricted stock units	1			—
Diluted	189			202
Earnings (Loss) per common share attributable to McKesson: (1)
Diluted
Continuing operations	$	2.27		$	(0.69	)
Discontinued operations	(0.03		)	0.01
Total	$	2.24		$	(0.68	)
Basic
Continuing operations	$	2.28		$	(0.69	)
Discontinued operations	(0.03		)	0.01
Total	$	2.25		$	(0.68	)

(1) Certain computations may reflect rounding adjustments.

17

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Potentially dilutive securities include outstanding stock options, restricted stock units, and performance-based and other restricted stock units. Approximately 3 million and 2 million potentially dilutive securities for the first quarters of 2020 and 2019 were excluded from the computations of diluted net earnings per common share, as they were anti-dilutive.

9. Goodwill and Intangible Assets, Net

Changes in the carrying amount of goodwill were as follows:

(In millions)	U.S. Pharmaceutical and Specialty Solutions		European Pharmaceutical Solutions		Medical-Surgical Solutions		Other		Total
Balance, March 31, 2019	$	4,078	$	—	$	2,451	$	2,829	$	9,358
Goodwill acquired	—		39		—		—		39
Acquisition accounting, transfers and other adjustments	1		1		7		—		9
Foreign currency translation adjustments, net	9		—		—		26		35
Balance, June 30, 2019	$	4,088	$	40	$	2,458	$	2,855	$	9,441

As of June 30, 2019 accumulated goodwill impairment losses were $2,913 million in our European Pharmaceutical Solutions segment and $470 million in Other. As of March 31, 2019 accumulated goodwill impairment losses were $2,943 million in our European Pharmaceutical Solutions segment and $461 million in Other.

Information regarding intangible assets is as follows:

	June 30, 2019								March 31, 2019
(Dollars in millions)	Weighted Average Remaining Amortization Period (years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	12	$	3,831	$	(1,871	)	$	1,960	$	3,818	$	(1,801	)	$	2,017
Service agreements	11	1,022		(447		)	575		1,017		(430		)	587
Pharmacy licenses	26	513		(210		)	303		513		(209		)	304
Trademarks and trade names	13	893		(244		)	649		887		(232		)	655
Technology	4	141		(98		)	43		141		(94		)	47
Other	5	282		(212		)	70		288		(209		)	79
Total		$	6,682	$	(3,082	)	$	3,600	$	6,664	$	(2,975	)	$	3,689

Amortization expense of intangible assets was $112 million and $122 million for the quarters ended June 30, 2019 and 2018. Estimated amortization expense of these assets is as follows: $298 million, $389 million, $365 million, $277 million and $248 million for the remainder of 2020 and each of the succeeding years through 2024 and $2,023 million thereafter. All intangible assets were subject to amortization as of June 30, 2019 and March 31, 2019.

10. Debt and Financing Activities

Long-Term Debt

Our long-term debt includes both U.S. dollar and foreign currency-denominated borrowings. At June 30, 2019 and March 31, 2019, $7,692 million and $7,595 million of total debt were outstanding, of which $310 million and $330 million were included under the caption “Current portion of long-term debt” within our condensed consolidated balance sheets.

18

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Revolving Credit Facilities

We have a syndicated $3.5 billion five-year senior unsecured revolving credit facility (the “Global Facility”), which has a $3.15 billion aggregate sublimit of availability in Canadian dollars, British pound sterling and Euros. The Global Facility matures on October 22, 2020. Borrowings under the Global Facility bear interest based upon the London Interbank Offered Rate, Canadian Dealer Offered Rate for credit extensions denominated in Canadian dollars, a prime rate, or alternative overnight rates as applicable, plus agreed margins. The Global Facility contains a financial covenant which obligates the Company to maintain a debt to capital ratio of no greater than 65% and other customary investment grade covenants. If we do not comply with these covenants, our ability to use the Global Facility may be suspended and repayment of any outstanding balances under the Global Facility may be required. At June 30, 2019, we were in compliance with all covenants. There were no borrowings under this facility during the first quarters of 2020 and 2019, and no borrowings outstanding as of June 30, 2019 and March 31, 2019.

We also maintain bilateral credit lines primarily denominated in Euros with a committed balance of $9 million and an uncommitted balance of $199 million as of June 30, 2019. Borrowings and repayments were not material during the first quarters of 2020 and 2019 and amounts outstanding under these credit lines were not material as of June 30, 2019 and March 31, 2019.

Commercial Paper

We maintain a commercial paper program to support our working capital requirements and for other general corporate purposes. Under the program, the Company can issue up to $3.5 billion in outstanding commercial paper notes. During the first quarters of 2020 and 2019, we borrowed $2.6 billion and $9.0 billion and repaid $2.6 billion and $7.0 billion under the program. At June 30, 2019 and March 31, 2019, there were no commercial paper notes outstanding.

11. Leases

Lessee

We lease facilities and equipment primarily under operating leases. We recognize lease expense on a straight-line basis over the term of the lease, taking into account, when applicable, lessor incentives for tenant improvements, periods where no rent payment is required and escalations in rent payments over the term of the lease. Remaining terms for facility leases generally range from one to fifteen years, while remaining terms for equipment leases generally range from one to six years. Most real property leases contain renewal options (typically for five-year increments). Generally, the renewal option periods are not included within the lease term as we are not reasonably certain to exercise that right at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets and operating lease liabilities are recognized at the lease commencement date. ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating leases liabilities are recognized based on the present value of the future lease payments over the lease term discounted at our incremental borrowing rate as the implicit rate in the lease is not readily determinable for most of our leases. We estimate the discount rate as our incremental borrowing rate based on qualitative factors including Company-specific credit rating, lease term, general economic and the interest rate environment. For existing leases that commenced prior to the adoption of the amended leasing guidance, we determined the discount rate on April 1, 2019 using the full lease term. Operating lease liabilities are recorded under the caption, “Current portion of operating lease liabilities” and “Long-Term Operating Lease Liabilities” and the corresponding lease assets are recorded under the caption, “Operating Lease Right-of-Use Assets,” in our condensed consolidated balance sheet. Finance lease assets are included in property, plant and equipment, net and finance lease liabilities are included in current portion of long-term debt and long-term debt in our condensed consolidated balance sheet.

19

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Supplemental balance sheet information related to leases was as follows:

(In millions, except lease term and discount rate)	June 30, 2019
Operating leases
Operating Lease Right-of-Use Assets	$	2,031
Current portion of operating lease liabilities	$	373
Long-Term Operating Lease Liabilities	1,805
Total operating lease liabilities	$	2,178
Finance Leases
Property, Plant and Equipment, net	$	67
Current portion of long-term debt	$	7
Long-Term Debt	86
Total finance lease liabilities	$	93
Weighted Average Remaining Lease Term (Years)
Operating leases	8.56
Finance leases	11.76
Weighted Average Discount Rate
Operating leases	3.61		%
Finance leases	3.99		%

The components of lease cost were as follows:

	Quarter Ended June 30,
(In millions)	2019
Short-term lease cost	$	8
Operating lease cost	115
Finance lease cost:
Amortization of right-of-use assets	2
Interest on lease liabilities	1
Total finance lease cost	3
Variable lease cost (1)	31
Sublease income	(8		)
Total lease cost (2)	$	149

(1) These amounts include payments for maintenance, taxes, payments affected by the consumer price index and other similar metrics and payments contingent on usage.

(2) These amounts were primarily recorded within operating expenses in the accompanying condensed consolidated statement of operations.

20

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Supplemental cash flow information related to leases was as follows:

	Quarter Ended June 30,
(In millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(99	)
Operating cash flows from finance leases	—
Financing cash flows from finance leases	(3		)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (1)	$	2,290
Finance leases	55

(1) These amounts include the transition adjustment for the adoption of the amended leasing guidance discussed in Financial Note 1, “Significant Accounting Policies.”

Maturities of lease liabilities as of June 30, 2019 were as follows:

(In millions)	Operating Leases			Finance Leases			Total
The remainder of 2020	$	319		$	8		$	327
2021	401			10			411
2022	344			10			354
2023	286			10			296
2024	232			10			242
Thereafter	900			69			969
Total lease payments (1)	$	2,482		$	117		$	2,599
Less imputed interest	(304		)	(24		)	(328		)
Present value of lease liabilities	$	2,178		$	93		$	2,271

(1) Total lease payments have not been reduced by minimum sublease income of $191 million due under future noncancelable subleases.

As of June 30, 2019, we entered into additional leases primarily for facilities that have not yet commenced with future lease payments of $275 million that are not reflected in the table above. These operating leases will commence between 2020 and 2022 with noncancelable lease terms of 5 to 20 years.

As previously disclosed in our 2019 Annual Report and under the previous lease accounting, the minimum lease payments required under operating leases were as follows as of March 31, 2019:

(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.

21

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Lessor

We lease primarily certain owned equipment to the physician practices that are classified as direct financing or sales-type leases. As of June 30, 2019, the total lease receivable was $303 million with a weighted average remaining lease term of approximately nine years. Interest income from these leases recorded was not material during the first quarter of 2020.

12. Pension Benefits

The net periodic expense for our defined pension benefit plans was $24 million and $5 million for the first quarters of 2020 and 2019.

Cash contributions to these plans were $6 million and $3 million for the first quarters of 2020 and 2019. The projected unit credit method is utilized in measuring net periodic pension expense over the employees’ service life for the pension plans. Unrecognized actuarial losses exceeding 10% of the greater of the projected benefit obligation or the market value of assets are amortized straight-line over the average remaining future service periods and expected life expectancy.

On May 23, 2018, the Company’s Board of Directors approved the termination of our frozen U.S. defined benefit pension plan (“Plan”). The Plan was fully funded by its plan assets at June 30, 2019 and March 31, 2019. During the first quarter of 2020, we offered the option of receiving a lump sum payment to certain participants with vested qualified Plan benefits in lieu of receiving monthly annuity payments. Approximately 1,300 participants elected to receive the settlement, and lump sum payments of approximately $49 million were made from plan assets to these participants in June 2019. The benefit obligation settled approximated payments to plan participants and a pre-tax settlement charge of $17 million was recorded during the first quarter of 2020. We expect to purchase non-participating annuity contracts from an insurer that will pay and administer the future pension benefits of the remaining participants, which is expected to be completed by September 30, 2019.

As of June 30, 2019 and March 31, 2019, this Plan had an accumulated other comprehensive loss of approximately $95 million and $121 million.

13. Hedging Activities

In the normal course of business, we are exposed to interest rate and foreign currency exchange rate fluctuations. At times, we limit these risks through the use of derivatives such as cross-currency swaps, foreign currency forward contracts and interest rate swaps. In accordance with our policy, derivatives are only used for hedging purposes. We do not use derivatives for trading or speculative purposes.

Foreign Currency Exchange Risk

We conduct our business worldwide in U.S. dollars and the functional currencies of our foreign subsidiaries, including Euro, British pound sterling and Canadian dollars. Changes in foreign currency exchange rates could have a material adverse impact on our financial results that are reported in U.S. dollars. We are also exposed to foreign currency exchange rate risk related to our foreign subsidiaries, including intercompany loans denominated in non-functional currencies. We have certain foreign currency exchange rate risk programs that use foreign currency forward contracts and cross-currency swaps. These forward contracts and cross-currency swaps are generally used to offset the potential income statement effects from intercompany loans denominated in non-functional currencies. These programs reduce but do not entirely eliminate foreign currency exchange rate risk.

22

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FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Non-Derivative Instruments Designated as Hedges

At June 30, 2019 and March 31, 2019, we had €1.95 billion Euro-denominated notes and £450 million British pound sterling-denominated notes designated as non-derivative net investment hedges which hedge portions of our net investments in non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For all notes that are designated as net investment hedges and meet effectiveness requirements, the changes in carrying value of the notes attributable to the change in spot rates are recorded in foreign currency translation adjustments within Accumulated Other Comprehensive Loss in the consolidated statement of stockholders’ equity where they offset foreign currency translation gains and losses recorded on our net investments. To the extent foreign currency denominated notes designated as net investment hedges are ineffective, changes in carrying value attributable to the change in spot rates are recorded in earnings. Losses of $24 million and gains of $161 million for net investment hedges were recorded in other comprehensive income during the first quarters of 2020 and 2019. Ineffectiveness on our non-derivative net investment hedges during the first quarter of 2020 resulted in gains of $10 million which were recorded in earnings within other income, net. There was no ineffectiveness in our non-derivative net investment hedges during the first quarter of 2019.

Derivatives Designated as Hedges

At June 30, 2019 and March 31, 2019, we had cross-currency swaps designated as net investment hedges with total gross notional amounts of $1,499 million Canadian dollars. At March 2019, we also had cross-currency swaps designated as net investment hedges with total gross notional amounts of £932 million British pound sterling.

Under the terms of the cross-currency swap contracts, we agree with third parties to exchange fixed interest payments in one currency for fixed interest payments in another currency at specified intervals and to exchange principal in one currency for principal in another currency, calculated by reference to agreed-upon notional amounts. These swaps are utilized to hedge portions of our net investments denominated in British pound sterling and Canadian dollars against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. The changes in the fair value of these derivatives attributable to the changes in spot currency exchange rates and differences between spot and forward interest rates are recorded in accumulated other comprehensive loss in the condensed consolidated statement of stockholders’ equity where they offset foreign currency translation gains and losses recorded on our net investments denominated in British pound sterling and Canadian dollars. To the extent foreign currency denominated notes designated as hedges are ineffective, changes in carrying value attributable to the change in spot rates are recorded in earnings. Losses of $11 million and gains of $34 million were recorded in other comprehensive income for net investment hedges during the first quarters of 2020 and 2019. During the first quarter of 2020, we terminated cross-currency swaps with total gross notional amounts of £932 million British pound sterling due to ineffectiveness in our hedges within our British pound sterling hedging program that arose due to 2019 impairments of goodwill and certain long-lived assets in our U.K. businesses. Proceeds from the termination of these swaps totaled $84 million and resulted in a settlement gain of $34 million recorded in earnings within other income, net. There was no ineffectiveness in our hedges for the first quarter of 2019. The remaining cross-currency swaps will mature between November 2020 and November 2024.

At June 30, 2019 and March 31, 2019, we had forward contracts to hedge the U.S. dollar against cash flows denominated in Canadian dollars with total gross notional amounts of $81 million, which were designated as cash flow hedges. The remaining contract will mature in March 2020.

From time to time, we also enter into cross-currency swaps to hedge intercompany loans denominated in non-functional currencies. These cross-currency swaps are designed to reduce the income statement effects arising from fluctuations in foreign exchange rates and have been designated as cash flow hedges. At June 30, 2019 and March 31, 2019, we had cross-currency swaps with total gross notional amounts of approximately $2,908 million, which are designated as cash flow hedges. These swaps will mature between April 2020 and January 2024.

For forward contracts and cross-currency swaps that are designated as cash flow hedges, the effective portion of changes in the fair value of the hedges is recorded in Accumulated Other Comprehensive Income and reclassified into earnings in the same period in which the hedged transaction affects earnings. Changes in fair values representing hedge ineffectiveness are recognized in current earnings. Gains or losses from cash flow hedges recorded in other comprehensive income were not material during the first quarters of 2020 and 2019. Gains or losses reclassified from Accumulated Other Comprehensive Income and recorded in operating expenses in the consolidated statements of operations were not material during the first quarters of 2020 and 2019. There was no ineffectiveness in our cash flow hedges during the first quarters of 2020 and 2019.

23

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Derivatives Not Designated as Hedges

Derivative instruments not designated as hedges are marked-to-market at the end of each accounting period with the change in value included in earnings.

We have a number of forward contracts to hedge the Euro against cash flows denominated in British pound sterling and other European currencies. At June 30, 2019 and March 31, 2019, the total gross notional amounts of these contracts were approximately $28 million. These contracts will mature through October 2020 and none of these contracts were designated for hedge accounting. Changes in the fair values for contracts not designated as hedges are recorded directly in earnings within operating expenses. Changes in the fair values were not material during the first quarters of 2020 and 2019. Gains or losses from these contracts are largely offset by changes in the value of the underlying intercompany foreign currency loans.

During the first quarter of 2020, we also entered a number of forward contracts to offset a portion of the earnings impacts from the ineffectiveness of net investment hedges discussed above. At June 30, 2019, the total gross notional amounts of these contracts were approximately $630 million. These contracts matured in July 2019 and none of these contracts were designated for hedge accounting. Changes in the fair values for contracts not designated as hedges are recorded directly in earnings. During the first quarter of 2020, losses of $19 million were recorded in earnings within other income, net.

Information regarding the fair value of derivatives on a gross basis is as follows:

	Balance Sheet Caption	June 30, 2019						March 31, 2019
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
(In millions)		Asset		Liability				Asset		Liability
Derivatives designated for hedge accounting
Foreign exchange contracts (current)	Prepaid expenses and other	$	16	$	—	$	81	$	17	$	—	$	81
Foreign exchange contracts (non-current)	Other Noncurrent Assets	—		—		—		—		—		—
Cross-currency swaps (current)	Prepaid expenses and other/Other Accrued Liabilities	37		8		355		—		18		—
Cross-currency swaps (non-current)	Other Noncurrent Assets/Liabilities	15		61		3,681		91		33		5,283
Total		$	68	$	69			$	108	$	51
Derivatives not designated for hedge accounting
Foreign exchange contracts (current)	Prepaid expenses and other	$	—	$	—	$	655	$	—	$	—	$	14
Foreign exchange contracts (current)	Other accrued liabilities	—		—		3		—		—		14
Total		$	—	$	—			$	—	$	—

Refer to Financial Note 14, "Fair Value Measurements," for more information on these recurring fair value measurements.

24

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FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

14. Fair Value Measurements

At June 30, 2019 and March 31, 2019, the carrying amounts of cash, certain cash equivalents, restricted cash, marketable securities, receivables, drafts and accounts payable, short-term borrowings and other current liabilities approximated their estimated fair values because of the short maturity of these financial instruments.

The fair value of our commercial paper was determined using quoted prices in active markets for identical liabilities, which are considered Level 1 inputs.

Our long-term debt is carried at amortized cost. The carrying amounts and estimated fair values of these liabilities were $7.7 billion and $8.1 billion at June 30, 2019, and $7.6 billion and $7.9 billion at March 31, 2019. The estimated fair value of our long-term debt was determined using quoted market prices in a less active market and other observable inputs from available market information, which are considered to be Level 2 inputs, and may not be representative of actual values that could have been realized or that will be realized in the future.

Assets Measured at Fair Value on a Recurring Basis

Cash and cash equivalents at June 30, 2019 and March 31, 2019 included investments in money market funds of $460 million and $1,205 million, which are reported at fair value. The fair value of money market funds was determined by using quoted prices for identical investments in active markets, which are considered to be Level 1 inputs under the fair value measurements and disclosure guidance. The carrying value of all other cash equivalents approximates their fair value due to their relatively short-term nature.

Fair values of our forward foreign currency contracts were determined using observable inputs from available market information. Fair values of our cross-currency swaps were determined using quoted foreign currency exchange rates and other observable inputs from available market information. These inputs are considered Level 2 under the fair value measurements and disclosure guidance, and may not be representative of actual values that could have been realized or that will be realized in the future. Refer to Financial Note 13, “Hedging Activities,” for fair value and other information on our foreign currency derivatives including forward foreign currency contracts and cross-currency swaps.

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the first quarters of 2020 and 2019.

Assets Measured at Fair Value on a Nonrecurring Basis

At March 31, 2019, assets measured at fair value on a nonrecurring basis primarily consisted of goodwill and long-lived assets for our European Pharmaceutical Solutions segment. There were no assets measured at fair value on a nonrecurring basis at June 30, 2019.

Goodwill

Fair value assessments of the reporting unit and the reporting unit's net assets, which are performed for goodwill impairment tests, are considered a Level 3 measurement due to the significance of unobservable inputs developed using company-specific information. We considered a market approach as well as an income approach using the discounted cash flow (“DCF”) model to determine the fair value of the reporting unit.

Long-lived Assets

We utilize multiple approaches including the DCF model and market approaches for estimating the fair value of intangible assets. The future cash flows used in the analysis are based on internal cash flow projections based on our long-range plans and include significant assumptions by management. Accordingly, the fair value assessment of the long-lived assets is considered a Level 3 fair value measurement.

We measure certain intangible and other long-lived assets at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. An impairment charge is recorded when the cost of the asset exceeds its fair value and this condition is determined to be other-than-temporary.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

There were no liabilities measured at fair value on a nonrecurring basis at June 30, 2019 and March 31, 2019.

15. Commitments and Contingent Liabilities

In addition to commitments and obligations incurred in our business, we are subject to a variety of claims and legal proceedings incidental to the normal conduct of our business, including claims from customers and vendors, pending and potential legal actions for damages, governmental investigations and other matters. The Company and its affiliates are parties to the legal claims and proceedings described below and in Note 24 to our 2019 Annual Report on Form 10-K which disclosure is incorporated in this footnote by this reference. The Company is vigorously defending itself against those claims and in those proceedings. Significant developments in those matters are described below. If we are unsuccessful in defending, or if we determine to settle any of these matters, we may be required to pay substantial sums, be subject to injunction or be forced to change how we operate our business, which could have a material adverse impact on our financial position or results of operations.

Unless otherwise stated, we are unable to reasonably estimate the loss or a range of possible loss for the matters described below. Often, it is not reasonably possible for us to determine that a loss is probable for a claim, or to reasonably estimate the amount of loss or a range of loss, because of the limited information available and the potential effects of future events and decisions by third parties, such as courts and regulators, that will determine the ultimate resolution of the claim. Many of the matters described are at preliminary stages, raise novel theories of liability or seek an indeterminate amount of damages. It is not uncommon for claims to be resolved over many years. We review loss contingencies at least quarterly, to determine whether the loss probability has changed and whether we can make a reasonable estimate of the possible loss or range of loss. When we determine that a loss from a claim is probable and reasonably estimable, we record a liability in the amount of our estimate for the ultimate loss. We also provide disclosure when it is reasonably possible that a loss may be incurred or when it is reasonably possible that the amount of a loss will exceed our recorded liability.

I. Litigation and Claims Involving Distribution of Controlled Substances

The Company is a defendant in many cases asserting claims related to distribution of controlled substances to pharmacies. We often are named as defendants along with other pharmaceutical wholesale distributors, pharmaceutical manufacturers and retail pharmacy chains. The plaintiffs in these actions include state attorneys general, county and municipal governments, hospitals, Indian tribes, pension funds, third-party payors and individuals. These actions have been filed in state and federal courts throughout the United States, and in Puerto Rico and Canada. They contain a variety of causes of action, including negligence, public nuisance, unjust enrichment, civil conspiracy, as well as alleging violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), state and federal controlled substances laws and other statutes.

Since December 5, 2017, nearly all such cases pending in federal district courts have been transferred for consolidated pre-trial proceeding to a multi-district litigation (“MDL”) in the United States District Court for the Northern District of Ohio captioned In re: National Prescription Opiate Litigation, Case No. 17-md-28-04. At present, there are approximately 2,000 cases under the jurisdiction of the MDL court. The court has set a trial date of October 21, 2019 for the claims brought by Cuyahoga County, Ohio and Summit County, Ohio. The Company has joined motions for summary judgments filed on July 19, 2019 addressing the RICO and Ohio Corrupt Practices Act claims, civil conspiracy, negligence per se, causation, preemption, and statute of limitations. On July 19, 2019, plaintiffs also filed motions for summary judgment addressing duties under the federal Controlled Substances Act and claims for abatement of public nuisance.

The Company is also named in more than 245 similar state court cases pending in 30 states plus Puerto Rico. These include actions filed by nineteen state attorneys general, and some by or on behalf of individuals, including wrongful death lawsuits and putative class action lawsuits brought on behalf of children with Neonatal Abstinence Syndrome due to alleged exposure to opioids in utero. In the Connecticut coordinated actions, the court granted defendants’ motion to dismiss and dismissed all claims filed by 21 municipalities; plaintiffs have appealed this decision. Defendants’ motions to dismiss have been denied by courts in various other jurisdictions. Trial dates have been set in several of these state cases: March 2, 2020 for the New York State Coordinated Proceedings; March 9, 2020 for the action brought by the Washington Attorney General; March 23, 2020 for the action brought by the Alaska Attorney General; July 21, 2020 brought by the Ohio Attorney General; January 25, 2021 for the action brought by Shelby County, Tennessee; and May 24, 2021 for the action brought by the Delaware Attorney General.

26

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

II. Other Litigation and Claims

On May 17, 2013, the Company was served with a complaint filed in the United States District Court for the Northern District of California by True Health Chiropractic Inc., alleging that McKesson sent unsolicited marketing faxes in violation of the Telephone Consumer Protection Act of 1991 (“TCPA”), as amended by the Junk Fax Protection Act of 2005 or JFPA, True Health Chiropractic Inc., et al. v. McKesson Corporation, et al., CV-13-02219 (HG). Plaintiffs seek statutory damages from $500 to $1,500 per violation plus injunctive relief. True Health Chiropractic later amended its complaint, adding McLaughlin Chiropractic Associates as an additional named plaintiff and McKesson Technologies Inc. as a defendant. Both plaintiffs alleged that the Company violated the TCPA because it sent faxes that did not contain notices regarding how to opt out of receiving the faxes. On July 16, 2015, plaintiffs filed a motion for class certification and on August 22, 2016, the court denied this motion, based, in part, on the grounds that identifying solicited faxes would require individualized inquiries as to consent. Plaintiffs appealed to the United States Court of Appeals for the Ninth Circuit. On July 17, 2018, the Ninth Circuit affirmed in part and reversed in part the district court’s denial of class certification and remanded the case to the district court for further proceedings. On June 24, 2019, the Supreme Court of the United States denied the Company’s petition for writ of certiorari asking the court to review the ruling by the Ninth Circuit. 

On March 5, 2018, the Company’s subsidiary, RxC Acquisition Company (d/b/a RxCrossroads), was served with a qui tam complaint filed in July 2017 in the United States District Court for the Southern District of Illinois by a relator against RxC Acquisition Company, among others, alleging that UCB, Inc., provided illegal “kickbacks” to providers, including nurse educator services and reimbursement assistance services provided through RxC Acquisition Company, in violation of the Anti-Kickback Statute, the False Claims Act, and various state false claims statutes. United States ex rel. CIMZNHCA, LLC v. UCB, Inc., et al., No. 17-cv-00765. The complaint seeks treble damages, civil penalties, and further relief, all in unspecified amounts. The United States and the states named in the complaint have declined to intervene in the suit. On December 17, 2018, the United States filed a motion to dismiss the complaint in its entirety; this motion was denied on April 15, 2019. On June 7, 2019, the court denied the United States’ motion for reconsideration. On July 8, 2019, the United States appealed to the United States Court of Appeals for the Seventh Circuit seeking interlocutory review of the denial of its motion for reconsideration of the denial of the motion to dismiss the complaint. The court has set a trial date of April 5, 2021.

On November 27, 2018, the Company’s subsidiary, RxC Acquisition Company (d/b/a RxCrossroads) was served with a qui tam complaint filed in the United States District Court for the Eastern District of Pennsylvania alleging that EMD Serono, Inc. and Pfizer, Inc. provided illegal “kickbacks” to providers, including services provided through RxC Acquisition Company and others, in violation of the Anti-Kickback statute, the False Claims Act, and various state false claims statutes. United States ex rel. Harris et al. v. EMD Serono, Inc. et al. No. 16-5594. The United States and the named states declined to intervene in the case. On December 17, 2018, the United States filed a motion to dismiss the complaint in its entirety. On April 3, 2019, the court granted the motion to dismiss. The time to appeal this ruling has expired.

On April 3, 2018, a second amended qui tam complaint was filed in the United States District Court for the Eastern District of New York by a relator, purportedly on behalf of the United States, 30 states, the District of Columbia, and two cities against McKesson Corporation, McKesson Specialty Care Distribution Corporation, McKesson Specialty Distribution LLC, McKesson Specialty Care Distribution Joint Venture, L.P., Oncology Therapeutics Network Corporation, Oncology Therapeutics Network Joint Venture, L.P., US Oncology, Inc. and US Oncology Specialty, L.P., alleging that from 2001 through 2010 the defendants repackaged and sold single-dose syringes of oncology medications in a manner that violated the federal False Claims Act and various state and local false claims statutes, and seeking damages, treble damages, civil penalties, attorneys’ fees and costs of suit, all in unspecified amounts, United States ex rel. Omni Healthcare Inc. v. McKesson Corporation, et al., 12-CV-06440 (NG).  The United States and the named states have declined to intervene in the case. On October 15, 2018, the Company filed a motion to dismiss the complaint as to all named defendants. On February 3, 2019, the court granted the motion to dismiss in part and denied it in part, leaving the Company and Oncology Therapeutics Network Corporation as the only remaining defendants in the case. On February 19, 2019, the relator filed a motion for reconsideration of the court’s dismissal of Oncology Therapeutics Network Joint Venture; this motion was denied by the court on June 28, 2019.

On September 25, 2018, plaintiffs filed a complaint in the United States District Court for the Eastern District of Pennsylvania alleging that the Company and its subsidiary, McKesson Medical-Surgical Inc., among others, violated the Sherman Act by restraining trade in the sale of generic drugs. Marion Diagnostic Center, LLC v. McKesson Corporation, et al., No. 2:18-cv-4137. On June 26, 2019, the court granted the Company’s motion to dismiss and authorized plaintiffs to seek leave to amend the claims against the Company.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

On May 21, 2019, Jean E. Henry, a purported Company shareholder, filed a shareholder derivative complaint in the Superior Court of San Francisco, California against certain current and former officers and directors of the Company, and the Company as a nominal defendant, alleging violations of fiduciary duties and waste of corporate assets with respect to an alleged conspiracy to fix the prices of generic drugs, Henry v. Tyler, et al., CGC-19-576119. On May 23, 2019, the Company removed the case to the United States District Court for the Northern District of California, Case No. 19-cv-02869.

III. Government Subpoenas and Investigations

From time to time, the Company receives subpoenas or requests for information from various government agencies. The Company generally responds to such subpoenas and requests in a cooperative, thorough and timely manner. These responses sometimes require time and effort and can result in considerable costs being incurred by the Company. Such subpoenas and requests also can lead to the assertion of claims or the commencement of civil or criminal legal proceedings against the Company and other members of the health care industry, as well as to settlements.

16. Stockholders’ Equity

Each share of the Company’s outstanding common stock is permitted one vote on proposals presented to stockholders and is entitled to share equally in any dividends declared by the Company’s Board of Directors (the “Board”).

The Company currently pays quarterly dividends of $0.39 per common share. In July 2019, the Company’s quarterly dividend was raised from $0.39 to $0.41 per common share for dividends declared on or after such date by the Board. The Company anticipates that it will continue to pay quarterly cash dividends in the future.  However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon the Company's future earnings, financial condition, capital requirements and other factors.

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.

In May 2019, we entered into an ASR program with a third-party financial institution to repurchase $600 million of the Company’s common stock. We repurchased a total of 4.7 million shares at an average price per share of $127.68 during the first quarter of 2020.

During the first quarter of 2020, we repurchased 0.7 million of the Company’s shares for $84 million through open market transactions at an average price per share of $128.64.

The total authorization outstanding for repurchases of the Company’s common stock was $2.8 billion at June 30, 2019.

28

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

 Other Comprehensive Income (Loss)

Information regarding other comprehensive income (loss) including noncontrolling interests and redeemable noncontrolling interests, net of tax, by component is as follows:

	Quarter Ended June 30,
(In millions)	2019			2018
Foreign currency translation adjustments (1)
Foreign currency translation adjustments arising during period, net of income tax benefit of nil and nil (2) (3)	$	70		$	(273	)
Reclassified to income statement, net of income tax expense of nil and nil	—			—
	70			(273		)
Unrealized gains (losses) on net investment hedges arising during period, net of income tax (expense) benefit of $9 and ($51) (4)	(26		)	144
Reclassified to income statement, net of income tax expense of nil and nil	—			—
	(26		)	144
Unrealized gains on cash flow hedges
Unrealized gains on cash flow hedges arising during period, net of income tax expense of $6 and nil	12			—
Reclassified to income statement, net of income tax expense of nil and nil	—			—
	12			—
Changes in retirement-related benefit plans (5)
Net actuarial gain and prior service cost arising during the period, net of income tax expense of $1 and nil	6			—
Amortization of actuarial loss, prior service cost and transition obligation, net of income tax expense of nil and nil (6)	1			1
Foreign currency translation adjustments and other, net of income tax expense of nil and nil	2			7
Reclassified to income statement, net of income tax expense of $5 and nil (7)	12			—
	21			8
Other comprehensive income (loss), net of tax	$	77		$	(121	)

(1) Foreign currency translation adjustments primarily result from the conversion of non-U.S. dollar financial statements of our foreign subsidiary, McKesson Europe, into the Company’s reporting currency, U.S. dollars, during the first quarters of 2020 and 2019.

(2) During the first quarter of 2020, the net foreign currency translation gains were primarily due to the strengthening of the Canadian dollar and Euro against the U.S. dollar from April 1, 2019 to June 30, 2019. During the first quarter of 2019, the net foreign currency translation losses were primarily due to the weakening of the Euro and British pound sterling against the U.S. dollar from April 1, 2018 to June 30, 2018.

(3) The first quarter of 2020 includes net foreign currency translation gains of $6 million attributable to redeemable noncontrolling interests and the first quarter of 2019 includes net foreign currency translation losses of $39 million attributable to redeemable noncontrolling interests.

(4) The first quarter of 2020 includes foreign currency losses of $24 million on the net investment hedges from the €1.95 billion Euro-denominated notes and £450 million British pound sterling-denominated notes and losses of $11 million on the net investment hedges from the cross-currency swaps. The first quarter of 2019 includes foreign currency gains of $161 million on the net investment hedges from the €1.95 billion Euro-denominated notes and £450 million British pound sterling-denominated notes and gains of $34 million on the net investment hedges from cross-currency swaps.

(5) The first quarters of 2020 and 2019 include net actuarial losses of nil and $2 million which are attributable to redeemable noncontrolling interests.

(6) Pre-tax amount reclassified into cost of sales and operating expenses in our condensed consolidated statements of operations. The related tax expense was reclassified into income tax expense in our condensed consolidated statements of operations.

(7) The first quarter of 2020 reflects a reclassification of a pension settlement charge from accumulated other comprehensive loss to other income, net in our condensed consolidated statement of operations.  

29

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Accumulated Other Comprehensive Income (Loss)

Information regarding changes in our accumulated other comprehensive income (loss), net of tax, by component for the first quarters of 2020 and 2019 are as follows:

	Foreign Currency Translation Adjustments
(In millions)	Foreign Currency Translation Adjustments, Net of Tax			Unrealized Gains (Losses) on Net Investment Hedges, Net of Tax			Unrealized Gains (Losses) on Cash Flow Hedges, Net of Tax			Unrealized Net Gains (Losses) and Other Components of Benefit Plans, Net of Tax			Total Accumulated Other Comprehensive Income (Loss)
Balance at March 31, 2019	$	(1,628	)	$	53		$	(37	)	$	(237	)	$	(1,849	)
Other comprehensive income (loss) before reclassifications	70			(26		)	12			8			64
Amounts reclassified to earnings and other	—			—			—			13			13
Other comprehensive income (loss)	70			(26		)	12			21			77
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	6			—			—			—			6
Other comprehensive income (loss) attributable to McKesson	64			(26		)	12			21			71
Balance at June 30, 2019	$	(1,564	)	$	27		$	(25	)	$	(216	)	$	(1,778	)

	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	(273		)	144			—			8			(121		)
Amounts reclassified to earnings and other	—			—			—			—			—
Other comprehensive income (loss)	(273		)	144			—			8			(121		)
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	(39		)	—			—			2			(37		)
Other comprehensive income (loss) attributable to McKesson	(234		)	144			—			6			(84		)
Balance at June 30, 2018	$	(1,492	)	$	(44	)	$	(61	)	$	(204	)	$	(1,801	)

30

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

17. Related Party Balances and Transactions

During the fourth quarter of 2018, a public benefit California foundation (“Foundation”) was established to provide opioid education to patients, caregivers, and providers, address policy issues, and increase patient access to life-saving treatments. Certain officers of the Company also serve as directors and officers of the Foundation. The Company had a pledge payable balance of $100 million ($64 million after-tax) to the Foundation as of March 31, 2018, which was paid in the first quarter of 2019.

Refer to Financial Note 2, “Equity Method Investment in Change Healthcare Joint Venture,” for information regarding related party balances and transactions with Change Healthcare Inc.

18. Segments of Business

We report our financial results in three reportable segments: 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. 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 life sciences companies 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 equity method investment in Change Healthcare JV

31

McKESSON CORPORATION

FINANCIAL NOTES (CONCLUDED)

(UNAUDITED)

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

	Quarter Ended June 30,
(In millions)	2019			2018
Revenues
U.S. Pharmaceutical and Specialty Solutions (1)	$	44,165		$	40,977
European Pharmaceutical Solutions (1)	6,710			6,935
Medical-Surgical Solutions (1)	1,903			1,703
Other	2,950			2,992
Total Revenues	$	55,728		$	52,607
Operating profit (2)
U.S. Pharmaceutical and Specialty Solutions (3)	$	579		$	543
European Pharmaceutical Solutions (4)	5			(560		)
Medical-Surgical Solutions	125			93
Other (5) (6)	141			114
Total	850			190
Corporate Expenses, Net (7)	(175		)	(123		)
Interest Expense	(56		)	(61		)
Income from Continuing Operations Before Income Taxes	$	619		$	6
Revenues, net by geographic area
United States	$	46,321		$	42,890
Foreign	9,407			9,717
Total Revenues	$	55,728		$	52,607

(1) Revenues derived from services represent less than 1% of our U.S. Pharmaceutical and Specialty Solutions segment’s total revenues, less than 10% of our European Pharmaceutical Solutions segment’s total revenues and less than 2% of our Medical-Surgical Solutions segment’s total revenues.

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

(3) Our U.S. Pharmaceutical and Specialty Solutions segment’s operating profit for the first quarters of 2020 and 2019 includes $15 million and $21 million pre-tax credits related to our last-in, first-out (“LIFO”) method of accounting for inventories. Operating profit for the first quarter of 2019 also include $35 million of cash receipts for our share of antitrust legal settlements.

(4) European Pharmaceutical Solutions segment’s operating profit for the first quarter of 2019 includes non-cash goodwill impairment charges of $570 million (pre-tax and after-tax).

(5) Operating profit for Other for the first quarter of 2019 includes pre-tax restructuring charges of $38 million (pre-tax and after-tax) primarily associated with the closure of retail pharmacy stores within our Canadian business and an escrow settlement gain of $97 million (pre-tax and after-tax) representing certain indemnity and other claims related to our 2017 third quarter acquisition of Rexall Health.

(6) Operating profit for Other also includes our proportionate share of income of $4 million and loss of $56 million from Change Healthcare JV for the first quarters of 2020 and 2019.

(7) Corporate expenses, net, for the first quarter of 2020 include pre-tax net settlement gains of $25 million from our net investment hedges and forward contracts and a pre-tax settlement charge of $17 million from the termination of our defined benefit pension plan.

32

McKESSON CORPORATION

FINANCIAL REVIEW

(UNAUDITED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

GENERAL

Management’s discussion and analysis of financial condition and results of operations, referred to as the Financial Review, is intended to assist the reader in the understanding and assessment of significant changes and trends related to the results of operations and financial position of the Company together with its subsidiaries. This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and accompanying financial notes in Item 1 of Part I of this Quarterly Report on Form 10-Q and in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 previously filed with the SEC on May 15, 2019 (“2019 Annual Report”).

The Company’s fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year shall mean the Company’s fiscal year.

Certain statements in this report constitute forward-looking statements. See “Cautionary Notice About Forward-Looking Statements” included in this Quarterly Report on Form 10-Q.

Operating Segments

We report our financial results in three reportable segments: 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 . 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. Refer to Financial Note 18, “Segments of Business,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q.

33

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

RESULTS OF OPERATIONS

Overview of Consolidated Results:

(Dollars in millions, except per share data)	Quarter Ended June 30,
	2019				2018				Change
Revenues	$	55,728			$	52,607			6		%
Gross Profit	$	2,787			$	2,779			—
Gross Profit Margin	5.00			%	5.28			%	(28	)	bp
Operating Expenses:
Operating Expenses	$	(2,130	)		$	(2,127	)		—		%
Goodwill Impairment Charges	—				(570		)		(100	)
Restructuring and Asset Impairment Charges	(23		)		(96		)		(76	)
Gain from Escrow Settlement	—				97				(100	)
Total Operating Expenses	$	(2,153	)		$	(2,696	)		(20	)	%
Operating Expenses as a Percentage of Revenues	3.86			%	5.12			%	(126	)	bp
Other Income, Net	$	37			$	40			(8	)	%
Income (Loss) from Equity Method Investment in Change Healthcare Joint Venture	4				(56		)		107
Interest Expense	(56		)		(61		)		(8	)
Income from Continuing Operations Before Income Taxes	619				6				NM
Income Tax Expense	(136		)		(87		)		56
Income (Loss) from Continuing Operations	483				(81		)		696
Income (Loss) from Discontinued Operations, Net of Tax	(6		)		1				(700	)
Net Income (Loss)	477				(80		)		696
Net Income Attributable to Noncontrolling Interests	(54		)		(58		)		(7	)
Net Income (Loss) Attributable to McKesson Corporation	$	423			$	(138	)		407		%
Diluted Earnings (Loss) Per Common Share Attributable to McKesson Corporation
Continuing Operations	$	2.27			$	(0.69	)		429		%
Discontinued Operations	(0.03		)		0.01				(400	)
Total	$	2.24			$	(0.68	)		429		%
Weighted Average Diluted Common Shares	189				202				(6	)	%

bp - basis points

NM - not meaningful

Revenues

Revenues increased in the first quarter of 2020 compared to the same period a year ago primarily due to market growth, including expanded business with existing customers. Market growth includes growing drug utilization, price increases and newly launched products, partially offset by price deflation associated with brand to generic drug conversion.

34

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Gross Profit

Gross profit remained flat in the first quarter of 2020 primarily due to market growth and an acquisition, partially offset by unfavorable effects of foreign currency exchange fluctuations. Gross profit margin decreased in 2020 due to our mix of businesses. Gross profit and gross profit margin for 2020 were also unfavorably affected by continuous lower government reimbursements in the United Kingdom (“U.K.”) and lower last-in, first-out (“LIFO”) credits. Additionally, gross profit in the first quarter of 2019 included $35 million of net cash proceeds representing our share of antitrust legal settlements.

LIFO inventory credits were $15 million and $21 million in the first quarters of 2020 and 2019. Our U.S. Pharmaceutical business uses the LIFO method of accounting for the majority of its inventories, which results in cost of sales that more closely reflects replacement cost than under other accounting methods. The business’ practice is to pass on to customers published price changes from suppliers. Manufacturers generally provide us with price protection, which limits price related inventory losses. A LIFO expense is recognized when the net effect of price increases on pharmaceutical and non-pharmaceutical products held in inventory exceeds the impact of price declines, including the effect of branded pharmaceutical products that have lost market exclusivity. A LIFO credit is recognized when the net effect of price declines exceeds the impact of price increases on pharmaceutical and non-pharmaceutical products held in inventory. Our quarterly LIFO expense is based on our estimates of annual LIFO expense which are impacted by expected changes in year-end inventory quantities, product mix and manufacturer pricing practices, which may be influenced by market and other external influences. Changes to any of the above factors could have a material impact to our annual LIFO expense. The actual valuation of inventory under the LIFO method is calculated at the end of the fiscal year.

Operating Expenses

Operating expenses, and operating expenses as a percentage of revenues decreased for the first quarter of 2020 compared to the same period a year ago primarily due to the 2019 first quarter goodwill impairment charges of $570 million (pre-tax and after-tax) for our European Pharmaceutical Solutions segment and lower restructuring and asset impairment charges. Additionally, operating expenses decreased due to favorable effects of foreign currency exchange fluctuations. Refer to Financial Note 4, “Goodwill Impairment Charges,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q for more information.

Operating expenses were also affected by the following significant items:

• Opioid-related pre-tax expenses of $36 million and $42 million in the first quarters of 2020 and 2019 primarily related to litigation expenses. Refer to Financial Note 15, “Commitments and Contingent Liabilities,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10‑Q;

• First quarter 2019 pre-tax restructuring and asset impairment charges of $96 million ($85 million after-tax), primarily representing employee severance, exit-related costs and asset impairment charges; and

• First quarter 2019 gain from an escrow settlement of $97 million (pre-tax and after-tax) representing certain indemnity and other claims related to our third quarter 2017 acquisition of Rexall Health.

Restructuring Initiatives

During 2019, we committed to various restructuring initiatives intended to drive long-term incremental profit growth and increase operational efficiency. The initiatives consist of the optimization of the Company’s operating models and cost structures primarily through centralization and outsourcing of certain administrative functions and cost management. The initiatives also consist of implementing certain actions including a reduction in workforce, reorganization and consolidation of our business operations and related headcount reductions, the closures of retail pharmacy stores in Europe as well as other facility closures. This set of initiatives are expected to be completed by the end of 2021. Additionally, we committed to certain actions in connection with the previously announced relocation of our corporate headquarters from San Francisco, California to Irving, Texas, which became effective April 1, 2019. We anticipate that the relocation will be completed by January 2021. In connection with these initiatives, we expect to record total pre-tax charges of approximately $520 million to $660 million, of which $354 million of pre-tax charges were recorded to date primarily representing employee severance, exit-related costs, asset impairment charges and accelerated depreciation. Estimated remaining charges primarily consist of facility and other exit costs and employee-related costs. Refer to Financial Note 3, “Restructuring and Asset Impairment Charges,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q for more information on various initiatives.

35

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Goodwill Impairment

As previously disclosed in our 2019 Annual Report on Form 10-K, the estimated fair value of our McKesson Canada reporting unit exceeded the carrying value as part of our 2019 annual goodwill impairment test. However, other risks, expenses and future developments, such as additional government actions and material changes in key market assumptions that we were unable to anticipate as of the 2019 testing date may require us to revise the projected cash flows, which could adversely affect the fair value of our McKesson Canada reporting unit in Other in future periods.

State Opioid Statutes

Legislative, regulatory or industry measures to address the misuse of prescription opioid medications could affect the Company’s business in ways that we may not be able to predict. In April 2018, the State of New York adopted the Opioid Stewardship Act (the “OSA”) which required the imposition of certain annual surcharge on all manufacturers and distributors licensed to sell or distribute opioids in New York.  On December 19, 2018, the U.S. District Court for the Southern District of New York found the law unconstitutional and issued an injunction preventing the State of New York from enforcing the law. The State appealed to the U.S. Court of Appeals to the Second Circuit but did not seek a stay of the district court’s ruling. During the third quarter of 2019, we reversed the previously accrued estimated liability under the New York State OSA. The State of New York has subsequently adopted an exercise tax on sales of opioids in the State, which became effective July 1, 2019. The excise tax would apply only to the first sale occurring in New York, and thus may not apply to sales from the Company’s distribution centers in New York to New York customers. In addition, certain states have now passed legislation that could require us to pay taxes or assessments on the distribution of opioid medications in those states. Other states are also considering similar legislation. These proposed and passed bills vary in the amounts and the means of calculation. Liabilities for taxes or assessments under any such laws could have an adverse impact on our results of operations, unless we are able to mitigate them through operational changes or commercial arrangements where permitted.

Other Income, Net: Other income, net, for the first quarter of 2020 decreased slightly compared to the same period a year ago primarily due to the 2019 higher gains recognized from the sale of investments and a pension settlement charge, as further discussed below. The decreases are partially offset by net settlement gains of $25 million from our net investment hedges and forward contracts.

Other income, net, for the first quarter of 2020 also includes a pre-tax settlement charge of $17 million related to the Company’s previously approved termination of its frozen U.S. defined benefit pension plan. In connection with the plan termination, we expect to purchase non-participating annuity contracts from an insurer that will pay and administer the future pension benefits of the remaining participants, which is expected to be completed during the second quarter of 2020. Upon transfer of the remaining pension liabilities to the insurer, we expect to record a pre-tax settlement charge for the remaining balance of the plan-related accumulated other comprehensive loss. As of June 30, 2019, this benefit plan had an accumulated other comprehensive loss of approximately $95 million.

36

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Income (Loss) from Equity Method Investment in Change Healthcare Joint Venture: Our investment in Change Healthcare LLC (“Change Healthcare JV”) is accounted for using the equity method of accounting. During the first quarters of 2019 and 2020, we owned approximately 70% of the joint venture with the remaining equity ownership of approximately 30% held by shareholders of Change Healthcare Inc. Our proportionate share of income from equity method investment in Change Healthcare JV was $4 million and loss of $56 million for the first quarters of 2020 and 2019. Our proportionate share of income or loss for 2020 and 2019 includes amortization expenses associated with equity method intangible assets and integration expenses incurred by the joint venture. The amounts are recorded under the caption, “Income (Loss) from Equity Method Investment in Change Healthcare Joint Venture,” in our condensed consolidated statements of operations.

On June 27, 2019, common stock and certain other securities of Change Healthcare Inc. began trading on the NASDAQ (“IPO.”). On July 1, 2019, upon the completion of its IPO, Change Healthcare Inc. received net cash proceeds of approximately $888 million. Change Healthcare Inc. contributed the proceeds from its offering of common stock of $609 million to Change Healthcare JV in exchange for additional membership interests of Change Healthcare JV (“LLC Units”) at the equivalent of its offering price of $13 per share. The proceeds from the concurrent offering of other securities of $279 million were used by Change Healthcare Inc. to acquire certain securities of Change Healthcare JV that substantially mirror the terms of other securities included in the offering by Change Healthcare Inc. As a result, McKesson’s equity interest in Change Healthcare JV was reduced to approximately 58.5%, which will be used to recognize our proportionate share in net income or loss from Change Healthcare JV, commencing the second quarter of 2020. As a result of this ownership dilution to 58.5% from 70%, we expect to recognize a pre-tax dilution loss of approximately $246 million in the second quarter of 2020. Additionally, our proportionate share of income or loss from this equity method investment is expected to be further reduced as settlements of other securities may occur in the future reporting periods.

Subsequent to the IPO, the fair value that was derived from trading prices of Change Healthcare Inc.’s common stock was below the carrying value of our investment in Change Healthcare JV indicating a potential impairment. Accordingly, we evaluated our equity method investment in Change Healthcare JV for an other-than-temporary impairment (“OTTI”). We considered various factors in determining whether an OTTI has occurred, including the limited trading history available, our ability and intent to hold the investment until its fair value recovers, the implied EBITDA valuation multiples compared to public guideline companies, the joint venture’s ability to achieve milestones and any notable operational and strategic changes by the joint venture. After the evaluation, we determined that an OTTI has not occurred as of June 30, 2019 and as of the date of this Quarterly Report on Form 10-Q. However, we may be required to recognize an impairment loss in future reporting periods if and when a decline in fair value of our investment in Change Healthcare JV below the carrying value is determined to be other than temporary. Such determination will be based on the prevailing facts and circumstances at that time, including the reported results and disclosures of Change Healthcare Inc. as well as the market price of its common stock. Refer to Financial Note 2, “Equity Method Investment in Change Healthcare Joint Venture,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q for more information.

We expect to complete a tax-efficient exit from our equity method investment in Change Healthcare JV through a distribution of the shares of a subsidiary holding all of our interests in the Change Healthcare JV to our shareholders, followed by a merger of such subsidiary with and into Change Healthcare Inc. in exchange for shares of common stock in Change Healthcare Inc. (“Qualified McKesson Exit”). If the Qualified McKesson Exit does not qualify as a tax-efficient transaction, Change Healthcare Inc. has agreed to pay us 85% of related cash tax savings realized subsequent to the spin-off or split-off and, in certain circumstances, if the failure of the Qualified McKesson Exit to qualify as a tax efficient transaction is due to Change Healthcare Inc.’s failure to comply with a tax matters agreement, to indemnify us for certain tax-related losses. In the event of a partial exit, Change Healthcare Inc. will be required to pay us 85% of the net cash tax savings realized from the exchange of a portion of our interest in Change Healthcare JV for shares of common stock in Change Healthcare Inc.

37

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Transaction-Related Expenses and Adjustments

Transaction-related expenses generally included transaction and integration expenses that are directly related to business acquisitions and divestitures.

Transaction-related expenses and adjustments for the first quarters of 2020 and 2019 were $44 million and $52 million, as follows:

	Quarter Ended June 30,
(Dollars in millions)	2019		2018
Operating Expenses
Integration related expenses	$	17	$	16
Restructuring, severance and relocation	—		3
Transaction closing expenses	—		1
Other Expenses (1)	27		32
Transaction-Related Expenses and Adjustments	$	44	$	52

(1) Includes our proportionate share of transaction and integration expenses incurred by Change Healthcare JV, excluding certain fair value adjustments, which were recorded within “Income (Loss) from Equity Method Investment in Change Healthcare Joint Venture”.

Amortization Expenses of Acquired Intangible Assets

Amortization expenses of intangible assets directly related to business acquisitions and our equity method investment in Change Healthcare JV were $189 million and $199 million for the first quarters of 2020 and 2019. The amounts are primarily recorded in operating expenses and under the caption, “Income (Loss) from Equity Method Investment in Change Healthcare Joint Venture”.

Income Taxes: During the first quarters of 2020 and 2019, income tax expense related to continuing operations was $136 million and $87 million. During the first quarter of 2019, no tax benefit was recognized for the pre-tax goodwill impairment charge of $570 million related to our European Pharmaceutical Solutions segment given that this charge is not deductible for income tax purposes. Fluctuations in our reported income tax rates are primarily due to the prior year impact of nondeductible impairment charges as well as changes within our business mix of income and discrete items recognized in the quarter.

On June 7, 2019, after a rehearing, the Ninth Circuit Court of Appeals issued an opinion in Altera Corp. v. Commissioner requiring related parties in an intercompany cost-sharing arrangement to share expenses related to share-based compensation. The opinion reversed the prior decision of the United States Tax Court which had ruled in favor of the taxpayer. We will continue to monitor developments in this case, including further appeals. The ultimate outcome may have an adverse impact on our effective tax rate.

Net Income Attributable to Noncontrolling Interests: Net income attributable to noncontrolling interests for the first quarters of 2020 and 2019, primarily represents ClarusONE, Vantage Oncology Holdings, LLC and the accrual of the annual recurring compensation amount of €0.83 per McKesson Europe AG (“McKesson Europe”) share that McKesson is obligated to pay to the noncontrolling shareholders of McKesson Europe under a domination and profit and loss transfer agreement (the “Domination Agreement”). Refer to Financial Note 7, “Redeemable Noncontrolling Interests and Noncontrolling Interests,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form10-Q for more information.

Net Income (Loss) Attributable to McKesson Corporation: Net income (loss) attributable to McKesson Corporation was net income of $423 million and a net loss of $138 million for the first quarters of 2020 and 2019. Diluted earnings per common share attributable to McKesson Corporation was $2.24 in the first quarter of 2020 and diluted loss per common share attributable to McKesson Corporation was $0.68 in the first quarter of 2019. The first quarter of 2019 diluted loss per share was calculated by excluding dilutive securities from the denominator due to their anti-dilutive effects. Additionally, our 2020 and 2019 diluted earnings per share reflect the cumulative effects of share repurchases.

38

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Weighted Average Diluted Common Shares Outstanding: Diluted earnings per common share was calculated based on a weighted average number of shares outstanding of 189 million and 202 million for the first quarters of 2020 and 2019. Weighted average diluted shares for 2020 decreased from 2019 primarily reflecting common stock repurchases.

Segment Results:

Revenues:

	Quarter Ended June 30,
(Dollars in millions)	2019		2018		Change
U.S. Pharmaceutical and Specialty Solutions	$	44,165	$	40,977	8		%
European Pharmaceutical Solutions	6,710		6,935		(3	)
Medical-Surgical Solutions	1,903		1,703		12
Other	2,950		2,992		(1	)
Total Revenues	$	55,728	$	52,607	6		%

U.S. Pharmaceutical and Specialty Solutions

U.S. Pharmaceutical and Specialty Solutions revenues for the first quarter of 2020 compared to the same period a year ago increased 8% primarily due to market growth, including expanded business with existing customers, and growth of specialty pharmaceuticals. Market growth includes growing drug utilization, price increases and newly launched products, partially offset by price deflation associated with brand to generic drug conversions.

European Pharmaceutical Solutions

European Pharmaceutical Solutions revenues decreased 3% for the first quarter of 2020 compared to the same period a year ago primarily due to unfavorable effects of foreign currency exchange fluctuations of 6%, partially offset by market growth in our distribution businesses.

Medical-Surgical Solutions

Medical-Surgical Solutions revenues for the first quarter of 2020 compared to the same period a year ago increased 12% primarily due to our 2019 first quarter acquisition of Medical Specialties Distributors LLC (“MSD”) and market growth.

Other

Revenues in Other decreased 1% for the first quarter of 2020 compared to the same period a year ago. Revenues decreased primarily due to unfavorable effects of foreign currency exchange fluctuations of 3%, partially offset by growth in our McKesson Prescription Technology Solutions (“MRxTS”) business.

39

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Segment Operating Profit, Corporate Expenses, Net and Interest Expense:

	Quarter Ended June 30,
(Dollars in millions)	2019				2018				Change
Segment Operating Profit (1)
U.S. Pharmaceutical and Specialty Solutions	$	579			$	543			7		%
European Pharmaceutical Solutions (2)	5				(560		)		101
Medical-Surgical Solutions	125				93				34
Other	141				114				24
Subtotal	850				190				347
Corporate Expenses, Net	(175		)		(123		)		42
Interest Expense	(56		)		(61		)		(8	)	%
Income from Continuing Operations Before Income Taxes	$	619			$	6			NM
Segment Operating Profit (Loss) Margin
U.S. Pharmaceutical and Specialty Solutions	1.31			%	1.33			%	(2	)	bp
European Pharmaceutical Solutions	0.07				(8.07		)		814
Medical-Surgical Solutions	6.57				5.46				111

bp - basis points

NM - not meaningful

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

(2) Operating profit of our European Pharmaceutical Solutions segment for 2019 includes a goodwill impairment charge of $570 million.

Segment Operating Profit

U.S. Pharmaceutical and Specialty Solutions: Operating profit increased for this segment for the first quarter of 2020 compared to the same period a year ago primarily due to market growth including growth in our specialty business. Operating profit margin slightly decreased primarily due to the 2019 net cash proceeds representing our share of antitrust legal settlements and lower LIFO credits, partially offset by lower opioid-related costs.

European Pharmaceutical Solutions: Operating profit and operating profit margin increased for the first quarter of 2020 compared to the same period a year ago primarily due to the 2019 goodwill impairment charges of $570 million and lower restructuring and asset impairment charges, partially offset by continuous lower government reimbursements in the U.K. Operating profit in in the first quarter of 2020 was also unfavorably impacted by lower sales volume in retail pharmacy U.K.

Medical-Surgical Solutions: Operating profit for this segment increased for the first quarter of 2020 compared to the same period a year ago primarily due to market growth. Operating profit margin for the first quarter of 2020 compared to the same period a year ago increased primarily due to lower restructuring charges and ongoing cost management.

Other: Operating profit for Other increased for the first quarter of 2020 compared to the same period a year ago primarily due to growth in our MRxTS business, lower restructuring charges related to our Canada business, partially offset by the 2019 gain from an escrow settlement of $97 million related to our 2017 acquisition of Rexall Health. Operating profit for Other for the first quarter of 2020 also includes income of $4 million from our equity method investment in Change Healthcare JV compared to a loss of $56 million in the same prior year period.

Corporate: Corporate expenses, net, increased for the first quarter of 2020 compared to the same period a year ago primarily due to an increase in opioid-related costs, a pension settlement charge, higher costs for technology initiatives, partially offset by net settlement gains from our net investment hedges and forward contracts. The first quarter of 2019 included gains recognized from the sale of investments.

40

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Interest Expense: Interest expense for the first quarter of 2020 compared to the same period a year ago decreased primarily due to a decrease in the issuance of commercial paper. Interest expense fluctuates based on timing, amounts and interest rates of term debt repaid and new term debt issued, as well as amounts incurred associated with financing fees.

Business Combinations

Refer to Financial Note 5, “Business Combinations,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10‑Q.

New Accounting Pronouncements

New accounting pronouncements that we have recently adopted as well as those that have been recently issued but not yet adopted by us are included in Financial Note 1, “Significant Accounting Policies,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

Except as noted below, there have been no material changes during the period covered by this Quarterly Report on Form 10-Q to the "Critical Accounting Policies and Estimates" disclosed in Part II, Item 7 of our 2019 Annual Report on Form 10-K.

Equity Method Investments

We evaluate our investments for other-than-temporary impairments when circumstances indicate those assets may be impaired. When the decline in value is deemed to be other than temporary, an impairment is recognized to the extent that the fair value is less than the carrying value of the investment. We consider various factors in determining whether a loss in value of an investment is other than temporary including: the length of time and the extent to which the fair value has been below cost; the financial condition of the investees, and our intent and ability to retain the investment for a period of time sufficient to allow for recovery of value. Management makes certain judgments and estimates in its assessment including but not limited to: identifying if circumstances indicate a decline in value is other than temporary, expectations about the business operations of investees, as well as industry, financial and market factors. Any significant changes in assumptions or judgments in assessing impairments could result in an impairment charge.

The carrying value of our equity method investment in the Change Healthcare JV was $3,617 million at June 30, 2019.  We have not disposed of any LLC units in our investment in Change Healthcare JV and management believes it has the ability and intent to hold the investment for sufficient time to allow for the fair value to recover.

Financial Condition, Liquidity and Capital Resources

We expect our available cash generated from operations, together with our existing sources of liquidity from our credit facilities and commercial paper program will be sufficient to fund our long-term and short-term capital expenditures, working capital and other cash requirements. In addition, from time to time, we may access the long-term debt capital markets to discharge our other liabilities.

Operating activities utilized cash of $51 million and $1,061 million during the first quarters of 2020 and 2019. Operating activities for the first quarter of 2020 were affected by increases in receivables, and for the first quarter of 2019 were affected by increases in receivables and inventory, primarily associated with revenue growth. Cash flows from operations can be significantly impacted by factors such as timing of receipts from customers, inventory receipts and payments to vendors. Additionally, working capital is primarily a function of sale and purchase volumes, inventory requirements and vendor payment terms.

Investing activities utilized cash of $129 million and $875 million during the first quarters of 2020 and 2019. Investing activities for 2020 and 2019 include $111 million and $145 million in capital expenditures for property, plant and equipment, and capitalized software. Investing activities for 2019 include $826 million of net cash payments for acquisitions, including $784 million for our acquisition of MSD. Investing activities for 2019 also included $97 million cash received as a result of resolving certain indemnity and other claims related to our 2017 acquisition of Rexall Health.

41

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Financing activities utilized cash of $872 million during the first quarter of 2020, and provided cash of $1,541 million during the first quarter of 2019. Financing activities for 2020 include cash receipts and payments of $2,610 million for short-term borrowings, primarily commercial paper. Financing activities for the first quarter of 2019 included cash receipts of $9,036 million and payments of $7,005 million for short-term borrowings. Financing activities for the first quarters of 2020 and 2019 include $701 million and $307 million of cash paid for stock repurchases, including shares surrendered for tax withholding. Additionally, financing activities for 2020 and 2019 also include $75 million and $71 million of cash paid for dividends.

The Company’s Board has authorized the repurchase of McKesson’s common stock from time-to-time in open market transactions, privately negotiated transactions, 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.

In May 2019, we entered into an ASR program with a third-party financial institution to repurchase $600 million of the Company’s common stock. We repurchased a total of 4.7 million shares at an average price per share of $127.68 during the first quarter of 2020.

During the first quarter of 2020, we repurchased 0.7 million of the Company’s shares for $84 million through open market transactions at an average price per share of $128.64.

The total authorization outstanding for repurchases of the Company’s common stock was $2.8 billion at June 30, 2019.

We believe that our operating cash flow, financial assets and current access to capital and credit markets, including our existing credit facilities, will give us the ability to meet our financing needs for the foreseeable future. However, there can be no assurance that future volatility and disruption in the global capital and credit markets will not impair our liquidity or increase our costs of borrowing.

Selected Measures of Liquidity and Capital Resources

(Dollars in millions)	June 30, 2019			March 31, 2019
Cash, cash equivalents and restricted cash	$	1,947		$	2,981
Working capital	476			839
Debt to capital ratio (1)	44.3		%	43.3		%
Return on McKesson stockholders’ equity (2)	6.8			0.4

(1) Ratio is computed as total debt divided by the sum of total debt and McKesson stockholders’ equity, which excludes noncontrolling and redeemable noncontrolling interests and accumulated other comprehensive income (loss).

(2) Ratio is computed as net income (loss) attributable to McKesson Corporation for the last four quarters, divided by a five-quarter average of McKesson stockholders’ equity, which excludes noncontrolling and redeemable noncontrolling interests.

Cash equivalents, which are available-for-sale, are carried at fair value. Cash equivalents are primarily invested in AAA rated prime and U.S. government money market funds denominated in U.S. dollars, overnight repurchase agreements collateralized by U.S. government securities, Canadian government securities and/or securities that are guaranteed or sponsored by the U.S. government and an AAA rated prime money market fund denominated in British pound sterling.

The remaining cash and cash equivalents are deposited with several financial institutions. We mitigate the risk of our short-term investment portfolio by depositing funds with reputable financial institutions and monitoring risk profiles and investment strategies of money market funds.

Our cash and cash equivalents balance as of June 30, 2019 included approximately $1,012 million of cash held by our subsidiaries outside of the United States. Our primary intent is to utilize this cash for foreign operations for an indefinite period of time. Although the vast majority of cash held outside the United States is available for repatriation, doing so could subject us to foreign withholding taxes and state income taxes.  Following enactment of the 2017 Tax Cuts and Jobs Act, the repatriation of cash to the United States is generally no longer taxable for federal income tax purposes.

42

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Working capital primarily includes cash and cash equivalents, receivables and inventories net of drafts and accounts payable, short-term borrowings, current portion of long-term debt and other current liabilities. We require a substantial investment in working capital that is susceptible to large variations during the year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity is a function of sales activity and other requirements.

Our debt to capital ratio increased in the first quarter of 2020 primarily due to a decrease in stockholders’ equity driven by share repurchases.

In July 2019, the Company’s quarterly dividend was raised from $0.39 to $0.41 per common share for dividends declared on or after such date by the Board. The Company anticipates that it will continue to pay quarterly cash dividends in the future.  However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon the Company's future earnings, financial condition, capital requirements and other factors.

The carrying value of redeemable noncontrolling interests related to McKesson Europe was $1.40 billion at June 30, 2019, which exceeded the maximum redemption value of $1.25 billion. The balance of redeemable noncontrolling interests is reported at the greater of its carrying value or its maximum redemption value at each reporting date. Upon the effectiveness of the Domination Agreement on December 2, 2014, the noncontrolling shareholders of McKesson Europe received a put right that enables them to put their McKesson Europe shares to McKesson at €22.99 per share, which price is increased annually for interest in the amount of 5 percentage points above a base rate published semiannually by the German Bundesbank, less any compensation amount or guaranteed dividend already paid (“Put Amount”).  The redemption value is the Put Amount adjusted for exchange rate fluctuations each period. The ultimate amount and timing of any future cash payments related to the Put Amount are uncertain. Additionally, we are obligated to pay an annual recurring compensation of €0.83 per McKesson Europe share (the “Compensation Amount”) to the noncontrolling shareholders of McKesson Europe under the Domination Agreement. The Compensation Amount is recognized ratably during the applicable annual period. The Domination Agreement does not have an expiration date and can be terminated by McKesson without cause in writing no earlier than March 31, 2020.

Refer to Financial Note 7, “Redeemable Noncontrolling Interests and Noncontrolling Interests,” to the condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q.

Credit Resources

We fund our working capital requirements primarily with cash and cash equivalents as well as short-term borrowings from our credit facilities and commercial paper issuances. Funds necessary for future debt maturities and our other cash requirements are expected to be met by existing cash balances, cash flow from operations, existing credit sources and other capital market transactions. Detailed information regarding our debt and financing activities is included in Financial Note 10, “Debt and Financing Activities,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

CAUTIONARY NOTICE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Some of these statements can be identified by the use of terminology such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or the negative of these words and other comparable terminology. The discussion of financial trends, strategy, plans or intentions may also include forward-looking statements. Readers are cautioned not to place undue reliance on forward‑looking statements, which speak only as of the date such statements were first made. We undertake no obligation to publicly release any updates or revisions to our forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. Although it is not possible to predict or identify all such risks and uncertainties, they include the following factors, which are described in more detail in the Risk Factors discussion in Item 1A of Part I of our most recent Annual Report on Form 10-K, as updated in Item 1A of Part II of this report. The reader should not consider this list to be a complete statement of all potential risks and uncertainties:

• Changes in the U.S. and European healthcare industry and regulatory environments could have a material adverse impact on our results of operations.

• Our foreign operations subject us to a number of operating, economic, political and regulatory risks that may have a material adverse impact on our financial position and results of operations.

• Changes in the Canadian healthcare industry and regulatory environment could have a material adverse impact on our results of operations.

• General European economic conditions together with austerity measures taken by certain European governments could have a material adverse impact on our results of operations.

• Changes in the European regulatory environment with respect to privacy and data protection regulations could have a material adverse impact on our results of operations.

• Our results of operations, which are stated in U.S. dollars, could be adversely impacted by fluctuations in foreign currency exchange rates.

• Our business could be hindered if we are unable to complete and integrate acquisitions successfully.

• Our results of operations are impacted by our investment in Change Healthcare JV.

• Our business and results of operations could be impacted if we fail to manage and complete divestitures and distributions.

• We are subject to legal and regulatory proceedings that could have a material adverse impact on our financial position and results of operations.

• Competition and industry consolidation may erode our profit.

• A material reduction in purchases or the loss of a large customer or group purchasing organization, as well as substantial defaults in payments by a large customer or group purchasing organization, could have a material adverse impact on our financial position and results of operations.

• Contracts with foreign and domestic government entities and their agencies pose additional risks relating to future funding and compliance.

• Our future results could be materially affected by public health issues whether occurring in the United States or abroad.

• We rely on sophisticated computer systems to perform our business operations. Although we, our customers, our strategic partners and our external service providers use a variety of security measures to protect our and their computer systems, a failure or compromise of our, our customers’, our strategic partners’ or our external service providers’ computer systems from a cyberattack, disaster, or malfunction may result in material adverse operational and financial consequences.

• We could experience losses or liability not covered by insurance.

• Proprietary protections may not be adequate, and products may be found to infringe the rights of third parties.

• System errors or failures of our products or services to conform to specifications cause unforeseen liabilities or injury, harm our reputation and have a material adverse impact on our results of operations.

• Various risks could interrupt customers’ access to their data residing in our service centers, exposing us to significant costs.

• We may be required to record a significant charge to earnings if our goodwill, intangible and other long-lived assets, or investments become further impaired.

• Tax legislation initiatives or challenges to our tax positions could have a material adverse impact on our results of operations.

• Volatility and disruption to the global capital and credit markets may adversely affect our ability to access credit, our cost of credit and the financial soundness of our customers and suppliers.

• Changes in accounting standards issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies may adversely affect our consolidated financial statements.

44

McKESSON CORPORATION

FINANCIAL REVIEW (CONCLUDED)

(UNAUDITED)

• We could face significant liability if we withdraw from participation in one or more multiemployer pension plans in which we participate, or if one or more multiemployer plans in which we participate is underfunded.

• We may not realize the expected benefits from our restructuring and business process initiatives.

• We may experience difficulties with outsourcing and similar third-party relationships.

• We may face risks associated with our retail expansion.

• We may be unable to keep existing retail store locations or open new retail locations in desirable places, which could materially adversely affect our results of operations.

45

McKESSON CORPORATION

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We believe there has been no material change in our exposure to risks associated with fluctuations in interest and foreign currency exchange rates as disclosed in our 2019 Annual Report on Form 10-K.

Item 4. Controls and Procedures.

Our Chief Executive Officer and our Chief Financial Officer, with the participation of other members of the Company’s management, have evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the period covered by this quarterly report, and our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

There were no changes in our “internal control over financial reporting” (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that occurred during our first quarter of 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The information set forth in Financial Note 15, “Commitments and Contingent Liabilities,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors.

Except as noted below, there have been no material changes during the period covered by this Quarterly Report on Form 10-Q to the risk factors disclosed in Part I, Item 1A, of our 2019 Annual Report on Form 10-K.

Our results of operations are impacted by our investment in Change Healthcare JV.

Change Healthcare JV is jointly governed by McKesson and Change Healthcare Inc. Operating a business under joint governance of unaffiliated, controlling members could lead to conflicts of interest or deadlocks on important and time-sensitive operational, financial or strategic decisions, and will require additional organizational formalities as well as time-consuming procedures for sharing information and making decisions. Any failure to manage the joint venture relationship or to realize the strategic and financial benefits that we expect, may have a material adverse impact on our results of operations.

Our business and results of operations could be impacted if we fail to manage and complete divestitures and distributions.

We regularly evaluate our portfolio in order to determine whether an asset or business may no longer help us meet our objectives. When we decide to sell assets or otherwise exit a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the achievement of our strategic objectives. For example, we might experience unexpected challenges in our plans for a tax-efficient distribution of our investment in Change Healthcare JV that could delay our exit from that investment. We may also experience greater dissynergies than expected from divestitures, and the impact of any divestiture on our revenue growth may be larger than projected. After reaching an agreement with a buyer, we likely will be subject to satisfaction of pre-closing conditions as well as to necessary regulatory and governmental approvals, which, if not satisfied or obtained, may prevent us from completing the transaction. Dispositions may also involve continued financial involvement in the divested business, such as through continuing equity ownership, guarantees, indemnities or other financial obligations. Under these arrangements, performance by the divested businesses or other conditions outside of our control could have a material adverse impact on our results of operations.

46

We may be required to record a significant charge to earnings if our goodwill, intangible and other long-lived assets, or investments become further impaired.

We are required under U.S. Generally Accepted Accounting Principles (“GAAP”) to test our goodwill for impairment annually or more frequently if indicators for potential impairment exist. Indicators that are considered include significant changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry, or economic trends or a significant decline in the Company’s stock price and/or market capitalization for a sustained time. In addition, we periodically review our intangible and other long-lived assets for impairment when events or changes in circumstances, such as a divestiture, indicate the carrying value may not be recoverable. Factors that may be considered a change in circumstances indicating that the carrying value of our intangible and other long-lived assets may not be recoverable include slower growth rates, the loss of a significant customer, or divestiture of a business or asset for less than our carrying value. We may be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or intangible and other long-lived assets is determined. Any such charge could have a material adverse impact on our results of operations.

For example, we expect to continue to review the carrying value of our equity method investment in Change Healthcare JV for potential impairment, and we might incur a material impairment charge. Any such impairment charge could materially adversely affect our consolidated statements of operations. Refer to Financial Note 2, “Equity Method Investment in Change Healthcare Joint Venture,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10‑Q.

There are inherent uncertainties in management’s estimates, judgments and assumptions used in assessing recoverability of goodwill, intangible, other long-lived assets, or investments. Any material changes in key assumptions, including failure to meet business plans, negative changes in government reimbursement rates, a deterioration in the U.S. and global financial markets, an increase in interest rate or an increase in the cost of equity financing by market participants within the industry or other unanticipated events and circumstances, may decrease the projected cash flows or increase the discount rates and could potentially result in an impairment charge that could have a material adverse effect on our results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

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.

In May 2019, we entered into an ASR program with a third-party financial institution to repurchase $600 million of the Company’s common stock. We repurchased a total of 4.7 million shares at an average price per share of $127.68 during the first quarter of 2020.

During the first quarter of 2020, we repurchased 0.7 million of the Company’s shares for $84 million through open market transactions at an average price per share of $128.64.

The total authorization outstanding for repurchases of the Company’s common stock was $2.8 billion at June 30, 2019.

47

McKESSON CORPORATION

The following table provides information on the Company’s share repurchases during the first quarter of 2020.

	Share Repurchases (1)
(In millions, except price per share)	Total Number of Shares Purchased		Average Price Paid Per Share	Total Number of Shares Purchased As Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
April 1, 2019 – April 31, 2019	—	$	—	—	$	3,469
May 1, 2019 – May 31, 2019	3.8		127.68	3.8		2,984
June 1, 2019 – June 30, 2019	1.6		128.08	1.6		2,785
Total	5.4			5.4

(1) This table does not include shares tendered to satisfy the exercise price in connection with cashless exercises of employee stock options or shares tendered to satisfy tax withholding obligations in connection with employee equity awards.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not Applicable

Item 5. Other Information.

Not Applicable

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McKESSON CORPORATION

Item 6. Exhibits.

Exhibits identified in parentheses below are on file with the SEC and are incorporated by reference as exhibits hereto.

Exhibit Number	Description
10.1*	Forms of Statement of Terms and Conditions Applicable to Awards Pursuant to the McKesson Corporation 2013 Stock Plan.
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32†	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the McKesson Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) related Financial Notes.

* Management contract or compensation plan or arrangement in which directors and/or executive officers are eligible to participate.

† Furnished herewith.

49

McKESSON CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		MCKESSON CORPORATION
Date:	July 31, 2019	/s/ Britt J. Vitalone
		Britt J. Vitalone
		Executive Vice President and Chief Financial Officer

 

		MCKESSON CORPORATION
Date:	July 31, 2019	/s/ Sundeep G. Reddy
		Sundeep G. Reddy
		Senior Vice President and Controller

50

EX-10.1

EXHIBIT 10.1    

OUTSIDE DIRECTOR

McKESSON CORPORATIONSTATEMENT OF TERMS AND CONDITIONS APPLICABLE TORESTRICTED STOCK UNITS GRANTED TOOUTSIDE DIRECTORS PURSUANT TO THE 2013 STOCK PLAN

For Grants Beginning July 31, 2019

I. INTRODUCTION

The following terms and conditions shall apply to Restricted Stock Unit Awards granted under the Plan and are subject to the terms and conditions of the Plan. This Statement of Terms and Conditions is intended to meet the requirements of Code Section 409A and any regulations and rules promulgated thereunder. In the event of any inconsistency between this Statement of Terms and Conditions and the Plan, the Plan shall govern. Capitalized terms not otherwise defined in this Statement of Terms and Conditions shall have the meaning set forth in the Plan.

II. RESTRICTED STOCK UNITS

1.Award Agreement. A Restricted Stock Unit Award granted to an Outside Director under the Plan shall be evidenced by a Restricted Stock Unit Agreement to be executed by the Outside Director and the Corporation setting forth the terms and conditions of the Restricted Stock Unit Award. Each Restricted Stock Unit Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions and together both documents shall constitute the Restricted Stock Unit Agreement. The Restricted Stock Units are also subject to the terms and conditions of the Plan.

2.Terms and Conditions. The Administrator administering the Plan has authority to determine the Outside Directors to whom, and the time or times at which, grants of Restricted Stock Units will be made, the number of Units to be awarded, and all other terms and conditions of such awards. With respect to annual Restricted Stock Unit Awards granted to Outside Directors under the Plan, such awards shall be subject to the following terms, conditions and restrictions.

(A)Grant Date. Each Outside Director may be granted a Restricted Stock Unit Award on the date of each annual meeting of stockholders. An Outside Director that is elected to the Board between annual meetings of stockholders may also be granted a Restricted Stock Unit Award on the date that the Board determines in its sole discretion.

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(B)Number of Units. Unless otherwise determined by the Board or the Governance Committee of the Board (the “Governance Committee”), the number of Units granted for the annual meeting grant will be determined by dividing the Fair Market Value of a Share on the date of grant into $180,000 (with any fractional Unit rounded up to the nearest whole Unit). In addition to such grant, unless otherwise determined by the Board or the Governance Committee, the Independent Chair shall be granted an annual meeting grant determined by dividing the Fair Market Value of a Share on the date of grant into $120,000 (with any fractional Unit rounded up to the nearest whole Unit). Notwithstanding the foregoing, in no event shall the aggregate number of Units granted to any Outside Director pursuant to such annual meeting grant or grants exceed 5,000. A newly elected Outside Director may receive a prorated annual meeting grant effective upon the date of the Outside Director’s election to the Board.

(C)No Restrictions. Each Restricted Stock Unit Award granted to an Outside Director will be fully vested on the date of grant.

3.Dividend Equivalents. Dividend equivalents in respect of Restricted Stock Units may be credited on behalf of an Outside Director to a deferred cash account or converted into additional Restricted Stock Units, which will be subject to all of the terms and conditions of the underlying Restricted Stock Unit Award. Currently, dividend equivalents in respect of Restricted Stock Units granted to Outside Directors are credited to a deferred cash account and accrue interest until such time as the underlying Shares are issued, at a rate for any calendar year determined by reference to the default interest rate applicable to compensation deferred under the McKesson Corporation Deferred Compensation Administration Plan III (“DCAP III”).

4.Assignability. An Outside Director shall not be permitted to sell, transfer, pledge, assign or encumber Restricted Stock Units, other than pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act.

5.No Stockholder Rights. Neither an Outside Director nor any person entitled to exercise an Outside Director’s rights in the event of the Outside Director’s death shall have any of the rights of a stockholder with respect to a Restricted Stock Unit Award except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to the underlying Shares paid upon the settlement of any Restricted Stock Unit Award as described in Section II.6 below.

6.Time of Payment of Restricted Stock Units. Except as noted in Section II.7 below, Restricted Stock Units granted to Outside Directors shall not be paid until after the Outside Director’s separation of service with the Corporation (“Automatic Deferral Requirement”). “Separation of service” shall have the meaning provided under DCAP III. Payment shall be made in Shares in the form of an appropriate book entry entered in the records of the Corporation’s transfer agent recording the Outside Director’s unrestricted interest in the number of Shares subject to the Restricted Stock Unit Award.

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7.Satisfaction of Director Stock Ownership Guidelines. For those Outside Directors who have met the Director Stock Ownership Guidelines in effect at the time, Restricted Stock Unit grants shall not be subject to the Automatic Deferral Requirement and such grants will be immediately converted into Shares and distributed to the Outside Director; provided, however, that the Outside Director may elect to defer receipt of the Shares underlying the Restricted Stock Units.

8.Deferrals of Restricted Stock Units. Deferrals of Restricted Stock Units, whether elective or pursuant to the Automatic Deferral Requirement, shall be subject to the terms and conditions of DCAP III.

III. MISCELLANEOUS

1.No Effect on Terms of Service with the Corporation. Nothing contained in this Statement of Terms and Conditions, the Plan or a Restricted Stock Unit Agreement shall affect the Corporation’s right to terminate the service of any Outside Director.

2.Grants to Outside Directors in Foreign Countries. If an Outside Director is not a United States citizen, the Board has the full discretion to deviate from this Statement of Terms and Conditions in order to adjust a Restricted Stock Unit Award to prevailing local conditions, including custom and legal and tax requirements. Furthermore, the Corporation reserves the right to impose other requirements on the Outside Director’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Corporation determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Outside Director to sign any additional agreements or undertaking that may be necessary to accomplish the foregoing.

3.Information Notification. Any information required to be given under the terms of a Restricted Stock Unit Award shall be addressed to the Corporation in care of its Corporate Secretary at McKesson Corporation, 6555 State Highway 161, Irving, Texas 75039, and any notice to be given to an Outside Director shall be addressed to the Outside Director at the address indicated beneath the Outside Director’s name on the Restricted Stock Unit Agreement or such other address as either party may designate in writing to the other. Any such notice shall be deemed to have been duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified and deposited (postage or registration or certification fee prepaid) in a post office or branch post office. The parties may use email delivery, so long as the message is clearly marked, sent to the email address(es) set forth herein. Email delivery will be deemed to occur when the sender receives confirmation that such message has been received and read by the recipient. Emails to the Corporation shall be delivered to CorpSecretary@McKesson.com.

4.Electronic Delivery. The Corporation may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or a third party designated by the Corporation.

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5.Administrator Decisions Conclusive. All decisions of the Administrator administering the Plan upon any questions arising under the Plan, under this Statement of Terms and Conditions, or under a Restricted Stock Unit Agreement, shall be conclusive and binding on all persons.

6.No Effect on Other Benefit Plans. Nothing herein contained shall affect an Outside Director’s right, if any, to participate in and receive benefits from and in accordance with the then current provisions of any benefit plan or program offered by the Corporation.

7.Withholding. Each Outside Director shall agree to make appropriate arrangements with the Corporation for satisfaction of any applicable federal, state or local income tax withholding requirements or payroll tax requirements, if any is required.

8.Data Privacy Information and Consent.

(A)Data Collection and Usage. The Corporation and the Employer may collect, process and use certain personal information about the Outside Director, including, but not limited to, the Outside Director’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any Shares held in the Corporation, details of all Restricted Stock Units or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Outside Director’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Outside Director’s consent.

(B)Stock Plan Administration Service Providers. The Corporation transfers Data to Fidelity Stock Plan Services LLC and its affiliated companies, an independent service provider based in the United States, which is assisting the Corporation with the implementation, administration and management of the Plan. The Corporation may select a different service provider or additional service providers and share Data with such other provider serving in a similar manner. The Outside Director may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

(C)International Data Transfers. The Corporation and its service providers are based in the United States. The Outside Director’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program. The Corporation’s legal basis, where required, for the transfer of Data isthe Outside Director’s consent.

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(D)Data Retention. The Corporation will hold and use the Data only as long as is necessary to implement, administer and manage the Outside Director’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws. In the latter case, the Outside Director understands and acknowledges that the Corporation’s legal basis for the processing of the Outside Director’s Data would be compliance with the relevant laws or regulations or the pursuit by the Corporation of respective legitimate interests not outweighed by the Outside Director’s interests, rights or freedoms. When the Corporation no longer needs the Outside Director’s Data for any of the above purposes, the Outside Director understands the Corporation will remove it from its systems.

(E)Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Outside Director is providing the consents herein on a purely voluntary basis. If the Outside Director does not consent, or if the Outside Director later seeks to revoke the Outside Director’s consent, the Outside Director’s retainer and fees from or services with the Corporation will not be affected; the only consequence of refusing or withdrawing the Outside Director’s consent is that the Corporation would not be able to grant Awards to the Outside Director or administer or maintain such Awards.

(F)Data Subject Rights. The Outside Director may have a number of rights under data privacy laws in the Outside Director’s jurisdiction. Depending on where the Outside Director is based, such rights may include the right to (i) inquire whether and what kind of Data the Corporation holds about the Outside Director and how it is processed, and to request access or copies of Data the Corporation processes, (ii) request the correction or supplementation of Data about the Outside Director that is inaccurate, incomplete or out-of-date in light of the purposes underlying the processing, (iii) obtain the erasure of Data no longer necessary for the purposes underlying the processing, processed based on withdrawn consent, processed for legitimate interests that, in the context of the Outside Director’s objection, do not prove to be compelling, or processed in non-compliance with applicable legal requirements, (iv) request restrictions on processing of Data in certain situations where the Outside Director feels its processing is inappropriate, (v) request portability of the Outside Director’s Data that the Outside Director has actively or passively provided to the Corporation (which does not include data derived or inferred from the collected data), where the processing of such Data is based on consent or the Outside Director’s service on the Board and is carried out by automated means, (vi) object, in certain circumstances, to the processing of Data for legitimate interests, (vii) lodge complaints with competent authorities in the Outside Director’s jurisdiction, and/or (viii) receive a list with the names and addresses of any potential recipients of Data. To receive clarification regarding these rights or to exercise these rights, the Outside Director can contact the Corporate Secretary.

By accepting the Award and indicating consent via the Corporation’s acceptance procedure, the Outside Director is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Corporation and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.

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Finally, the Outside Director understands that the Corporation may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Outside Director provide another data privacy consent form. If applicable and upon request of the Corporation, the Outside Director agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Corporation (or any other acknowledgements, agreements or consents that may be required by the Employer or the Corporation) that the Corporation and/or the Employer may deem necessary to obtain under the data privacy laws in the Outside Director’s country, either now or in the future. The Outside Director understands that the Outside Director will not be able to participate in the Plan if the Outside Director fails to execute any such acknowledgement, agreement or consent requested by the Corporation and/or the Employer.

9.Successors. This Statement of Terms and Conditions and the Restricted Stock Unit Agreements shall be binding upon and inure to the benefit of any successor or successors of the Corporation. “Outside Director” as used herein shall include the Outside Director’s Beneficiary.

10.Delaware Law. The interpretation, performance, and enforcement of this Statement of Terms and Conditions and all Restricted Stock Unit Agreements shall be governed by the laws of the State of Delaware.

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EXECUTIVE OFFICERS

McKESSON CORPORATION

STATEMENT OF TERMS AND CONDITIONS APPLICABLE TO

OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS

AND PERFORMANCE STOCK UNITS GRANTED TO EXECUTIVE OFFICERSPURSUANT TO THE 2013 STOCK PLAN

Effective for Grants Beginning May 21, 2019

I. INTRODUCTION

The following terms and conditions shall apply to an Award granted under the Plan and are subject to the terms and conditions of the Plan. This Statement of Terms and Conditions is intended to meet the requirements of Code Section 409A and any rules promulgated thereunder. In the event of any inconsistency between this Statement of Terms and Conditions and the Plan, the Plan shall govern. Capitalized terms not otherwise defined in this Statement of Terms and Conditions shall have the meaning set forth in the Plan.

II. OPTIONS

1.Option Agreement. An Option granted under the Plan shall be evidenced by an Option Agreement setting forth the terms and conditions of the Option, including whether the Option is an Incentive Stock Option or a Nonstatutory Stock Option and the number of Shares subject to the Option. Each Option Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Option Agreement. The Option is also subject to the terms and conditions of the Plan.

2.Exercise Price. The Exercise Price of an Option, as specified in the Option Agreement, shall be equal to or greater than the Fair Market Value of the Shares underlying the Option on the Grant Date.

3.Option Period. An Option shall be exercisable only during the applicable Option Period, and during such Option Period the exercisability of the Option shall be subject to the vesting provisions of Section II.4 as modified by the rules set forth in Sections II.5 and VI. The Option Period shall be not more than seven years from the Grant Date.

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4.Vesting of Right to Exercise Options.

(A)Subject to Sections II.5 and VI, an Option shall be exercisable during the Option Period in accordance with the vesting terms and conditions established on the Grant Date and specified in the Option Grant Notice.

(B)Any vested portion of an Option not exercised hereunder shall accumulate and be exercisable at any time on or before the Expiration Date, subject to the rules set forth in Sections II.5 and VI. No Option may be exercised for less than 5% of the total number of Shares then available for exercise under such Option. In no event shall the Corporation be required to issue fractional Shares.

5.Limits on Option Period and Acceleration of Vesting. The Option Period may end before the Expiration Date, and in certain circumstances the vesting schedule of an Option may be accelerated (subject to the provisions of Section VI), as follows:

(A)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period for reasons other than for Cause, Long-Term Disability, Normal Retirement, Early Retirement, Severance under the circumstances provided in Section II.5(F)(ii), or death, the Option Period shall end on the earlier of (i) 90 days after the date of the Participant’s termination of employment and (ii) the Expiration Date, and in all cases the Option shall be exercisable only to the extent that it was exercisable at the time of such termination of employment. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Notwithstanding any other provision in this Section II.5, if a Participant’s employment is terminated for Cause during the Option Period, the Option Period shall end on the date of such termination of employment and the Option shall thereupon not be exercisable to any extent whatsoever.

(C)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Long-Term Disability, the vesting schedule of the Participant’s Option shall be accelerated, the Option shall become fully exercisable and the Option Period shall end on the earlier of (i) three years after the date of the Participant’s termination of employment and (ii) the Expiration Date.

(D)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Early Retirement, (i) the Option shall be exercisable only to the extent that it was exercisable at the time of such retirement and (ii) the Option Period for that portion of the Option designated as a Nonstatutory Stock Option shall end on the earlier of (a) three years after the date of such retirement and (b) the Expiration Date.

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(E)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Normal Retirement:

(i)    If such Normal Retirement occurs prior to the first anniversary of the Grant Date of the Option, such Option shall be subject to the provisions of Section II.5(D) as though the Participant were eligible for Early Retirement; or

(ii)If such Normal Retirement occurs on or after the first anniversary of the Grant Date of an Option, (a) that portion of the Option designated as a Nonstatutory Stock Option shall continue to vest as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such vesting period, and (b) the Option Period for such portion of the Option designated as a Nonstatutory Stock Option shall end on the Expiration Date.

(F)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Severance, and

(i)The Participant has attained the requirements for Normal Retirement on or prior to the Participant’s termination date, then such Option shall be subject to the Normal Retirement provisions of Section II.5(E); or

(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, but would have attained the requirements for Normal Retirement within six months after the termination date, and

(a)The first anniversary of the Grant Date of the applicable Award has not occurred on or prior to the termination date, then such Option shall be subject to the Early Retirement provision in Section II.5(D); or

(b)The first anniversary of the Grant Date of the applicable Award has occurred on or prior to the termination date, then (x) that portion of the Option designated as a Nonstatutory Stock Option shall continue to vest as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such vesting period, and (y) the Option Period for such portion of the Option designated as a Nonstatutory Stock Option shall end on the Expiration Date; or

(iii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the termination date, then (a) the vesting schedule of the Participant’s Option shall be accelerated as to the portion of the Option that would have vested in accordance with the original vesting schedule as though the Participant had continued to be employed by the Corporation or one of its Affiliates six months after the termination date, and (b) the expiration of the Option Period provided in Section II.5(A) shall apply; provided that if the Participant is also eligible for Early Retirement at the time of the termination of employment, then the expiration of the Option Period provided in Section II.5(D) shall apply.

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(G)If a Participant should die (i) while in the employ of the Corporation or an Affiliate and (ii) during the Option Period, the vesting schedule of the Participant’s Option shall be accelerated and the Option shall become fully exercisable, the Option Period shall end on the earlier of (a) three years after the date of death and (b) the Expiration Date, and the Participant’s Beneficiary may exercise the entire unexercised portion of the then exercisable Shares covered by such Option (or any lesser amount) remaining on the date of death.

(H)If a Participant who ceases to be a bona fide employee of the Corporation or an Affiliate is subsequently rehired prior to the expiration of the Participant's Option, then the Option shall continue to remain outstanding until the earlier of (i) such time as the Participant subsequently terminates employment and (ii) the Expiration Date. Upon the Participant’s subsequent termination of employment, the post-termination exercise period calculated pursuant to the terms and conditions of this Section II.5 shall be reduced by the number of days between the date of the Participant’s initial termination of employment and the Participant's re-hire date; provided, however, that if the rehired Participant continues to be employed by the Corporation or an Affiliate for at least one year from the Participant's rehire date, then the post termination exercise period for the Option shall be determined in accordance with Sections II.5(A) through (G) and shall not be adjusted as described in this Section II.5(H).

6.Method of Exercise. A Participant may exercise an Option with respect to all or any part of the exercisable Shares as follows:

(A)By giving the Corporation, or its authorized representative designated for this purpose, written notice of such exercise specifying the number of Shares as to which the Option is so exercised. Such notice shall be accompanied by an amount equal to the Exercise Price multiplied by the number of Shares exercised, in the form of any one or combination of the following:  cash or a certified check, bank draft, postal or express money order payable to the order of the Corporation in lawful money of the United States. Unless otherwise determined by the Administrator in its sole discretion, the Participant may pay the Exercise Price, in whole or in part, by tendering to the Corporation or its authorized representative Shares, which have been owned by the Participant for at least six months prior to said tender, and having a fair market value, as determined by the Corporation, equal to the Exercise Price, or in lieu of the delivery of actual Shares in such tender, the Corporation may accept an attestation by the Participant, in a form prescribed by the Corporation or its authorized representative, that the Participant owns sufficient Shares of record or in an account in street name to satisfy the Exercise Price, and such attestation will be deemed a tender of Shares for purposes of this method of exercise. The Corporation or its authorized representative may accept payment of the amount due upon the exercise of the Option in the form of a Participant’s personal check. Payment may also be made by delivery (including by FAX transmission) to the Corporation or its authorized representative of an executed irrevocable Option exercise form together with irrevocable instructions to an approved registered investment broker to sell Shares in an amount sufficient to pay the Exercise Price plus any applicable Tax-Related Items (as defined in Section VIII.6) and to transfer the proceeds of such sale to the Corporation.

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(B)If required by the Corporation, by giving satisfactory assurance in writing, signed by the Participant, the Participant shall give the Participant's assurance that the Shares subject to the Option are being purchased for investment and not with a view to the distribution thereof; provided that such assurance shall be deemed inapplicable to (i) any sale of the Shares by such Participant made in accordance with the terms of a registration statement covering such sale, which has heretofore been (or may hereafter be) filed and become effective under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and with respect to which no stop order suspending the effectiveness thereof has been issued, and (ii) any other sale of the Shares with respect to which, in the opinion of counsel for the Corporation, such assurance is not required to be given in order to comply with the provisions of the Securities Act.

(C)As soon as practicable after receipt of the notice and the assurance described in Sections II.6(A) and (B), the Corporation shall, without transfer or issue tax (except for withholding tax arrangements contemplated in Section VIII.6) and without other incidental expense to the Participant, credit the purchased Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then the Corporation shall cause an appropriate book entry to be entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the purchased Shares; provided, however, that the time of such delivery may be postponed by the Corporation for such period as may be required for it with reasonable diligence to comply with applicable registration requirements under the Securities Act, the Exchange Act, any applicable listing requirements of any national securities exchange and requirements under any other law or regulation applicable to the issuance or transfer of the Shares.

7.Limitations on Transfer. An Option shall, during a Participant’s lifetime, be exercisable only by the Participant. No Option or any right granted thereunder shall be transferable by the Participant by operation of law or otherwise, other than by will or the laws of descent and distribution. Notwithstanding the foregoing: (A) a Participant may designate a beneficiary to succeed, after the Participant’s death, to all of the Participant’s Options outstanding on the date of death; (B) a Nonstatutory Stock Option may be transferable pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act; and (C) any Participant, who is a senior executive officer recommended by the Chief Executive Officer of the Corporation and approved by the Administrator may voluntarily transfer any Nonstatutory Stock Option to a Family Member as a gift or through a transfer to an entity in which more than 50% of the voting interests are owned by Family Members (or the Participant) in exchange for an interest in that entity. In the event of any attempt by a Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of an Option or of any right thereunder, except as provided herein, or in the event of the levy of any attachment, execution, or similar process upon the rights or interest hereby conferred, the Corporation at its election may terminate the affected Option by notice to the Participant and the Option shall thereupon become null and void.

8.No Stockholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to the Shares subject to an Option except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to such Shares upon the exercise of an Option.

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III. RESTRICTED STOCK

1.Restricted Stock Agreement. A Restricted Stock Award granted under the Plan shall be evidenced by a Restricted Stock Agreement to be executed by the Participant and the Corporation setting forth the terms and conditions of the Restricted Stock Award. Each Restricted Stock Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Restricted Stock Agreement. The Restricted Stock Award is also subject to the terms and conditions of the Plan.

2.Rights with Respect to Shares of Restricted Stock. Upon written acceptance of a Restricted Stock Award by a Participant, including the restrictions and other terms and conditions described in the Plan and the Restricted Stock Agreement, the Corporation shall cause an appropriate book entry to be entered in the records of the Corporation’s transfer agent recording the Participant’s interest in the Restricted Stock. From and after the Grant Date, the Participant shall have the rights of Common Stock ownership, including the right to vote and to receive dividends on Shares of Restricted Stock, subject to the terms, conditions and restrictions described in the Plan and the Restricted Stock Agreement.

3.Special Restrictions. Each Restricted Stock Award made under the Plan shall be subject to the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Administrator; provided, however, that no Restricted Stock grant shall be subject to additional terms, conditions and restrictions which are more favorable to a Participant than the terms, conditions and restrictions set forth elsewhere in the Plan or the Restricted Stock Agreement.

(A)Restrictions. Until the restrictions imposed on any Restricted Stock grant shall lapse (the “Restriction Period”), Shares of Restricted Stock granted to a Participant (i) shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of, other than pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act and (ii) shall, if the Participant’s continuous employment with the Corporation or any of its Affiliates shall terminate for any reason (except as otherwise provided in the Plan, or in Section III.3(B) or Section III.3(C)) be returned to the Corporation forthwith, and all the rights of the Participant to such Shares shall immediately terminate. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short‑Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision to the contrary contained in the Restricted Stock Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of a Restricted Stock Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of:

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(i)Death or Long-Term Disability, then the restrictions imposed on any Restricted Stock Award shall lapse as to all Shares granted to such Participant pursuant to such Restricted Stock Award on the date of such termination; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date of any time-vesting Restricted Stock Award, the restrictions applicable to such Restricted Stock Award shall continue to lapse at such time(s) as are set forth in the applicable Grant Notice, as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such restricted period; provided, that notwithstanding any other provision of the Plan or this Statement of Terms and Conditions, this Section III.3(B)(ii) shall not apply to any Restricted Stock Award the vesting of which is based, in whole or in part, on attainment of performance objectives. The procedures set forth in Section VIII.6 will be applied for any taxes due upon the lapse of restrictions imposed on a Restricted Stock Award due to a Participant’s Normal Retirement eligibility.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary contained in the Restricted Stock Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of a Restricted Stock Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and:

(i)The Participant either (a) has attained the requirements for Normal Retirement on or prior to the Participant’s termination date or (b) would have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then any time-vesting Restricted Stock Award shall be subject to the Normal Retirement provisions of Section III.3(B)(ii); or

(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then the restrictions applicable to any time-vesting Restricted Stock Award shall lapse upon the Participant’s termination date, as to such Shares of Restricted Stock that would have vested at such time(s) as are set forth in the applicable Grant Notice as if the Participant had continued to be employed by the Corporation or one of its Affiliates during the six-month period after the Participant’s termination date.

Notwithstanding the foregoing, this Section III.3(C) shall not apply to any Restricted Stock Award the vesting of which is based, in whole or in part, on attainment of performance objectives. The procedures set forth in Section VIII.6 will be applied for any taxes due upon the lapse of restrictions imposed on a Restricted Stock Award due to a Participant’s Normal Retirement eligibility.

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(D)Restriction on Sale. The Administrator reserves the right to impose a restriction on the sale of Shares that the Participant receives upon the vesting and settlement of a Restricted Stock Award, unless the Participant has satisfied the ownership targets applicable to the Participant as provided in the Stock Ownership Policy.

4.Dividends. Cash dividends paid with respect to Restricted Stock during the Restriction Period shall be credited on behalf of the Participant to a deferred cash account (in a manner designed to comply with Code Section 409A) and the restrictions on such cash dividends shall lapse at the same time that the restrictions lapse on the associated Restricted Stock Award. Stock dividends paid with respect to Restricted Stock during the Restriction Period shall be treated as Restricted Stock which shall be subject to the same restrictions as the original award for the duration of the Restriction Period.

5.Election to Recognize Gross Income in the Year of Grant. If any Participant validly elects within 30 days of the Grant Date, to include in gross income for federal income tax purposes an amount equal to the fair market value of the Shares of Restricted Stock granted on the Grant Date, such Participant shall (at the same time or prior to the date that the Participant files the Participant's election with the Internal Revenue Service) (A) pay to the Corporation, or make arrangements satisfactory to the Administrator to pay to the Corporation in the year of such grant, any federal, state or local taxes required to be withheld with respect to such Shares in accordance with Section VIII.6, and (B) provide the Administrator with a copy of the election filed with the Internal Revenue Service.

6.Restrictive Legend. Each book entry in the records of the Corporation’s transfer agent evidencing Shares granted pursuant to a Restricted Stock grant may bear an appropriate legend referring to the terms, conditions and restrictions described in the Plan and/or the Restricted Stock Agreement.

7.Expiration of Restriction Period. If and when the Restriction Period applicable to the Restricted Stock expires without a prior forfeiture, Shares shall be credited to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then an appropriate book entry recording the Participant’s interest in the unrestricted Shares shall be entered on the records of the Corporation’s transfer agent.

IV. RESTRICTED STOCK UNITS

1.Restricted Stock Unit Agreement. Restricted Stock Units granted under the Plan shall be evidenced by a Restricted Stock Unit Agreement to be executed by the Participant and the Corporation setting forth the terms and conditions of the Restricted Stock Units. Each Restricted Stock Unit Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Restricted Stock Unit Agreement. The Restricted Stock Units are also subject to the terms and conditions of the Plan.

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2.Special Restrictions. Restricted Stock Units granted under the Plan shall be subject to the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Administrator, consistent with the terms of the Plan.

(A)Restrictions. If a Participant ceases to be a bona fide employee of the Corporation or any Affiliate (except as otherwise provided in the Plan, or in Section IV.2(B) or Section IV.2(C)) prior to the lapse of the restrictions imposed on the Award, the unvested Restricted Stock Units shall be canceled, and all the rights of the Participant to such Awards shall immediately terminate. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision contained to the contrary in the Restricted Stock Unit Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of such Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of:

(i)Death or Long-Term Disability, then the restrictions imposed on any Award of Restricted Stock Units shall lapse on the date of such termination; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date of any time-vesting Restricted Stock Units, the restrictions applicable to such Restricted Stock Units shall continue to lapse at such time(s) as are set forth in the applicable Grant Notice, as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such restricted period.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary contained in the Restricted Stock Unit Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of a Restricted Stock Unit Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and:

(i)The Participant either (a) has attained the requirements for Normal Retirement on or prior to the Participant’s termination date or (b) would have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then any time-vesting Restricted Stock Unit Award shall be subject to the Normal Retirement provisions of Section IV.2(B)(ii); or

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(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then the restrictions applicable to any time-vesting Restricted Stock Unit Award shall lapse upon the termination date, as to such Restricted Stock Units that would have vested at such time(s) as are set forth in the applicable Grant Notice as if the Participant had continued to be employed by the Corporation or one of its Affiliates during the six-month period after the termination date.

(D)Restriction on Sale. The Administrator reserves the right to impose a restriction on the sale of Shares that the Participant receives upon the settlement of Restricted Stock Units, unless the Participant has satisfied the ownership targets applicable to the Participant as provided in the Stock Ownership Policy.

3.Dividend Equivalents. Subject to the discretion of the Compensation Committee, dividend equivalents shall be credited in respect of Restricted Stock Units. Cash dividends shall be credited on behalf of the Participant to a deferred cash account (in a manner designed to comply with Code Section 409A) and the restrictions on such cash dividends shall lapse at the same time that the restrictions lapse on the associated Award of Restricted Stock Units, and cash dividends, along with accrued interest (if any) on such cash dividends, shall be paid in a lump sum at the same time that the Shares underlying the Restricted Stock Unit Award, and to which the cash dividends relate, are distributed. Stock dividends shall be converted into additional Restricted Stock Units, which will be subject to all of the terms and conditions of the underlying Restricted Stock Units, including the same vesting restrictions as the underlying Award.

4.Assignability. A Participant shall not be permitted to sell, transfer, pledge, assign or encumber Restricted Stock Units, other than pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act.

5.No Stockholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to an Award of Restricted Stock Units except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to the Shares paid upon the settlement of any vested Restricted Stock Units.

6.Time of Payment of Restricted Stock Units. Upon the lapse of the restriction imposed on Restricted Stock Units, all Restricted Stock Units that were not forfeited pursuant to Section IV.2(A), Section IV.2(B)(i), Section IV.2(C)(i), or Section VI shall be paid to the Participant as soon as reasonably practicable after the restrictions lapse. Payment shall be made in Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then in the form of an appropriate book entry entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the number of Shares subject to the Restricted Stock Units.

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Notwithstanding the foregoing, if a Participant becomes eligible for Normal Retirement, or is eligible for additional vesting under Section IV.2(C)(ii), prior to the date of the lapse of restrictions imposed on Restricted Stock Units and the vesting provisions of Section IV.2(B)(ii) or Section IV.2(C)(ii) apply, then such Restricted Stock Units shall be paid to the Participant’s brokerage account of record as soon as reasonably practicable after the earlier of the Participant’s Separation from Service or the originally scheduled vesting date (in any event before the end of the calendar year in which such date occurs), subject to the delay of payment (if applicable) provided in Section VIII.14. The procedures set forth in Section VIII.6 will be applied for any taxes due upon the lapse of restrictions imposed on a Restricted Stock Unit Award due to a Participant’s Normal Retirement eligibility or additional vesting as provided in Section IV.2(C)(ii).

V. PERFORMANCE STOCK UNITS

1.Award Agreement. Performance Stock Unit Awards shall be evidenced by a Performance Stock Unit Agreement to be executed by the Participant and the Corporation setting forth the terms and conditions of the Performance Stock Unit Award. Performance Stock Unit Awards are “Other Share-Based Awards” as provided under Section 11 of the Plan. Each Performance Stock Unit Agreement shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Performance Stock Unit Agreement. Performance Stock Unit Awards are also subject to the terms and conditions of the Plan.

2.Number of Shares Granted Based on Performance. The performance period of a Performance Stock Unit Award shall be greater than one year, and performance shall be based on such criteria as the Compensation Committee shall determine in its discretion at the beginning of the performance period. Following the end of the performance period, the Compensation Committee shall determine the extent to which the criteria have been achieved, and shall authorize the grant and issuance of Shares in respect of the Performance Stock Unit Award.

3.Special Conditions. Performance Stock Unit Awards shall be subject to the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Compensation Committee, consistent with the terms of the Plan.

(A)Forfeiture. If a Participant ceases to be a bona fide employee of the Corporation or any Affiliate (except as otherwise provided in the Plan or in Section V.3(B) or Section V.3(C)) prior to the end of the performance period, any then-outstanding Performance Stock Units shall be canceled, and all the rights of the Participant to such Award shall immediately terminate. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Compensation Committee may otherwise expressly determine.

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(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision contained herein or in the Plan or the Award Agreement to the contrary, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of such Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of:

(i)Death or Long-Term Disability, the Participant shall be eligible to receive, following completion of the applicable performance period, a prorated portion of each such Performance Stock Unit Award, equal to (1) the target number of Performance Stock Units subject to such Award, multiplied by (2) the performance criteria determined by the Compensation Committee to apply to such Award, multiplied by (3) a fraction, the numerator of which is the number of whole calendar months, rounded down to the nearest whole month, during which the Participant provided Service to the Corporation or an Affiliate during the performance period applicable to such Award, and the denominator of which is the number of calendar months in such performance period; provided, that for purposes of this clause (3), “whole calendar months” shall be calculated commencing on the applicable Grant Date; provided, however, that in no event shall such amount exceed any applicable cap or limitation set forth in the Performance Stock Unit Grant Notice; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date, the Participant shall be eligible to vest in such Performance Stock Unit Award following completion of the applicable performance period, as though the Participant had continued to be employed by the Corporation or one of its Affiliates through the date on which the Compensation Committee determines performance against the applicable performance goals.

Amounts, if any, to be paid under this Section V.3(B) shall be paid in accordance with Section V.7 and, if applicable, Section VIII.14.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary, if the Participant has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date and ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and:

(i)The Participant either (a) has attained the requirements for Normal Retirement on or prior to the Participant’s termination date or (b) would have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then any Performance Stock Unit Award shall be subject to the Normal Retirement provisions of Section V.3(B)(ii); or

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(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then if such Participant’s termination date is no greater than six months prior to the date on which the Compensation Committee determines performance against the applicable performance goals, such Participant shall be eligible to vest in such Performance Stock Unit Award following completion of the applicable performance period, as though the Participant had continued to be employed by the Corporation or one of its Affiliates through such performance determination date.

Amounts, if any, to be paid under this Section V.3(C) shall be paid in accordance with Section V.7 and, if applicable, Section VIII.14.

(D)Restriction on Sale of Shares. The Administrator reserves the right to impose a restriction on the sale of Shares that the Participant receives with respect to the settlement of a Performance Stock Unit Award, unless the Participant has satisfied the ownership targets applicable to the Participant as provided in the Stock Ownership Policy.

4.Dividend Equivalents. Unless otherwise determined by the Compensation Committee in its sole discretion, Dividend Equivalents shall not be accrued with respect to Performance Stock Unit Awards during the performance period.

5.Assignability. A Participant shall not be permitted to sell, transfer, pledge, assign or encumber all or any portion of a Performance Stock Unit Award.

6.No Stockholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to a Performance Stock Unit Award, except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to the Shares paid upon the settlement of any Performance Stock Unit Award.

7.Time of Payment of Performance Stock Units. The Compensation Committee shall determine the extent to which Shares are payable pursuant to a Performance Stock Unit Award as soon as practicable following the end of the performance period, and such Shares shall be paid as soon as practicable thereafter and in any event no later than the end of the period under which payment would be deemed to be a “short-term deferral” as defined in the regulations under Code Section 409A. Payment shall be made in the form of Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then in the form of an appropriate book entry entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the number of Shares earned pursuant to the Performance Stock Unit Award.

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VI. SPECIAL FORFEITURE AND REPAYMENT RULES

Any other provision of this Statement of Terms and Conditions to the contrary notwithstanding, if the Administrator determines that a Participant has engaged in any of the actions described in 3 below, the consequences set forth in 1 and 2 below shall result:

1.Any outstanding Option shall immediately and automatically terminate, be forfeited and shall cease to be exercisable, without limitation. In addition, any Award of Restricted Stock or Restricted Stock Units as to which the restrictions have not lapsed shall immediately and automatically be forfeited, Performance Stock Unit Awards shall immediately and automatically be forfeited and any such Shares of Restricted Stock shall be returned to the Corporation and all of the rights of the Participant to such Awards and the underlying Shares shall immediately terminate.

2.If the Participant exercised an Option within 12 months prior to the date upon which the Corporation discovered that the Participant engaged in any actions described in 3 below, the Participant, upon written notice from the Corporation, shall immediately pay to the Corporation the economic value realized or obtained by the exercise of such Option measured at the date of exercise. In addition, if the restrictions imposed on any Award of Restricted Stock or Restricted Stock Units (including any unpaid dividends or Dividend Equivalents) lapsed, or any Performance Stock Unit Award was settled, within 12 months prior to the date the Corporation discovered that the Participant engaged in any action described in 3 below, the Participant, upon written notice from the Corporation, shall immediately pay to the Corporation the economic value realized or obtained with respect to such Award, measured at the date such Award vested.

3.The consequences described in 1 and 2 above shall apply if the Participant, either before or after termination of employment with the Corporation or its Affiliates:

(A)Discloses to others, or takes or uses for the Participant’s own purpose or the purpose of others, any trade secrets, confidential information, knowledge, data or know‑how or any other proprietary information or intellectual property belonging to the Corporation or its Affiliates and obtained by the Participant during the term of the Participant’s employment, whether or not they are the Participant’s work product. Examples of such confidential information or trade secrets include, without limitation, customer lists, supplier lists, pricing and cost data, computer programs, delivery routes, advertising plans, wage and salary data, financial information, research and development plans, processes, equipment, product information and all other types and categories of information as to which the Participant knows or has reason to know that the Corporation or its Affiliates intends or expects secrecy to be maintained;

(B)Fails to promptly return all documents and other tangible items belonging to the Corporation or its Affiliates in the Participant’s possession or control, including all complete or partial copies, recordings, abstracts, notes or reproductions of any kind made from or about such documents or information contained therein, upon termination of employment, whether pursuant to retirement or otherwise;

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(C)Fails to provide the Corporation with at least 30 days’ written notice prior to directly or indirectly engaging in, becoming employed by, or rendering services, advice or assistance to any business in competition with the Corporation or its Affiliates. As used herein, “business in competition” means any person, organization or enterprise which is engaged in or is about to become engaged in any line of business engaged in by the Corporation or its Affiliates at the time of the termination of the Participant’s employment with the Corporation or its Affiliates;

(D)Fails to inform any new employer, before accepting employment, of the terms of this paragraph and of the Participant’s continuing obligation to maintain the confidentiality of the trade secrets and other confidential information belonging to the Corporation or its Affiliates and obtained by the Participant during the term of the Participant’s employment with the Corporation or any of its Affiliates;

(E)Induces or attempts to induce, directly or indirectly, any of the customers of the Corporation or its Affiliates, employees, representatives or consultants to terminate, discontinue or cease working with or for the Corporation or its Affiliates, or to breach any contract with the Corporation or any of its Affiliates, in order to work with or for, or enter into a contract with, the Participant or any third party;

(F)Engages in conduct which is not in good faith and which disrupts, damages, impairs or interferes with the business, reputation or employees of the Corporation or its Affiliates; or

(G)Fails to meet the Participant’s continuing obligations with respect to non-disclosure, non-competition and/or non-solicitation under the Participant’s agreement with the Corporation or any Affiliate.

The Administrator shall determine in its sole discretion whether the Participant has engaged in any of the acts set forth in (A) through (G) above, and its determination shall be conclusive and binding on all interested persons.

Any provision of this Section VI which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such invalid or unenforceable provision, without invalidating or rendering unenforceable the remaining provisions of this Section VI.

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VII. CHANGE IN CONTROL

If as a result of a Change in Control, the Common Stock ceases to be listed for trading on a national securities exchange (an “Exchange”), any Option, Restricted Stock Award, Restricted Stock Unit Award or Performance Stock Unit Award that is unvested on the effective date of the Change in Control shall continue to vest according to the terms and conditions of such Award, provided that such Award is replaced with an award for voting securities of the resulting corporation or the acquiring corporation, as the case may be, (including without limitation, the voting securities of any corporation which as a result of the Change in Control owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) (the “Surviving Company”) which are traded on an Exchange (a “Replacement Award”), which Replacement Award, (i) in the case of an Option, shall consist of an option with the number of underlying shares and exercise price determined in a manner consistent with Code Section 424(a) with vesting and any other terms continuing in the same manner as the replaced Option; (ii) in the case of a Performance Stock Unit Award, shall consist of restricted stock or restricted stock units with a value (determined using the Surviving Company’s stock price as of the effective date of the Change in Control) equal to the value of the Performance Stock Unit Award (determined using the Corporation’s stock price and assuming attainment of target performance or actual performance achieved, if greater, as of the effective date of the Change in Control), with any restrictions on such Replacement Award lapsing at the end of the measuring period over which performance for the replaced Performance Stock Unit Award was to be measured prior to the granting of the Replacement Award; and (iii) in the case of a Restricted Stock Award or Restricted Stock Unit Award, shall consist of restricted stock or restricted stock units with a value (determined using the Surviving Company’s stock price as of the effective date of the Change in Control) equal to the value of the Restricted Stock Award or Restricted Stock Unit Award (determined using the Corporation’s stock price as of the effective date of the Change in Control), with any restrictions on such restricted stock or restricted stock units lapsing at the same time and manner as the replaced Award; provided, however, that in the event of the Participant’s involuntary Separation from Service by the Corporation without Cause or Separation from Service by the Participant for Good Reason during the vesting period of any Replacement Award, the Replacement Award shall immediately vest and be paid as soon as practicable following such Separation from Service (subject to Section VIII.14), based on the fair market value of the underlying shares on the vesting date, or in the case of options, based on the excess of the fair market value of the underlying shares over the option exercise price on the vesting date. If any Option, Restricted Stock Award, Restricted Stock Unit Award or Performance Stock Unit Award that is unvested at the effective time of the Change in Control is not replaced with a Replacement Award, such Award shall immediately vest and, in the case of a Performance Stock Unit Award, shall vest based upon deemed attainment of target performance or actual performance achieved, if greater.

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If as a result of a Change in Control, the Common Stock continues to be listed for trading on an Exchange, any unvested Option, Restricted Stock Award, or Restricted Stock Unit Award shall continue to vest according to the terms and conditions of such Award and any Performance Stock Unit Award shall be replaced with a Restricted Stock Unit Award where the number of shares subject to such Restricted Stock Unit Award shall be equal to the number of Shares assuming attainment of target performance or actual performance achieved, if greater, as of the effective date of the Change in Control with any restrictions on such Restricted Stock Unit Award lapsing at the end of the measuring period over which performance for the replaced Performance Stock Unit Award was to be measured prior to the granting of the replacement Award; provided however, that, in the event of the Participant’s involuntary Separation from Service by the Corporation without Cause or Separation from Service by the Participant for Good Reason during the vesting period of an Award, such Award shall immediately vest and be paid as soon as practicable following such Separation from Service (subject to Section VIII.14).

VIII. MISCELLANEOUS

1.No Effect on Terms of Employment. Participation in the Plan shall not create a right to further employment with the Participant’s employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate, with or without cause, or change the terms of employment of a Participant at any time.

2.Grants to Participants in Foreign Countries. In making grants to Participants in foreign countries, the Administrator has the full discretion to deviate from this Statement of Terms and Conditions in order to adjust grants under the Plan to prevailing local conditions, including custom and legal and tax requirements. Furthermore, the Corporation reserves the right to impose other requirements on the Participant’s participation in the Plan on the Award and on any Shares acquired under the Plan, to the extent the Corporation determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertaking that may be necessary to accomplish the foregoing.

3.Information Notification. Any information required to be given under the terms of an Award shall be addressed to the Corporation in care of its Corporate Secretary at McKesson Corporation, 6555 North Highway 161, Irving, Texas 75039, and any notice to be given to a Participant shall be addressed to such Participant at the address indicated beneath the Participant's name on the Award Agreement or such other address as either party may designate in writing to the other. Any such notice shall be deemed to have been duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified and deposited (postage or registration or certification fee prepaid) in a post office or branch post office. The parties may use email delivery, so long as the message is clearly marked, sent to the email address(es) set forth herein, and a delivery receipt and a read receipt are made part of the message.  Email delivery will be deemed to occur when the sender receives confirmation that such message has been received and read by the recipient. Emails to the Corporation shall be delivered to CorpSecretary@mckesson.com.

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4.Administrator Decisions Conclusive. All decisions of the Administrator administering the Plan upon any questions arising under the Plan or under an Award Agreement, shall be conclusive and binding on all interested persons.

5.No Effect on Other Benefit Plans. Nothing herein contained shall affect a Participant’s right to participate in and receive benefits from and in accordance with the then current provisions of any pensions, insurance or other employment welfare plan or program offered by the Corporation.

6.Withholding. Regardless of any action the Corporation or the Employer takes with respect to any federal, state or local income tax, social insurance, payroll tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains the Participant's responsibility and may exceed the amount actually withheld by the Corporation or the Employer. The Participant further acknowledges that the Corporation and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant, vesting or exercise of the Award, as applicable, the subsequent sale of Shares acquired pursuant to the Plan and the receipt of any dividends and/or dividend equivalents; and (2) do not commit and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant has become subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable event, the Participant acknowledges that the Corporation and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

Prior to any relevant taxable or tax withholding event, as applicable, the Participant will pay or make adequate arrangements satisfactory to the Corporation and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: (1) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Corporation and/or the Employer; (2) withholding from proceeds of the sale of Shares acquired under the Plan either through a voluntary sale or through a mandatory sale arranged by the Corporation (on the Participant’s behalf pursuant to this authorization and any other authorization the Corporation and/or the broker designated by the Corporation may require the Participant to sign in connection with the sale of Shares); or (3) withholding Shares to be issued upon grant, vesting/settlement or exercise, as applicable. Calculation of the number of Shares to be withheld shall be made based on the closing price of the Common Stock on the New York Stock Exchange on the date that the amount of tax to be withheld is determined. In no event, however, shall the Corporation be required to issue fractional Shares. With respect to an Award other than an Option, if adequate arrangements to satisfy the obligations with regard to all Tax-Related Items are not made by the Participant with the Corporation and/or the Employer prior to the relevant taxable event, the Corporation will satisfy such obligations as provided above in clause (3) of this paragraph.

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To avoid negative accounting treatment, the Corporation may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant will be deemed to have been issued the full number of Shares subject to the Award, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of the Participant’s participation in the Plan.

Finally, the Participant shall pay to the Corporation or the Employer any amount of Tax-Related Items that the Corporation or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Corporation may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if the Participant fails to comply with the Participant's obligations in connection with the Tax-Related Items.

The Administrator shall be authorized to establish such rules, forms and procedures as it deems necessary to implement the foregoing.

7.Successors. The Award Agreements shall be binding upon and inure to the benefit of any successor or successors of the Corporation. “Participant” as used herein shall include the Participant’s Beneficiary.

8.Delaware Law. The interpretation, performance, and enforcement of all Award Agreements shall be governed by the laws of the State of Delaware.

9.Nature of Grant. In accepting the grant, the Participant acknowledges that:

(A)the Plan is established voluntarily by the Corporation, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Corporation at any time;

(B)the grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future Award grants, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past;

(C)all decisions with respect to future Awards, if any, will be at the sole discretion of the Corporation;

(D)the Participant is voluntarily participating in the Plan;

(E)the Award and the Shares subject to the Award, and the income from and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;

(F)the Award will not be interpreted to form an employment contract or relationship with the Corporation; and furthermore, the Award will not be interpreted to form an employment contract with any subsidiary or Affiliate of the Corporation;

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(G)the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;

(H)if the underlying Shares do not increase in value, the Options will have no value;

(I)in consideration of the grant of the Award, no claim or entitlement to compensation or damages shall arise from forfeiture of the Award which results from termination of the Participant’s employment with the Employer or the Corporation or one of its Affiliates (for any reason whatsoever, and whether or not such forfeiture is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any) and the Participant irrevocably releases the Corporation or its Affiliates from any such claim that may arise; provided that, notwithstanding the foregoing, in the event any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the Award, the Participant shall be deemed irrevocably to have waived the Participant's entitlement to pursue such claim;

(J)for purposes of an Award, the Participant’s employment relationship will be considered terminated as of the date the Participant is no longer a bona fide employee of the Corporation, the Employer or one of the Corporation’s other Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and unless otherwise expressly provided in this Award Agreement or determined by the Corporation in its sole discretion, the Participant’s right to receive Awards and vest in Awards under the Plan, if any, will terminate effective as of such date and will not be extended by any notice period mandated under local law (for example, the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any); similarly, any right to exercise Options under the Plan after termination of employment will be measured as of the date the Participant is no longer a bona fide employee of the Corporation, the Employer or one of the Corporation’s other Affiliates and will not be extended by any notice period mandated under local law; the Administrator shall have the sole discretion to determine when the Participant is no longer a bona fide employee for purposes of an Award (including whether the Participant may still be considered to be providing services while on a leave of absence);

(K)the Corporation is not providing any tax, legal or financial advice, nor is the Corporation making any recommendations regarding participation in the Plan or the Participant’s acquisition or sale of Shares; and

(L)Participant is hereby advised to consult with the Participant's own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.

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10.Data Privacy Information and Consent.

(A)Data Collection and Usage. The Corporation and the Employer may collect, process and use certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any Shares or directorships held in the Corporation, details of all Options, Restricted Stock, Restricted Stock Units, Performance Shares, Other Share-Based Awards, or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Employee’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Participant’s consent.

(B)Stock Plan Administration Service Providers. The Corporation transfers Data to Fidelity Stock Plan Services LLC and its affiliated companies, an independent service provider based in the United States, which is assisting the Corporation with the implementation, administration and management of the Plan. The Corporation may select a different service provider or additional service providers and share Data with such other provider serving in a similar manner. The Participant may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

(C)International Data Transfers. The Corporation and its service providers are based in the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program. The Corporation’s legal basis, where required, for the transfer of Data isthe Participant’s consent.

(D)Data Retention. The Corporation will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws. In the latter case, the Participant understands and acknowledges that the Corporation’s legal basis for the processing of the Participant’s Data would be compliance with the relevant laws or regulations or the pursuit by the Corporation of respective legitimate interests not outweighed by the Participant’s interests, rights or freedoms. When the Corporation no longer needs the Participant’s Data for any of the above purposes, the Participant understands the Corporation will remove it from its systems.

(E)Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s salary from or employment with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Corporation would not be able to grant Awards to the Participant or administer or maintain such Awards.

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(F)Data Subject Rights. The Participant may have a number of rights under data privacy laws in the Participant’s jurisdiction. Depending on where the Participant is based, such rights may include the right to (i) inquire whether and what kind of Data the Corporation holds about the Participant and how it is processed, and to request access or copies of Data the Corporation processes, (ii) request the correction or supplementation of Data about the Participant that is inaccurate, incomplete or out-of-date in light of the purposes underlying the processing, (iii) obtain the erasure of Data no longer necessary for the purposes underlying the processing, processed based on withdrawn consent, processed for legitimate interests that, in the context of the Participant’s objection, do not prove to be compelling, or processed in non-compliance with applicable legal requirements, (iv) request restrictions on processing of Data in certain situations where the Participant feels its processing is inappropriate, (v) request portability of the Participant’s Data that the Participant has actively or passively provided to the Corporation (which does not include data derived or inferred from the collected data), where the processing of such Data is based on consent or the Participant’s employment and is carried out by automated means, (vi) object, in certain circumstances, to the processing of Data for legitimate interests, (vii) lodge complaints with competent authorities in the Participant’s jurisdiction, and/or (viii) receive a list with the names and addresses of any potential recipients of Data. To receive clarification regarding these rights or to exercise these rights, the Participant can contact his or her local human resources representative.

By accepting the Award and indicating consent via the Corporation’s acceptance procedure, the Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Corporation and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.

Finally, the Participant understands that the Corporation may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Participant provide another data privacy consent form. If applicable and upon request of the Corporation, the Participant agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Corporation (or any other acknowledgements, agreements or consents that may be required by the Employer or the Corporation) that the Corporation and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands that the Participant will not be able to participate in the Plan if the Participant fails to execute any such acknowledgement, agreement or consent requested by the Corporation and/or the Employer.

11.Severability. The provisions in this Statement of Terms and Conditions are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

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12.Language. The Participant acknowledges that the Participant is proficient in the English language and, accordingly, understands the provisions of the Plan and this Statement of Terms and Conditions. If the Participant has received this Statement of Terms and Conditions or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

13.Electronic Delivery. The Corporation may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or a third party designated by the Corporation.

14.Section 409A. If (A) the Participant is a Specified Employee at the time of the Participant’s Separation from Service, and (B) some or any portion of the amounts payable to the Participant, if any, when considered together with any other payments or benefits which may be considered deferred compensation under section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and subject to the plan aggregation rules under Treasury Regulation section 1.409A-1(c)(3)(viii) (together, the “Deferred Compensation Benefits”) would result in the imposition of additional tax under Section 409A if paid to the Participant on or within the six month period following the Separation from Service, then to the extent such portion of the Deferred Compensation Benefits resulting in the imposition of additional tax would otherwise have been payable on or within the first six months following the Separation from Service, it will instead become payable on the first payroll date that occurs in the seventh month following the Separation from Service (or such longer period as is required to avoid the imposition of additional tax under Section 409A). All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit.

IX. DEFINITIONS

When capitalized in this Statement of Terms and Conditions, the following terms shall have the meaning set forth below:

1.“Award Agreement” means an agreement between the Participant and the Corporation evidencing the grant of an Option, Restricted Stock Award, Restricted Stock Award, Performance Shares or Other Share-Based Award, as applicable.

2.“Cause” means termination of the Participant’s employment with the Corporation or an Affiliate upon the Participant’s negligent or willful engagement in misconduct which, in the sole determination of the Chief Executive Officer of the Corporation (or the Chief Executive Officer’s designee), is injurious to the Corporation, its employees, or its customers.

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3.“Early Retirement” means a termination of employment (other than due to death, Long-Term Disability or for Cause) which occurs prior to Normal Retirement but on or after the date on which the Participant’s age (expressed in terms of years and completed months) plus service with the Corporation or an Affiliate equals 65. For purposes of determining eligibility for Early Retirement, the term “service” shall include years and completed whole months of service.

4.“Family Member” means any person identified as an “immediate family” member in Rule 16(a)‑1(e) of the Exchange Act, as such Rule may be amended from time to time. Notwithstanding the foregoing, the Administrator may designate any other person(s) or entity(ies) as a “family member.”

5.    “Good Reason” means any of the following actions, if taken without the express written consent of the Participant:

(A)    Any material change by the Corporation in the Participant’s functions, duties, or responsibilities, which change would cause the Participant’s position with the Corporation to become of less dignity, responsibility, importance, or scope from the position and attributes that applied to the Participant immediately prior to the Change in Control;

(B)    Any significant reduction in the Participant’s aggregate base annual salary and target incentive opportunity, as in effect immediately prior to the Change in Control;

(C)    Any material failure by the Corporation to comply with any of the provisions of an Award subsequent to a Change in Control;

(D)    The Corporation’s requiring the Participant to be based at any location which would increase the Participant’s regular one-way commute by more than 25 miles from that in effect immediately preceding the Change in Control, except for travel reasonably required in the performance of the Participant’s responsibilities; or

(E)    Any change in the person to whom the Participant reports, as this relationship existed immediately prior to a Change in Control;

Provided that the Participant gives notice to the Corporation of the existence of the Good Reason condition within 30 days of the initial existence of the Good Reason condition and the Corporation is provided 30 days after receipt of the Participant’s notice to remedy the Good Reason condition; provided further that the Participant’s Separation from Service must occur within six months from the initial existence of the Good Reason condition if the Corporation does not remedy such condition for such separation to be considered to be for Good Reason.

6.    “Expiration Date” means the date that an Option expires as set forth in the Option Grant Notice as the “Expiration Date.”

7.    “Grant Date” means the date the Administrator grants the Award.

8.    “Grant Notice” means the notice of an Award granted to the Participant, which sets forth certain terms of such Award.

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9.    “Long‑Term Disability” means a physical or mental condition in respect of which the administrator of the Corporation’s long-term disability plan has determined that the Participant is eligible to receive income replacement benefits; or, if the Participant is not then a participant in the Corporation’s long-term disability plan, a physical or mental condition that the administrator of the Corporation’s long-term disability plan determines would have rendered the Participant eligible to receive income replacement benefits, had the Participant been enrolled in such plan.

10.    “Normal Retirement” means termination of employment (other than due to death, Long-Term Disability or for Cause) at or after age 60 (57, in the case of a participant in the McKesson Corporation 1984 Executive Benefit Retirement Plan) with at least 10 years of service with the Corporation or an Affiliate. For purposes of determining eligibility for Normal Retirement, “service” shall mean completed whole years of service (12 consecutive months).

11.    “Option Period” means the period commencing on the Grant Date of an Option and, except at otherwise provided in Section II.5, ending on the Expiration Date.

12.    “Separation from Service” means termination of employment with the Corporation or an affiliate. A Participant shall be deemed to have had a Separation from Service if the Participant’s service with the Corporation or an affiliate is reduced to an annual rate that is equal to or less than 20% of the services rendered, on average, during the immediately preceding three years of service with the Corporation or an affiliate (or, if providing service to the Corporation or an affiliate for less than three years, such lesser period).

13.    “Severance” means termination of employment with the Corporation or an affiliate, and qualified for participation in and entitlement to benefits under the McKesson Corporation Severance Pay Plan, in accordance with the terms and conditions of such plan.

14.     “Short-Term Disability” means short-term disability as defined in the Corporation’s short-term disability plan.

15.    “Specified Employee” means those employees identified by the Corporation as "Specified Employees" for purposes of Code Section 409A.

16.    “Stock Ownership Policy” means the Corporation’s Stock Ownership Policy, as amended from time to time, which can be found on McKNet. A Participant or a Participant’s beneficiary may also request a copy of the Stock Ownership Policy by writing to the Corporate Secretary at McKesson Corporation, 6555 North Highway 161, Irving, Texas 75039.

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EMPLOYEES SUBJECT TO STOCK OWNERSHIP POLICY

McKESSON CORPORATION

STATEMENT OF TERMS AND CONDITIONS APPLICABLE TO

OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS

AND PERFORMANCE STOCK UNITS GRANTED TO EMPLOYEES SUBJECT TO STOCK OWNERSHIP POLICY PURSUANT TO THE 2013 STOCK PLAN

Effective for Grants Beginning May 21, 2019

I. INTRODUCTION

The following terms and conditions shall apply to an Award granted under the Plan and are subject to the terms and conditions of the Plan. This Statement of Terms and Conditions is intended to meet the requirements of Code Section 409A and any rules promulgated thereunder. In the event of any inconsistency between this Statement of Terms and Conditions and the Plan, the Plan shall govern. Capitalized terms not otherwise defined in this Statement of Terms and Conditions shall have the meaning set forth in the Plan.

II. OPTIONS

1.Option Agreement. An Option granted under the Plan shall be evidenced by an Option Agreement setting forth the terms and conditions of the Option, including whether the Option is an Incentive Stock Option or a Nonstatutory Stock Option and the number of Shares subject to the Option. Each Option Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Option Agreement. The Option is also subject to the terms and conditions of the Plan.

2.Exercise Price. The Exercise Price of an Option, as specified in the Option Agreement, shall be equal to or greater than the Fair Market Value of the Shares underlying the Option on the Grant Date.

3.Option Period. An Option shall be exercisable only during the applicable Option Period, and during such Option Period the exercisability of the Option shall be subject to the vesting provisions of Section II.4 as modified by the rules set forth in Sections II.5 and VI. The Option Period shall be not more than seven years from the Grant Date.

4.Vesting of Right to Exercise Options.

(A)Subject to Sections II.5 and VI, an Option shall be exercisable during the Option Period in accordance with the vesting terms and conditions established on the Grant Date and specified in the Option Grant Notice.

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(B)Any vested portion of an Option not exercised hereunder shall accumulate and be exercisable at any time on or before the Expiration Date, subject to the rules set forth in Sections II.5 and VI. No Option may be exercised for less than 5% of the total number of Shares then available for exercise under such Option. In no event shall the Corporation be required to issue fractional Shares.

5.Limits on Option Period and Acceleration of Vesting. The Option Period may end before the Expiration Date, and in certain circumstances the vesting schedule of an Option may be accelerated (subject to the provisions of Section VI), as follows:

(A)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period for reasons other than for Cause, Long-Term Disability, Normal Retirement, Early Retirement, Severance under the circumstances provided in Section II.5(F)(ii), or death, the Option Period shall end on the earlier of (i) 90 days after the date of the Participant’s termination of employment and (ii) the Expiration Date, and in all cases the Option shall be exercisable only to the extent that it was exercisable at the time of such termination of employment. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Notwithstanding any other provision in this Section II.5, if a Participant’s employment is terminated for Cause during the Option Period, the Option Period shall end on the date of such termination of employment and the Option shall thereupon not be exercisable to any extent whatsoever.

(C)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Long-Term Disability, the vesting schedule of the Participant’s Option shall be accelerated, the Option shall become fully exercisable and the Option Period shall end on the earlier of (i) three years after the date of the Participant’s termination of employment and (ii) the Expiration Date.

(D)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Early Retirement, (i) the Option shall be exercisable only to the extent that it was exercisable at the time of such retirement and (ii) the Option Period for that portion of the Option designated as a Nonstatutory Stock Option shall end on the earlier of (a) three years after the date of such retirement and (b) the Expiration Date.

(E)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Normal Retirement:

(i)If such Normal Retirement occurs prior to the first anniversary of the Grant Date of the Option, such Option shall be subject to the provisions of Section II.5(D) as though the Participant were eligible for Early Retirement; or

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(ii)If such Normal Retirement occurs on or after the first anniversary of the Grant Date of an Option, (a) that portion of the Option designated as a Nonstatutory Stock Option shall continue to vest as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such vesting period, and (b) the Option Period for such portion of the Option designated as a Nonstatutory Stock Option shall end on the Expiration Date.

(F)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Severance, and

(i)The Participant has attained the requirements for Normal Retirement on or prior to the Participant’s termination date, then such Option shall be subject to the Normal Retirement provisions of Section II.5(E); or

(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, but would have attained the requirements for Normal Retirement within six months after the termination date, and

(a)The first anniversary of the Grant Date of the applicable Award has not occurred on or prior to the termination date, then such Option shall be subject to the Early Retirement provision in Section II.5(D); or

(b)The first anniversary of the Grant Date of the applicable Award has occurred on or prior to the termination date, then (x) that portion of the Option designated as a Nonstatutory Stock Option shall continue to vest as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such vesting period, and (y) the Option Period for such portion of the Option designated as a Nonstatutory Stock Option shall end on the Expiration Date; or

(iii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the termination date, then (a) the vesting schedule of the Participant’s Option shall be accelerated as to the portion of the Option that would have vested in accordance with the original vesting schedule as though the Participant had continued to be employed by the Corporation or one of its Affiliates six months after the termination date, and (b) the expiration of the Option Period provided in Section II.5(A) shall apply; provided that if the Participant is also eligible for Early Retirement at the time of the termination of employment, then the expiration of the Option Period provided in Section II.5(D) shall apply.

(G)If a Participant should die (i) while in the employ of the Corporation or an Affiliate and (ii) during the Option Period, the vesting schedule of the Participant’s Option shall be accelerated and the Option shall become fully exercisable, the Option Period shall end on the earlier of (a) three years after the date of death and (b) the Expiration Date, and the Participant’s Beneficiary may exercise the entire unexercised portion of the then exercisable Shares covered by such Option (or any lesser amount) remaining on the date of death.

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(H)If a Participant who ceases to be a bona fide employee of the Corporation or an Affiliate is subsequently rehired prior to the expiration of the Participant's Option, then the Option shall continue to remain outstanding until the earlier of (i) such time as the Participant subsequently terminates employment and (ii) the Expiration Date. Upon the Participant’s subsequent termination of employment, the post-termination exercise period calculated pursuant to the terms and conditions of this Section II.5 shall be reduced by the number of days between the date of the Participant’s initial termination of employment and the Participant's re-hire date; provided, however, that if the rehired Participant continues to be employed by the Corporation or an Affiliate for at least one year from the Participant's rehire date, then the post termination exercise period for the Option shall be determined in accordance with Sections II.5(A) through (G) and shall not be adjusted as described in this Section II.5(H).

6.Method of Exercise. A Participant may exercise an Option with respect to all or any part of the exercisable Shares as follows:

(A)By giving the Corporation, or its authorized representative designated for this purpose, written notice of such exercise specifying the number of Shares as to which the Option is so exercised. Such notice shall be accompanied by an amount equal to the Exercise Price multiplied by the number of Shares exercised, in the form of any one or combination of the following:  cash or a certified check, bank draft, postal or express money order payable to the order of the Corporation in lawful money of the United States. Unless otherwise determined by the Administrator in its sole discretion, the Participant may pay the Exercise Price, in whole or in part, by tendering to the Corporation or its authorized representative Shares, which have been owned by the Participant for at least six months prior to said tender, and having a fair market value, as determined by the Corporation, equal to the Exercise Price, or in lieu of the delivery of actual Shares in such tender, the Corporation may accept an attestation by the Participant, in a form prescribed by the Corporation or its authorized representative, that the Participant owns sufficient Shares of record or in an account in street name to satisfy the Exercise Price, and such attestation will be deemed a tender of Shares for purposes of this method of exercise. The Corporation or its authorized representative may accept payment of the amount due upon the exercise of the Option in the form of a Participant’s personal check. Payment may also be made by delivery (including by FAX transmission) to the Corporation or its authorized representative of an executed irrevocable Option exercise form together with irrevocable instructions to an approved registered investment broker to sell Shares in an amount sufficient to pay the Exercise Price plus any applicable Tax-Related Items (as defined in Section VIII.6) and to transfer the proceeds of such sale to the Corporation.

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(B)If required by the Corporation, by giving satisfactory assurance in writing, signed by the Participant, the Participant shall give the Participant's assurance that the Shares subject to the Option are being purchased for investment and not with a view to the distribution thereof; provided that such assurance shall be deemed inapplicable to (i) any sale of the Shares by such Participant made in accordance with the terms of a registration statement covering such sale, which has heretofore been (or may hereafter be) filed and become effective under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and with respect to which no stop order suspending the effectiveness thereof has been issued, and (ii) any other sale of the Shares with respect to which, in the opinion of counsel for the Corporation, such assurance is not required to be given in order to comply with the provisions of the Securities Act.

(C)As soon as practicable after receipt of the notice and the assurance described in Sections II.6(A) and (B), the Corporation shall, without transfer or issue tax (except for withholding tax arrangements contemplated in Section VIII.6) and without other incidental expense to the Participant, credit the purchased Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then the Corporation shall cause an appropriate book entry to be entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the purchased Shares; provided, however, that the time of such delivery may be postponed by the Corporation for such period as may be required for it with reasonable diligence to comply with applicable registration requirements under the Securities Act, the Exchange Act, any applicable listing requirements of any national securities exchange and requirements under any other law or regulation applicable to the issuance or transfer of the Shares.

7.Limitations on Transfer. An Option shall, during a Participant’s lifetime, be exercisable only by the Participant. No Option or any right granted thereunder shall be transferable by the Participant by operation of law or otherwise, other than by will or the laws of descent and distribution. Notwithstanding the foregoing: (A) a Participant may designate a beneficiary to succeed, after the Participant’s death, to all of the Participant’s Options outstanding on the date of death; (B) a Nonstatutory Stock Option may be transferable pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act; and (C) any Participant, who is a senior executive officer recommended by the Chief Executive Officer of the Corporation and approved by the Administrator may voluntarily transfer any Nonstatutory Stock Option to a Family Member as a gift or through a transfer to an entity in which more than 50% of the voting interests are owned by Family Members (or the Participant) in exchange for an interest in that entity. In the event of any attempt by a Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of an Option or of any right thereunder, except as provided herein, or in the event of the levy of any attachment, execution, or similar process upon the rights or interest hereby conferred, the Corporation at its election may terminate the affected Option by notice to the Participant and the Option shall thereupon become null and void.

8.No Stockholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to the Shares subject to an Option except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to such Shares upon the exercise of an Option.

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III. RESTRICTED STOCK

1.Restricted Stock Agreement. A Restricted Stock Award granted under the Plan shall be evidenced by a Restricted Stock Agreement to be executed by the Participant and the Corporation setting forth the terms and conditions of the Restricted Stock Award. Each Restricted Stock Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Restricted Stock Agreement. The Restricted Stock Award is also subject to the terms and conditions of the Plan.

2.Rights with Respect to Shares of Restricted Stock. Upon written acceptance of a Restricted Stock Award by a Participant, including the restrictions and other terms and conditions described in the Plan and the Restricted Stock Agreement, the Corporation shall cause an appropriate book entry to be entered in the records of the Corporation’s transfer agent recording the Participant’s interest in the Restricted Stock. From and after the Grant Date, the Participant shall have the rights of Common Stock ownership, including the right to vote and to receive dividends on Shares of Restricted Stock, subject to the terms, conditions and restrictions described in the Plan and the Restricted Stock Agreement.

3.Special Restrictions. Each Restricted Stock Award made under the Plan shall be subject to the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Administrator; provided, however, that no Restricted Stock grant shall be subject to additional terms, conditions and restrictions which are more favorable to a Participant than the terms, conditions and restrictions set forth elsewhere in the Plan or the Restricted Stock Agreement.

(A)Restrictions. Until the restrictions imposed on any Restricted Stock grant shall lapse (the “Restriction Period”), Shares of Restricted Stock granted to a Participant (i) shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of, other than pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act and (ii) shall, if the Participant’s continuous employment with the Corporation or any of its Affiliates shall terminate for any reason (except as otherwise provided in the Plan, or in Section III.3(B) or Section III.3(C)) be returned to the Corporation forthwith, and all the rights of the Participant to such Shares shall immediately terminate. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short‑Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision to the contrary contained in the Restricted Stock Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of a Restricted Stock Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of:

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(i)Death or Long-Term Disability, then the restrictions imposed on any Restricted Stock Award shall lapse as to all Shares granted to such Participant pursuant to such Restricted Stock Award on the date of such termination; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date of any time-vesting Restricted Stock Award, the restrictions applicable to such Restricted Stock Award shall continue to lapse at such time(s) as are set forth in the applicable Grant Notice, as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such restricted period; provided, that notwithstanding any other provision of the Plan or this Statement of Terms and Conditions, this Section III.3(B)(ii) shall not apply to any Restricted Stock Award the vesting of which is based, in whole or in part, on attainment of performance objectives. The procedures set forth in Section VIII.6 will be applied for any taxes due upon the lapse of restrictions imposed on a Restricted Stock Award due to a Participant’s Normal Retirement eligibility.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary contained in the Restricted Stock Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of a Restricted Stock Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and:

(i)The Participant either (a) has attained the requirements for Normal Retirement on or prior to the Participant’s termination date or (b) would have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then any time-vesting Restricted Stock Award shall be subject to the Normal Retirement provisions of Section III.3(B)(ii); or

(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then the restrictions applicable to any time-vesting Restricted Stock Award shall lapse upon the Participant’s termination date, as to such Shares of Restricted Stock that would have vested at such time(s) as are set forth in the applicable Grant Notice as if the Participant had continued to be employed by the Corporation or one of its Affiliates during the six-month period after the Participant’s termination date.

Notwithstanding the foregoing, this Section III.3(C) shall not apply to any Restricted Stock Award the vesting of which is based, in whole or in part, on attainment of performance objectives. The procedures set forth in Section VIII.6 will be applied for any taxes due upon the lapse of restrictions imposed on a Restricted Stock Award due to a Participant’s Normal Retirement eligibility.

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(D)Restriction on Sale. The Administrator reserves the right to impose a restriction on the sale of Shares that the Participant receives upon the vesting and settlement of a Restricted Stock Award, unless the Participant has satisfied the ownership targets applicable to the Participant as provided in the Stock Ownership Policy.

4.Dividends. Cash dividends paid with respect to Restricted Stock during the Restriction Period shall be credited on behalf of the Participant to a deferred cash account (in a manner designed to comply with Code Section 409A) and the restrictions on such cash dividends shall lapse at the same time that the restrictions lapse on the associated Restricted Stock Award. Stock dividends paid with respect to Restricted Stock during the Restriction Period shall be treated as Restricted Stock which shall be subject to the same restrictions as the original award for the duration of the Restriction Period.

5.Election to Recognize Gross Income in the Year of Grant. If any Participant validly elects within 30 days of the Grant Date, to include in gross income for federal income tax purposes an amount equal to the fair market value of the Shares of Restricted Stock granted on the Grant Date, such Participant shall (at the same time or prior to the date that the Participant files the Participant's election with the Internal Revenue Service) (A) pay to the Corporation, or make arrangements satisfactory to the Administrator to pay to the Corporation in the year of such grant, any federal, state or local taxes required to be withheld with respect to such Shares in accordance with Section VIII.6, and (B) provide the Administrator with a copy of the election filed with the Internal Revenue Service.

6.Restrictive Legend. Each book entry in the records of the Corporation’s transfer agent evidencing Shares granted pursuant to a Restricted Stock grant may bear an appropriate legend referring to the terms, conditions and restrictions described in the Plan and/or the Restricted Stock Agreement.

7.Expiration of Restriction Period. If and when the Restriction Period applicable to the Restricted Stock expires without a prior forfeiture, Shares shall be credited to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then an appropriate book entry recording the Participant’s interest in the unrestricted Shares shall be entered on the records of the Corporation’s transfer agent.

IV. RESTRICTED STOCK UNITS

1.Restricted Stock Unit Agreement. Restricted Stock Units granted under the Plan shall be evidenced by a Restricted Stock Unit Agreement to be executed by the Participant and the Corporation setting forth the terms and conditions of the Restricted Stock Units. Each Restricted Stock Unit Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Restricted Stock Unit Agreement. The Restricted Stock Units are also subject to the terms and conditions of the Plan.

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2.Special Restrictions. Restricted Stock Units granted under the Plan shall be subject to the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Administrator, consistent with the terms of the Plan.

(A)Restrictions. If a Participant ceases to be a bona fide employee of the Corporation or any Affiliate (except as otherwise provided in the Plan, or in Section IV.2(B) or Section IV.2(C)) prior to the lapse of the restrictions imposed on the Award, the unvested Restricted Stock Units shall be canceled, and all the rights of the Participant to such Awards shall immediately terminate. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision contained to the contrary in the Restricted Stock Unit Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of such Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of:

(i)Death or Long-Term Disability, then the restrictions imposed on any Award of Restricted Stock Units shall lapse on the date of such termination; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date of any time-vesting Restricted Stock Units, the restrictions applicable to such Restricted Stock Units shall continue to lapse at such time(s) as are set forth in the applicable Grant Notice, as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such restricted period.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary contained in the Restricted Stock Unit Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of a Restricted Stock Unit Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and:

(i)The Participant either (a) has attained the requirements for Normal Retirement on or prior to the Participant’s termination date or (b) would have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then any time-vesting Restricted Stock Unit Award shall be subject to the Normal Retirement provisions of Section IV.2(B)(ii); or

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(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then the restrictions applicable to any time-vesting Restricted Stock Unit Award shall lapse upon the termination date, as to such Restricted Stock Units that would have vested at such time(s) as are set forth in the applicable Grant Notice as if the Participant had continued to be employed by the Corporation or one of its Affiliates during the six-month period after the termination date.

(D)Restriction on Sale. The Administrator reserves the right to impose a restriction on the sale of Shares that the Participant receives upon the settlement of Restricted Stock Units, unless the Participant has satisfied the ownership targets applicable to the Participant as provided in the Stock Ownership Policy.

3.Dividend Equivalents. Subject to the discretion of the Compensation Committee, dividend equivalents shall be credited in respect of Restricted Stock Units. Cash dividends shall be credited on behalf of the Participant to a deferred cash account (in a manner designed to comply with Code Section 409A) and the restrictions on such cash dividends shall lapse at the same time that the restrictions lapse on the associated Award of Restricted Stock Units, and cash dividends, along with accrued interest (if any) on such cash dividends, shall be paid in a lump sum at the same time that the Shares underlying the Restricted Stock Unit Award, and to which the cash dividends relate, are distributed. Stock dividends shall be converted into additional Restricted Stock Units, which will be subject to all of the terms and conditions of the underlying Restricted Stock Units, including the same vesting restrictions as the underlying Award.

4.Assignability. A Participant shall not be permitted to sell, transfer, pledge, assign or encumber Restricted Stock Units, other than pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act.

5.No Stockholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to an Award of Restricted Stock Units except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to the Shares paid upon the settlement of any vested Restricted Stock Units.

6.Time of Payment of Restricted Stock Units. Upon the lapse of the restriction imposed on Restricted Stock Units, all Restricted Stock Units that were not forfeited pursuant to Section IV.2(A), Section IV.2(B)(i), Section IV.2(C)(i), or Section VI shall be paid to the Participant as soon as reasonably practicable after the restrictions lapse. Payment shall be made in Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then in the form of an appropriate book entry entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the number of Shares subject to the Restricted Stock Units.

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Notwithstanding the foregoing, if a Participant becomes eligible for Normal Retirement, or is eligible for additional vesting under Section IV.2(C)(ii), prior to the date of the lapse of restrictions imposed on Restricted Stock Units and the vesting provisions of Section IV.2(B)(ii) or Section IV.2(C)(ii) apply, then such Restricted Stock Units shall be paid to the Participant’s brokerage account of record as soon as reasonably practicable after the earlier of the Participant’s Separation from Service or the originally scheduled vesting date (in any event before the end of the calendar year in which such date occurs), subject to the delay of payment (if applicable) provided in Section VIII.14. The procedures set forth in Section VIII.6 will be applied for any taxes due upon the lapse of restrictions imposed on a Restricted Stock Unit Award due to a Participant’s Normal Retirement eligibility or additional vesting as provided in Section IV.2(C)(ii).

V. PERFORMANCE STOCK UNITS

1.Award Agreement. Performance Stock Unit Awards shall be evidenced by a Performance Stock Unit Agreement to be executed by the Participant and the Corporation setting forth the terms and conditions of the Performance Stock Unit Award. Performance Stock Unit Awards are “Other Share-Based Awards” as provided under Section 11 of the Plan. Each Performance Stock Unit Agreement shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Performance Stock Unit Agreement. Performance Stock Unit Awards are also subject to the terms and conditions of the Plan.

2.Number of Shares Granted Based on Performance. The performance period of a Performance Stock Unit Award shall be greater than one year, and performance shall be based on such criteria as the Compensation Committee shall determine in its discretion at the beginning of the performance period. Following the end of the performance period, the Compensation Committee shall determine the extent to which the criteria have been achieved, and shall authorize the grant and issuance of Shares in respect of the Performance Stock Unit Award.

3.Special Conditions. Performance Stock Unit Awards shall be subject to the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Compensation Committee, consistent with the terms of the Plan.

(A)Forfeiture. If a Participant ceases to be a bona fide employee of the Corporation or any Affiliate (except as otherwise provided in the Plan or in Section V.3(B) or Section V.3(C)) prior to the end of the performance period, any then-outstanding Performance Stock Units shall be canceled, and all the rights of the Participant to such Award shall immediately terminate. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Compensation Committee may otherwise expressly determine.

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(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision contained herein or in the Plan or the Award Agreement to the contrary, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of such Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of:

(i)Death or Long-Term Disability, the Participant shall be eligible to receive, following completion of the applicable performance period, a prorated portion of each such Performance Stock Unit Award, equal to (1) the target number of Performance Stock Units subject to such Award, multiplied by (2) the performance criteria determined by the Compensation Committee to apply to such Award, multiplied by (3) a fraction, the numerator of which is the number of whole calendar months, rounded down to the nearest whole month, during which the Participant provided Service to the Corporation or an Affiliate during the performance period applicable to such Award, and the denominator of which is the number of calendar months in such performance period; provided, that for purposes of this clause (3), “whole calendar months” shall be calculated commencing on the applicable Grant Date; provided, however, that in no event shall such amount exceed any applicable cap or limitation set forth in the Performance Stock Unit Grant Notice; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date, the Participant shall be eligible to vest in such Performance Stock Unit Award following completion of the applicable performance period, as though the Participant had continued to be employed by the Corporation or one of its Affiliates through the date on which the Compensation Committee determines performance against the applicable performance goals.

Amounts, if any, to be paid under this Section V.3(B) shall be paid in accordance with Section V.7 and, if applicable, Section VIII.14.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary, if the Participant has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date and ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and:

(i)The Participant either (a) has attained the requirements for Normal Retirement on or prior to the Participant’s termination date or (b) would have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then any Performance Stock Unit Award shall be subject to the Normal Retirement provisions of Section V.3(B)(ii); or

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(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then if such Participant’s termination date is no greater than six months prior to the date on which the Compensation Committee determines performance against the applicable performance goals, such Participant shall be eligible to vest in such Performance Stock Unit Award following completion of the applicable performance period, as though the Participant had continued to be employed by the Corporation or one of its Affiliates through such performance determination date.

Amounts, if any, to be paid under this Section V.3(C) shall be paid in accordance with Section V.7 and, if applicable, Section VIII.14.

(D)Restriction on Sale of Shares. The Administrator reserves the right to impose a restriction on the sale of Shares that the Participant receives with respect to the settlement of a Performance Stock Unit Award, unless the Participant has satisfied the ownership targets applicable to the Participant as provided in the Stock Ownership Policy.

4.Dividend Equivalents. Unless otherwise determined by the Compensation Committee in its sole discretion, Dividend Equivalents shall not be accrued with respect to Performance Stock Unit Awards during the performance period.

5.Assignability. A Participant shall not be permitted to sell, transfer, pledge, assign or encumber all or any portion of a Performance Stock Unit Award.

6.No Stockholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to a Performance Stock Unit Award, except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to the Shares paid upon the settlement of any Performance Stock Unit Award.

7.Time of Payment of Performance Stock Units. The Compensation Committee shall determine the extent to which Shares are payable pursuant to a Performance Stock Unit Award as soon as practicable following the end of the performance period, and such Shares shall be paid as soon as practicable thereafter and in any event no later than the end of the period under which payment would be deemed to be a “short-term deferral” as defined in the regulations under Code Section 409A. Payment shall be made in the form of Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then in the form of an appropriate book entry entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the number of Shares earned pursuant to the Performance Stock Unit Award.

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VI. SPECIAL FORFEITURE AND REPAYMENT RULES

Any other provision of this Statement of Terms and Conditions to the contrary notwithstanding, if the Administrator determines that a Participant has engaged in any of the actions described in 3 below, the consequences set forth in 1 and 2 below shall result:

1.Any outstanding Option shall immediately and automatically terminate, be forfeited and shall cease to be exercisable, without limitation. In addition, any Award of Restricted Stock or Restricted Stock Units as to which the restrictions have not lapsed shall immediately and automatically be forfeited, Performance Stock Unit Awards shall immediately and automatically be forfeited and any such Shares of Restricted Stock shall be returned to the Corporation and all of the rights of the Participant to such Awards and the underlying Shares shall immediately terminate.

2.If the Participant exercised an Option within 12 months prior to the date upon which the Corporation discovered that the Participant engaged in any actions described in 3 below, the Participant, upon written notice from the Corporation, shall immediately pay to the Corporation the economic value realized or obtained by the exercise of such Option measured at the date of exercise. In addition, if the restrictions imposed on any Award of Restricted Stock or Restricted Stock Units (including any unpaid dividends or Dividend Equivalents) lapsed, or any Performance Stock Unit Award was settled, within 12 months prior to the date the Corporation discovered that the Participant engaged in any action described in 3 below, the Participant, upon written notice from the Corporation, shall immediately pay to the Corporation the economic value realized or obtained with respect to such Award, measured at the date such Award vested.

3.The consequences described in 1 and 2 above shall apply if the Participant, either before or after termination of employment with the Corporation or its Affiliates:

(A)Discloses to others, or takes or uses for the Participant’s own purpose or the purpose of others, any trade secrets, confidential information, knowledge, data or know‑how or any other proprietary information or intellectual property belonging to the Corporation or its Affiliates and obtained by the Participant during the term of the Participant’s employment, whether or not they are the Participant’s work product. Examples of such confidential information or trade secrets include, without limitation, customer lists, supplier lists, pricing and cost data, computer programs, delivery routes, advertising plans, wage and salary data, financial information, research and development plans, processes, equipment, product information and all other types and categories of information as to which the Participant knows or has reason to know that the Corporation or its Affiliates intends or expects secrecy to be maintained;

(B)Fails to promptly return all documents and other tangible items belonging to the Corporation or its Affiliates in the Participant’s possession or control, including all complete or partial copies, recordings, abstracts, notes or reproductions of any kind made from or about such documents or information contained therein, upon termination of employment, whether pursuant to retirement or otherwise;

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(C)Fails to provide the Corporation with at least 30 days’ written notice prior to directly or indirectly engaging in, becoming employed by, or rendering services, advice or assistance to any business in competition with the Corporation or its Affiliates. As used herein, “business in competition” means any person, organization or enterprise which is engaged in or is about to become engaged in any line of business engaged in by the Corporation or its Affiliates at the time of the termination of the Participant’s employment with the Corporation or its Affiliates;

(D)Fails to inform any new employer, before accepting employment, of the terms of this paragraph and of the Participant’s continuing obligation to maintain the confidentiality of the trade secrets and other confidential information belonging to the Corporation or its Affiliates and obtained by the Participant during the term of the Participant’s employment with the Corporation or any of its Affiliates;

(E)Induces or attempts to induce, directly or indirectly, any of the customers of the Corporation or its Affiliates, employees, representatives or consultants to terminate, discontinue or cease working with or for the Corporation or its Affiliates, or to breach any contract with the Corporation or any of its Affiliates, in order to work with or for, or enter into a contract with, the Participant or any third party;

(F)Engages in conduct which is not in good faith and which disrupts, damages, impairs or interferes with the business, reputation or employees of the Corporation or its Affiliates; or

(G)Fails to meet the Participant’s continuing obligations with respect to non-disclosure, non-competition and/or non-solicitation under the Participant’s agreement with the Corporation or any Affiliate.

The Administrator shall determine in its sole discretion whether the Participant has engaged in any of the acts set forth in (A) through (G) above, and its determination shall be conclusive and binding on all interested persons.

Any provision of this Section VI which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such invalid or unenforceable provision, without invalidating or rendering unenforceable the remaining provisions of this Section VI.

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VII. CHANGE IN CONTROL

If as a result of a Change in Control, the Common Stock ceases to be listed for trading on a national securities exchange (an “Exchange”), any Option, Restricted Stock Award, Restricted Stock Unit Award or Performance Stock Unit Award that is unvested on the effective date of the Change in Control shall continue to vest according to the terms and conditions of such Award, provided that such Award is replaced with an award for voting securities of the resulting corporation or the acquiring corporation, as the case may be, (including without limitation, the voting securities of any corporation which as a result of the Change in Control owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) (the “Surviving Company”) which are traded on an Exchange (a “Replacement Award”), which Replacement Award, (i) in the case of an Option, shall consist of an option with the number of underlying shares and exercise price determined in a manner consistent with Code Section 424(a) with vesting and any other terms continuing in the same manner as the replaced Option; (ii) in the case of a Performance Stock Unit Award, shall consist of restricted stock or restricted stock units with a value (determined using the Surviving Company’s stock price as of the effective date of the Change in Control) equal to the value of the Performance Stock Unit Award (determined using the Corporation’s stock price and assuming attainment of target performance or actual performance achieved, if greater, as of the effective date of the Change in Control), with any restrictions on such Replacement Award lapsing at the end of the measuring period over which performance for the replaced Performance Stock Unit Award was to be measured prior to the granting of the Replacement Award; and (iii) in the case of a Restricted Stock Award or Restricted Stock Unit Award, shall consist of restricted stock or restricted stock units with a value (determined using the Surviving Company’s stock price as of the effective date of the Change in Control) equal to the value of the Restricted Stock Award or Restricted Stock Unit Award (determined using the Corporation’s stock price as of the effective date of the Change in Control), with any restrictions on such restricted stock or restricted stock units lapsing at the same time and manner as the replaced Award; provided, however, that in the event of the Participant’s involuntary Separation from Service by the Corporation without Cause or Separation from Service by the Participant for Good Reason during the vesting period of any Replacement Award, the Replacement Award shall immediately vest and be paid as soon as practicable following such Separation from Service (subject to Section VIII.14), based on the fair market value of the underlying shares on the vesting date, or in the case of options, based on the excess of the fair market value of the underlying shares over the option exercise price on the vesting date. If any Option, Restricted Stock Award, Restricted Stock Unit Award or Performance Stock Unit Award that is unvested at the effective time of the Change in Control is not replaced with a Replacement Award, such Award shall immediately vest and, in the case of a Performance Stock Unit Award, shall vest based upon deemed attainment of target performance or actual performance achieved, if greater.

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If as a result of a Change in Control, the Common Stock continues to be listed for trading on an Exchange, any unvested Option, Restricted Stock Award, or Restricted Stock Unit Award shall continue to vest according to the terms and conditions of such Award and any Performance Stock Unit Award shall be replaced with a Restricted Stock Unit Award where the number of shares subject to such Restricted Stock Unit Award shall be equal to the number of Shares assuming attainment of target performance or actual performance achieved, if greater, as of the effective date of the Change in Control with any restrictions on such Restricted Stock Unit Award lapsing at the end of the measuring period over which performance for the replaced Performance Stock Unit Award was to be measured prior to the granting of the Replacement Award; provided however, that, in the event of the Participant’s involuntary Separation from Service by the Corporation without Cause or Separation from Service by the Participant for Good Reason during the vesting period of an Award, such Award shall immediately vest and be paid as soon as practicable following such Separation from Service (subject to Section VIII.14).

VIII. MISCELLANEOUS

1.No Effect on Terms of Employment. Participation in the Plan shall not create a right to further employment with the Participant’s employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate, with or without cause, or change the terms of employment of a Participant at any time.

2.Grants to Participants in Foreign Countries. In making grants to Participants in foreign countries, the Administrator has the full discretion to deviate from this Statement of Terms and Conditions in order to adjust grants under the Plan to prevailing local conditions, including custom and legal and tax requirements. Furthermore, the Corporation reserves the right to impose other requirements on the Participant’s participation in the Plan on the Award and on any Shares acquired under the Plan, to the extent the Corporation determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertaking that may be necessary to accomplish the foregoing.

3.Information Notification. Any information required to be given under the terms of an Award shall be addressed to the Corporation in care of its Corporate Secretary at McKesson Corporation, 6555 North Highway 161, Irving, Texas 75039, and any notice to be given to a Participant shall be addressed to such Participant at the address indicated beneath the Participant's name on the Award Agreement or such other address as either party may designate in writing to the other. Any such notice shall be deemed to have been duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified and deposited (postage or registration or certification fee prepaid) in a post office or branch post office. The parties may use email delivery, so long as the message is clearly marked, sent to the email address(es) set forth herein, and a delivery receipt and a read receipt are made part of the message.  Email delivery will be deemed to occur when the sender receives confirmation that such message has been received and read by the recipient. Emails to the Corporation shall be delivered to CorpSecretary@mckesson.com.

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4.Administrator Decisions Conclusive. All decisions of the Administrator administering the Plan upon any questions arising under the Plan or under an Award Agreement, shall be conclusive and binding on all interested persons.

5.No Effect on Other Benefit Plans. Nothing herein contained shall affect a Participant’s right to participate in and receive benefits from and in accordance with the then current provisions of any pensions, insurance or other employment welfare plan or program offered by the Corporation.

6.Withholding. Regardless of any action the Corporation or the Employer takes with respect to any federal, state or local income tax, social insurance, payroll tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains the Participant's responsibility and may exceed the amount actually withheld by the Corporation or the Employer. The Participant further acknowledges that the Corporation and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant, vesting or exercise of the Award, as applicable, the subsequent sale of Shares acquired pursuant to the Plan and the receipt of any dividends and/or dividend equivalents; and (2) do not commit and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant has become subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable event, the Participant acknowledges that the Corporation and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

Prior to any relevant taxable or tax withholding event, as applicable, the Participant will pay or make adequate arrangements satisfactory to the Corporation and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: (1) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Corporation and/or the Employer; (2) withholding from proceeds of the sale of Shares acquired under the Plan either through a voluntary sale or through a mandatory sale arranged by the Corporation (on the Participant’s behalf pursuant to this authorization and any other authorization the Corporation and/or the broker designated by the Corporation may require the Participant to sign in connection with the sale of Shares); or (3) withholding Shares to be issued upon grant, vesting/settlement or exercise, as applicable. Calculation of the number of Shares to be withheld shall be made based on the closing price of the Common Stock on the New York Stock Exchange on the date that the amount of tax to be withheld is determined. In no event, however, shall the Corporation be required to issue fractional Shares. With respect to an Award other than an Option, if adequate arrangements to satisfy the obligations with regard to all Tax-Related Items are not made by the Participant with the Corporation and/or the Employer prior to the relevant taxable event, the Corporation will satisfy such obligations as provided above in clause (3) of this paragraph.

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To avoid negative accounting treatment, the Corporation may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant will be deemed to have been issued the full number of Shares subject to the Award, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of the Participant’s participation in the Plan.

Finally, the Participant shall pay to the Corporation or the Employer any amount of Tax-Related Items that the Corporation or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Corporation may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if the Participant fails to comply with the Participant's obligations in connection with the Tax-Related Items.

The Administrator shall be authorized to establish such rules, forms and procedures as it deems necessary to implement the foregoing.

7.Successors. The Award Agreements shall be binding upon and inure to the benefit of any successor or successors of the Corporation. “Participant” as used herein shall include the Participant’s Beneficiary.

8.Delaware Law. The interpretation, performance, and enforcement of all Award Agreements shall be governed by the laws of the State of Delaware.

9.Nature of Grant. In accepting the grant, the Participant acknowledges that:

(A)the Plan is established voluntarily by the Corporation, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Corporation at any time;

(B)the grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future Award grants, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past;

(C)all decisions with respect to future Awards, if any, will be at the sole discretion of the Corporation;

(D)the Participant is voluntarily participating in the Plan;

(E)the Award and the Shares subject to the Award, and the income from and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;

(F)the Award will not be interpreted to form an employment contract or relationship with the Corporation; and furthermore, the Award will not be interpreted to form an employment contract with any subsidiary or Affiliate of the Corporation;

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(G)the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;

(H)if the underlying Shares do not increase in value, the Options will have no value;

(I)in consideration of the grant of the Award, no claim or entitlement to compensation or damages shall arise from forfeiture of the Award which results from termination of the Participant’s employment with the Employer or the Corporation or one of its Affiliates (for any reason whatsoever, and whether or not such forfeiture is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any) and the Participant irrevocably releases the Corporation or its Affiliates from any such claim that may arise; provided that, notwithstanding the foregoing, in the event any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the Award, the Participant shall be deemed irrevocably to have waived the Participant's entitlement to pursue such claim;

(J)for purposes of an Award, the Participant’s employment relationship will be considered terminated as of the date the Participant is no longer a bona fide employee of the Corporation, the Employer or one of the Corporation’s other Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and unless otherwise expressly provided in this Award Agreement or determined by the Corporation in its sole discretion, the Participant’s right to receive Awards and vest in Awards under the Plan, if any, will terminate effective as of such date and will not be extended by any notice period mandated under local law (for example, the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any); similarly, any right to exercise Options under the Plan after termination of employment will be measured as of the date the Participant is no longer a bona fide employee of the Corporation, the Employer or one of the Corporation’s other Affiliates and will not be extended by any notice period mandated under local law; the Administrator shall have the sole discretion to determine when the Participant is no longer a bona fide employee for purposes of an Award (including whether the Participant may still be considered to be providing services while on a leave of absence);

(K)the Corporation is not providing any tax, legal or financial advice, nor is the Corporation making any recommendations regarding participation in the Plan or the Participant’s acquisition or sale of Shares; and

(L)Participant is hereby advised to consult with the Participant's own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.

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10.Data Privacy Information and Consent.

(A)Data Collection and Usage. The Corporation and the Employer may collect, process and use certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any Shares or directorships held in the Corporation, details of all Options, Restricted Stock, Restricted Stock Units, Performance Shares, Other Share-Based Awards, or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Employee’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Participant’s consent.

(B)Stock Plan Administration Service Providers. The Corporation transfers Data to Fidelity Stock Plan Services LLC and its affiliated companies, an independent service provider based in the United States, which is assisting the Corporation with the implementation, administration and management of the Plan. The Corporation may select a different service provider or additional service providers and share Data with such other provider serving in a similar manner. The Participant may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

(C)International Data Transfers. The Corporation and its service providers are based in the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program. The Corporation’s legal basis, where required, for the transfer of Data isthe Participant’s consent.

(D)Data Retention. The Corporation will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws. In the latter case, the Participant understands and acknowledges that the Corporation’s legal basis for the processing of the Participant’s Data would be compliance with the relevant laws or regulations or the pursuit by the Corporation of respective legitimate interests not outweighed by the Participant’s interests, rights or freedoms. When the Corporation no longer needs the Participant’s Data for any of the above purposes, the Participant understands the Corporation will remove it from its systems.

(E)Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s salary from or employment with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Corporation would not be able to grant Awards to the Participant or administer or maintain such Awards.

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(F)Data Subject Rights. The Participant may have a number of rights under data privacy laws in the Participant’s jurisdiction. Depending on where the Participant is based, such rights may include the right to (i) inquire whether and what kind of Data the Corporation holds about the Participant and how it is processed, and to request access or copies of Data the Corporation processes, (ii) request the correction or supplementation of Data about the Participant that is inaccurate, incomplete or out-of-date in light of the purposes underlying the processing, (iii) obtain the erasure of Data no longer necessary for the purposes underlying the processing, processed based on withdrawn consent, processed for legitimate interests that, in the context of the Participant’s objection, do not prove to be compelling, or processed in non-compliance with applicable legal requirements, (iv) request restrictions on processing of Data in certain situations where the Participant feels its processing is inappropriate, (v) request portability of the Participant’s Data that the Participant has actively or passively provided to the Corporation (which does not include data derived or inferred from the collected data), where the processing of such Data is based on consent or the Participant’s employment and is carried out by automated means, (vi) object, in certain circumstances, to the processing of Data for legitimate interests, (vii) lodge complaints with competent authorities in the Participant’s jurisdiction, and/or (viii) receive a list with the names and addresses of any potential recipients of Data. To receive clarification regarding these rights or to exercise these rights, the Participant can contact his or her local human resources representative.

By accepting the Award and indicating consent via the Corporation’s acceptance procedure, the Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Corporation and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.

Finally, the Participant understands that the Corporation may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Participant provide another data privacy consent form. If applicable and upon request of the Corporation, the Participant agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Corporation (or any other acknowledgements, agreements or consents that may be required by the Employer or the Corporation) that the Corporation and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands that the Participant will not be able to participate in the Plan if the Participant fails to execute any such acknowledgement, agreement or consent requested by the Corporation and/or the Employer.

11.Severability. The provisions in this Statement of Terms and Conditions are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

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12.Language. The Participant acknowledges that the Participant is proficient in the English language and, accordingly, understands the provisions of the Plan and this Statement of Terms and Conditions. If the Participant has received this Statement of Terms and Conditions or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

13.Electronic Delivery. The Corporation may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or a third party designated by the Corporation.

14.Section 409A. If (A) the Participant is a Specified Employee at the time of the Participant’s Separation from Service, and (B) some or any portion of the amounts payable to the Participant, if any, when considered together with any other payments or benefits which may be considered deferred compensation under section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and subject to the plan aggregation rules under Treasury Regulation section 1.409A-1(c)(3)(viii) (together, the “Deferred Compensation Benefits”) would result in the imposition of additional tax under Section 409A if paid to the Participant on or within the six month period following the Separation from Service, then to the extent such portion of the Deferred Compensation Benefits resulting in the imposition of additional tax would otherwise have been payable on or within the first six months following the Separation from Service, it will instead become payable on the first payroll date that occurs in the seventh month following the Separation from Service (or such longer period as is required to avoid the imposition of additional tax under Section 409A). All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit.

IX. DEFINITIONS

When capitalized in this Statement of Terms and Conditions, the following terms shall have the meaning set forth below:

1.“Award Agreement” means an agreement between the Participant and the Corporation evidencing the grant of an Option, Restricted Stock Award, Restricted Stock Award, Performance Shares or Other Share-Based Award, as applicable.

2.“Cause” means termination of the Participant’s employment with the Corporation or an Affiliate upon the Participant’s negligent or willful engagement in misconduct which, in the sole determination of the Chief Executive Officer of the Corporation (or the Chief Executive Officer’s designee), is injurious to the Corporation, its employees, or its customers.

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3.“Early Retirement” means a termination of employment (other than due to death, Long-Term Disability or for Cause) which occurs prior to Normal Retirement but on or after the date on which the Participant’s age (expressed in terms of years and completed months) plus service with the Corporation or an Affiliate equals 65. For purposes of determining eligibility for Early Retirement, the term “service” shall include years and completed whole months of service.

4.“Family Member” means any person identified as an “immediate family” member in Rule 16(a)‑1(e) of the Exchange Act, as such Rule may be amended from time to time. Notwithstanding the foregoing, the Administrator may designate any other person(s) or entity(ies) as a “family member.”

5.    “Good Reason” means any of the following actions, if taken without the express written consent of the Participant:

(A)    Any material change by the Corporation in the Participant’s functions, duties, or responsibilities, which change would cause the Participant’s position with the Corporation to become of less dignity, responsibility, importance, or scope from the position and attributes that applied to the Participant immediately prior to the Change in Control; provided, however, that, any such change attributable to the Corporation’s no longer being a company with publicly traded common stock shall not constitute Good Reason; and provided, further, that a reduction in the Participant’s functions, duties or responsibilities solely by virtue of the Corporation being acquired and made part of a larger entity (for example, if following a Change in Control the Participant retains the Participant’s position, or has a comparable position, with respect to a division or subsidiary of the acquirer that contains the Corporation’s business) shall not constitute Good Reason;

(B)    Any significant reduction in the Participant’s aggregate base annual salary and target incentive opportunity, as in effect immediately prior to the Change in Control;

(C)    Any material failure by the Corporation to comply with any of the provisions of an Award subsequent to a Change in Control; or

(D)    The Corporation’s requiring the Participant to be based at any location which would increase the Participant’s regular one-way commute by more than 25 miles from that in effect immediately preceding the Change in Control, except for travel reasonably required in the performance of the Participant’s responsibilities;

Provided that the Participant gives notice to the Corporation of the existence of the Good Reason condition within 30 days of the initial existence of the Good Reason condition and the Corporation is provided 30 days after receipt of the Participant’s notice to remedy the Good Reason condition; provided further that the Participant’s Separation from Service must occur within six months from the initial existence of the Good Reason condition if the Corporation does not remedy such condition for such separation to be considered to be for Good Reason.

6.    “Expiration Date” means the date that an Option expires as set forth in the Option Grant Notice as the “Expiration Date.”

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7.    “Grant Date” means the date the Administrator grants the Award.

8.    “Grant Notice” means the notice of an Award granted to the Participant, which sets forth certain terms of such Award.

9.    “Long‑Term Disability” means a physical or mental condition in respect of which the administrator of the Corporation’s long-term disability plan has determined that the Participant is eligible to receive income replacement benefits; or, if the Participant is not then a participant in the Corporation’s long-term disability plan, a physical or mental condition that the administrator of the Corporation’s long-term disability plan determines would have rendered the Participant eligible to receive income replacement benefits, had the Participant been enrolled in such plan.

10.    “Normal Retirement” means termination of employment (other than due to death, Long-Term Disability or for Cause) at or after age 60 (57, in the case of a participant in the McKesson Corporation 1984 Executive Benefit Retirement Plan) with at least 10 years of service with the Corporation or an Affiliate. For purposes of determining eligibility for Normal Retirement, “service” shall mean completed whole years of service (12 consecutive months).

11.    “Option Period” means the period commencing on the Grant Date of an Option and, except at otherwise provided in Section II.5, ending on the Expiration Date.

12.    “Separation from Service” means termination of employment with the Corporation or an affiliate. A Participant shall be deemed to have had a Separation from Service if the Participant’s service with the Corporation or an affiliate is reduced to an annual rate that is equal to or less than 20% of the services rendered, on average, during the immediately preceding three years of service with the Corporation or an affiliate (or, if providing service to the Corporation or an affiliate for less than three years, such lesser period).

13.    “Severance” means termination of employment with the Corporation or an affiliate, and qualified for participation in and entitlement to benefits under the McKesson Corporation Severance Pay Plan, in accordance with the terms and conditions of such plan.

14.     “Short-Term Disability” means short-term disability as defined in the Corporation’s short-term disability plan.

15.    “Specified Employee” means those employees identified by the Corporation as "Specified Employees" for purposes of Code Section 409A.

16.    “Stock Ownership Policy” means the Corporation’s Stock Ownership Policy, as amended from time to time, which can be found on McKNet. A Participant or a Participant’s beneficiary may also request a copy of the Stock Ownership Policy by writing to the Corporate Secretary at McKesson Corporation, 6555 North Highway 161, Irving, Texas 75039.

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EMPLOYEES

McKESSON CORPORATION

STATEMENT OF TERMS AND CONDITIONS APPLICABLE TO

OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS

AND PERFORMANCE STOCK UNITS GRANTED TO EMPLOYEES
PURSUANT TO THE 2013 STOCK PLAN

Effective for Grants Beginning May 21, 2019

I. INTRODUCTION

The following terms and conditions shall apply to an Award granted under the Plan and are subject to the terms and conditions of the Plan. This Statement of Terms and Conditions is intended to meet the requirements of Code Section 409A and any rules promulgated thereunder. In the event of any inconsistency between this Statement of Terms and Conditions and the Plan, the Plan shall govern. Capitalized terms not otherwise defined in this Statement of Terms and Conditions shall have the meaning set forth in the Plan.

II. OPTIONS

1.Option Agreement. An Option granted under the Plan shall be evidenced by an Option Agreement setting forth the terms and conditions of the Option, including whether the Option is an Incentive Stock Option or a Nonstatutory Stock Option and the number of Shares subject to the Option. Each Option Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Option Agreement. The Option is also subject to the terms and conditions of the Plan.

2.Exercise Price. The Exercise Price of an Option, as specified in the Option Agreement, shall be equal to or greater than the Fair Market Value of the Shares underlying the Option on the Grant Date.

3.Option Period. An Option shall be exercisable only during the applicable Option Period, and during such Option Period the exercisability of the Option shall be subject to the vesting provisions of Section II.4 as modified by the rules set forth in Sections II.5 and VI. The Option Period shall be not more than seven years from the Grant Date.

4.Vesting of Right to Exercise Options.

(A)Subject to Sections II.5 and VI, an Option shall be exercisable during the Option Period in accordance with the vesting terms and conditions established on the Grant Date and specified in the Option Grant Notice.

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(B)Any vested portion of an Option not exercised hereunder shall accumulate and be exercisable at any time on or before the Expiration Date, subject to the rules set forth in Sections II.5 and VI. No Option may be exercised for less than 5% of the total number of Shares then available for exercise under such Option. In no event shall the Corporation be required to issue fractional Shares.

5.Limits on Option Period and Acceleration of Vesting. The Option Period may end before the Expiration Date, and in certain circumstances the vesting schedule of an Option may be accelerated (subject to the provisions of Section VI), as follows:

(A)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period for reasons other than for Cause, Long-Term Disability, Normal Retirement, Early Retirement, Severance under the circumstances provided in Section II.5(F)(ii), or death, the Option Period shall end on the earlier of (i) 90 days after the date of the Participant’s termination of employment and (ii) the Expiration Date, and in all cases the Option shall be exercisable only to the extent that it was exercisable at the time of such termination of employment. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Notwithstanding any other provision in this Section II.5, if a Participant’s employment is terminated for Cause during the Option Period, the Option Period shall end on the date of such termination of employment and the Option shall thereupon not be exercisable to any extent whatsoever.

(C)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Long-Term Disability, the vesting schedule of the Participant’s Option shall be accelerated, the Option shall become fully exercisable and the Option Period shall end on the earlier of (i) three years after the date of the Participant’s termination of employment and (ii) the Expiration Date.

(D)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Early Retirement, (i) the Option shall be exercisable only to the extent that it was exercisable at the time of such retirement and (ii) the Option Period for that portion of the Option designated as a Nonstatutory Stock Option shall end on the earlier of (a) three years after the date of such retirement and (b) the Expiration Date.

(E)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Normal Retirement:

(i)If such Normal Retirement occurs prior to the first anniversary of the Grant Date of the Option, such Option shall be subject to the provisions of Section II.5(D) as though the Participant were eligible for Early Retirement; or

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(ii)If such Normal Retirement occurs on or after the first anniversary of the Grant Date of an Option, (a) that portion of the Option designated as a Nonstatutory Stock Option shall continue to vest as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such vesting period, and (b) the Option Period for such portion of the Option designated as a Nonstatutory Stock Option shall end on the Expiration Date.

(F)If a Participant ceases to be a bona fide employee of the Corporation or of its Affiliates during the Option Period by reason of Severance, and

(i)The Participant has attained the requirements for Normal Retirement on or prior to the Participant’s termination date, then such Option shall be subject to the Normal Retirement provisions of Section II.5(E); or

(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, but would have attained the requirements for Normal Retirement within six months after the termination date, and

(a)The first anniversary of the Grant Date of the applicable Award has not occurred on or prior to the termination date, then such Option shall be subject to the Early Retirement provision in Section II.5(D); or

(b)The first anniversary of the Grant Date of the applicable Award has occurred on or prior to the termination date, then (x) that portion of the Option designated as a Nonstatutory Stock Option shall continue to vest as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such vesting period, and (y) the Option Period for such portion of the Option designated as a Nonstatutory Stock Option shall end on the Expiration Date; or

(iii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the termination date, then (a) the vesting schedule of the Participant’s Option shall be accelerated as to the portion of the Option that would have vested in accordance with the original vesting schedule as though the Participant had continued to be employed by the Corporation or one of its Affiliates six months after the termination date, and (b) the expiration of the Option Period provided in Section II.5(A) shall apply; provided that if the Participant is also eligible for Early Retirement at the time of the termination of employment, then the expiration of the Option Period provided in Section II.5(D) shall apply.

(G)If a Participant should die (i) while in the employ of the Corporation or an Affiliate and (ii) during the Option Period, the vesting schedule of the Participant’s Option shall be accelerated and the Option shall become fully exercisable, the Option Period shall end on the earlier of (a) three years after the date of death and (b) the Expiration Date, and the Participant’s Beneficiary may exercise the entire unexercised portion of the then exercisable Shares covered by such Option (or any lesser amount) remaining on the date of death.

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(H)If a Participant who ceases to be a bona fide employee of the Corporation or an Affiliate is subsequently rehired prior to the expiration of the Participant's Option, then the Option shall continue to remain outstanding until the earlier of (i) such time as the Participant subsequently terminates employment and (ii) the Expiration Date. Upon the Participant’s subsequent termination of employment, the post-termination exercise period calculated pursuant to the terms and conditions of this Section II.5 shall be reduced by the number of days between the date of the Participant’s initial termination of employment and the Participant's re-hire date; provided, however, that if the rehired Participant continues to be employed by the Corporation or an Affiliate for at least one year from the Participant's rehire date, then the post termination exercise period for the Option shall be determined in accordance with Sections II.5(A) through (G) and shall not be adjusted as described in this Section II.5(H).

6.Method of Exercise. A Participant may exercise an Option with respect to all or any part of the exercisable Shares as follows:

(A)By giving the Corporation, or its authorized representative designated for this purpose, written notice of such exercise specifying the number of Shares as to which the Option is so exercised. Such notice shall be accompanied by an amount equal to the Exercise Price multiplied by the number of Shares exercised, in the form of any one or combination of the following:  cash or a certified check, bank draft, postal or express money order payable to the order of the Corporation in lawful money of the United States. Unless otherwise determined by the Administrator in its sole discretion, the Participant may pay the Exercise Price, in whole or in part, by tendering to the Corporation or its authorized representative Shares, which have been owned by the Participant for at least six months prior to said tender, and having a fair market value, as determined by the Corporation, equal to the Exercise Price, or in lieu of the delivery of actual Shares in such tender, the Corporation may accept an attestation by the Participant, in a form prescribed by the Corporation or its authorized representative, that the Participant owns sufficient Shares of record or in an account in street name to satisfy the Exercise Price, and such attestation will be deemed a tender of Shares for purposes of this method of exercise. The Corporation or its authorized representative may accept payment of the amount due upon the exercise of the Option in the form of a Participant’s personal check. Payment may also be made by delivery (including by FAX transmission) to the Corporation or its authorized representative of an executed irrevocable Option exercise form together with irrevocable instructions to an approved registered investment broker to sell Shares in an amount sufficient to pay the Exercise Price plus any applicable Tax-Related Items (as defined in Section VIII.6) and to transfer the proceeds of such sale to the Corporation.

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(B)If required by the Corporation, by giving satisfactory assurance in writing, signed by the Participant, the Participant shall give the Participant's assurance that the Shares subject to the Option are being purchased for investment and not with a view to the distribution thereof; provided that such assurance shall be deemed inapplicable to (i) any sale of the Shares by such Participant made in accordance with the terms of a registration statement covering such sale, which has heretofore been (or may hereafter be) filed and become effective under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and with respect to which no stop order suspending the effectiveness thereof has been issued, and (ii) any other sale of the Shares with respect to which, in the opinion of counsel for the Corporation, such assurance is not required to be given in order to comply with the provisions of the Securities Act.

(C)As soon as practicable after receipt of the notice and the assurance described in Sections II.6(A) and (B), the Corporation shall, without transfer or issue tax (except for withholding tax arrangements contemplated in Section VIII.6) and without other incidental expense to the Participant, credit the purchased Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then the Corporation shall cause an appropriate book entry to be entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the purchased Shares; provided, however, that the time of such delivery may be postponed by the Corporation for such period as may be required for it with reasonable diligence to comply with applicable registration requirements under the Securities Act, the Exchange Act, any applicable listing requirements of any national securities exchange and requirements under any other law or regulation applicable to the issuance or transfer of the Shares.

7.Limitations on Transfer. An Option shall, during a Participant’s lifetime, be exercisable only by the Participant. No Option or any right granted thereunder shall be transferable by the Participant by operation of law or otherwise, other than by will or the laws of descent and distribution. Notwithstanding the foregoing: (A) a Participant may designate a beneficiary to succeed, after the Participant’s death, to all of the Participant’s Options outstanding on the date of death; (B) a Nonstatutory Stock Option may be transferable pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act; and (C) any Participant, who is a senior executive officer recommended by the Chief Executive Officer of the Corporation and approved by the Administrator may voluntarily transfer any Nonstatutory Stock Option to a Family Member as a gift or through a transfer to an entity in which more than 50% of the voting interests are owned by Family Members (or the Participant) in exchange for an interest in that entity. In the event of any attempt by a Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of an Option or of any right thereunder, except as provided herein, or in the event of the levy of any attachment, execution, or similar process upon the rights or interest hereby conferred, the Corporation at its election may terminate the affected Option by notice to the Participant and the Option shall thereupon become null and void.

8.No Stockholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to the Shares subject to an Option except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to such Shares upon the exercise of an Option.

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III. RESTRICTED STOCK

1.Restricted Stock Agreement. A Restricted Stock Award granted under the Plan shall be evidenced by a Restricted Stock Agreement to be executed by the Participant and the Corporation setting forth the terms and conditions of the Restricted Stock Award. Each Restricted Stock Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Restricted Stock Agreement. The Restricted Stock Award is also subject to the terms and conditions of the Plan.

2.Rights with Respect to Shares of Restricted Stock. Upon written acceptance of a Restricted Stock Award by a Participant, including the restrictions and other terms and conditions described in the Plan and the Restricted Stock Agreement, the Corporation shall cause an appropriate book entry to be entered in the records of the Corporation’s transfer agent recording the Participant’s interest in the Restricted Stock. From and after the Grant Date, the Participant shall have the rights of Common Stock ownership, including the right to vote and to receive dividends on Shares of Restricted Stock, subject to the terms, conditions and restrictions described in the Plan and the Restricted Stock Agreement.

3.Special Restrictions. Each Restricted Stock Award made under the Plan shall be subject to the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Administrator; provided, however, that no Restricted Stock grant shall be subject to additional terms, conditions and restrictions which are more favorable to a Participant than the terms, conditions and restrictions set forth elsewhere in the Plan or the Restricted Stock Agreement.

(A)Restrictions. Until the restrictions imposed on any Restricted Stock grant shall lapse (the “Restriction Period”), Shares of Restricted Stock granted to a Participant (i) shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of, other than pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act and (ii) shall, if the Participant’s continuous employment with the Corporation or any of its Affiliates shall terminate for any reason (except as otherwise provided in the Plan, or in Section III.3(B) or Section III.3(C)) be returned to the Corporation forthwith, and all the rights of the Participant to such Shares shall immediately terminate. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short‑Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision to the contrary contained in the Restricted Stock Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of a Restricted Stock Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of:

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(i)Death or Long-Term Disability, then the restrictions imposed on any Restricted Stock Award shall lapse as to all Shares granted to such Participant pursuant to such Restricted Stock Award on the date of such termination; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date of any time-vesting Restricted Stock Award, the restrictions applicable to such Restricted Stock Award shall continue to lapse at such time(s) as are set forth in the applicable Grant Notice, as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such restricted period; provided, that notwithstanding any other provision of the Plan or this Statement of Terms and Conditions, this Section III.3(B)(ii) shall not apply to any Restricted Stock Award the vesting of which is based, in whole or in part, on attainment of performance objectives. The procedures set forth in Section VIII.6 will be applied for any taxes due upon the lapse of restrictions imposed on a Restricted Stock Award due to a Participant’s Normal Retirement eligibility.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary contained in the Restricted Stock Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of a Restricted Stock Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and:

(i)The Participant either (a) has attained the requirements for Normal Retirement on or prior to the Participant’s termination date or (b) would have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then any time-vesting Restricted Stock Award shall be subject to the Normal Retirement provisions of Section III.3(B)(ii); or

(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then the restrictions applicable to any time-vesting Restricted Stock Award shall lapse upon the Participant’s termination date, as to such Shares of Restricted Stock that would have vested at such time(s) as are set forth in the applicable Grant Notice as if the Participant had continued to be employed by the Corporation or one of its Affiliates during the six-month period after the Participant’s termination date.

Notwithstanding the foregoing, this Section III.3(C) shall not apply to any Restricted Stock Award the vesting of which is based, in whole or in part, on attainment of performance objectives. The procedures set forth in Section VIII.6 will be applied for any taxes due upon the lapse of restrictions imposed on a Restricted Stock Award due to a Participant’s Normal Retirement eligibility.

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4.Dividends. Cash dividends paid with respect to Restricted Stock during the Restriction Period shall be credited on behalf of the Participant to a deferred cash account (in a manner designed to comply with Code Section 409A) and the restrictions on such cash dividends shall lapse at the same time that the restrictions lapse on the associated Restricted Stock Award. Stock dividends paid with respect to Restricted Stock during the Restriction Period shall be treated as Restricted Stock which shall be subject to the same restrictions as the original award for the duration of the Restriction Period.

5.Election to Recognize Gross Income in the Year of Grant. If any Participant validly elects within 30 days of the Grant Date, to include in gross income for federal income tax purposes an amount equal to the fair market value of the Shares of Restricted Stock granted on the Grant Date, such Participant shall (at the same time or prior to the date that the Participant files the Participant's election with the Internal Revenue Service) (A) pay to the Corporation, or make arrangements satisfactory to the Administrator to pay to the Corporation in the year of such grant, any federal, state or local taxes required to be withheld with respect to such Shares in accordance with Section VIII.6, and (B) provide the Administrator with a copy of the election filed with the Internal Revenue Service.

6.Restrictive Legend. Each book entry in the records of the Corporation’s transfer agent evidencing Shares granted pursuant to a Restricted Stock grant may bear an appropriate legend referring to the terms, conditions and restrictions described in the Plan and/or the Restricted Stock Agreement.

7.Expiration of Restriction Period. If and when the Restriction Period applicable to the Restricted Stock expires without a prior forfeiture, Shares shall be credited to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then an appropriate book entry recording the Participant’s interest in the unrestricted Shares shall be entered on the records of the Corporation’s transfer agent.

IV. RESTRICTED STOCK UNITS

1.Restricted Stock Unit Agreement. Restricted Stock Units granted under the Plan shall be evidenced by a Restricted Stock Unit Agreement to be executed by the Participant and the Corporation setting forth the terms and conditions of the Restricted Stock Units. Each Restricted Stock Unit Grant Notice shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Restricted Stock Unit Agreement. The Restricted Stock Units are also subject to the terms and conditions of the Plan.

2.Special Restrictions. Restricted Stock Units granted under the Plan shall be subject to the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Administrator, consistent with the terms of the Plan.

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(A)Restrictions. If a Participant ceases to be a bona fide employee of the Corporation or any Affiliate (except as otherwise provided in the Plan, or in Section IV.2(B) or Section IV.2(C)) prior to the lapse of the restrictions imposed on the Award, the unvested Restricted Stock Units shall be canceled, and all the rights of the Participant to such Awards shall immediately terminate. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision contained to the contrary in the Restricted Stock Unit Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of such Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of:

(i)Death or Long-Term Disability, then the restrictions imposed on any Award of Restricted Stock Units shall lapse on the date of such termination; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date of any time-vesting Restricted Stock Units, the restrictions applicable to such Restricted Stock Units shall continue to lapse at such time(s) as are set forth in the applicable Grant Notice, as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such restricted period.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary contained in the Restricted Stock Unit Grant Notice, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of a Restricted Stock Unit Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and:

(i)The Participant either (a) has attained the requirements for Normal Retirement on or prior to the Participant’s termination date or (b) would have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then any time-vesting Restricted Stock Unit Award shall be subject to the Normal Retirement provisions of Section IV.2(B)(ii); or;

(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then the restrictions applicable to any time-vesting Restricted Stock Unit Award shall lapse upon the termination date, as to such Restricted Stock Units that would have vested at such time(s) as are set forth in the applicable Grant Notice as if the Participant had continued to be employed by the Corporation or one of its Affiliates during the six-month period after the termination date.

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3.Dividend Equivalents. Subject to the discretion of the Compensation Committee, dividend equivalents shall be credited in respect of Restricted Stock Units. Cash dividends shall be credited on behalf of the Participant to a deferred cash account (in a manner designed to comply with Code Section 409A) and the restrictions on such cash dividends shall lapse at the same time that the restrictions lapse on the associated Award of Restricted Stock Units, and cash dividends, along with accrued interest (if any) on such cash dividends, shall be paid in a lump sum at the same time that the Shares underlying the Restricted Stock Unit Award, and to which the cash dividends relate, are distributed. Stock dividends shall be converted into additional Restricted Stock Units, which will be subject to all of the terms and conditions of the underlying Restricted Stock Units, including the same vesting restrictions as the underlying Award.

4.Assignability. A Participant shall not be permitted to sell, transfer, pledge, assign or encumber Restricted Stock Units, other than pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act.

5.No Stockholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to an Award of Restricted Stock Units except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to the Shares paid upon the settlement of any vested Restricted Stock Units.

6.Time of Payment of Restricted Stock Units. Upon the lapse of the restriction imposed on Restricted Stock Units, all Restricted Stock Units that were not forfeited pursuant to Section IV.2(A), Section IV.2(B)(i), Section IV.2(C)(i), or Section VI shall be paid to the Participant as soon as reasonably practicable after the restrictions lapse. Payment shall be made in Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then in the form of an appropriate book entry entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the number of Shares subject to the Restricted Stock Units.

Notwithstanding the foregoing, if a Participant becomes eligible for Normal Retirement, or is eligible for additional vesting under Section IV.2(C)(ii), prior to the date of the lapse of restrictions imposed on Restricted Stock Units and the vesting provisions of Section IV.2(B)(ii) or Section IV.2(C)(ii) apply, then such Restricted Stock Units shall be paid to the Participant’s brokerage account of record as soon as reasonably practicable after the earlier of the Participant’s Separation from Service or the originally scheduled vesting date (in any event before the end of the calendar year in which such date occurs), subject to the delay of payment (if applicable) provided in Section VIII.14. The procedures set forth in Section VIII.6 will be applied for any taxes due upon the lapse of restrictions imposed on a Restricted Stock Award due to a Participant’s Normal Retirement eligibility or additional vesting as provided in Section IV.2(C)(ii).

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V. PERFORMANCE STOCK UNITS

1.Award Agreement. Performance Stock Unit Awards shall be evidenced by a Performance Stock Unit Agreement to be executed by the Participant and the Corporation setting forth the terms and conditions of the Performance Stock Unit Award. Performance Stock Unit Awards are “Other Share-Based Awards” as provided under Section 11 of the Plan. Each Performance Stock Unit Agreement shall incorporate by reference and be subject to this Statement of Terms and Conditions, including the special terms and conditions in the Appendix for the Participant’s country (if any) which forms part of this Statement of Terms and Conditions, and together both documents shall constitute the Performance Stock Unit Agreement. Performance Stock Unit Awards are also subject to the terms and conditions of the Plan.

2.Number of Shares Granted Based on Performance. The performance period of a Performance Stock Unit Award shall be greater than one year, and performance shall be based on such criteria as the Compensation Committee shall determine in its discretion at the beginning of the performance period. Following the end of the performance period, the Compensation Committee shall determine the extent to which the criteria have been achieved, and shall authorize the grant and issuance of Shares in respect of the Performance Stock Unit Award.

3.Special Conditions. Performance Stock Unit Awards shall be subject to the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Compensation Committee, consistent with the terms of the Plan.

(A)Forfeiture. If a Participant ceases to be a bona fide employee of the Corporation or any Affiliate (except as otherwise provided in the Plan or in Section V.3(B) or Section V.3(C)) prior to the end of the performance period, any then-outstanding Performance Stock Units shall be canceled, and all the rights of the Participant to such Award shall immediately terminate. If a Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Compensation Committee may otherwise expressly determine.

(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision contained herein or in the Plan or the Award Agreement to the contrary, if a Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of such Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of:

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(i)Death or Long-Term Disability, the Participant shall be eligible to receive, following completion of the applicable performance period, a prorated portion of each such Performance Stock Unit Award, equal to (1) the target number of Performance Stock Units subject to such Award, multiplied by (2) the performance criteria determined by the Compensation Committee to apply to such Award, multiplied by (3) a fraction, the numerator of which is the number of whole calendar months, rounded down to the nearest whole month, during which the Participant provided Service to the Corporation or an Affiliate during the performance period applicable to such Award, and the denominator of which is the number of calendar months in such performance period; provided, that for purposes of this clause (3), “whole calendar months” shall be calculated commencing on the applicable Grant Date; provided, however, that in no event shall such amount exceed any applicable cap or limitation set forth in the Performance Stock Unit Grant Notice; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date, the Participant shall be eligible to vest in such Performance Stock Unit Award following completion of the applicable performance period, as though the Participant had continued to be employed by the Corporation or one of its Affiliates through the date on which the Compensation Committee determines performance against the applicable performance goals.

Amounts, if any, to be paid under this Section V.3(B) shall be paid in accordance with Section V.7 and, if applicable, Section VIII.14.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary, if the Participant has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date and ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and:

(i)The Participant either (a) has attained the requirements for Normal Retirement on or prior to the Participant’s termination date or (b) would have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then any Performance Stock Unit Award shall be subject to the Normal Retirement provisions of Section V.3(B)(ii); or

(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the Participant’s termination date, then if such Participant’s termination date is no greater than six months prior to the date on which the Compensation Committee determines performance against the applicable performance goals, such Participant shall be eligible to vest in such Performance Stock Unit Award following completion of the applicable performance period, as though the Participant had continued to be employed by the Corporation or one of its Affiliates through such performance determination date.

Amounts, if any, to be paid under this Section V.3(C) shall be paid in accordance with Section V.7 and, if applicable, Section VIII.14.

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4.Dividend Equivalents. Unless otherwise determined by the Compensation Committee in its sole discretion, Dividend Equivalents shall not be accrued with respect to Performance Stock Unit Awards during the performance period.

5.Assignability. A Participant shall not be permitted to sell, transfer, pledge, assign or encumber all or any portion of a Performance Stock Unit Award.

6.No Stockholder Rights. Neither a Participant nor any person entitled to exercise a Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to a Performance Stock Unit Award, except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to the Shares paid upon the settlement of any Performance Stock Unit Award.

7.Time of Payment of Performance Stock Units. The Compensation Committee shall determine the extent to which Shares are payable pursuant to a Performance Stock Unit Award as soon as practicable following the end of the performance period, and such Shares shall be paid as soon as practicable thereafter and in any event no later than the end of the period under which payment would be deemed to be a “short-term deferral” as defined in the regulations under Code Section 409A. Payment shall be made in the form of Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then in the form of an appropriate book entry entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the number of Shares earned pursuant to the Performance Stock Unit Award.

VI. SPECIAL FORFEITURE AND REPAYMENT RULES

Any other provision of this Statement of Terms and Conditions to the contrary notwithstanding, if the Administrator determines that a Participant has engaged in any of the actions described in 3 below, the consequences set forth in 1 and 2 below shall result:

1.Any outstanding Option shall immediately and automatically terminate, be forfeited and shall cease to be exercisable, without limitation. In addition, any Award of Restricted Stock or Restricted Stock Units as to which the restrictions have not lapsed shall immediately and automatically be forfeited, Performance Stock Unit Awards shall immediately and automatically be forfeited and any such Shares of Restricted Stock shall be returned to the Corporation and all of the rights of the Participant to such Awards and the underlying Shares shall immediately terminate.

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2.If the Participant exercised an Option within 12 months prior to the date upon which the Corporation discovered that the Participant engaged in any actions described in 3 below, the Participant, upon written notice from the Corporation, shall immediately pay to the Corporation the economic value realized or obtained by the exercise of such Option measured at the date of exercise. In addition, if the restrictions imposed on any Award of Restricted Stock or Restricted Stock Units (including any unpaid dividends or Dividend Equivalents) lapsed, or any Performance Stock Unit Award was settled, within 12 months prior to the date the Corporation discovered that the Participant engaged in any action described in 3 below, the Participant, upon written notice from the Corporation, shall immediately pay to the Corporation the economic value realized or obtained with respect to such Award, measured at the date such Award vested.

3.The consequences described in 1 and 2 above shall apply if the Participant, either before or after termination of employment with the Corporation or its Affiliates:

(A)Discloses to others, or takes or uses for the Participant’s own purpose or the purpose of others, any trade secrets, confidential information, knowledge, data or know‑how or any other proprietary information or intellectual property belonging to the Corporation or its Affiliates and obtained by the Participant during the term of the Participant’s employment, whether or not they are the Participant’s work product. Examples of such confidential information or trade secrets include, without limitation, customer lists, supplier lists, pricing and cost data, computer programs, delivery routes, advertising plans, wage and salary data, financial information, research and development plans, processes, equipment, product information and all other types and categories of information as to which the Participant knows or has reason to know that the Corporation or its Affiliates intends or expects secrecy to be maintained;

(B)Fails to promptly return all documents and other tangible items belonging to the Corporation or its Affiliates in the Participant’s possession or control, including all complete or partial copies, recordings, abstracts, notes or reproductions of any kind made from or about such documents or information contained therein, upon termination of employment, whether pursuant to retirement or otherwise;

(C)Fails to provide the Corporation with at least 30 days’ written notice prior to directly or indirectly engaging in, becoming employed by, or rendering services, advice or assistance to any business in competition with the Corporation or its Affiliates. As used herein, “business in competition” means any person, organization or enterprise which is engaged in or is about to become engaged in any line of business engaged in by the Corporation or its Affiliates at the time of the termination of the Participant’s employment with the Corporation or its Affiliates;

(D)Fails to inform any new employer, before accepting employment, of the terms of this paragraph and of the Participant’s continuing obligation to maintain the confidentiality of the trade secrets and other confidential information belonging to the Corporation or its Affiliates and obtained by the Participant during the term of the Participant’s employment with the Corporation or any of its Affiliates;

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(E)Induces or attempts to induce, directly or indirectly, any of the customers of the Corporation or its Affiliates, employees, representatives or consultants to terminate, discontinue or cease working with or for the Corporation or its Affiliates, or to breach any contract with the Corporation or any of its Affiliates, in order to work with or for, or enter into a contract with, the Participant or any third party;

(F)Engages in conduct which is not in good faith and which disrupts, damages, impairs or interferes with the business, reputation or employees of the Corporation or its Affiliates; or

(G)Fails to meet the Participant’s continuing obligations with respect to non-disclosure, non-competition and/or non-solicitation under the Participant’s agreement with the Corporation or any Affiliate.

The Administrator shall determine in its sole discretion whether the Participant has engaged in any of the acts set forth in (A) through (G) above, and its determination shall be conclusive and binding on all interested persons.

Any provision of this Section VI which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such invalid or unenforceable provision, without invalidating or rendering unenforceable the remaining provisions of this Section VI.

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VII. CHANGE IN CONTROL

If as a result of a Change in Control, the Common Stock ceases to be listed for trading on a national securities exchange (an “Exchange”), any Option, Restricted Stock Award, Restricted Stock Unit Award or Performance Stock Unit Award that is unvested on the effective date of the Change in Control shall continue to vest according to the terms and conditions of such Award, provided that such Award is replaced with an award for voting securities of the resulting corporation or the acquiring corporation, as the case may be, (including without limitation, the voting securities of any corporation which as a result of the Change in Control owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) (the “Surviving Company”) which are traded on an Exchange (a “Replacement Award”), which Replacement Award, (i) in the case of an Option, shall consist of an option with the number of underlying shares and exercise price determined in a manner consistent with Code Section 424(a) with vesting and any other terms continuing in the same manner as the replaced Option; (ii) in the case of a Performance Stock Unit Award, shall consist of restricted stock or restricted stock units with a value (determined using the Surviving Company’s stock price as of the effective date of the Change in Control) equal to the value of the Performance Stock Unit Award (determined using the Corporation’s stock price and assuming attainment of target performance or actual performance achieved, if greater, as of the effective date of the Change in Control), with any restrictions on such Replacement Award lapsing at the end of the measuring period over which performance for the replaced Performance Stock Unit Award was to be measured prior to the granting of the Replacement Award; and (iii) in the case of a Restricted Stock Award or Restricted Stock Unit Award, shall consist of restricted stock or restricted stock units with a value (determined using the Surviving Company’s stock price as of the effective date of the Change in Control) equal to the value of the Restricted Stock Award or Restricted Stock Unit Award (determined using the Corporation’s stock price as of the effective date of the Change in Control), with any restrictions on such restricted stock or restricted stock units lapsing at the same time and manner as the replaced Award; provided, however, that in the event of the Participant’s involuntary Separation from Service by the Corporation without Cause or Separation from Service by the Participant for Good Reason during the vesting period of any Replacement Award, the Replacement Award shall immediately vest and be paid as soon as practicable following such Separation from Service (subject to Section VIII.14), based on the fair market value of the underlying shares on the vesting date, or in the case of options, based on the excess of the fair market value of the underlying shares over the option exercise price on the vesting date. If any Option, Restricted Stock Award, Restricted Stock Unit Award or Performance Stock Unit Award that is unvested at the effective time of the Change in Control is not replaced with a Replacement Award, such Award shall immediately vest and, in the case of a Performance Stock Unit Award, shall vest based upon deemed attainment of target performance or actual performance achieved, if greater.

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If as a result of a Change in Control, the Common Stock continues to be listed for trading on an Exchange, any unvested Option, Restricted Stock Award, or Restricted Stock Unit Award shall continue to vest according to the terms and conditions of such Award and any Performance Stock Unit Award shall be replaced with a Restricted Stock Unit Award where the number of shares subject to such Restricted Stock Unit Award shall be equal to the number of Shares assuming attainment of target performance or actual performance achieved, if greater, as of the effective date of the Change in Control with any restrictions on such Restricted Stock Unit Award lapsing at the end of the measuring period over which performance for the replaced Performance Stock Unit Award was to be measured prior to the granting of the Replacement Award; provided however, that, in the event of the Participant’s involuntary Separation from Service by the Corporation without Cause or Separation from Service by the Participant for Good Reason during the vesting period of an Award, such Award shall immediately vest and be paid as soon as practicable following such Separation from Service (subject to Section VIII.14).

VIII. MISCELLANEOUS

1.No Effect on Terms of Employment. Participation in the Plan shall not create a right to further employment with the Participant’s employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate, with or without cause, or change the terms of employment of a Participant at any time.

2.Grants to Participants in Foreign Countries. In making grants to Participants in foreign countries, the Administrator has the full discretion to deviate from this Statement of Terms and Conditions in order to adjust grants under the Plan to prevailing local conditions, including custom and legal and tax requirements. Furthermore, the Corporation reserves the right to impose other requirements on the Participant’s participation in the Plan on the Award and on any Shares acquired under the Plan, to the extent the Corporation determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertaking that may be necessary to accomplish the foregoing.

3.Information Notification. Any information required to be given under the terms of an Award shall be addressed to the Corporation in care of its Corporate Secretary at McKesson Corporation, 6555 North Highway 161, Irving, Texas 75039, and any notice to be given to a Participant shall be addressed to such Participant at the address indicated beneath the Participant's name on the Award Agreement or such other address as either party may designate in writing to the other. Any such notice shall be deemed to have been duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified and deposited (postage or registration or certification fee prepaid) in a post office or branch post office. The parties may use email delivery, so long as the message is clearly marked, sent to the email address(es) set forth herein, and a delivery receipt and a read receipt are made part of the message.  Email delivery will be deemed to occur when the sender receives confirmation that such message has been received and read by the recipient. Emails to the Corporation shall be delivered to CorpSecretary@mckesson.com.

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4.Administrator Decisions Conclusive. All decisions of the Administrator administering the Plan upon any questions arising under the Plan or under an Award Agreement, shall be conclusive and binding on all interested persons.

5.No Effect on Other Benefit Plans. Nothing herein contained shall affect a Participant’s right to participate in and receive benefits from and in accordance with the then current provisions of any pensions, insurance or other employment welfare plan or program offered by the Corporation.

6.Withholding. Regardless of any action the Corporation or the Employer takes with respect to any federal, state or local income tax, social insurance, payroll tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains the Participant's responsibility and may exceed the amount actually withheld by the Corporation or the Employer. The Participant further acknowledges that the Corporation and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant, vesting or exercise of the Award, as applicable, the subsequent sale of Shares acquired pursuant to the Plan and the receipt of any dividends and/or dividend equivalents; and (2) do not commit and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant has become subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable event, the Participant acknowledges that the Corporation and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

Prior to any relevant taxable or tax withholding event, as applicable, the Participant will pay or make adequate arrangements satisfactory to the Corporation and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: (1) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Corporation and/or the Employer; (2) withholding from proceeds of the sale of Shares acquired under the Plan either through a voluntary sale or through a mandatory sale arranged by the Corporation (on the Participant’s behalf pursuant to this authorization and any other authorization the Corporation and/or the broker designated by the Corporation may require the Participant to sign in connection with the sale of Shares); or (3) withholding Shares to be issued upon grant, vesting/settlement or exercise, as applicable. Calculation of the number of Shares to be withheld shall be made based on the closing price of the Common Stock on the New York Stock Exchange on the date that the amount of tax to be withheld is determined. In no event, however, shall the Corporation be required to issue fractional Shares. With respect to an Award other than an Option, if adequate arrangements to satisfy the obligations with regard to all Tax-Related Items are not made by the Participant with the Corporation and/or the Employer prior to the relevant taxable event, the Corporation will satisfy such obligations as provided above in clause (3) of this paragraph.

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To avoid negative accounting treatment, the Corporation may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant will be deemed to have been issued the full number of Shares subject to the Award, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of the Participant’s participation in the Plan.

Finally, the Participant shall pay to the Corporation or the Employer any amount of Tax-Related Items that the Corporation or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Corporation may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if the Participant fails to comply with the Participant's obligations in connection with the Tax-Related Items.

The Administrator shall be authorized to establish such rules, forms and procedures as it deems necessary to implement the foregoing.

7.Successors. The Award Agreements shall be binding upon and inure to the benefit of any successor or successors of the Corporation. “Participant” as used herein shall include the Participant’s Beneficiary.

8.Delaware Law. The interpretation, performance, and enforcement of all Award Agreements shall be governed by the laws of the State of Delaware.

9.Nature of Grant. In accepting the grant, the Participant acknowledges that:

(A)the Plan is established voluntarily by the Corporation, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Corporation at any time;

(B)the grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future Award grants, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past;

(C)all decisions with respect to future Awards, if any, will be at the sole discretion of the Corporation;

(D)the Participant is voluntarily participating in the Plan;

(E)the Award and the Shares subject to the Award, and the income from and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;

(F)the Award will not be interpreted to form an employment contract or relationship with the Corporation; and furthermore, the Award will not be interpreted to form an employment contract with any subsidiary or Affiliate of the Corporation;

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(G)the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;

(H)if the underlying Shares do not increase in value, the Options will have no value;

(I)in consideration of the grant of the Award, no claim or entitlement to compensation or damages shall arise from forfeiture of the Award which results from termination of the Participant’s employment with the Employer or the Corporation or one of its Affiliates (for any reason whatsoever, and whether or not such forfeiture is later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any) and the Participant irrevocably releases the Corporation or its Affiliates from any such claim that may arise; provided that, notwithstanding the foregoing, in the event any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the Award, the Participant shall be deemed irrevocably to have waived the Participant's entitlement to pursue such claim;

(J)for purposes of an Award, the Participant’s employment relationship will be considered terminated as of the date the Participant is no longer a bona fide employee of the Corporation, the Employer or one of the Corporation’s other Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and unless otherwise expressly provided in this Award Agreement or determined by the Corporation in its sole discretion, the Participant’s right to receive Awards and vest in Awards under the Plan, if any, will terminate effective as of such date and will not be extended by any notice period mandated under local law (for example, the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any); similarly, any right to exercise Options under the Plan after termination of employment will be measured as of the date the Participant is no longer a bona fide employee of the Corporation, the Employer or one of the Corporation’s other Affiliates and will not be extended by any notice period mandated under local law; the Administrator shall have the sole discretion to determine when the Participant is no longer a bona fide employee for purposes of an Award (including whether the Participant may still be considered to be providing services while on a leave of absence);

(K)the Corporation is not providing any tax, legal or financial advice, nor is the Corporation making any recommendations regarding participation in the Plan or the Participant’s acquisition or sale of Shares; and

(L)Participant is hereby advised to consult with the Participant's own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.

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10.Data Privacy Information and Consent.

(A)Data Collection and Usage. The Corporation and the Employer may collect, process and use certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any Shares or directorships held in the Corporation, details of all Options, Restricted Stock, Restricted Stock Units, Performance Shares, Other Share-Based Awards, or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Employee’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Participant’s consent.

(B)Stock Plan Administration Service Providers. The Corporation transfers Data to Fidelity Stock Plan Services LLC and its affiliated companies, an independent service provider based in the United States, which is assisting the Corporation with the implementation, administration and management of the Plan. The Corporation may select a different service provider or additional service providers and share Data with such other provider serving in a similar manner. The Participant may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

(C)International Data Transfers. The Corporation and its service providers are based in the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program. The Corporation’s legal basis, where required, for the transfer of Data isthe Participant’s consent.

(D)Data Retention. The Corporation will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws. In the latter case, the Participant understands and acknowledges that the Corporation’s legal basis for the processing of the Participant’s Data would be compliance with the relevant laws or regulations or the pursuit by the Corporation of respective legitimate interests not outweighed by the Participant’s interests, rights or freedoms. When the Corporation no longer needs the Participant’s Data for any of the above purposes, the Participant understands the Corporation will remove it from its systems.

(E)Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s salary from or employment with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Corporation would not be able to grant Awards to the Participant or administer or maintain such Awards.

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(F)Data Subject Rights. The Participant may have a number of rights under data privacy laws in the Participant’s jurisdiction. Depending on where the Participant is based, such rights may include the right to (i) inquire whether and what kind of Data the Corporation holds about the Participant and how it is processed, and to request access or copies of Data the Corporation processes, (ii) request the correction or supplementation of Data about the Participant that is inaccurate, incomplete or out-of-date in light of the purposes underlying the processing, (iii) obtain the erasure of Data no longer necessary for the purposes underlying the processing, processed based on withdrawn consent, processed for legitimate interests that, in the context of the Participant’s objection, do not prove to be compelling, or processed in non-compliance with applicable legal requirements, (iv) request restrictions on processing of Data in certain situations where the Participant feels its processing is inappropriate, (v) request portability of the Participant’s Data that the Participant has actively or passively provided to the Corporation (which does not include data derived or inferred from the collected data), where the processing of such Data is based on consent or the Participant’s employment and is carried out by automated means, (vi) object, in certain circumstances, to the processing of Data for legitimate interests, (vii) lodge complaints with competent authorities in the Participant’s jurisdiction, and/or (viii) receive a list with the names and addresses of any potential recipients of Data. To receive clarification regarding these rights or to exercise these rights, the Participant can contact his or her local human resources representative.

By accepting the Award and indicating consent via the Corporation’s acceptance procedure, the Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Corporation and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.

Finally, the Participant understands that the Corporation may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Participant provide another data privacy consent form. If applicable and upon request of the Corporation, the Participant agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Corporation (or any other acknowledgements, agreements or consents that may be required by the Employer or the Corporation) that the Corporation and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands that the Participant will not be able to participate in the Plan if the Participant fails to execute any such acknowledgement, agreement or consent requested by the Corporation and/or the Employer.

11.Severability. The provisions in this Statement of Terms and Conditions are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

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12.Language. The Participant acknowledges that the Participant is proficient in the English language and, accordingly, understands the provisions of the Plan and this Statement of Terms and Conditions. If the Participant has received this Statement of Terms and Conditions or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

13.Electronic Delivery. The Corporation may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or a third party designated by the Corporation.

14.Section 409A. If (A) the Participant is a Specified Employee at the time of the Participant’s Separation from Service, and (B) some or any portion of the amounts payable to the Participant, if any, when considered together with any other payments or benefits which may be considered deferred compensation under section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and subject to the plan aggregation rules under Treasury Regulation section 1.409A-1(c)(3)(viii) (together, the “Deferred Compensation Benefits”) would result in the imposition of additional tax under Section 409A if paid to the Participant on or within the six month period following the Separation from Service, then to the extent such portion of the Deferred Compensation Benefits resulting in the imposition of additional tax would otherwise have been payable on or within the first six months following the Separation from Service, it will instead become payable on the first payroll date that occurs in the seventh month following the Separation from Service (or such longer period as is required to avoid the imposition of additional tax under Section 409A). All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit.

IX. DEFINITIONS

When capitalized in this Statement of Terms and Conditions, the following terms shall have the meaning set forth below:

1.“Award Agreement” means an agreement between the Participant and the Corporation evidencing the grant of an Option, Restricted Stock Award, Restricted Stock Award, Performance Shares or Other Share-Based Award, as applicable.

2.“Cause” means termination of the Participant’s employment with the Corporation or an Affiliate upon the Participant’s negligent or willful engagement in misconduct which, in the sole determination of the Chief Executive Officer of the Corporation (or the Chief Executive Officer’s designee), is injurious to the Corporation, its employees, or its customers.

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3.“Early Retirement” means a termination of employment (other than due to death, Long-Term Disability or for Cause) which occurs prior to Normal Retirement but on or after the date on which the Participant’s age (expressed in terms of years and completed months) plus service with the Corporation or an Affiliate equals 65. For purposes of determining eligibility for Early Retirement, the term “service” shall include years and completed whole months of service.

4.“Family Member” means any person identified as an “immediate family” member in Rule 16(a)‑1(e) of the Exchange Act, as such Rule may be amended from time to time. Notwithstanding the foregoing, the Administrator may designate any other person(s) or entity(ies) as a “family member.”

5.    “Good Reason” means any of the following actions, if taken without the express written consent of the Participant:

(A)    Any material change by the Corporation in the Participant’s functions, duties, or responsibilities, which change would cause the Participant’s position with the Corporation to become of less dignity, responsibility, importance, or scope from the position and attributes that applied to the Participant immediately prior to the Change in Control; provided, however, that, any such change attributable to the Corporation’s no longer being a company with publicly traded common stock shall not constitute Good Reason; and provided, further, that a reduction in the Participant’s functions, duties or responsibilities solely by virtue of the Corporation being acquired and made part of a larger entity (for example, if following a Change in Control the Participant retains the Participant’s position, or has a comparable position, with respect to a division or subsidiary of the acquirer that contains the Corporation’s business) shall not constitute Good Reason;

(B)    Any significant reduction in the Participant’s aggregate base annual salary and target incentive opportunity, as in effect immediately prior to the Change in Control;

(C)    Any material failure by the Corporation to comply with any of the provisions of an Award subsequent to a Change in Control; or

(D)    The Corporation’s requiring the Participant to be based at any location which would increase the Participant’s regular one-way commute by more than 25 miles from that in effect immediately preceding the Change in Control, except for travel reasonably required in the performance of the Participant’s responsibilities;

Provided that the Participant gives notice to the Corporation of the existence of the Good Reason condition within 30 days of the initial existence of the Good Reason condition and the Corporation is provided 30 days after receipt of the Participant’s notice to remedy the Good Reason condition; provided further that the Participant’s Separation from Service must occur within six months from the initial existence of the Good Reason condition if the Corporation does not remedy such condition for such separation to be considered to be for Good Reason.

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6.    “Expiration Date” means the date that an Option expires as set forth in the Option Grant Notice as the “Expiration Date.”

7.    “Grant Date” means the date the Administrator grants the Award.

8.    “Grant Notice” means the notice of an Award granted to the Participant, which sets forth certain terms of such Award.

9.    “Long‑Term Disability” means a physical or mental condition in respect of which the administrator of the Corporation’s long-term disability plan has determined that the Participant is eligible to receive income replacement benefits; or, if the Participant is not then a participant in the Corporation’s long-term disability plan, a physical or mental condition that the administrator of the Corporation’s long-term disability plan determines would have rendered the Participant eligible to receive income replacement benefits, had the Participant been enrolled in such plan.

10.    “Normal Retirement” means termination of employment (other than due to death, Long-Term Disability or for Cause) at or after age 60 (57, in the case of a participant in the McKesson Corporation 1984 Executive Benefit Retirement Plan) with at least 10 years of service with the Corporation or an Affiliate. For purposes of determining eligibility for Normal Retirement, “service” shall mean completed whole years of service (12 consecutive months).

11.    “Option Period” means the period commencing on the Grant Date of an Option and, except at otherwise provided in Section II.5, ending on the Expiration Date.

12.    “Separation from Service” means termination of employment with the Corporation or an affiliate. A Participant shall be deemed to have had a Separation from Service if the Participant’s service with the Corporation or an affiliate is reduced to an annual rate that is equal to or less than 20% of the services rendered, on average, during the immediately preceding three years of service with the Corporation or an affiliate (or, if providing service to the Corporation or an affiliate for less than three years, such lesser period).

13.    “Severance” means termination of employment with the Corporation or an affiliate, and qualified for participation in and entitlement to benefits under the McKesson Corporation Severance Pay Plan, in accordance with the terms and conditions of such plan.

14.     “Short-Term Disability” means short-term disability as defined in the Corporation’s short-term disability plan.

15.    “Specified Employee” means those employees identified by the Corporation as "Specified Employees" for purposes of Code Section 409A.

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SPECIAL INCENTIVE AWARD

McKESSON CORPORATION
STATEMENT OF TERMS AND CONDITIONS APPLICABLE TO

FY 2019 SPECIAL INCENTIVE AWARD

PERFORMANCE STOCK UNITS AND RESTRICTED STOCK UNITS

GRANTED PURSUANT TO THE 2013 STOCK PLAN

I. INTRODUCTION; GRANT DATE

The following terms and conditions shall apply to the special incentive (the “Special Incentive Award”) of Performance Stock Units (“PSUs”) and Restricted Stock Units (“RSUs”) granted under the Plan and subject to the terms and conditions of the Plan. The Grant Date of the Special Incentive Award is [           ], 2018. This Statement of Terms and Conditions is intended to meet the requirements of Code Section 409A and any rules promulgated thereunder. In the event of any inconsistency between this Statement of Terms and Conditions and the Plan, the Plan shall govern. Capitalized terms not otherwise defined in this Statement of Terms and Conditions shall have the meaning set forth in the Plan.

II. PERFORMANCE STOCK UNITS

1.The Special Incentive Award includes a target Award of [       ] Performance Stock Units (the “PSU Award”), which is subject to the terms and conditions set forth herein. The PSU Award is an “Other Share-Based Award” as provided under Section 11 of the Plan. The PSU Award is also subject to the terms and conditions of the Plan.

2.Lapse of Performance Restrictions.

(A)Performance Goals. The performance goals applicable to the PSU Award are attached as Exhibit A to this Statement of Terms and Conditions. The vesting and payment of the PSU Award is also subject to Section II.3, Section II.4 and Section IV.

(B)Payment of Earned PSUs. As soon as practicable following the end of the performance period, Compensation Committee shall determine the extent to which the performance goals have been achieved, and shall determine the number of PSUs that have been earned.

Fifty percent (50%) of the Shares underlying earned PSUs shall be paid as soon as practicable thereafter and in any event no later than the end of the period under which payment would be deemed to be a “short-term deferral” as defined in the regulations under Code Section 409A. The remaining fifty percent (50%) of such earned PSUs shall be subject to one additional year of vesting service and shall be evidenced by the issuance of a One-Year RSU Award on the terms and conditions set forth in Section II.4.

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3.Termination of Service Prior to Determination of Performance Against Goals.

(A)Restrictions. If the Participant ceases to be a bona fide employee of the Corporation or any Affiliate (except as otherwise provided in the Plan, or in Section II.3(B) or Section II.3(C)) prior to the lapse of the performance restrictions imposed on the PSU Award, this PSU Award shall be canceled, and all the rights of the Participant to the PSU Award shall immediately terminate. If the Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision contained herein or in the Plan, if the Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of the PSU Award ceases to be a bona fide employee of the Corporation or an Affiliate prior to completion of the performance period as a result of:

(i)Death or Long-Term Disability, the Participant shall be eligible to receive, following completion of the performance period, an amount in cash equal to the value of a prorated portion of the PSU Award, equal to (1) the target number of PSUs subject to the PSU Award, multiplied by (2) the performance results determined by the Compensation Committee to apply to such Award, multiplied by (3) a fraction, the numerator of which is the number of whole calendar months, rounded down to the nearest whole month, during which the Participant provided Service to the Corporation or an Affiliate during the performance period, and the denominator of which is the number of calendar months in such performance period; provided, that for purposes of this clause (3), “whole calendar months” shall be calculated commencing on April 1, 2018; provided, however, that in no event shall such amount exceed any applicable cap or limitation set forth in Exhibit A; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date, the Participant shall be eligible to receive, following completion of the performance period, an amount in cash equal to the value of the earned PSUs, paid in installments at the same times as actively employed holders of PSU Awards and calculated as though the Participant had continued to be employed by the Corporation or one of its Affiliates during the entire performance period and additional one-year vesting period applicable to the One-Year RSU Award as set forth in Section II.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary, if the Participant has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date and ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and the Participant’s termination date is within six months prior to the date on which the Compensation Committee determines performance against the applicable performance goals, and:

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(i)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, and would not have attained the requirements for Normal Retirement within six months after the termination date, then the Participant shall be eligible to receive an amount in cash equal to one-half (1/2) of the value of the earned PSUs, paid at the same time as actively employed holders of PSU Awards are paid the first installment of Shares, and calculated as though the Participant had continued to be employed by the Corporation or one of its Affiliates during the entire performance period; or

(ii)The Participant has not attained the requirements for Normal Retirement on or prior to the Participant’s termination date, but would have attained the requirements for Normal Retirement within six months after the termination date, such Participant shall be eligible for the Normal Retirement benefit set forth in Section II.3(B)(ii).

4.Grant of One-Year RSU Award. Once the Compensation Committee has determined the number of PSUs that have been earned pursuant to the PSU Award, if any, an award of Restricted Stock Units with respect to one-half (50%) of such earned PSUs (the “One-Year RSU Award”) will be granted to the Participant on the terms and conditions set forth below and subject to the terms and conditions of the Plan.

(A)The restrictions applicable to the One-Year RSU Award shall lapse with respect to 100% of the underlying Shares on the first anniversary of the Grant Date with respect to such One-Year RSU Award, subject to Section II.4(C) and Section IV.

(B)Dividend Equivalents. Dividend equivalents shall be credited in respect of the One-Year RSU Award. Cash dividends shall be credited on behalf of the Participant to a deferred cash account (in a manner designed to comply with Code Section 409A) and the restrictions on such cash dividends shall lapse at the same time that the restrictions lapse on the One-Year RSU Award, and cash dividends, along with accrued interest (if any) on such cash dividends, shall be paid in a lump sum at the same time that the Shares underlying the One-Year RSU Award are distributed. Stock dividends shall be converted into additional Restricted Stock Units, which will be subject to all of the terms and conditions of the One-Year RSU Award.

(C)Termination of Service.

(i)Restrictions. If the Participant ceases to be a bona fide employee of the Corporation or any Affiliate (except as otherwise provided in the Plan, or in Section II.4(C)(ii) or Section II.4(C)(iii)) prior to the lapse of the restrictions imposed on the One-Year RSU Award, any unvested Restricted Stock Units subject to the One-Year RSU Award shall be canceled, and all the rights of the Participant to the One-Year RSU Award shall immediately terminate. If the Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

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(ii)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision contained to the contrary herein, if the Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of the One-Year RSU Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of

(a)Death or Long-Term Disability, then the restrictions imposed on the One-Year RSU Award shall lapse on the date of such termination; or

(b)    Normal Retirement, the One-Year RSU Award shall not be cancelled and will vest and be paid on the first anniversary of such Grant Date, as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such restricted period.

(iii)    Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary, if the Participant has been in the continuous employment of the Corporation or any of its Affiliates since the applicable Grant Date and ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and the Participant’s termination date is within six months prior to the date on which such RSU Award is scheduled to vest and be paid, the restrictions applicable to such RSU Award shall lapse upon the termination date.

5.Payment of Performance Stock Units and Restricted Stock Units. Except as provided with respect to the payment of earned PSUs in cash following certain terminations of employment under Section II.3, payment shall be made in Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then in the form of an appropriate book entry entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the number of Shares subject to the Performance Stock Units or Restricted Stock Units, as applicable.

III. THREE-YEAR RESTRICTED STOCK UNITS

1.Award Agreement. The Special Incentive Award includes an Award of [       ] Restricted Stock Units (the “RSU Award”), which is subject to the terms and conditions set forth herein. The RSU Award also subject to the terms and conditions of the Plan.

2.Lapse of Restrictions. The restrictions applicable to the RSU Award shall lapse with respect to 100% of the underlying Shares on the third anniversary of the Grant Date, subject to Sections III.4 and IV.

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3.Dividend Equivalents. Dividend equivalents shall be credited in respect of the RSU Award granted under this Section III. Cash dividends shall be credited on behalf of the Participant to a deferred cash account (in a manner designed to comply with Code Section 409A) and the restrictions on such cash dividends shall lapse at the same time that the restrictions lapse on such RSU Award, and cash dividends, along with accrued interest (if any) on such cash dividends, shall be paid in a lump sum at the same time that the Shares underlying such RSU Award are distributed. Stock dividends shall be converted into additional Restricted Stock Units, which will be subject to all of the terms and conditions of the applicable RSU Award, including the same vesting restrictions as the RSU Award.

4.Termination of Service.

(A)Restrictions. If the Participant ceases to be a bona fide employee of the Corporation or any Affiliate (except as otherwise provided in the Plan, or in Section III.4(B) or Section III.4(C)) prior to the lapse of the restrictions imposed on the Award, any unvested Restricted Stock Units subject to the RSU Award shall be canceled, and all the rights of the Participant to such portion of the RSU Award shall immediately terminate. If the Participant is absent from work with the Corporation or an Affiliate because of the Participant's Short-Term Disability or because the Participant is on an approved leave of absence, the Participant shall not be deemed during the period of any such absence, by virtue of such absence alone, to have terminated employment with the Corporation or an Affiliate except as the Administrator may otherwise expressly determine.

(B)Termination of Employment by Reason of Death, Long-Term Disability or Normal Retirement. Notwithstanding any provision contained to the contrary herein, if the Participant who has been in the continuous employment of the Corporation or any of its Affiliates since the Grant Date of the RSU Award ceases to be a bona fide employee of the Corporation or an Affiliate as a result of

(i)Death or Long-Term Disability, then the restrictions imposed on any Award of Restricted Stock Units shall lapse on the date of such termination; or

(ii)Normal Retirement on or after the first anniversary of the Grant Date of the RSU Award, such award shall not be cancelled and will vest and be paid on the third anniversary of such Grant Date, as though the Participant had continued to be employed by the Corporation or one of its Affiliates during such restricted period.

(C)Termination of Employment by Reason of Severance. Notwithstanding any provision to the contrary, if the Participant has been in the continuous employment of the Corporation or any of its Affiliates since the applicable Grant Date and ceases to be a bona fide employee of the Corporation or an Affiliate as a result of Severance, and the Participant’s termination date is within six months prior to the date on which such RSU Award is scheduled to vest and be paid, the restrictions applicable to such RSU Award shall lapse upon the termination date.

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5.Time of Payment of Restricted Stock Units. Upon the lapse of the restriction imposed on the Restricted Stock Units, such units that were not otherwise forfeited pursuant to the terms of the Plan and this Award Agreement shall be paid to the Participant as soon as reasonably practicable after the restrictions lapse. Payment shall be made in Shares to the Participant’s brokerage account of record. If the Participant does not have a brokerage account of record, then in the form of an appropriate book entry entered in the records of the Corporation’s transfer agent recording the Participant’s unrestricted interest in the number of Shares subject to the Restricted Stock Units.

IV. SPECIAL FORFEITURE AND REPAYMENT RULES

Any other provision of this Statement of Terms and Conditions to the contrary notwithstanding, if the Administrator determines that the Participant has engaged in any of the actions described in 3 below, the consequences set forth in 1 and 2 below shall result:

1.Performance Stock Units and Restricted Stock Units, to the extent the restrictions have not lapsed, shall immediately and automatically be forfeited.

2.If the restrictions imposed on an RSU Award (including any unpaid Dividend Equivalents) lapsed within 12 months prior to the date the Corporation discovered that the Participant engaged in any action described in 3 below, the Participant, upon written notice from the Corporation, shall immediately pay to the Corporation the economic value realized or obtained with respect to the PSU Award and any RSU Award, measured at the date on which Shares (or cash, if applicable) was paid in respect of the PSU Award or on which such RSU Award vested.

3.The consequences described in 1 and 2 above shall apply if the Participant, either before or after termination of employment with the Corporation or its Affiliates:

(A)Discloses to others, or takes or uses for the Participant’s own purpose or the purpose of others, any trade secrets, confidential information, knowledge, data or know‑how or any other proprietary information or intellectual property belonging to the Corporation or its Affiliates and obtained by the Participant during the term of the Participant’s employment, whether or not they are the Participant’s work product. Examples of such confidential information or trade secrets include, without limitation, customer lists, supplier lists, pricing and cost data, computer programs, delivery routes, advertising plans, wage and salary data, financial information, research and development plans, processes, equipment, product information and all other types and categories of information as to which the Participant knows or has reason to know that the Corporation or its Affiliates intends or expects secrecy to be maintained;

(B)Fails to promptly return all documents and other tangible items belonging to the Corporation or its Affiliates in the Participant’s possession or control, including all complete or partial copies, recordings, abstracts, notes or reproductions of any kind made from or about such documents or information contained therein, upon termination of employment, whether pursuant to retirement or otherwise;

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(C)Fails to provide the Corporation with at least 30 days’ written notice prior to directly or indirectly engaging in, becoming employed by, or rendering services, advice or assistance to any business in competition with the Corporation or its Affiliates. As used herein, “business in competition” means any person, organization or enterprise which is engaged in or is about to become engaged in any line of business engaged in by the Corporation or its Affiliates at the time of the termination of the Participant’s employment with the Corporation or its Affiliates;

(D)Fails to inform any new employer, before accepting employment, of the terms of this paragraph and of the Participant’s continuing obligation to maintain the confidentiality of the trade secrets and other confidential information belonging to the Corporation or its Affiliates and obtained by the Participant during the term of the Participant’s employment with the Corporation or any of its Affiliates;

(E)Induces or attempts to induce, directly or indirectly, any of the customers of the Corporation or its Affiliates, employees, representatives or consultants to terminate, discontinue or cease working with or for the Corporation or its Affiliates, or to breach any contract with the Corporation or any of its Affiliates, in order to work with or for, or enter into a contract with, the Participant or any third party;

(F)Engages in conduct which is not in good faith and which disrupts, damages, impairs or interferes with the business, reputation or employees of the Corporation or its Affiliates; or

(G)Fails to meet the Participant’s continuing obligations with respect to non-disclosure, non-competition and/or non-solicitation under the Participant’s agreement with the Corporation or any Affiliate.

The Administrator shall determine in its sole discretion whether the Participant has engaged in any of the acts set forth in (A) through (G) above, and its determination shall be conclusive and binding on all interested persons.

Any provision of this Section IV which is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such invalid or unenforceable provision, without invalidating or rendering unenforceable the remaining provisions of this Section IV.

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V. CHANGE IN CONTROL

If as a result of a Change in Control, the Common Stock ceases to be listed for trading on a national securities exchange (an “Exchange”), any portion of the PSU Award or an RSU Award granted hereby (for purposes of this Section V, “RSU Award” shall include time-vesting RSU awards granted under Section III or Section IV) that is unvested on the effective date of the Change in Control shall continue to vest according to the terms and conditions of such Award, provided that such Award is replaced with an award for voting securities of the resulting corporation or the acquiring corporation, as the case may be (including without limitation, the voting securities of any corporation which as a result of the Change in Control owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) (the “Surviving Company”), which are traded on an Exchange (a “Replacement Award”), which Replacement Award, (i) in the case of the PSU Award, shall consist of restricted stock units with a value (determined using the Surviving Company’s stock price as of the effective date of the Change in Control) equal to the value of the PSU Award (determined using the Corporation’s stock price and assuming attainment of target performance or actual performance achieved, if greater, as of the effective date of the Change in Control), with any restrictions on such restricted stock units lapsing at the end of the PSU Award’s performance period, with continued vesting after the Change in Control based only on continued service to the Corporation or an Affiliate, as though a time-based vesting award; and (ii) in the case of an RSU Award, shall consist of restricted stock units with a value (determined using the Surviving Company’s stock price as of the effective date of the Change in Control) equal to the value of the RSU Award (determined using the Corporation’s stock price as of the effective date of the Change in Control), with any restrictions on such restricted stock units lapsing at the same time and manner as the replaced Award; provided, however, that in the event of the Participant’s involuntary Separation from Service by the Corporation without Cause or Separation from Service by the Participant for Good Reason during the vesting period of any Replacement Award, the Replacement Award shall immediately vest and be paid as soon as practicable following such Separation from Service (subject to Section VI.17), based on the fair market value of the underlying shares on the vesting date. If any portion of the PSU Award or an RSU Award that is unvested at the effective time of the Change in Control is not replaced with a Replacement Award, such Award shall immediately vest and, in the case of the PSU Award, such Award shall vest based upon deemed attainment of target performance or actual performance achieved, if greater, if such Change in Control occurs during the performance period.

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If as a result of a Change in Control, the Common Stock continues to be listed for trading on an Exchange, (i) any unvested portion of the PSU Award shall continue to vest with respect to that number of Shares that reflects the deemed attainment of target performance or actual performance achieved, if greater, as of the effective date of the Change in Control, such vesting occurring at such time or times as (x) performance would have been measured and (y) the related RSU Award would have vested absent such Change in Control, and (ii) any unvested portion of an RSU Award shall continue to vest according to the terms and conditions of such Award and; provided however, that, in the event of the Participant’s involuntary Separation from Service by the Corporation without Cause or Separation from Service by the Participant for Good Reason during the vesting period of this PSU Award or an RSU Award, such Award shall immediately vest and be paid as soon as practicable following such Separation from Service (subject to Section VI.17), based on the fair market value of the underlying Shares on the vesting date.

VI. PARTICIPANT RIGHTS; MISCELLANEOUS

1.Restriction on Sale. If the Participant is covered by the Stock Ownership Policy at the time of settlement of an Award granted hereunder, the Compensation Committee reserves the right to impose a restriction on the sale of Shares that the Participant receives upon the settlement of the Performance Stock Units and Restricted Stock Units granted hereunder, unless the Participant has satisfied the ownership targets applicable to the Participant as provided in such policy.

2.Assignability. The Participant shall not be permitted to sell, transfer, pledge, assign or encumber the Performance Stock Units or Restricted Stock Units granted hereby, other than pursuant to a qualified domestic relations order as defined in the Code or Title I of the U.S. Employee Retirement Income Security Act.

3.No Stockholder Rights. Neither the Participant nor any person entitled to exercise the Participant’s rights in the event of the Participant’s death shall have any of the rights of a stockholder with respect to the Performance Stock Units or Restricted Stock Units except to the extent that a book entry has been entered in the records of the Corporation’s transfer agent with respect to the Shares paid upon the settlement of any such Award.

4.No Effect on Terms of Employment. Participation in the Plan shall not create a right to further employment with the Participant’s employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate, with or without cause, or change the terms of employment of the Participant at any time.

5.Participants in Foreign Countries. The Administrator has the full discretion to deviate from this Award Agreement in order to adjust the Awards granted hereby to prevailing local conditions, including custom and legal and tax requirements. Furthermore, the Corporation reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Awards granted hereby and on any Shares acquired under the Plan, to the extent the Corporation determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertaking that may be necessary to accomplish the foregoing.

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6.Information Notification. Any information required to be given under the terms of the Awards granted hereby shall be addressed to the Corporation in care of its Corporate Secretary at McKesson Corporation, One Post Street, San Francisco, California 94104, and any notice to be given to the Participant shall be addressed to such Participant at the address indicated beneath the Participant's name on the Award Agreement or such other address as either party may designate in writing to the other. Any such notice shall be deemed to have been duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified and deposited (postage or registration or certification fee prepaid) in a post office or branch post office.

7.Administrator Decisions Conclusive. All decisions of the Administrator administering the Plan upon any questions arising under the Plan or under this Award Agreement, shall be conclusive and binding on all interested persons.

8.No Effect on Other Benefit Plans. Nothing herein contained shall affect the Participant’s right to participate in and receive benefits from and in accordance with the then current provisions of any pensions, insurance or other employment welfare plan or program offered by the Corporation.

9.Withholding. Regardless of any action the Corporation or the Employer takes with respect to any federal, state or local income tax, social insurance, payroll tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains the Participant's responsibility and may exceed the amount actually withheld by the Corporation or the Employer. The Participant further acknowledges that the Corporation and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant or vesting of the Award, the subsequent sale of Shares acquired pursuant to the Plan and the receipt of any dividends and/or dividend equivalents; and (ii) do not commit and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant has become subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable event, the Participant acknowledges that the Corporation and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

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Prior to any relevant taxable or tax withholding event, as applicable, the Participant will pay or make adequate arrangements satisfactory to the Corporation and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: (i) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Corporation and/or the Employer; (ii) withholding from proceeds of the sale of Shares acquired under the Plan either through a voluntary sale or through a mandatory sale arranged by the Corporation (on the Participant’s behalf pursuant to this authorization and any other authorization the Corporation and/or the broker designated by the Corporation may require the Participant to sign in connection with the sale of Shares); or (iii) withholding Shares to be issued upon grant, vesting/settlement or exercise, as applicable. Calculation of the number of Shares to be withheld shall be made based on the closing price of the Common Stock on the New York Stock Exchange on the date that the amount of tax to be withheld is determined. In no event, however, shall the Corporation be required to issue fractional Shares. If adequate arrangements to satisfy the obligations with regard to all Tax-Related Items are not made by the Participant with the Corporation and/or the Employer prior to the relevant taxable event, the Corporation will satisfy such obligations as provided above in clause (iii) of this paragraph.

To avoid negative accounting treatment, the Corporation may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant will be deemed to have been issued the full number of Shares subject to the Award, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of the Participant’s participation in the Plan.

Finally, the Participant shall pay to the Corporation or the Employer any amount of Tax-Related Items that the Corporation or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Corporation may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if the Participant fails to comply with the Participant's obligations in connection with the Tax-Related Items.

The Administrator shall be authorized to establish such rules, forms and procedures as it deems necessary to implement the foregoing.

10.Successors. The Plan, this Statement of Terms and Conditions and applicable Grant Notices shall be binding upon and inure to the benefit of any successor or successors of the Corporation. “Participant” as used herein shall include the Participant’s Beneficiary.

11.Delaware Law. The interpretation, performance, and enforcement of all Award Agreements shall be governed by the laws of the State of Delaware.

12.Nature of Grant. In accepting the grant, the Participant acknowledges that:

(A)the Plan is established voluntarily by the Corporation, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Corporation at any time;

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(B)the grant of the Awards is voluntary and occasional and does not create any contractual or other right to receive future Award grants, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past;

(C)all decisions with respect to future Awards, if any, will be at the sole discretion of the Corporation;

(D)the Participant is voluntarily participating in the Plan;

(E)the Special Incentive Award is not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;

(F)the Awards will not be interpreted to form an employment contract or relationship with the Corporation; and furthermore, the Awards will not be interpreted to form an employment contract with any subsidiary or Affiliate of the Corporation;

(G)the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;

(H)in consideration of the grant of the Awards, no claim or entitlement to compensation or damages shall arise from forfeiture of the Awards which results from termination of the Participant’s employment with the Employer or the Corporation or one of its Affiliates (for any reason whatsoever) and the Participant irrevocably releases the Corporation or its Affiliates from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the Awards, the Participant shall be deemed irrevocably to have waived the Participant's entitlement to pursue such claim;

(I)for purposes of the Awards, the Participant’s employment relationship will be considered terminated as of the date the Participant is no longer a bona fide employee of the Corporation or one of its Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and unless otherwise expressly provided in this Award Agreement or determined by the Corporation in its sole discretion, the Participant’s right to receive Awards and vest in Awards under the Plan, if any, will terminate effective as of such date and will not be extended by any notice period mandated under local law; the Administrator shall have the sole discretion to determine when the Participant is no longer a bona fide employee;

(J)the Corporation is not providing any tax, legal or financial advice, nor is the Corporation making any recommendations regarding participation in the Plan or the Participant’s acquisition or sale of Shares; and

12

(K)Participant is hereby advised to consult with the Participant's own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.

13.Data Privacy Information and Consent.

(A)Data Collection and Usage. The Corporation and the Employer may collect, process and use certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, job title, any Shares or directorships held in the Corporation, details of all Options, Restricted Stock, Restricted Stock Units, Performance Shares, Other Share-Based Awards, or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Employee’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Participant’s consent.

(B)Stock Plan Administration Service Providers. The Corporation transfers Data to Merrill Lynch and its affiliated companies, an independent service provider based in the United States, which is assisting the Corporation with the implementation, administration and management of the Plan. The Corporation may select a different service provider or additional service providers and share Data with such other provider serving in a similar manner. The Participant may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan.

(C)International Data Transfers. The Corporation and its service providers are based in the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program. The Corporation’s legal basis, where required, for the transfer of Data isthe Participant’s consent.

(D)Data Retention. The Corporation will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws.

(E)Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s salary from or employment with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Corporation would not be able to grant Awards to the Participant or administer or maintain such Awards.

13

(F)Data Subject Rights. The Participant may have a number of rights under data privacy laws in the Participant’s jurisdiction. Depending on where the Participant is based, such rights may include the right to (i) request access or copies of Data the Corporation processes, (ii) rectification of incorrect Data, (iii) deletion of Data, (iv) restrictions on processing of Data, (v) portability of Data, (vi) lodge complaints with competent authorities in the Participant’s jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of Data. To receive clarification regarding these rights or to exercise these rights, the Participant can contact his or her local human resources representative.

By accepting the Award and indicating consent via the Corporation’s acceptance procedure, the Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Corporation and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.

Finally, the Participant understands that the Corporation may rely on a different legal basis for the processing or transfer of Data in the future and/or request that the Participant provide another data privacy consent form. If applicable and upon request of the Corporation, the Participant agrees to provide an executed acknowledgement or data privacy consent form to the Employer or the Corporation (or any other acknowledgements, agreements or consents that may be required by the Employer or the Corporation) that the Corporation and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands that the Participant will not be able to participate in the Plan if the Participant fails to execute any such acknowledgement, agreement or consent requested by the Corporation and/or the Employer.

14.Severability. The provisions in this Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

15.Language. If the Participant has received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

16.Electronic Delivery. The Corporation may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or a third party designated by the Corporation.

14

17.Section 409A. If (i) the Participant is a Specified Employee at the time of the Participant’s Separation from Service, and (ii) some or any portion of the amounts payable to the Participant, if any, when considered together with any other payments or benefits which may be considered deferred compensation under section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and subject to the plan aggregation rules under Treasury Regulation section 1.409A-1(c)(3)(viii) (together, the “Deferred Compensation Benefits”) would result in the imposition of additional tax under Section 409A if paid to the Participant on or within the six month period following the Separation from Service, then to the extent such portion of the Deferred Compensation Benefits resulting in the imposition of additional tax would otherwise have been payable on or within the first six months following the Separation from Service, it will instead become payable on the first payroll date that occurs in the seventh month following the Separation from Service (or such longer period as is required to avoid the imposition of additional tax under Section 409A). All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit.

VII. DEFINITIONS

When capitalized in this Award Agreement, the following terms shall have the meaning set forth below:

1.“Award Agreement” means the documents between the Participant and the Corporation evidencing the grant of the PSU Award and the RSU Award, the terms of which are set forth herein and in the Plan.

2.“Cause” means termination of the Participant’s employment with the Corporation or an Affiliate upon the Participant’s negligent or willful engagement in misconduct which, in the sole determination of the Chief Executive Officer of the Corporation (or the Chief Executive Officer’s designee), is injurious to the Corporation, its employees, or its customers.

3.“Family Member” means any person identified as an “immediate family” member in Rule 16(a)‑1(e) of the Exchange Act, as such Rule may be amended from time to time. Notwithstanding the foregoing, the Administrator may designate any other person(s) or entity(ies) as a “family member.”

4.    “Good Reason” means any of the following actions, if taken without the express written consent of the Participant:

(A)    Any material change by the Corporation in the Participant’s functions, duties, or responsibilities, which change would cause the Participant’s position with the Corporation to become of less dignity, responsibility, importance, or scope from the position and attributes that applied to the Participant immediately prior to the Change in Control;

(B)    Any significant reduction in the Participant’s aggregate base annual salary and target incentive opportunity, as in effect immediately prior to the Change in Control;

15

(C)    Any material failure by the Corporation to comply with any of the provisions of an Award subsequent to a Change in Control;

(D)    The Corporation’s requiring the Participant to be based at any location which would increase the Participant’s regular one-way commute by more than 25 miles from that in effect immediately preceding the Change in Control, except for travel reasonably required in the performance of the Participant’s responsibilities; or

(E)    Any change in the person to whom the Participant reports, as this relationship existed immediately prior to a Change in Control;

Provided that the Participant gives notice to the Corporation of the existence of the Good Reason condition within 30 days of the initial existence of the Good Reason condition and the Corporation is provided 30 days after receipt of the Participant’s notice to remedy the Good Reason condition; provided further that the Participant’s Separation from Service must occur within six months from the initial existence of the Good Reason condition if the Corporation does not remedy such condition for such separation to be considered to be for Good Reason.

5.    “Grant Date” means the date the Administrator grants the Award.

6.    “Long‑Term Disability” means a physical or mental condition in respect of which the administrator of the Corporation’s long-term disability plan has determined that the Participant is eligible to receive income replacement benefits; or, if the Participant is not then a participant in the Corporation’s long-term disability plan, a physical or mental condition that the administrator of the Corporation’s long-term disability plan determines would have rendered the Participant eligible to receive income replacement benefits, had the Participant been enrolled in such plan.

7.    “Separation from Service” means termination of employment with the Corporation or an Affiliate. A Participant shall be deemed to have had a Separation from Service if the Participant’s service with the Corporation or an Affiliate is reduced to an annual rate that is equal to or less than 20% of the services rendered, on average, during the immediately preceding three years of service with the Corporation or an Affiliate (or, if providing service to the Corporation or an Affiliate for less than three years, such lesser period).

8.    “Short-Term Disability” means short-term disability as defined in the Corporation’s short-term disability plan.

9.    “Specified Employee” means those employees identified by the Corporation as "Specified Employees" for purposes of Code Section 409A.

10.    “Stock Ownership Policy” means the Corporation’s Stock Ownership Policy, as amended from time to time, which can be found on McKNet. A Participant or the Participant’s beneficiary may also request a copy of the Stock Ownership Policy by writing to the Corporate Secretary at McKesson Corporation, One Post Street, San Francisco, CA 94104.

16

OUTSIDE DIRECTOR

FORM OF

MCKESSON CORPORATION 2013 STOCK PLAN

RESTRICTED STOCK UNIT GRANT NOTICE

Grantee Name:

Number of RSUs Granted

Date of Grant:

Vesting Schedule: 100% vested on grant date.

McKesson Corporation (the “Company”) is pleased to grant you restricted stock units (“RSUs”) under the Company’s 2013 Stock Plan, as may be amended from time to time (the “Plan”) to receive shares of common stock of the Company (“Shares”). This Grant Notice (“Notice”), together with the Statement of Terms and Conditions, as provided as an attachment to this Notice (the “ST&Cs”), constitute your Restricted Stock Unit Agreement, which along with the Plan set forth the terms of your grant.

Below is a list of documents that are made available to you in connection with this Notice. PLEASE BE SURE TO READ THESE DOCUMENTS BECAUSE THEY CONTAIN IMPORTANT INFORMATION SPECIFIC TO THIS GRANT OF RSUs. This grant, along with any other outstanding awards under the Plan, can be viewed on the Fidelity web site at www.Netbenefits.com.

By signing below, I acknowledge that:

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.

IN WITNESS WHEREOF, the Grantee has executed this Agreement, and the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date.

By:

Brian S. Tyler Grantee Signature  Date

Chief Executive Officer

McKesson Corporation

ATTACHMENTS:

* 2013 Stock Plan

* 2013 Stock Plan Prospectus for Non-Employee Directors

* ST&Cs

* Hedging and Pledging Policy

July 2019

Employee

FORM OF

MCKESSON CORPORATION 2013 STOCK PLAN

RESTRICTED STOCK UNIT GRANT NOTICE

Grantee Name:
Number of RSUs Granted:
Date of Grant:
Vesting Schedule:	Please see Appendix

McKesson Corporation (the “Company”) is pleased to grant you restricted stock units (“RSUs”) under the Company’s 2013 Stock Plan (the “Plan”) which represent the contingent right to receive shares of common stock of the Company (“Shares”). This Grant Notice (“Notice”), together with the Statement of Terms and Conditions, as provided as an attachment to this Notice (the “ST&Cs”), constitute your Restricted Stock Unit Agreement. Your Restricted Stock Unit Agreement and your RSUs are subject to the terms of the Plan, which incorporates by reference the Company’s Compensation Recoupment Policy (the “Recoupment Policy”) and the Company’s Stock Ownership Policy (the “Stock Ownership Policy”), as both are amended from time to time).

Below is a list of documents that are made available to you in connection with this Notice. PLEASE BE SURE TO READ THESE DOCUMENTS BECAUSE THEY CONTAIN IMPORTANT INFORMATION SPECIFIC TO THIS GRANT OF RSUs. This grant, along with any other outstanding awards under the Plan, can be viewed on the Fidelity web site at www.Netbenefits.com.

By signing below, I acknowledge that:

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.

IN WITNESS WHEREOF, the Grantee has executed this Agreement, and the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date.

Brian S. Tyler     Grantee Signature Date

Chief Executive Officer            

McKesson Corporation

ATTACHMENTS:

* 2013 Stock Plan

* 2013 Stock Plan Prospectus

* ST&Cs Applicable to __________

* Compensation Recoupment Policy

* Hedging and Pledging Policy (Section 16 only)

* Stock Ownership Policy (EOT only)

* Appendix (Outside U.S. – country-specific)

May 2019

FORM OF

MCKESSON CORPORATION 2013 STOCK PLAN

PERFORMANCE STOCK UNIT GRANT NOTICE

Grantee Name:
Target PSUs Granted:
Date of Grant:
Performance Period:	FY 20__ - FY 20__

McKesson Corporation (the “Company”) is pleased to grant you target performance stock units (“PSUs”) under the Company’s 2013 Stock Plan (the “Plan”). This Grant Notice (“Notice”), together with the Statement of Terms and Conditions, as provided with this Notice (the “ST&Cs”), constitute your Performance Stock Unit Agreement. Your Performance Stock Unit Agreement and your PSUs are subject to the terms of the Plan, which incorporates by reference the Company’s Compensation Recoupment Policy (the “Recoupment Policy”), and the Company’s Stock Ownership Policy (the “Stock Ownership Policy”), as both are amended from time to time.

Your PSUs will be earned subject to the Company’s attainment of performance goals that have been pre-established by the Compensation Committee (the “Committee”) of the Company’s Board of Directors. You may receive 0% - 200% of the target number of PSUs set forth above. PSUs, if earned, will be paid in the form of shares of the Company’s Common Stock (“Shares”) that are not subject to any further vesting restrictions. The Committee has the sole discretion to determine the Company’s performance against the pre-established goals after completion of the performance period, and to authorize the grant of Shares.

Below is a list of documents that are made available to you in connection with this Notice. PLEASE BE SURE TO READ THESE DOCUMENTS BECAUSE THEY CONTAIN IMPORTANT INFORMATION SPECIFIC TO THIS GRANT OF PSUs. This grant, along with any other outstanding awards under the Plan, can be viewed on the Fidelity web site at www.Netbenefits.com.

By signing below, I acknowledge that:

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. 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

7. I accept ALL the terms and conditions as set forth in the Plan and ST&Cs applicable to this grant of PSUs.

IN WITNESS WHEREOF, the Grantee has executed this Agreement, and the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date.

Brian S. Tyler   Grantee Signature Date

Chief Executive Officer

McKesson Corporation            

Plan Documents and Related Policies

* 2013 Stock Plan

* 2013 Stock Plan Prospectus

* ST&Cs Applicable to __________________

* Compensation Recoupment Policy

* Hedging and Pledging Policy (Section 16 only)

* Stock Ownership Policy (EOT only)

* Appendix (Outside U.S. - country specific)

May 2019

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a) AND RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian S. Tyler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of McKesson Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	July 31, 2019	/s/  Brian S. Tyler
		Brian S. Tyler
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a) AND RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Britt J. Vitalone, certify that:

1. I have reviewed this quarterly report on Form 10-Q of McKesson Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	July 31, 2019	/s/ Britt J. Vitalone
		Britt J. Vitalone
		Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of McKesson Corporation (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:

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

July 31, 2019

/s/ Britt J. Vitalone

Britt J. Vitalone

Executive Vice President and Chief Financial Officer

July 31, 2019

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to McKesson Corporation and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover Page	3 Months Ended
	Jun. 30, 2019 shares
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	1-13252
Entity Registrant Name	McKESSON CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-3207296
Entity Address, Address Line One	6555 State Hwy 161
Entity Address, City or Town	Irving
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75039
City Area Code	972
Local Phone Number	446-4800
Title of 12(b) Security	Common stock, $0.01 par value
Trading Symbol	MCK
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding	184,904,125
Entity Central Index Key	0000927653
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false
Current Fiscal Year End Date	--03-31

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Total Revenues	$ 55,728,000,000	$ 52,607,000,000
Cost of Sales	(52,941,000,000)	(49,828,000,000)
Gross Profit	2,787,000,000	2,779,000,000
Operating Expenses	(2,130,000,000)	(2,127,000,000)
Goodwill Impairment Charges	0	(570,000,000)
Restructuring and Asset Impairment Charges	(23,000,000)	(96,000,000)
Gain from Escrow Settlement	0	97,000,000
Total Operating Expenses	(2,153,000,000)	(2,696,000,000)
Operating Income	634,000,000	83,000,000
Other Income, Net	37,000,000	40,000,000
Income (Loss) from Equity Method Investment in Change Healthcare Joint Venture	4,000,000	(56,000,000)
Interest Expense	(56,000,000)	(61,000,000)
Income from Continuing Operations Before Income Taxes	619,000,000	6,000,000
Income Tax Expense	(136,000,000)	(87,000,000)
Income (Loss) from Continuing Operations	483,000,000	(81,000,000)
Income (Loss) from Discontinued Operations, Net of Tax	(6,000,000)	1,000,000
Net Income (Loss)	477,000,000	(80,000,000)
Net Income Attributable to Noncontrolling Interests	(54,000,000)	(58,000,000)
Net Income (Loss) Attributable to McKesson Corporation	$ 423,000,000	$ (138,000,000)
Diluted
Continuing operations (in dollars per share)	$ 2.27	$ (0.69)
Discontinued operations (in dollars per share)	(0.03)	0.01
Total (in dollars per share)	2.24	(0.68)
Basic
Continuing operations (in dollars per share)	2.28	(0.69)
Discontinued operations (in dollars per share)	(0.03)	0.01
Total (in dollars per share)	2.25	(0.68)
Dividends declared per common share (in dollars per share)	$ 0.39	$ 0.34
Weighted Average Common Shares
Diluted (in shares)	189	202
Basic (in shares)	188	202

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net Income (Loss)	$ 477	$ (80)
Other Comprehensive Income (Loss), Net of Tax
Foreign currency translation adjustments	44	(129)
Unrealized gains on cash flow hedges	12	0
Changes in retirement-related benefit plans	21	8
Other Comprehensive Income (Loss), Net of Tax	77	(121)
Comprehensive Income (Loss)	554	(201)
Comprehensive Income Attributable to Noncontrolling Interests	(60)	(21)
Comprehensive Income (Loss) Attributable to McKesson Corporation	$ 494	$ (222)

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Millions	Jun. 30, 2019	Mar. 31, 2019
Current Assets
Cash and cash equivalents	$ 1,947	$ 2,981
Receivables, net	19,287	18,246
Inventories, net	16,604	16,709
Prepaid expenses and other	590	529
Total Current Assets	38,428	38,465
Property, Plant and Equipment, Net	2,466	2,548
Operating Lease Right-of-Use Assets	2,031
Goodwill	9,441	9,358
Intangible Assets, Net	3,600	3,689
Equity Method Investment in Change Healthcare Joint Venture	3,617	3,513
Other Noncurrent Assets	2,097	2,099
Total Assets	61,680	59,672
Current Liabilities
Drafts and accounts payable	34,021	33,853
Current portion of long-term debt	310	330
Current portion of operating lease liabilities	373
Other accrued liabilities	3,248	3,443
Total Current Liabilities	37,952	37,626
Long-Term Debt	7,382	7,265
Long-Term Deferred Tax Liabilities	3,058	2,998
Long-Term Operating Lease Liabilities	1,805
Other Noncurrent Liabilities	2,016	2,103
Redeemable Noncontrolling Interests	1,399	1,393
McKesson Corporation Stockholders’ Equity
Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding	0	0
Common stock, $0.01 par value, 800 shares authorized at June 30, 2019 and March 31, 2019, 271 shares issued at June 30, 2019 and March 31, 2019	3	3
Additional Paid-in Capital	6,483	6,435
Retained Earnings	12,770	12,409
Accumulated Other Comprehensive Loss	(1,778)	(1,849)
Other	(1)	(2)
Treasury Shares, at Cost, 86 and 81 shares at June 30, 2019 and March 31, 2019	(9,603)	(8,902)
Total McKesson Corporation Stockholders’ Equity	7,874	8,094
Noncontrolling Interests	194	193
Total Equity	8,068	8,287
Total Liabilities, Redeemable Noncontrolling Interests and Equity	$ 61,680	$ 59,672

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) (Unaudited) - $ / shares	Jun. 30, 2019	Mar. 31, 2019
McKesson Corporation Stockholders’ Equity
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	100,000,000	100,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	800,000,000	800,000,000
Common stock, shares issued (in shares)	271,000,000	271,000,000
Treasury stock, shares (in shares)	86,000,000	81,000,000

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) shares in Millions, $ in Millions	Total	Common Stock	Additional Paid-in Capital	Other Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury	Noncontrolling Interests
Beginning balance (shares) at Mar. 31, 2018		275
Beginning balance (shares) at Mar. 31, 2018							(73)
Beginning balance at Mar. 31, 2018	$ 10,057	$ 3	$ 6,188	$ (1)	$ 12,986	$ (1,717)	$ (7,655)	$ 253
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares under employee plans	11		22				$ (11)
Share-based compensation	25		25
Payments to noncontrolling interests	(64)							(64)
Other comprehensive loss	(84)					(84)
Net income (loss)	(92)				(138)			46
Repurchase of common stock (shares)							(3)
Repurchase of common stock	(297)		135				$ (432)
Cash dividends declared	(69)				(69)
Other	6		2		(1)			5
Ending balance (shares) at Jun. 30, 2018		275
Ending balance (shares) at Jun. 30, 2018							(76)
Ending balance at Jun. 30, 2018	$ 9,647	$ 3	6,372	(1)	12,932	(1,801)	$ (8,098)	240
Beginning balance (shares) at Mar. 31, 2019		271
Beginning balance (shares) at Mar. 31, 2019	(81)						(81)
Beginning balance at Mar. 31, 2019	$ 8,287	$ 3	6,435	(2)	12,409	(1,849)	$ (8,902)	193
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares under employee plans	5		22				$ (17)
Share-based compensation	26		26
Payments to noncontrolling interests	(39)							(39)
Other comprehensive loss	71					71
Net income (loss)	466				423			43
Repurchase of common stock (shares)							(5)
Repurchase of common stock	(684)						$ (684)
Cash dividends declared	(73)				(73)
Other	$ (2)			1				(3)
Ending balance (shares) at Jun. 30, 2019		271
Ending balance (shares) at Jun. 30, 2019	(86)						(86)
Ending balance at Jun. 30, 2019	$ 8,068	$ 3	$ 6,483	$ (1)	$ 12,770	$ (1,778)	$ (9,603)	$ 194

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) (Unaudited) - $ / shares	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Statement of Stockholders' Equity [Abstract]
Dividends declared per common share (in dollars per share)	$ 0.39	$ 0.34

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating Activities
Net Income (Loss)	$ 477	$ (80)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization	229	235
Goodwill and other asset impairment charges	5	610
Deferred taxes	16	45
Credits associated with last-in, first-out inventory method	(15)	(21)
Loss (Income) from equity method investment in Change Healthcare Joint Venture	(4)	56
Other non-cash items	121	(79)
Changes in assets and liabilities, net of acquisitions:
Receivables	(1,061)	(1,414)
Inventories	145	(114)
Drafts and accounts payable	127	32
Taxes	82	(61)
Other	(173)	(270)
Net cash used in operating activities	(51)	(1,061)
Investing Activities
Payments for property, plant and equipment	(87)	(101)
Capitalized software expenditures	(24)	(44)
Acquisitions, net of cash, cash equivalents and restricted cash acquired	(46)	(826)
Other	28	96
Net cash used in investing activities	(129)	(875)
Financing Activities
Proceeds from short-term borrowings	2,610	9,036
Repayments of short-term borrowings	(2,610)	(7,005)
Common stock transactions:
Issuances	22	22
Share repurchases, including shares surrendered for tax withholding	(701)	(307)
Dividends paid	(75)	(71)
Other	(118)	(134)
Net cash provided by (used in) financing activities	(872)	1,541
Effect of exchange rate changes on cash, cash equivalents and restricted cash	18	(78)
Net decrease in cash, cash equivalents and restricted cash	(1,034)	(473)
Cash, cash equivalents and restricted cash at beginning of period	2,981	2,672
Cash, cash equivalents and restricted cash at end of period	$ 1,947	$ 2,199

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Significant Accounting Policies

3 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

Nature of Operations: McKesson Corporation (“McKesson,” the “Company,” the “Registrant” or “we” and other similar pronouns), currently ranked 7^th on the FORTUNE 500, is a global leader in healthcare supply chain management solutions, retail pharmacy, healthcare technology, community oncology and specialty care. McKesson partners with life sciences companies, manufacturers, providers, pharmacies, governments and other healthcare organizations to help provide the right medicines, medical products and healthcare services to the right patients at the right time, safely and cost-effectively. We report our financial results in three reportable segments: 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. Refer to Financial Note 18, “Segments of Business,” for more information.

Basis of Presentation: The condensed consolidated financial statements of McKesson include the financial statements of all wholly-owned subsidiaries and controlled companies. For those consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocable to the noncontrolling interests is reported as “Net Income Attributable to Noncontrolling Interests” on the condensed consolidated statements of operations. All significant intercompany balances and transactions have been eliminated in consolidation including the intercompany portion of transactions with equity method investees.

We consider ourselves to control an entity if we have voting control over such entity. We also assess control through means other than voting rights (“variable interest entities” or “VIEs”) and determine which business entity is the primary beneficiary of the VIE. We consolidate VIEs when it is determined that we are the primary beneficiary of the VIE. Investments in business entities in which we do not have control, but have the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and disclosures normally included in the annual consolidated financial statements.

To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these financial statements and income and expenses during the reporting period. Actual amounts may differ from these estimated amounts. In our opinion, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented.

The results of operations for the quarter ended June 30, 2019 are not necessarily indicative of the results that may be expected for the entire year. These interim financial statements should be read in conjunction with the annual audited financial statements, accounting policies and financial notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 previously filed with the SEC on May 15, 2019 (“2019 Annual Report”).

The Company’s fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year shall mean the Company’s fiscal year.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Recently Adopted Accounting Pronouncements

Leases: In the first quarter of 2020, we adopted amended guidance for leases using the modified retrospective basis and recorded a cumulative-effect adjustment to the opening retained earnings on the date of adoption. Under the amended guidance, entities are required to recognize operating lease liabilities and operating lease right-of-use (“ROU”) assets on the balance sheet for all leases with terms longer than 12 months and to provide enhanced disclosures on key information of leasing arrangements.

We elected the transition package of practical expedients provided within the amended guidance, which eliminates the requirements to reassess lease identification, lease classification and initial direct costs for leases commenced before April 1, 2019. We also elected not to separate lease from non-lease components for all leases and to exclude short-term leases with an initial term of 12 months or less from our condensed consolidated balance sheets.

Upon adoption of this amended guidance, we recorded $2.2 billion of operating lease liabilities, $2.1 billion of operating lease ROU assets and a cumulative-effect adjustment of $69 million to the opening retained earnings. The adjustment to the opening retained earnings included impairment charges of $89 million, net of tax to the ROU assets primarily related to previously impaired long-lived assets at the retail pharmacies in our United Kingdom (“U.K.”) and Canadian businesses, partially offset by derecognition of existing deferred gain on our sale-leaseback transaction related to our former corporate headquarters building. The adoption of this amended guidance did not have a material impact on our condensed consolidated statements of operations and cash flows.

Refer to Financial Note 11, “Leases,” for more information.

Derivatives and Hedging:  In the first quarter of 2020, we prospectively adopted amended guidance that allows us to include the Secured Overnight Financing Rate Overnight Index Swap Rate as a benchmark interest rate for hedge accounting purposes. The adoption of this amended guidance did not have a material effect on our condensed consolidated financial statements.

Disclosure Update and Simplification: In the first quarter of 2020, we adopted amended guidance that simplifies certain disclosure requirements and expands the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. The adoption of this amended guidance had no effect on our condensed consolidated statements of operations, comprehensive income, balance sheets and cash flows. This amended guidance resulted in a disclosure of the interim condensed consolidated statements of stockholders’ equity.

Accumulated Other Comprehensive Income: In the first quarter of 2020, we adopted amended guidance that allows for a reclassification of only those amounts related to the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”) to retained earnings thereby eliminating the stranded tax effects. Previous guidance required that deferred tax liabilities and assets be adjusted for a change in tax laws with the effect included in income from continuing operations in the reporting period that includes the enactment date. We have elected not to reclassify the stranded tax effects within accumulated other comprehensive loss to retained earnings. The adoption of this amended guidance did not affect our condensed consolidated financial statements.

Premium Amortization of Purchased Callable Debt Securities: In the first quarter of 2020, we adopted amended guidance on a modified retrospective basis that shortens the amortization period for certain callable debt securities held at a premium. The amended guidance requires the premium of callable debt securities to be amortized to the earliest call date but does not require an accounting change for securities held at a discount as they would still be amortized to maturity. The adoption of this amended guidance did not affect our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Collaborative Arrangements: In November 2018, amended guidance was issued which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under revenue recognition guidance when the counterparty is a customer. The amended guidance precludes presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The amended guidance is effective for us in the first quarter of 2021 on a retrospective basis with a cumulative-effect adjustment to beginning retained earnings. We may elect to apply this amended guidance retrospectively either to all contracts or only to contracts that are not completed at the date of initial adoption. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our condensed consolidated financial statements.

Intangibles - Goodwill and Other - Internal-Use Software: In August 2018, amended guidance was issued for a customer’s accounting for implementation and other upfront costs incurred in a cloud computing arrangement that is a service contract. The amended guidance aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs for a cloud computing arrangement that has a software license. The amended guidance is effective for us either on a retrospective or prospective basis commencing in the first quarter of 2021. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our condensed consolidated financial statements.

Compensation - Retirement Benefits - Defined Benefit Plans: In August 2018, amended guidance was issued for defined benefit pension or other postretirement plans. The amended guidance requires us to disclose the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates, and an explanation of reasons for significant gains and losses related to changes in the benefit obligation for the period. The amended guidance also requires us to remove disclosures on the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit costs over the next fiscal year. The amended guidance is effective for us on a retrospective basis commencing in the fiscal year ended March 31, 2021. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material effect on our condensed consolidated statements of operations, comprehensive income, balance sheets or cash flows. This amended guidance will result in changes in disclosures.

Fair Value Measurement: In August 2018, amended guidance was issued to remove, modify and add disclosure requirements on fair value measurements. The amended guidance removes disclosure requirements for transfers between Level 1 and Level 2 measurements and valuation processes for Level 3 measurements but adds new disclosure requirements including changes in unrealized gains or losses in other comprehensive income related to recurring Level 3 measurements. The amended guidance is effective for us commencing in the first quarter of 2021. Certain requirements will be applied prospectively while other changes will be applied retrospectively upon the effective date. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material effect on our condensed consolidated statements of operations, comprehensive income, balance sheets or cash flows. This amended guidance will result in changes in disclosures.

Financial Instruments - Credit Losses: In June 2016, amended guidance was issued, which will change the impairment model for most financial assets and require additional disclosures. The amended guidance requires financial assets that are measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of financial assets. The amended guidance also requires us to consider historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount in estimating credit losses. The guidance was further amended in May 2019 to provide an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. The amended guidance becomes effective for us commencing in the first quarter of 2021 and will be applied through a cumulative-effect adjustment to the opening retained earnings in the year of adoption. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our condensed consolidated financial statements.

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Equity Method Investment in Change Healthcare Joint Venture

3 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investment in Change Healthcare Joint Venture

Equity Method Investment in Change Healthcare Joint Venture

In the fourth quarter of 2017, we contributed the majority of our McKesson Technology Solutions businesses to form a joint venture, Change Healthcare LLC (“Change Healthcare JV”), under a contribution agreement between McKesson and Change Healthcare Inc. and others, including shareholders of Change Healthcare Inc. In exchange for the contribution, we initially owned approximately 70% of the joint venture with the remaining equity ownership of approximately 30% held by Change Healthcare Inc. The Change Healthcare JV is jointly governed by McKesson and shareholders of Change Healthcare Inc. The initial investment in Change Healthcare JV represented the fair value of our 70% equity interest in the joint venture upon closing of the transaction.

We account for our investment in Change Healthcare JV using the equity method of accounting with a one-month reporting lag. The Company’s accounting policy is to disclose any intervening events of the joint venture in the lag period that could materially affect our condensed consolidated financial statements. Effective April 1, 2019, Change Healthcare JV adopted the amended revenue recognition guidance. In the first quarter of 2020, we recorded our proportionate share of the joint venture’s adoption impact of the amended revenue recognition guidance of approximately $80 million, net of tax to the opening retained earnings.

During the first quarters of 2020 and 2019, we recorded our proportionate share of income of $4 million and loss of $56 million from Change Healthcare JV. Our proportionate share of income or loss from this equity method investment includes integration expenses incurred by Change Healthcare JV and basis differences between the joint venture and McKesson including amortization of fair value adjustments primarily representing incremental intangible assets. These amounts were recorded under the caption, “Income (Loss) from Equity Method Investment in Change Healthcare Joint Venture,” in our condensed consolidated statements of operations.

At June 30, 2019 and March 31, 2019, our carrying value of this equity method investment was $3,617 million and $3,513 million. Our carrying value included equity method intangible assets and goodwill which caused our investment basis to exceed our proportionate share of the Change Healthcare JV’s book value of net assets by approximately $4,091 million and $4,158 million at June 30, 2019 and March 31, 2019.

Initial Public Offering by Change Healthcare Inc.

On June 27, 2019, common stock and certain other securities of Change Healthcare Inc. began trading on the NASDAQ (“IPO”). Change Healthcare Inc. is a holding company and does not own any material assets or have any operations other than through its interest in Change Healthcare JV.

On July 1, 2019, upon the completion of its IPO, Change Healthcare Inc. received net cash proceeds of approximately $888 million. Change Healthcare Inc. contributed the proceeds from its offering of common stock of $609 million to Change Healthcare JV in exchange for additional membership interests of Change Healthcare JV (“LLC Units”) at the equivalent of its offering price of $13 per share. The proceeds from the concurrent offering of other securities of $279 million were used by Change Healthcare Inc. to acquire certain securities of Change Healthcare JV that substantially mirror the terms of other securities included in the offering by Change Healthcare Inc. Change Healthcare JV, in return, used the majority of the IPO proceeds to repay a portion of the joint venture’s outstanding debt. As a result, McKesson’s equity interest in Change Healthcare JV diluted from approximately 70% to approximately 58.5% and Change Healthcare Inc. now owns approximately 41.5% of the outstanding LLC Units. Accordingly, in the second quarter of 2020, we expect to recognize a pre-tax dilution loss of approximately $246 million associated with our reduction of our ownership in the Change Healthcare JV. The loss represents the difference between our proportionate share of the IPO proceeds and the dilution effect on our investment’s carrying value. Effective with the second quarter of 2020, we will recognize our proportionate share in net income or loss based on our reduced share of equity interest in Change Healthcare JV, adjusted for the effect of basis differences and other items as applicable.

Subsequent to the IPO, we now have a publicly available indication of the value of our investment in Change Healthcare JV. The fair value that was derived from trading prices of Change Healthcare Inc.’s common stock was below the carrying value of our investment in Change Healthcare JV indicating a potential impairment. Accordingly, we evaluated our equity method investment for an other-than-temporary impairment (“OTTI”). We considered various factors in determining whether an OTTI has occurred, including the limited trading history available, our ability and intent to hold the investment until its fair value recovers, the implied EBITDA valuation multiples compared to public guideline companies, the joint venture’s ability to achieve milestones and any notable operational and strategic changes by the joint venture. After the evaluation, we determined that an OTTI has not occurred as of June 30, 2019 and as of the date of this Quarterly Report on Form 10-Q. However, we may be required to recognize an impairment loss in future reporting periods if and when a decline in fair value of our investment in Change Healthcare JV below the carrying value is determined to be other than temporary. Such determination will be based on the prevailing facts and circumstances at that time, including the reported results and disclosures of Change Healthcare Inc. as well as the market price of its common stock.

Related Party Transactions

In connection with the formation of Change Healthcare JV, McKesson, Change Healthcare JV and certain shareholders of Change Healthcare Inc. entered into various ancillary agreements, including transition services agreements (“TSA”), a transaction and advisory fee agreement (“Advisory Agreement”), a tax receivable agreement (“TRA”) and certain other agreements. Fees incurred or earned from TSA and Advisory Agreement were not material to us during the first quarters of 2020 and 2019. At June 30, 2019 and March 31, 2019, we had no outstanding payable balance to the shareholders of Change Healthcare Inc. under the TRA.

Revenues recognized, and expenses incurred under these agreements with Change Healthcare JV were not material during the first quarters of 2020 and 2019. At June 30, 2019 and March 31, 2019, receivables due from the joint venture were not material.

Concurrent with the IPO, Change Healthcare Inc. appointed two of our current executive officers and our former chief executive officer to its Board of Directors. These appointments had no impact on the equity method of accounting we apply to our investment in Change Healthcare JV. There were no material transactions with Change Healthcare Inc.

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Restructuring and Asset Impairment Charges

3 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Restructuring and Asset Impairment Charges

Restructuring and Asset Impairment Charges

We recorded pre-tax restructuring and asset impairment charges of $23 million ($17 million after-tax) and $96 million ($85 million after-tax) during the first quarters of 2020 and 2019. These charges are included under the caption, “Restructuring and Asset Impairment Charges” within operating expenses in the accompanying condensed consolidated statements of operations.

Fiscal 2019 Initiatives

On April 25, 2018, the Company announced a strategic growth initiative intended to drive long-term incremental profit growth and to increase operational efficiency. The initiative consists of multiple growth priorities and plans to optimize the Company’s operating models and cost structures primarily through centralization, cost management and outsourcing of certain administrative functions.

As part of the growth initiative, we committed to implement certain actions including a reduction in workforce, facility consolidation and store closures. This set of the initiatives will be substantially completed by the end of 2020. We recorded pre-tax restructuring charges of $4 million ($3 million after-tax) during the first quarter of 2020. We expect to record total pre-tax charges of approximately $140 million to $180 million, of which $139 million of pre-tax charges were recorded to date. The charges primarily represent employee severance, exit-related costs and asset impairment charges. Estimated remaining charges primarily consist of exit-related costs.

As previously announced on November 30, 2018, the Company relocated its corporate headquarters, effective April 1, 2019, from San Francisco, California to Irving, Texas to improve efficiency, collaboration and cost competitiveness. We anticipate that the relocation will be completed by January 2021. As a result, during the first quarter of 2020, we recorded pre-tax charges of $8 million ($6 million after-tax) primarily representing employee retention expenses. We expect to record total pre-tax charges of approximately $80 million to $130 million, of which $41 million of pre-tax charges were recorded to date. Estimated remaining charges primarily consist of lease and other exit-related costs, and employee-related expenses, including retention.

During the fourth quarter of 2019, the Company committed to additional programs to continue our operating model and cost optimization efforts. We continue to implement centralization of certain functions and outsourcing through the expanded arrangement with a third-party vendor to achieve operational efficiency. The programs also include reorganization and consolidation of our business operations and related headcount reductions as well as the further closures of retail pharmacy stores in Europe and closure of other facilities. We anticipate these additional programs will be substantially completed by the end of 2021. During the first quarter of 2020, we recorded pre-tax charges of $11 million ($8 million after-tax) primarily representing project consulting fees. We expect to incur total pre-tax charges of approximately $300 million to $350 million for these programs, of which $174 million of pre-tax charges were recorded to date. Estimated remaining charges primarily consist of facility and other exit costs and employee-related costs.

Restructuring charges for our fiscal 2019 initiatives during the first quarter of 2020 consisted of the following:

(In millions)	U.S. Pharmaceutical and Specialty Solutions			European Pharmaceutical Solutions			Medical-Surgical Solutions		Other		Corporate		Total
Severance and employee-related costs, net	$	(1	)	$	(1	)	$	—	$	—	$	6	$	4
Exit and other-related costs (1)	—			1			2		1		10		14
Asset impairments and accelerated depreciation	—			3			1		—		1		5
Total	$	(1	)	$	3		$	3	$	1	$	17	$	23

(1) Exit and other-related costs primarily include project consulting fees.

Restructuring charges for our fiscal 2019 initiatives during the first quarter of 2019 consisted of the following:

(In millions)	U.S. Pharmaceutical and Specialty Solutions		Medical-Surgical Solutions		Other		Corporate		Total
Severance and employee-related costs, net	$	3	$	10	$	1	$	—	$	14
Exit and other-related costs (1)	1		2		21		11		35
Asset impairments and accelerated depreciation	4		—		16		—		20
Total	$	8	$	12	$	38	$	11	$	69

(1) Exit and other-related costs primarily include lease exit costs associated with closures of retail pharmacy stores within our Canadian business as well as project consulting fees.

The following table summarizes the activity related to the restructuring liabilities associated with our fiscal 2019 initiatives for the first quarter of 2020:

(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	(1		)	3			3			1			17			23
Non-cash charges	—			(3		)	(1		)	—			(1		)	(5		)
Cash payments	(1		)	(7		)	—			(12		)	(7		)	(27		)
Other	—			1			—			(6		)	(3		)	(8		)
Balance, June 30, 2019 (2)	$	29		$	32		$	17		$	12		$	43		$	133

(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 June 30, 2019, the total reserve balance was $133 million of which $107 million was recorded in other accrued liabilities and $26 million was recorded in other noncurrent liabilities.

Other Plans

There were no material restructuring charges for other plans recorded during the first quarters of 2020 and 2019. The restructuring liabilities for other plans as of June 30, 2019 and March 31, 2019 were $60 million and $87 million.

Long-Lived Asset Impairments

During the first quarter of 2019, we performed an interim impairment test of long-lived assets primarily for our U.K. retail business due to the decline in the estimated future cash flows driven by additional U.K. government reimbursement reductions announced on June 29, 2018. As a result, we recognized a non-cash pre-tax charge of $20 million ($16 million after-tax) to impair the carrying value of certain intangible assets (primarily pharmacy licenses). We utilized a market approach for estimating the fair value of intangible assets. The fair value of the intangible assets is considered a Level 3 fair value measurement due to the significance of unobservable inputs developed using company specific information.

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Goodwill Impairment Charges

3 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill Impairment Charges

Goodwill Impairment Charges

We evaluate goodwill for impairment on an annual basis as of January 1 each year and at an interim date, if indicators of potential impairment exist. Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or one level below an operating segment (also known as a component), for which discrete financial information is available and segment management regularly reviews the operating results of that reporting unit.

2020 First Quarter

In the first quarter of 2020, there was no goodwill impairment charge recorded.

2019 First Quarter

In the first quarter of 2019, we recorded non-cash goodwill impairment charges of $570 million (pre-tax and after-tax) for our two reporting units in the European Pharmaceutical Solutions segment. These charges were recorded under the caption, “Goodwill Impairment Charges” within operating expenses in the accompanying condensed consolidated statements of operations.

Prior to implementing the new segment reporting structure in the first quarter of 2019, our European operations were considered a single reporting unit. Following the change in reportable segments, our European Pharmaceutical Solutions segment was split into two distinct reporting units, Retail Pharmacy and Pharmaceutical Distribution (formerly known as “Consumer Solutions” and “Pharmacy Solutions”) for purposes of goodwill impairment testing. As a result, we were required to perform a goodwill impairment test for these two new reporting units upon the change in reportable segment. Consequently, we recorded a non-cash goodwill impairment charge of $238 million (pre-tax and after-tax) in the first quarter of 2019 primarily because the estimated fair value of the Pharmaceutical Distribution reporting unit was determined to be lower than its reassigned carrying value.

During the first quarter of 2019, both reporting units projected a decline in the estimated future cash flows primarily triggered by additional U.K. government actions which were announced on June 29, 2018. Accordingly, we performed an interim goodwill impairment test for these reporting units. As a result, we determined that the carrying values of these reporting units exceeded their estimated fair values and recorded non-cash goodwill impairment charges of $332 million (pre-tax and after-tax) primarily for our Retail Pharmacy reporting unit. The discount rate and terminal growth rate used for the Retail Pharmacy reporting unit in the first quarter 2019 impairment test were 8.5% and 1.25%. The discount rate and terminal growth rate used for the Pharmaceutical Distribution reporting unit in the first quarter 2019 impairment test were 8.0% and 1.25%. As previously disclosed in our 2019 Annual Report, we had impaired the entire remaining goodwill balances of both reporting units as of March 31, 2019.

Refer to Financial Note 14, “Fair Value Measurements,” for more information on nonrecurring fair value measurements.

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Business Combinations

3 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Business Combinations

Business Combinations

2019 Acquisition

Medical Specialties Distributors LLC (“MSD”)

On June 1, 2018, we completed our acquisition of MSD for the net purchase consideration of $784 million, which was funded from cash on hand. MSD is a leading national distributor of infusion and medical-surgical supplies as well as a provider of biomedical services to alternate site and home health providers. The financial results of MSD have been included in our condensed consolidated statements of operations within our Medical-Surgical Solutions segment since the acquisition date.

The fair value of assets acquired and liabilities assumed as of the acquisition date were finalized upon completion of the measurement period in the first quarter of 2020. As of June 30, 2019, the final amounts of fair value recognized for the assets acquired and liabilities assumed as of the acquisition date, excluding goodwill and intangibles, were $239 million and $169 million. Approximately $388 million of the final purchase price allocation was assigned to goodwill, which reflects the expected future benefits of certain synergies and intangible assets that do not qualify for separate recognition. The final purchase price allocation included acquired identifiable intangibles of $326 million primarily representing customer relationships with a weighted average life of 18 years.

2018 Acquisition

CoverMyMeds LLC (“CMM”)

On April 3, 2017, we completed our acquisition of CMM for the net purchase consideration of $1.3 billion, which was funded from cash on hand. The fair value of assets acquired and liabilities assumed as of the acquisition date were finalized upon completion of the measurement period in the first quarter of 2019. The financial results of CMM have been included in our condensed consolidated statements of operations within Other since the acquisition date.

Pursuant to the agreement, McKesson paid additional contingent consideration of $69 million and $68 million for each of May 2019 and 2018. As of June 30, 2019 and March 31, 2019, the related liability was nil and $69 million.

2017 Acquisition

Rexall Health

In the third quarter of 2017, we completed our acquisition of Rexall Health which operated approximately 400 retail pharmacies in Canada, particularly in Ontario and Western Canada. The net cash purchase consideration of $2.9 billion Canadian dollars (approximately $2.1 billion) was funded from cash on hand. On May 23, 2018, as a result of resolving certain indemnity and other claims related to this acquisition, $125 million Canadian dollars (approximately $97 million) was released to us from an escrow account. The receipt of this cash was recorded as a settlement gain within operating expenses in our condensed consolidated statement of operations in the first quarter of 2019.

Other Acquisitions

During the first quarters of 2020 and 2019, we also completed several other small acquisitions within our operating segments. Financial results for our business acquisitions have been included in our condensed consolidated financial statements since their respective acquisition dates. Purchase prices for our business acquisitions have been allocated based on estimated fair values at the date of acquisition.

Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax purposes. However, if we acquire the assets of a company, the goodwill may be deductible for tax purposes.

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Income Taxes

3 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

During the first quarters of 2020 and 2019, income tax expense related to continuing operations was $136 million and $87 million. During the first quarter of 2019, no tax benefits were recognized for the pre-tax goodwill impairment charges of $570 million related to our European Pharmaceutical Solutions segment given that these charges are not deductible for income tax purposes. Fluctuations in our reported income tax rates are primarily due to the prior year impact of nondeductible impairment charges as well as changes within our business mix of income and discrete items recognized in the quarter.

As of June 30, 2019, we had $1,071 million of unrecognized tax benefits, of which $887 million would reduce income tax expense and the effective tax rate, if recognized. During the next twelve months, we do not anticipate a significant increase or decrease to our unrecognized tax benefits based on the information currently available. However, this amount may change as we continue to have ongoing negotiations with various taxing authorities throughout the year.

We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. The IRS is currently examining our U.S. corporation income tax returns for 2013 through 2015. We are generally subject to audit by taxing authorities in various U.S. states and in foreign jurisdictions for fiscal years 2012 through the current fiscal year.

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Redeemable Noncontrolling Interests and Noncontrolling Interests

3 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interests and Noncontrolling Interests

Redeemable Noncontrolling Interests and Noncontrolling Interests

Redeemable Noncontrolling Interests

Our redeemable noncontrolling interests relate to our consolidated subsidiary, McKesson Europe AG (“McKesson Europe”). Under the December 2014 domination and profit and loss transfer agreement (the “Domination Agreement”), the noncontrolling shareholders of McKesson Europe are entitled to receive an annual recurring compensation amount of €0.83 per share and a one-time guaranteed dividend for calendar year 2014 of €0.83 per share reduced accordingly for any dividend paid by McKesson Europe in relation to that year. As a result, we recorded a total attribution of net income to the noncontrolling shareholders of McKesson Europe of $11 million and $12 million during the first quarters of 2020 and 2019. All amounts were recorded in our condensed consolidated statements of operations within the caption, “Net Income Attributable to Noncontrolling Interests,” and the corresponding liability balance was recorded within other accrued liabilities on our condensed consolidated balance sheets.

Under the Domination Agreement, the noncontrolling shareholders of McKesson Europe have a right to put (“Put Right”) their noncontrolling shares at €22.99 per share increased annually for interest in the amount of 5 percentage points above a base rate published by the German Bundesbank semi-annually, less any compensation amount or guaranteed dividend already paid by McKesson with respect to the relevant time period (“Put Amount”). The exercise of the Put Right will reduce the balance of redeemable noncontrolling interests. During the first quarters of 2020 and 2019, there were no material exercises of the Put Right. The balance of redeemable noncontrolling interests is reported as the greater of its carrying value or its maximum redemption value at each reporting date. The redemption value is the Put Amount adjusted each period for exchange rate fluctuations. At June 30, 2019 and March 31, 2019, the carrying value of redeemable noncontrolling interests of $1.40 billion and $1.39 billion exceeded the maximum redemption value of $1.25 billion and $1.23 billion. At June 30, 2019 and March 31, 2019, we owned approximately 77% of McKesson Europe’s outstanding common shares.

Noncontrolling Interests

Noncontrolling interests represent third-party equity interests in our consolidated entities primarily related to ClarusONE and Vantage Oncology Holdings, LLC, which were $194 million and $193 million at June 30, 2019 and March 31, 2019 on our condensed consolidated balance sheets. During the first quarters of 2020 and 2019, we allocated a total of $43 million and $46 million of net income to noncontrolling interests.

Changes in redeemable noncontrolling interests and noncontrolling interests for the first quarter of 2020 were as follows:

(In millions)	Noncontrolling Interests			Redeemable Noncontrolling Interests
Balance, March 31, 2019	$	193		$	1,393
Net income attributable to noncontrolling interests	43			11
Other comprehensive income	—			6
Reclassification of recurring compensation to other accrued liabilities	—			(11		)
Payments to noncontrolling interests	(39		)	—
Other	(3		)	—
Balance, June 30, 2019	$	194		$	1,399

Changes in redeemable noncontrolling interests and noncontrolling interests for the first quarter of 2019 were as follows:

(In millions)	Noncontrolling Interests			Redeemable Noncontrolling Interests
Balance, March 31, 2018	$	253		$	1,459
Net income attributable to noncontrolling interests	46			12
Other comprehensive income	—			(37		)
Reclassification of recurring compensation to other accrued liabilities	—			(12		)
Payments to noncontrolling interests	(64		)	—
Other	5			—
Balance, June 30, 2018	$	240		$	1,422

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Earnings Per Common Share

3 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share are computed similarly to basic earnings per common share except that the former reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Diluted loss per share for the first quarter of 2019 was calculated by excluding potentially dilutive securities from the denominator of the share computation due to their anti-dilutive effects.

The computations for basic and diluted earnings or loss per common share are as follows:

	Quarter Ended June 30,
(In millions, except per share amounts)	2019			2018
Income (Loss) from continuing operations	$	483		$	(81	)
Net income attributable to noncontrolling interests	(54		)	(58		)
Income (Loss) from continuing operations attributable to McKesson	429			(139		)
Income (Loss) from discontinued operations, net of tax	(6		)	1
Net income (loss) attributable to McKesson	$	423		$	(138	)
Weighted average common shares outstanding:
Basic	188			202
Effect of dilutive securities:
Restricted stock units	1			—
Diluted	189			202
Earnings (Loss) per common share attributable to McKesson: (1)
Diluted
Continuing operations	$	2.27		$	(0.69	)
Discontinued operations	(0.03		)	0.01
Total	$	2.24		$	(0.68	)
Basic
Continuing operations	$	2.28		$	(0.69	)
Discontinued operations	(0.03		)	0.01
Total	$	2.25		$	(0.68	)

(1) Certain computations may reflect rounding adjustments.

Potentially dilutive securities include outstanding stock options, restricted stock units, and performance-based and other restricted stock units. Approximately 3 million and 2 million potentially dilutive securities for the first quarters of 2020 and 2019 were excluded from the computations of diluted net earnings per common share, as they were anti-dilutive.

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Goodwill and Intangible Assets, Net

3 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

Goodwill and Intangible Assets, Net

Changes in the carrying amount of goodwill were as follows:

(In millions)	U.S. Pharmaceutical and Specialty Solutions		European Pharmaceutical Solutions		Medical-Surgical Solutions		Other		Total
Balance, March 31, 2019	$	4,078	$	—	$	2,451	$	2,829	$	9,358
Goodwill acquired	—		39		—		—		39
Acquisition accounting, transfers and other adjustments	1		1		7		—		9
Foreign currency translation adjustments, net	9		—		—		26		35
Balance, June 30, 2019	$	4,088	$	40	$	2,458	$	2,855	$	9,441

As of June 30, 2019 accumulated goodwill impairment losses were $2,913 million in our European Pharmaceutical Solutions segment and $470 million in Other. As of March 31, 2019 accumulated goodwill impairment losses were $2,943 million in our European Pharmaceutical Solutions segment and $461 million in Other.

Information regarding intangible assets is as follows:

	June 30, 2019								March 31, 2019
(Dollars in millions)	Weighted Average Remaining Amortization Period (years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	12	$	3,831	$	(1,871	)	$	1,960	$	3,818	$	(1,801	)	$	2,017
Service agreements	11	1,022		(447		)	575		1,017		(430		)	587
Pharmacy licenses	26	513		(210		)	303		513		(209		)	304
Trademarks and trade names	13	893		(244		)	649		887		(232		)	655
Technology	4	141		(98		)	43		141		(94		)	47
Other	5	282		(212		)	70		288		(209		)	79
Total		$	6,682	$	(3,082	)	$	3,600	$	6,664	$	(2,975	)	$	3,689

Amortization expense of intangible assets was $112 million and $122 million for the quarters ended June 30, 2019 and 2018. Estimated amortization expense of these assets is as follows: $298 million, $389 million, $365 million, $277 million and $248 million for the remainder of 2020 and each of the succeeding years through 2024 and $2,023 million thereafter. All intangible assets were subject to amortization as of June 30, 2019 and March 31, 2019.

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Debt and Financing Activities

3 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt and Financing Activities

Debt and Financing Activities

Long-Term Debt

Our long-term debt includes both U.S. dollar and foreign currency-denominated borrowings. At June 30, 2019 and March 31, 2019, $7,692 million and $7,595 million of total debt were outstanding, of which $310 million and $330 million were included under the caption “Current portion of long-term debt” within our condensed consolidated balance sheets.

Revolving Credit Facilities

We have a syndicated $3.5 billion five-year senior unsecured revolving credit facility (the “Global Facility”), which has a $3.15 billion aggregate sublimit of availability in Canadian dollars, British pound sterling and Euros. The Global Facility matures on October 22, 2020. Borrowings under the Global Facility bear interest based upon the London Interbank Offered Rate, Canadian Dealer Offered Rate for credit extensions denominated in Canadian dollars, a prime rate, or alternative overnight rates as applicable, plus agreed margins. The Global Facility contains a financial covenant which obligates the Company to maintain a debt to capital ratio of no greater than 65% and other customary investment grade covenants. If we do not comply with these covenants, our ability to use the Global Facility may be suspended and repayment of any outstanding balances under the Global Facility may be required. At June 30, 2019, we were in compliance with all covenants. There were no borrowings under this facility during the first quarters of 2020 and 2019, and no borrowings outstanding as of June 30, 2019 and March 31, 2019.

We also maintain bilateral credit lines primarily denominated in Euros with a committed balance of $9 million and an uncommitted balance of $199 million as of June 30, 2019. Borrowings and repayments were not material during the first quarters of 2020 and 2019 and amounts outstanding under these credit lines were not material as of June 30, 2019 and March 31, 2019.

Commercial Paper

We maintain a commercial paper program to support our working capital requirements and for other general corporate purposes. Under the program, the Company can issue up to $3.5 billion in outstanding commercial paper notes. During the first quarters of 2020 and 2019, we borrowed $2.6 billion and $9.0 billion and repaid $2.6 billion and $7.0 billion under the program. At June 30, 2019 and March 31, 2019, there were no commercial paper notes outstanding.

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Leases

3 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

Lessee

We lease facilities and equipment primarily under operating leases. We recognize lease expense on a straight-line basis over the term of the lease, taking into account, when applicable, lessor incentives for tenant improvements, periods where no rent payment is required and escalations in rent payments over the term of the lease. Remaining terms for facility leases generally range from one to fifteen years, while remaining terms for equipment leases generally range from one to six years. Most real property leases contain renewal options (typically for five-year increments). Generally, the renewal option periods are not included within the lease term as we are not reasonably certain to exercise that right at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets and operating lease liabilities are recognized at the lease commencement date. ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating leases liabilities are recognized based on the present value of the future lease payments over the lease term discounted at our incremental borrowing rate as the implicit rate in the lease is not readily determinable for most of our leases. We estimate the discount rate as our incremental borrowing rate based on qualitative factors including Company-specific credit rating, lease term, general economic and the interest rate environment. For existing leases that commenced prior to the adoption of the amended leasing guidance, we determined the discount rate on April 1, 2019 using the full lease term. Operating lease liabilities are recorded under the caption, “Current portion of operating lease liabilities” and “Long-Term Operating Lease Liabilities” and the corresponding lease assets are recorded under the caption, “Operating Lease Right-of-Use Assets,” in our condensed consolidated balance sheet. Finance lease assets are included in property, plant and equipment, net and finance lease liabilities are included in current portion of long-term debt and long-term debt in our condensed consolidated balance sheet.

Supplemental balance sheet information related to leases was as follows:

(In millions, except lease term and discount rate)	June 30, 2019
Operating leases
Operating Lease Right-of-Use Assets	$	2,031
Current portion of operating lease liabilities	$	373
Long-Term Operating Lease Liabilities	1,805
Total operating lease liabilities	$	2,178
Finance Leases
Property, Plant and Equipment, net	$	67
Current portion of long-term debt	$	7
Long-Term Debt	86
Total finance lease liabilities	$	93
Weighted Average Remaining Lease Term (Years)
Operating leases	8.56
Finance leases	11.76
Weighted Average Discount Rate
Operating leases	3.61		%
Finance leases	3.99		%

The components of lease cost were as follows:

	Quarter Ended June 30,
(In millions)	2019
Short-term lease cost	$	8
Operating lease cost	115
Finance lease cost:
Amortization of right-of-use assets	2
Interest on lease liabilities	1
Total finance lease cost	3
Variable lease cost (1)	31
Sublease income	(8		)
Total lease cost (2)	$	149

(1) These amounts include payments for maintenance, taxes, payments affected by the consumer price index and other similar metrics and payments contingent on usage.

(2) These amounts were primarily recorded within operating expenses in the accompanying condensed consolidated statement of operations.

Supplemental cash flow information related to leases was as follows:

	Quarter Ended June 30,
(In millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(99	)
Operating cash flows from finance leases	—
Financing cash flows from finance leases	(3		)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (1)	$	2,290
Finance leases	55

(1) These amounts include the transition adjustment for the adoption of the amended leasing guidance discussed in Financial Note 1, “Significant Accounting Policies.”

Maturities of lease liabilities as of June 30, 2019 were as follows:

(In millions)	Operating Leases			Finance Leases			Total
The remainder of 2020	$	319		$	8		$	327
2021	401			10			411
2022	344			10			354
2023	286			10			296
2024	232			10			242
Thereafter	900			69			969
Total lease payments (1)	$	2,482		$	117		$	2,599
Less imputed interest	(304		)	(24		)	(328		)
Present value of lease liabilities	$	2,178		$	93		$	2,271

(1) Total lease payments have not been reduced by minimum sublease income of $191 million due under future noncancelable subleases.

As of June 30, 2019, we entered into additional leases primarily for facilities that have not yet commenced with future lease payments of $275 million that are not reflected in the table above. These operating leases will commence between 2020 and 2022 with noncancelable lease terms of 5 to 20 years.

As previously disclosed in our 2019 Annual Report and under the previous lease accounting, the minimum lease payments required under operating leases were as follows as of March 31, 2019:

(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.

Lessor

We lease primarily certain owned equipment to the physician practices that are classified as direct financing or sales-type leases. As of June 30, 2019, the total lease receivable was $303 million with a weighted average remaining lease term of approximately nine years. Interest income from these leases recorded was not material during the first quarter of 2020.

Leases

Leases

Lessee

We lease facilities and equipment primarily under operating leases. We recognize lease expense on a straight-line basis over the term of the lease, taking into account, when applicable, lessor incentives for tenant improvements, periods where no rent payment is required and escalations in rent payments over the term of the lease. Remaining terms for facility leases generally range from one to fifteen years, while remaining terms for equipment leases generally range from one to six years. Most real property leases contain renewal options (typically for five-year increments). Generally, the renewal option periods are not included within the lease term as we are not reasonably certain to exercise that right at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets and operating lease liabilities are recognized at the lease commencement date. ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating leases liabilities are recognized based on the present value of the future lease payments over the lease term discounted at our incremental borrowing rate as the implicit rate in the lease is not readily determinable for most of our leases. We estimate the discount rate as our incremental borrowing rate based on qualitative factors including Company-specific credit rating, lease term, general economic and the interest rate environment. For existing leases that commenced prior to the adoption of the amended leasing guidance, we determined the discount rate on April 1, 2019 using the full lease term. Operating lease liabilities are recorded under the caption, “Current portion of operating lease liabilities” and “Long-Term Operating Lease Liabilities” and the corresponding lease assets are recorded under the caption, “Operating Lease Right-of-Use Assets,” in our condensed consolidated balance sheet. Finance lease assets are included in property, plant and equipment, net and finance lease liabilities are included in current portion of long-term debt and long-term debt in our condensed consolidated balance sheet.

Supplemental balance sheet information related to leases was as follows:

(In millions, except lease term and discount rate)	June 30, 2019
Operating leases
Operating Lease Right-of-Use Assets	$	2,031
Current portion of operating lease liabilities	$	373
Long-Term Operating Lease Liabilities	1,805
Total operating lease liabilities	$	2,178
Finance Leases
Property, Plant and Equipment, net	$	67
Current portion of long-term debt	$	7
Long-Term Debt	86
Total finance lease liabilities	$	93
Weighted Average Remaining Lease Term (Years)
Operating leases	8.56
Finance leases	11.76
Weighted Average Discount Rate
Operating leases	3.61		%
Finance leases	3.99		%

The components of lease cost were as follows:

	Quarter Ended June 30,
(In millions)	2019
Short-term lease cost	$	8
Operating lease cost	115
Finance lease cost:
Amortization of right-of-use assets	2
Interest on lease liabilities	1
Total finance lease cost	3
Variable lease cost (1)	31
Sublease income	(8		)
Total lease cost (2)	$	149

(1) These amounts include payments for maintenance, taxes, payments affected by the consumer price index and other similar metrics and payments contingent on usage.

(2) These amounts were primarily recorded within operating expenses in the accompanying condensed consolidated statement of operations.

Supplemental cash flow information related to leases was as follows:

	Quarter Ended June 30,
(In millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(99	)
Operating cash flows from finance leases	—
Financing cash flows from finance leases	(3		)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (1)	$	2,290
Finance leases	55

(1) These amounts include the transition adjustment for the adoption of the amended leasing guidance discussed in Financial Note 1, “Significant Accounting Policies.”

Maturities of lease liabilities as of June 30, 2019 were as follows:

(In millions)	Operating Leases			Finance Leases			Total
The remainder of 2020	$	319		$	8		$	327
2021	401			10			411
2022	344			10			354
2023	286			10			296
2024	232			10			242
Thereafter	900			69			969
Total lease payments (1)	$	2,482		$	117		$	2,599
Less imputed interest	(304		)	(24		)	(328		)
Present value of lease liabilities	$	2,178		$	93		$	2,271

(1) Total lease payments have not been reduced by minimum sublease income of $191 million due under future noncancelable subleases.

As of June 30, 2019, we entered into additional leases primarily for facilities that have not yet commenced with future lease payments of $275 million that are not reflected in the table above. These operating leases will commence between 2020 and 2022 with noncancelable lease terms of 5 to 20 years.

As previously disclosed in our 2019 Annual Report and under the previous lease accounting, the minimum lease payments required under operating leases were as follows as of March 31, 2019:

(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.

Lessor

We lease primarily certain owned equipment to the physician practices that are classified as direct financing or sales-type leases. As of June 30, 2019, the total lease receivable was $303 million with a weighted average remaining lease term of approximately nine years. Interest income from these leases recorded was not material during the first quarter of 2020.

Leases

Leases

Lessee

We lease facilities and equipment primarily under operating leases. We recognize lease expense on a straight-line basis over the term of the lease, taking into account, when applicable, lessor incentives for tenant improvements, periods where no rent payment is required and escalations in rent payments over the term of the lease. Remaining terms for facility leases generally range from one to fifteen years, while remaining terms for equipment leases generally range from one to six years. Most real property leases contain renewal options (typically for five-year increments). Generally, the renewal option periods are not included within the lease term as we are not reasonably certain to exercise that right at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets and operating lease liabilities are recognized at the lease commencement date. ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating leases liabilities are recognized based on the present value of the future lease payments over the lease term discounted at our incremental borrowing rate as the implicit rate in the lease is not readily determinable for most of our leases. We estimate the discount rate as our incremental borrowing rate based on qualitative factors including Company-specific credit rating, lease term, general economic and the interest rate environment. For existing leases that commenced prior to the adoption of the amended leasing guidance, we determined the discount rate on April 1, 2019 using the full lease term. Operating lease liabilities are recorded under the caption, “Current portion of operating lease liabilities” and “Long-Term Operating Lease Liabilities” and the corresponding lease assets are recorded under the caption, “Operating Lease Right-of-Use Assets,” in our condensed consolidated balance sheet. Finance lease assets are included in property, plant and equipment, net and finance lease liabilities are included in current portion of long-term debt and long-term debt in our condensed consolidated balance sheet.

Supplemental balance sheet information related to leases was as follows:

(In millions, except lease term and discount rate)	June 30, 2019
Operating leases
Operating Lease Right-of-Use Assets	$	2,031
Current portion of operating lease liabilities	$	373
Long-Term Operating Lease Liabilities	1,805
Total operating lease liabilities	$	2,178
Finance Leases
Property, Plant and Equipment, net	$	67
Current portion of long-term debt	$	7
Long-Term Debt	86
Total finance lease liabilities	$	93
Weighted Average Remaining Lease Term (Years)
Operating leases	8.56
Finance leases	11.76
Weighted Average Discount Rate
Operating leases	3.61		%
Finance leases	3.99		%

The components of lease cost were as follows:

	Quarter Ended June 30,
(In millions)	2019
Short-term lease cost	$	8
Operating lease cost	115
Finance lease cost:
Amortization of right-of-use assets	2
Interest on lease liabilities	1
Total finance lease cost	3
Variable lease cost (1)	31
Sublease income	(8		)
Total lease cost (2)	$	149

(1) These amounts include payments for maintenance, taxes, payments affected by the consumer price index and other similar metrics and payments contingent on usage.

(2) These amounts were primarily recorded within operating expenses in the accompanying condensed consolidated statement of operations.

Supplemental cash flow information related to leases was as follows:

	Quarter Ended June 30,
(In millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(99	)
Operating cash flows from finance leases	—
Financing cash flows from finance leases	(3		)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (1)	$	2,290
Finance leases	55

(1) These amounts include the transition adjustment for the adoption of the amended leasing guidance discussed in Financial Note 1, “Significant Accounting Policies.”

Maturities of lease liabilities as of June 30, 2019 were as follows:

(In millions)	Operating Leases			Finance Leases			Total
The remainder of 2020	$	319		$	8		$	327
2021	401			10			411
2022	344			10			354
2023	286			10			296
2024	232			10			242
Thereafter	900			69			969
Total lease payments (1)	$	2,482		$	117		$	2,599
Less imputed interest	(304		)	(24		)	(328		)
Present value of lease liabilities	$	2,178		$	93		$	2,271

(1) Total lease payments have not been reduced by minimum sublease income of $191 million due under future noncancelable subleases.

As of June 30, 2019, we entered into additional leases primarily for facilities that have not yet commenced with future lease payments of $275 million that are not reflected in the table above. These operating leases will commence between 2020 and 2022 with noncancelable lease terms of 5 to 20 years.

As previously disclosed in our 2019 Annual Report and under the previous lease accounting, the minimum lease payments required under operating leases were as follows as of March 31, 2019:

(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.

Lessor

We lease primarily certain owned equipment to the physician practices that are classified as direct financing or sales-type leases. As of June 30, 2019, the total lease receivable was $303 million with a weighted average remaining lease term of approximately nine years. Interest income from these leases recorded was not material during the first quarter of 2020.

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Pension Benefits

3 Months Ended

Jun. 30, 2019

Defined Benefit Plan [Abstract]

Pension Benefits

Pension Benefits

The net periodic expense for our defined pension benefit plans was $24 million and $5 million for the first quarters of 2020 and 2019.

Cash contributions to these plans were $6 million and $3 million for the first quarters of 2020 and 2019. The projected unit credit method is utilized in measuring net periodic pension expense over the employees’ service life for the pension plans. Unrecognized actuarial losses exceeding 10% of the greater of the projected benefit obligation or the market value of assets are amortized straight-line over the average remaining future service periods and expected life expectancy.

On May 23, 2018, the Company’s Board of Directors approved the termination of our frozen U.S. defined benefit pension plan (“Plan”). The Plan was fully funded by its plan assets at June 30, 2019 and March 31, 2019. During the first quarter of 2020, we offered the option of receiving a lump sum payment to certain participants with vested qualified Plan benefits in lieu of receiving monthly annuity payments. Approximately 1,300 participants elected to receive the settlement, and lump sum payments of approximately $49 million were made from plan assets to these participants in June 2019. The benefit obligation settled approximated payments to plan participants and a pre-tax settlement charge of $17 million was recorded during the first quarter of 2020. We expect to purchase non-participating annuity contracts from an insurer that will pay and administer the future pension benefits of the remaining participants, which is expected to be completed by September 30, 2019.

As of June 30, 2019 and March 31, 2019, this Plan had an accumulated other comprehensive loss of approximately $95 million and $121 million.

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Hedging Activities

3 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Hedging Activities

Hedging Activities

In the normal course of business, we are exposed to interest rate and foreign currency exchange rate fluctuations. At times, we limit these risks through the use of derivatives such as cross-currency swaps, foreign currency forward contracts and interest rate swaps. In accordance with our policy, derivatives are only used for hedging purposes. We do not use derivatives for trading or speculative purposes.

Foreign Currency Exchange Risk

We conduct our business worldwide in U.S. dollars and the functional currencies of our foreign subsidiaries, including Euro, British pound sterling and Canadian dollars. Changes in foreign currency exchange rates could have a material adverse impact on our financial results that are reported in U.S. dollars. We are also exposed to foreign currency exchange rate risk related to our foreign subsidiaries, including intercompany loans denominated in non-functional currencies. We have certain foreign currency exchange rate risk programs that use foreign currency forward contracts and cross-currency swaps. These forward contracts and cross-currency swaps are generally used to offset the potential income statement effects from intercompany loans denominated in non-functional currencies. These programs reduce but do not entirely eliminate foreign currency exchange rate risk.

Non-Derivative Instruments Designated as Hedges

At June 30, 2019 and March 31, 2019, we had €1.95 billion Euro-denominated notes and £450 million British pound sterling-denominated notes designated as non-derivative net investment hedges which hedge portions of our net investments in non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For all notes that are designated as net investment hedges and meet effectiveness requirements, the changes in carrying value of the notes attributable to the change in spot rates are recorded in foreign currency translation adjustments within Accumulated Other Comprehensive Loss in the consolidated statement of stockholders’ equity where they offset foreign currency translation gains and losses recorded on our net investments. To the extent foreign currency denominated notes designated as net investment hedges are ineffective, changes in carrying value attributable to the change in spot rates are recorded in earnings. Losses of $24 million and gains of $161 million for net investment hedges were recorded in other comprehensive income during the first quarters of 2020 and 2019. Ineffectiveness on our non-derivative net investment hedges during the first quarter of 2020 resulted in gains of $10 million which were recorded in earnings within other income, net. There was no ineffectiveness in our non-derivative net investment hedges during the first quarter of 2019.

Derivatives Designated as Hedges

At June 30, 2019 and March 31, 2019, we had cross-currency swaps designated as net investment hedges with total gross notional amounts of $1,499 million Canadian dollars. At March 2019, we also had cross-currency swaps designated as net investment hedges with total gross notional amounts of £932 million British pound sterling.

Under the terms of the cross-currency swap contracts, we agree with third parties to exchange fixed interest payments in one currency for fixed interest payments in another currency at specified intervals and to exchange principal in one currency for principal in another currency, calculated by reference to agreed-upon notional amounts. These swaps are utilized to hedge portions of our net investments denominated in British pound sterling and Canadian dollars against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. The changes in the fair value of these derivatives attributable to the changes in spot currency exchange rates and differences between spot and forward interest rates are recorded in accumulated other comprehensive loss in the condensed consolidated statement of stockholders’ equity where they offset foreign currency translation gains and losses recorded on our net investments denominated in British pound sterling and Canadian dollars. To the extent foreign currency denominated notes designated as hedges are ineffective, changes in carrying value attributable to the change in spot rates are recorded in earnings. Losses of $11 million and gains of $34 million were recorded in other comprehensive income for net investment hedges during the first quarters of 2020 and 2019. During the first quarter of 2020, we terminated cross-currency swaps with total gross notional amounts of £932 million British pound sterling due to ineffectiveness in our hedges within our British pound sterling hedging program that arose due to 2019 impairments of goodwill and certain long-lived assets in our U.K. businesses. Proceeds from the termination of these swaps totaled $84 million and resulted in a settlement gain of $34 million recorded in earnings within other income, net. There was no ineffectiveness in our hedges for the first quarter of 2019. The remaining cross-currency swaps will mature between November 2020 and November 2024.

At June 30, 2019 and March 31, 2019, we had forward contracts to hedge the U.S. dollar against cash flows denominated in Canadian dollars with total gross notional amounts of $81 million, which were designated as cash flow hedges. The remaining contract will mature in March 2020.

From time to time, we also enter into cross-currency swaps to hedge intercompany loans denominated in non-functional currencies. These cross-currency swaps are designed to reduce the income statement effects arising from fluctuations in foreign exchange rates and have been designated as cash flow hedges. At June 30, 2019 and March 31, 2019, we had cross-currency swaps with total gross notional amounts of approximately $2,908 million, which are designated as cash flow hedges. These swaps will mature between April 2020 and January 2024.

For forward contracts and cross-currency swaps that are designated as cash flow hedges, the effective portion of changes in the fair value of the hedges is recorded in Accumulated Other Comprehensive Income and reclassified into earnings in the same period in which the hedged transaction affects earnings. Changes in fair values representing hedge ineffectiveness are recognized in current earnings. Gains or losses from cash flow hedges recorded in other comprehensive income were not material during the first quarters of 2020 and 2019. Gains or losses reclassified from Accumulated Other Comprehensive Income and recorded in operating expenses in the consolidated statements of operations were not material during the first quarters of 2020 and 2019. There was no ineffectiveness in our cash flow hedges during the first quarters of 2020 and 2019.

Derivatives Not Designated as Hedges

Derivative instruments not designated as hedges are marked-to-market at the end of each accounting period with the change in value included in earnings.

We have a number of forward contracts to hedge the Euro against cash flows denominated in British pound sterling and other European currencies. At June 30, 2019 and March 31, 2019, the total gross notional amounts of these contracts were approximately $28 million. These contracts will mature through October 2020 and none of these contracts were designated for hedge accounting. Changes in the fair values for contracts not designated as hedges are recorded directly in earnings within operating expenses. Changes in the fair values were not material during the first quarters of 2020 and 2019. Gains or losses from these contracts are largely offset by changes in the value of the underlying intercompany foreign currency loans.

During the first quarter of 2020, we also entered a number of forward contracts to offset a portion of the earnings impacts from the ineffectiveness of net investment hedges discussed above. At June 30, 2019, the total gross notional amounts of these contracts were approximately $630 million. These contracts matured in July 2019 and none of these contracts were designated for hedge accounting. Changes in the fair values for contracts not designated as hedges are recorded directly in earnings. During the first quarter of 2020, losses of $19 million were recorded in earnings within other income, net.

Information regarding the fair value of derivatives on a gross basis is as follows:

	Balance Sheet Caption	June 30, 2019						March 31, 2019
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
(In millions)		Asset		Liability				Asset		Liability
Derivatives designated for hedge accounting
Foreign exchange contracts (current)	Prepaid expenses and other	$	16	$	—	$	81	$	17	$	—	$	81
Foreign exchange contracts (non-current)	Other Noncurrent Assets	—		—		—		—		—		—
Cross-currency swaps (current)	Prepaid expenses and other/Other Accrued Liabilities	37		8		355		—		18		—
Cross-currency swaps (non-current)	Other Noncurrent Assets/Liabilities	15		61		3,681		91		33		5,283
Total		$	68	$	69			$	108	$	51
Derivatives not designated for hedge accounting
Foreign exchange contracts (current)	Prepaid expenses and other	$	—	$	—	$	655	$	—	$	—	$	14
Foreign exchange contracts (current)	Other accrued liabilities	—		—		3		—		—		14
Total		$	—	$	—			$	—	$	—

Refer to Financial Note 14, "Fair Value Measurements," for more information on these recurring fair value measurements.

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Fair Value Measurements

3 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

At June 30, 2019 and March 31, 2019, the carrying amounts of cash, certain cash equivalents, restricted cash, marketable securities, receivables, drafts and accounts payable, short-term borrowings and other current liabilities approximated their estimated fair values because of the short maturity of these financial instruments.

The fair value of our commercial paper was determined using quoted prices in active markets for identical liabilities, which are considered Level 1 inputs.

Our long-term debt is carried at amortized cost. The carrying amounts and estimated fair values of these liabilities were $7.7 billion and $8.1 billion at June 30, 2019, and $7.6 billion and $7.9 billion at March 31, 2019. The estimated fair value of our long-term debt was determined using quoted market prices in a less active market and other observable inputs from available market information, which are considered to be Level 2 inputs, and may not be representative of actual values that could have been realized or that will be realized in the future.

Assets Measured at Fair Value on a Recurring Basis

Cash and cash equivalents at June 30, 2019 and March 31, 2019 included investments in money market funds of $460 million and $1,205 million, which are reported at fair value. The fair value of money market funds was determined by using quoted prices for identical investments in active markets, which are considered to be Level 1 inputs under the fair value measurements and disclosure guidance. The carrying value of all other cash equivalents approximates their fair value due to their relatively short-term nature.

Fair values of our forward foreign currency contracts were determined using observable inputs from available market information. Fair values of our cross-currency swaps were determined using quoted foreign currency exchange rates and other observable inputs from available market information. These inputs are considered Level 2 under the fair value measurements and disclosure guidance, and may not be representative of actual values that could have been realized or that will be realized in the future. Refer to Financial Note 13, “Hedging Activities,” for fair value and other information on our foreign currency derivatives including forward foreign currency contracts and cross-currency swaps.

There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the first quarters of 2020 and 2019.

Assets Measured at Fair Value on a Nonrecurring Basis

At March 31, 2019, assets measured at fair value on a nonrecurring basis primarily consisted of goodwill and long-lived assets for our European Pharmaceutical Solutions segment. There were no assets measured at fair value on a nonrecurring basis at June 30, 2019.

Goodwill

Fair value assessments of the reporting unit and the reporting unit's net assets, which are performed for goodwill impairment tests, are considered a Level 3 measurement due to the significance of unobservable inputs developed using company-specific information. We considered a market approach as well as an income approach using the discounted cash flow (“DCF”) model to determine the fair value of the reporting unit.

Long-lived Assets

We utilize multiple approaches including the DCF model and market approaches for estimating the fair value of intangible assets. The future cash flows used in the analysis are based on internal cash flow projections based on our long-range plans and include significant assumptions by management. Accordingly, the fair value assessment of the long-lived assets is considered a Level 3 fair value measurement.

We measure certain intangible and other long-lived assets at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. An impairment charge is recorded when the cost of the asset exceeds its fair value and this condition is determined to be other-than-temporary.

There were no liabilities measured at fair value on a nonrecurring basis at June 30, 2019 and March 31, 2019.

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Commitments and Contingent Liabilities

3 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Commitments and Contingent Liabilities

In addition to commitments and obligations incurred in our business, we are subject to a variety of claims and legal proceedings incidental to the normal conduct of our business, including claims from customers and vendors, pending and potential legal actions for damages, governmental investigations and other matters. The Company and its affiliates are parties to the legal claims and proceedings described below and in Note 24 to our 2019 Annual Report on Form 10-K which disclosure is incorporated in this footnote by this reference. The Company is vigorously defending itself against those claims and in those proceedings. Significant developments in those matters are described below. If we are unsuccessful in defending, or if we determine to settle any of these matters, we may be required to pay substantial sums, be subject to injunction or be forced to change how we operate our business, which could have a material adverse impact on our financial position or results of operations.

Unless otherwise stated, we are unable to reasonably estimate the loss or a range of possible loss for the matters described below. Often, it is not reasonably possible for us to determine that a loss is probable for a claim, or to reasonably estimate the amount of loss or a range of loss, because of the limited information available and the potential effects of future events and decisions by third parties, such as courts and regulators, that will determine the ultimate resolution of the claim. Many of the matters described are at preliminary stages, raise novel theories of liability or seek an indeterminate amount of damages. It is not uncommon for claims to be resolved over many years. We review loss contingencies at least quarterly, to determine whether the loss probability has changed and whether we can make a reasonable estimate of the possible loss or range of loss. When we determine that a loss from a claim is probable and reasonably estimable, we record a liability in the amount of our estimate for the ultimate loss. We also provide disclosure when it is reasonably possible that a loss may be incurred or when it is reasonably possible that the amount of a loss will exceed our recorded liability.

I. Litigation and Claims Involving Distribution of Controlled Substances

The Company is a defendant in many cases asserting claims related to distribution of controlled substances to pharmacies. We often are named as defendants along with other pharmaceutical wholesale distributors, pharmaceutical manufacturers and retail pharmacy chains. The plaintiffs in these actions include state attorneys general, county and municipal governments, hospitals, Indian tribes, pension funds, third-party payors and individuals. These actions have been filed in state and federal courts throughout the United States, and in Puerto Rico and Canada. They contain a variety of causes of action, including negligence, public nuisance, unjust enrichment, civil conspiracy, as well as alleging violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), state and federal controlled substances laws and other statutes.

Since December 5, 2017, nearly all such cases pending in federal district courts have been transferred for consolidated pre-trial proceeding to a multi-district litigation (“MDL”) in the United States District Court for the Northern District of Ohio captioned In re: National Prescription Opiate Litigation, Case No. 17-md-28-04. At present, there are approximately 2,000 cases under the jurisdiction of the MDL court. The court has set a trial date of October 21, 2019 for the claims brought by Cuyahoga County, Ohio and Summit County, Ohio. The Company has joined motions for summary judgments filed on July 19, 2019 addressing the RICO and Ohio Corrupt Practices Act claims, civil conspiracy, negligence per se, causation, preemption, and statute of limitations. On July 19, 2019, plaintiffs also filed motions for summary judgment addressing duties under the federal Controlled Substances Act and claims for abatement of public nuisance.

The Company is also named in more than 245 similar state court cases pending in 30 states plus Puerto Rico. These include actions filed by nineteen state attorneys general, and some by or on behalf of individuals, including wrongful death lawsuits and putative class action lawsuits brought on behalf of children with Neonatal Abstinence Syndrome due to alleged exposure to opioids in utero. In the Connecticut coordinated actions, the court granted defendants’ motion to dismiss and dismissed all claims filed by 21 municipalities; plaintiffs have appealed this decision. Defendants’ motions to dismiss have been denied by courts in various other jurisdictions. Trial dates have been set in several of these state cases: March 2, 2020 for the New York State Coordinated Proceedings; March 9, 2020 for the action brought by the Washington Attorney General; March 23, 2020 for the action brought by the Alaska Attorney General; July 21, 2020 brought by the Ohio Attorney General; January 25, 2021 for the action brought by Shelby County, Tennessee; and May 24, 2021 for the action brought by the Delaware Attorney General.

II. Other Litigation and Claims

On May 17, 2013, the Company was served with a complaint filed in the United States District Court for the Northern District of California by True Health Chiropractic Inc., alleging that McKesson sent unsolicited marketing faxes in violation of the Telephone Consumer Protection Act of 1991 (“TCPA”), as amended by the Junk Fax Protection Act of 2005 or JFPA, True Health Chiropractic Inc., et al. v. McKesson Corporation, et al., CV-13-02219 (HG). Plaintiffs seek statutory damages from $500 to $1,500 per violation plus injunctive relief. True Health Chiropractic later amended its complaint, adding McLaughlin Chiropractic Associates as an additional named plaintiff and McKesson Technologies Inc. as a defendant. Both plaintiffs alleged that the Company violated the TCPA because it sent faxes that did not contain notices regarding how to opt out of receiving the faxes. On July 16, 2015, plaintiffs filed a motion for class certification and on August 22, 2016, the court denied this motion, based, in part, on the grounds that identifying solicited faxes would require individualized inquiries as to consent. Plaintiffs appealed to the United States Court of Appeals for the Ninth Circuit. On July 17, 2018, the Ninth Circuit affirmed in part and reversed in part the district court’s denial of class certification and remanded the case to the district court for further proceedings. On June 24, 2019, the Supreme Court of the United States denied the Company’s petition for writ of certiorari asking the court to review the ruling by the Ninth Circuit. 

On March 5, 2018, the Company’s subsidiary, RxC Acquisition Company (d/b/a RxCrossroads), was served with a qui tam complaint filed in July 2017 in the United States District Court for the Southern District of Illinois by a relator against RxC Acquisition Company, among others, alleging that UCB, Inc., provided illegal “kickbacks” to providers, including nurse educator services and reimbursement assistance services provided through RxC Acquisition Company, in violation of the Anti-Kickback Statute, the False Claims Act, and various state false claims statutes. United States ex rel. CIMZNHCA, LLC v. UCB, Inc., et al., No. 17-cv-00765. The complaint seeks treble damages, civil penalties, and further relief, all in unspecified amounts. The United States and the states named in the complaint have declined to intervene in the suit. On December 17, 2018, the United States filed a motion to dismiss the complaint in its entirety; this motion was denied on April 15, 2019. On June 7, 2019, the court denied the United States’ motion for reconsideration. On July 8, 2019, the United States appealed to the United States Court of Appeals for the Seventh Circuit seeking interlocutory review of the denial of its motion for reconsideration of the denial of the motion to dismiss the complaint. The court has set a trial date of April 5, 2021.

On November 27, 2018, the Company’s subsidiary, RxC Acquisition Company (d/b/a RxCrossroads) was served with a qui tam complaint filed in the United States District Court for the Eastern District of Pennsylvania alleging that EMD Serono, Inc. and Pfizer, Inc. provided illegal “kickbacks” to providers, including services provided through RxC Acquisition Company and others, in violation of the Anti-Kickback statute, the False Claims Act, and various state false claims statutes. United States ex rel. Harris et al. v. EMD Serono, Inc. et al. No. 16-5594. The United States and the named states declined to intervene in the case. On December 17, 2018, the United States filed a motion to dismiss the complaint in its entirety. On April 3, 2019, the court granted the motion to dismiss. The time to appeal this ruling has expired.

On April 3, 2018, a second amended qui tam complaint was filed in the United States District Court for the Eastern District of New York by a relator, purportedly on behalf of the United States, 30 states, the District of Columbia, and two cities against McKesson Corporation, McKesson Specialty Care Distribution Corporation, McKesson Specialty Distribution LLC, McKesson Specialty Care Distribution Joint Venture, L.P., Oncology Therapeutics Network Corporation, Oncology Therapeutics Network Joint Venture, L.P., US Oncology, Inc. and US Oncology Specialty, L.P., alleging that from 2001 through 2010 the defendants repackaged and sold single-dose syringes of oncology medications in a manner that violated the federal False Claims Act and various state and local false claims statutes, and seeking damages, treble damages, civil penalties, attorneys’ fees and costs of suit, all in unspecified amounts, United States ex rel. Omni Healthcare Inc. v. McKesson Corporation, et al., 12-CV-06440 (NG).  The United States and the named states have declined to intervene in the case. On October 15, 2018, the Company filed a motion to dismiss the complaint as to all named defendants. On February 3, 2019, the court granted the motion to dismiss in part and denied it in part, leaving the Company and Oncology Therapeutics Network Corporation as the only remaining defendants in the case. On February 19, 2019, the relator filed a motion for reconsideration of the court’s dismissal of Oncology Therapeutics Network Joint Venture; this motion was denied by the court on June 28, 2019.

On September 25, 2018, plaintiffs filed a complaint in the United States District Court for the Eastern District of Pennsylvania alleging that the Company and its subsidiary, McKesson Medical-Surgical Inc., among others, violated the Sherman Act by restraining trade in the sale of generic drugs. Marion Diagnostic Center, LLC v. McKesson Corporation, et al., No. 2:18-cv-4137. On June 26, 2019, the court granted the Company’s motion to dismiss and authorized plaintiffs to seek leave to amend the claims against the Company.

On May 21, 2019, Jean E. Henry, a purported Company shareholder, filed a shareholder derivative complaint in the Superior Court of San Francisco, California against certain current and former officers and directors of the Company, and the Company as a nominal defendant, alleging violations of fiduciary duties and waste of corporate assets with respect to an alleged conspiracy to fix the prices of generic drugs, Henry v. Tyler, et al., CGC-19-576119. On May 23, 2019, the Company removed the case to the United States District Court for the Northern District of California, Case No. 19-cv-02869.

III. Government Subpoenas and Investigations

From time to time, the Company receives subpoenas or requests for information from various government agencies. The Company generally responds to such subpoenas and requests in a cooperative, thorough and timely manner. These responses sometimes require time and effort and can result in considerable costs being incurred by the Company. Such subpoenas and requests also can lead to the assertion of claims or the commencement of civil or criminal legal proceedings against the Company and other members of the health care industry, as well as to settlements.

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Stockholders' Equity

3 Months Ended

Jun. 30, 2019

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Each share of the Company’s outstanding common stock is permitted one vote on proposals presented to stockholders and is entitled to share equally in any dividends declared by the Company’s Board of Directors (the “Board”).

The Company currently pays quarterly dividends of $0.39 per common share. In July 2019, the Company’s quarterly dividend was raised from $0.39 to $0.41 per common share for dividends declared on or after such date by the Board. The Company anticipates that it will continue to pay quarterly cash dividends in the future.  However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon the Company's future earnings, financial condition, capital requirements and other factors.

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.

In May 2019, we entered into an ASR program with a third-party financial institution to repurchase $600 million of the Company’s common stock. We repurchased a total of 4.7 million shares at an average price per share of $127.68 during the first quarter of 2020.

During the first quarter of 2020, we repurchased 0.7 million of the Company’s shares for $84 million through open market transactions at an average price per share of $128.64.

The total authorization outstanding for repurchases of the Company’s common stock was $2.8 billion at June 30, 2019.

 Other Comprehensive Income (Loss)

Information regarding other comprehensive income (loss) including noncontrolling interests and redeemable noncontrolling interests, net of tax, by component is as follows:

	Quarter Ended June 30,
(In millions)	2019			2018
Foreign currency translation adjustments (1)
Foreign currency translation adjustments arising during period, net of income tax benefit of nil and nil (2) (3)	$	70		$	(273	)
Reclassified to income statement, net of income tax expense of nil and nil	—			—
	70			(273		)
Unrealized gains (losses) on net investment hedges arising during period, net of income tax (expense) benefit of $9 and ($51) (4)	(26		)	144
Reclassified to income statement, net of income tax expense of nil and nil	—			—
	(26		)	144
Unrealized gains on cash flow hedges
Unrealized gains on cash flow hedges arising during period, net of income tax expense of $6 and nil	12			—
Reclassified to income statement, net of income tax expense of nil and nil	—			—
	12			—
Changes in retirement-related benefit plans (5)
Net actuarial gain and prior service cost arising during the period, net of income tax expense of $1 and nil	6			—
Amortization of actuarial loss, prior service cost and transition obligation, net of income tax expense of nil and nil (6)	1			1
Foreign currency translation adjustments and other, net of income tax expense of nil and nil	2			7
Reclassified to income statement, net of income tax expense of $5 and nil (7)	12			—
	21			8
Other comprehensive income (loss), net of tax	$	77		$	(121	)

(1) Foreign currency translation adjustments primarily result from the conversion of non-U.S. dollar financial statements of our foreign subsidiary, McKesson Europe, into the Company’s reporting currency, U.S. dollars, during the first quarters of 2020 and 2019.

(2) During the first quarter of 2020, the net foreign currency translation gains were primarily due to the strengthening of the Canadian dollar and Euro against the U.S. dollar from April 1, 2019 to June 30, 2019. During the first quarter of 2019, the net foreign currency translation losses were primarily due to the weakening of the Euro and British pound sterling against the U.S. dollar from April 1, 2018 to June 30, 2018.

(3) The first quarter of 2020 includes net foreign currency translation gains of $6 million attributable to redeemable noncontrolling interests and the first quarter of 2019 includes net foreign currency translation losses of $39 million attributable to redeemable noncontrolling interests.

(4) The first quarter of 2020 includes foreign currency losses of $24 million on the net investment hedges from the €1.95 billion Euro-denominated notes and £450 million British pound sterling-denominated notes and losses of $11 million on the net investment hedges from the cross-currency swaps. The first quarter of 2019 includes foreign currency gains of $161 million on the net investment hedges from the €1.95 billion Euro-denominated notes and £450 million British pound sterling-denominated notes and gains of $34 million on the net investment hedges from cross-currency swaps.

(5) The first quarters of 2020 and 2019 include net actuarial losses of nil and $2 million which are attributable to redeemable noncontrolling interests.

(6) Pre-tax amount reclassified into cost of sales and operating expenses in our condensed consolidated statements of operations. The related tax expense was reclassified into income tax expense in our condensed consolidated statements of operations.

(7) The first quarter of 2020 reflects a reclassification of a pension settlement charge from accumulated other comprehensive loss to other income, net in our condensed consolidated statement of operations.  

Accumulated Other Comprehensive Income (Loss)

Information regarding changes in our accumulated other comprehensive income (loss), net of tax, by component for the first quarters of 2020 and 2019 are as follows:

	Foreign Currency Translation Adjustments
(In millions)	Foreign Currency Translation Adjustments, Net of Tax			Unrealized Gains (Losses) on Net Investment Hedges, Net of Tax			Unrealized Gains (Losses) on Cash Flow Hedges, Net of Tax			Unrealized Net Gains (Losses) and Other Components of Benefit Plans, Net of Tax			Total Accumulated Other Comprehensive Income (Loss)
Balance at March 31, 2019	$	(1,628	)	$	53		$	(37	)	$	(237	)	$	(1,849	)
Other comprehensive income (loss) before reclassifications	70			(26		)	12			8			64
Amounts reclassified to earnings and other	—			—			—			13			13
Other comprehensive income (loss)	70			(26		)	12			21			77
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	6			—			—			—			6
Other comprehensive income (loss) attributable to McKesson	64			(26		)	12			21			71
Balance at June 30, 2019	$	(1,564	)	$	27		$	(25	)	$	(216	)	$	(1,778	)

	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	(273		)	144			—			8			(121		)
Amounts reclassified to earnings and other	—			—			—			—			—
Other comprehensive income (loss)	(273		)	144			—			8			(121		)
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	(39		)	—			—			2			(37		)
Other comprehensive income (loss) attributable to McKesson	(234		)	144			—			6			(84		)
Balance at June 30, 2018	$	(1,492	)	$	(44	)	$	(61	)	$	(204	)	$	(1,801	)

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Related Party Balances and Transactions

3 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Balances and Transactions

Related Party Balances and Transactions

During the fourth quarter of 2018, a public benefit California foundation (“Foundation”) was established to provide opioid education to patients, caregivers, and providers, address policy issues, and increase patient access to life-saving treatments. Certain officers of the Company also serve as directors and officers of the Foundation. The Company had a pledge payable balance of $100 million ($64 million after-tax) to the Foundation as of March 31, 2018, which was paid in the first quarter of 2019.

Refer to Financial Note 2, “Equity Method Investment in Change Healthcare Joint Venture,” for information regarding related party balances and transactions with Change Healthcare Inc.

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Segments of Business

3 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segments of Business

Segments of Business

We report our financial results in three reportable segments: 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. 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 life sciences companies 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 equity method investment in Change Healthcare JV

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

	Quarter Ended June 30,
(In millions)	2019			2018
Revenues
U.S. Pharmaceutical and Specialty Solutions (1)	$	44,165		$	40,977
European Pharmaceutical Solutions (1)	6,710			6,935
Medical-Surgical Solutions (1)	1,903			1,703
Other	2,950			2,992
Total Revenues	$	55,728		$	52,607
Operating profit (2)
U.S. Pharmaceutical and Specialty Solutions (3)	$	579		$	543
European Pharmaceutical Solutions (4)	5			(560		)
Medical-Surgical Solutions	125			93
Other (5) (6)	141			114
Total	850			190
Corporate Expenses, Net (7)	(175		)	(123		)
Interest Expense	(56		)	(61		)
Income from Continuing Operations Before Income Taxes	$	619		$	6
Revenues, net by geographic area
United States	$	46,321		$	42,890
Foreign	9,407			9,717
Total Revenues	$	55,728		$	52,607

(1) Revenues derived from services represent less than 1% of our U.S. Pharmaceutical and Specialty Solutions segment’s total revenues, less than 10% of our European Pharmaceutical Solutions segment’s total revenues and less than 2% of our Medical-Surgical Solutions segment’s total revenues.

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

(3) Our U.S. Pharmaceutical and Specialty Solutions segment’s operating profit for the first quarters of 2020 and 2019 includes $15 million and $21 million pre-tax credits related to our last-in, first-out (“LIFO”) method of accounting for inventories. Operating profit for the first quarter of 2019 also include $35 million of cash receipts for our share of antitrust legal settlements.

(4) European Pharmaceutical Solutions segment’s operating profit for the first quarter of 2019 includes non-cash goodwill impairment charges of $570 million (pre-tax and after-tax).

(5) Operating profit for Other for the first quarter of 2019 includes pre-tax restructuring charges of $38 million (pre-tax and after-tax) primarily associated with the closure of retail pharmacy stores within our Canadian business and an escrow settlement gain of $97 million (pre-tax and after-tax) representing certain indemnity and other claims related to our 2017 third quarter acquisition of Rexall Health.

(6) Operating profit for Other also includes our proportionate share of income of $4 million and loss of $56 million from Change Healthcare JV for the first quarters of 2020 and 2019.

(7)

Corporate expenses, net, for the first quarter of 2020 include pre-tax net settlement gains of $25 million from our net investment hedges and forward contracts and a pre-tax settlement charge of $17 million from the termination of our defined benefit pension plan.

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Significant Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation: The condensed consolidated financial statements of McKesson include the financial statements of all wholly-owned subsidiaries and controlled companies. For those consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocable to the noncontrolling interests is reported as “Net Income Attributable to Noncontrolling Interests” on the condensed consolidated statements of operations. All significant intercompany balances and transactions have been eliminated in consolidation including the intercompany portion of transactions with equity method investees.

We consider ourselves to control an entity if we have voting control over such entity. We also assess control through means other than voting rights (“variable interest entities” or “VIEs”) and determine which business entity is the primary beneficiary of the VIE. We consolidate VIEs when it is determined that we are the primary beneficiary of the VIE. Investments in business entities in which we do not have control, but have the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and disclosures normally included in the annual consolidated financial statements.

To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these financial statements and income and expenses during the reporting period. Actual amounts may differ from these estimated amounts. In our opinion, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented.

Use of Estimates

The results of operations for the quarter ended June 30, 2019 are not necessarily indicative of the results that may be expected for the entire year. These interim financial statements should be read in conjunction with the annual audited financial statements, accounting policies and financial notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 previously filed with the SEC on May 15, 2019 (“2019 Annual Report”).

Fiscal Period

The Company’s fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year shall mean the Company’s fiscal year.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation.

Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Adopted Accounting Pronouncements

Leases: In the first quarter of 2020, we adopted amended guidance for leases using the modified retrospective basis and recorded a cumulative-effect adjustment to the opening retained earnings on the date of adoption. Under the amended guidance, entities are required to recognize operating lease liabilities and operating lease right-of-use (“ROU”) assets on the balance sheet for all leases with terms longer than 12 months and to provide enhanced disclosures on key information of leasing arrangements.

We elected the transition package of practical expedients provided within the amended guidance, which eliminates the requirements to reassess lease identification, lease classification and initial direct costs for leases commenced before April 1, 2019. We also elected not to separate lease from non-lease components for all leases and to exclude short-term leases with an initial term of 12 months or less from our condensed consolidated balance sheets.

Upon adoption of this amended guidance, we recorded $2.2 billion of operating lease liabilities, $2.1 billion of operating lease ROU assets and a cumulative-effect adjustment of $69 million to the opening retained earnings. The adjustment to the opening retained earnings included impairment charges of $89 million, net of tax to the ROU assets primarily related to previously impaired long-lived assets at the retail pharmacies in our United Kingdom (“U.K.”) and Canadian businesses, partially offset by derecognition of existing deferred gain on our sale-leaseback transaction related to our former corporate headquarters building. The adoption of this amended guidance did not have a material impact on our condensed consolidated statements of operations and cash flows.

Refer to Financial Note 11, “Leases,” for more information.

Derivatives and Hedging:  In the first quarter of 2020, we prospectively adopted amended guidance that allows us to include the Secured Overnight Financing Rate Overnight Index Swap Rate as a benchmark interest rate for hedge accounting purposes. The adoption of this amended guidance did not have a material effect on our condensed consolidated financial statements.

Disclosure Update and Simplification: In the first quarter of 2020, we adopted amended guidance that simplifies certain disclosure requirements and expands the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. The adoption of this amended guidance had no effect on our condensed consolidated statements of operations, comprehensive income, balance sheets and cash flows. This amended guidance resulted in a disclosure of the interim condensed consolidated statements of stockholders’ equity.

Accumulated Other Comprehensive Income: In the first quarter of 2020, we adopted amended guidance that allows for a reclassification of only those amounts related to the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”) to retained earnings thereby eliminating the stranded tax effects. Previous guidance required that deferred tax liabilities and assets be adjusted for a change in tax laws with the effect included in income from continuing operations in the reporting period that includes the enactment date. We have elected not to reclassify the stranded tax effects within accumulated other comprehensive loss to retained earnings. The adoption of this amended guidance did not affect our condensed consolidated financial statements.

Premium Amortization of Purchased Callable Debt Securities: In the first quarter of 2020, we adopted amended guidance on a modified retrospective basis that shortens the amortization period for certain callable debt securities held at a premium. The amended guidance requires the premium of callable debt securities to be amortized to the earliest call date but does not require an accounting change for securities held at a discount as they would still be amortized to maturity. The adoption of this amended guidance did not affect our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Collaborative Arrangements: In November 2018, amended guidance was issued which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under revenue recognition guidance when the counterparty is a customer. The amended guidance precludes presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The amended guidance is effective for us in the first quarter of 2021 on a retrospective basis with a cumulative-effect adjustment to beginning retained earnings. We may elect to apply this amended guidance retrospectively either to all contracts or only to contracts that are not completed at the date of initial adoption. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our condensed consolidated financial statements.

Intangibles - Goodwill and Other - Internal-Use Software: In August 2018, amended guidance was issued for a customer’s accounting for implementation and other upfront costs incurred in a cloud computing arrangement that is a service contract. The amended guidance aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs for a cloud computing arrangement that has a software license. The amended guidance is effective for us either on a retrospective or prospective basis commencing in the first quarter of 2021. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our condensed consolidated financial statements.

Compensation - Retirement Benefits - Defined Benefit Plans: In August 2018, amended guidance was issued for defined benefit pension or other postretirement plans. The amended guidance requires us to disclose the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates, and an explanation of reasons for significant gains and losses related to changes in the benefit obligation for the period. The amended guidance also requires us to remove disclosures on the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit costs over the next fiscal year. The amended guidance is effective for us on a retrospective basis commencing in the fiscal year ended March 31, 2021. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material effect on our condensed consolidated statements of operations, comprehensive income, balance sheets or cash flows. This amended guidance will result in changes in disclosures.

Fair Value Measurement: In August 2018, amended guidance was issued to remove, modify and add disclosure requirements on fair value measurements. The amended guidance removes disclosure requirements for transfers between Level 1 and Level 2 measurements and valuation processes for Level 3 measurements but adds new disclosure requirements including changes in unrealized gains or losses in other comprehensive income related to recurring Level 3 measurements. The amended guidance is effective for us commencing in the first quarter of 2021. Certain requirements will be applied prospectively while other changes will be applied retrospectively upon the effective date. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material effect on our condensed consolidated statements of operations, comprehensive income, balance sheets or cash flows. This amended guidance will result in changes in disclosures.

Financial Instruments - Credit Losses: In June 2016, amended guidance was issued, which will change the impairment model for most financial assets and require additional disclosures. The amended guidance requires financial assets that are measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of financial assets. The amended guidance also requires us to consider historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount in estimating credit losses. The guidance was further amended in May 2019 to provide an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. The amended guidance becomes effective for us commencing in the first quarter of 2021 and will be applied through a cumulative-effect adjustment to the opening retained earnings in the year of adoption. Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our condensed consolidated financial statements.

Goodwill Impairment Charges

We evaluate goodwill for impairment on an annual basis as of January 1 each year and at an interim date, if indicators of potential impairment exist. Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or one level below an operating segment (also known as a component), for which discrete financial information is available and segment management regularly reviews the operating results of that reporting unit.

Commitments and Contingencies

In addition to commitments and obligations incurred in our business, we are subject to a variety of claims and legal proceedings incidental to the normal conduct of our business, including claims from customers and vendors, pending and potential legal actions for damages, governmental investigations and other matters. The Company and its affiliates are parties to the legal claims and proceedings described below and in Note 24 to our 2019 Annual Report on Form 10-K which disclosure is incorporated in this footnote by this reference. The Company is vigorously defending itself against those claims and in those proceedings. Significant developments in those matters are described below. If we are unsuccessful in defending, or if we determine to settle any of these matters, we may be required to pay substantial sums, be subject to injunction or be forced to change how we operate our business, which could have a material adverse impact on our financial position or results of operations.

Unless otherwise stated, we are unable to reasonably estimate the loss or a range of possible loss for the matters described below. Often, it is not reasonably possible for us to determine that a loss is probable for a claim, or to reasonably estimate the amount of loss or a range of loss, because of the limited information available and the potential effects of future events and decisions by third parties, such as courts and regulators, that will determine the ultimate resolution of the claim. Many of the matters described are at preliminary stages, raise novel theories of liability or seek an indeterminate amount of damages. It is not uncommon for claims to be resolved over many years. We review loss contingencies at least quarterly, to determine whether the loss probability has changed and whether we can make a reasonable estimate of the possible loss or range of loss. When we determine that a loss from a claim is probable and reasonably estimable, we record a liability in the amount of our estimate for the ultimate loss. We also provide disclosure when it is reasonably possible that a loss may be incurred or when it is reasonably possible that the amount of a loss will exceed our recorded liability.

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Restructuring and Asset Impairment Charges (Tables)

3 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Restructuring and Related Costs

Restructuring charges for our fiscal 2019 initiatives during the first quarter of 2020 consisted of the following:

(In millions)	U.S. Pharmaceutical and Specialty Solutions			European Pharmaceutical Solutions			Medical-Surgical Solutions		Other		Corporate		Total
Severance and employee-related costs, net	$	(1	)	$	(1	)	$	—	$	—	$	6	$	4
Exit and other-related costs (1)	—			1			2		1		10		14
Asset impairments and accelerated depreciation	—			3			1		—		1		5
Total	$	(1	)	$	3		$	3	$	1	$	17	$	23

(1) Exit and other-related costs primarily include project consulting fees.

Restructuring charges for our fiscal 2019 initiatives during the first quarter of 2019 consisted of the following:

(In millions)	U.S. Pharmaceutical and Specialty Solutions		Medical-Surgical Solutions		Other		Corporate		Total
Severance and employee-related costs, net	$	3	$	10	$	1	$	—	$	14
Exit and other-related costs (1)	1		2		21		11		35
Asset impairments and accelerated depreciation	4		—		16		—		20
Total	$	8	$	12	$	38	$	11	$	69

(1)

Exit and other-related costs primarily include lease exit costs associated with closures of retail pharmacy stores within our Canadian business as well as project consulting fees.

Schedule of Restructuring and Asset Impairment Charges

The following table summarizes the activity related to the restructuring liabilities associated with our fiscal 2019 initiatives for the first quarter of 2020:

(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	(1		)	3			3			1			17			23
Non-cash charges	—			(3		)	(1		)	—			(1		)	(5		)
Cash payments	(1		)	(7		)	—			(12		)	(7		)	(27		)
Other	—			1			—			(6		)	(3		)	(8		)
Balance, June 30, 2019 (2)	$	29		$	32		$	17		$	12		$	43		$	133

(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 June 30, 2019, the total reserve balance was $133 million of which $107 million was recorded in other accrued liabilities and $26 million was recorded in other noncurrent liabilities.

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Redeemable Noncontrolling Interests and Noncontrolling Interests (Tables)

3 Months Ended

Jun. 30, 2019

Noncontrolling Interest [Abstract]

Changes in Redeemable Noncontrolling Interests and Noncontrolling Interests

Changes in redeemable noncontrolling interests and noncontrolling interests for the first quarter of 2020 were as follows:

(In millions)	Noncontrolling Interests			Redeemable Noncontrolling Interests
Balance, March 31, 2019	$	193		$	1,393
Net income attributable to noncontrolling interests	43			11
Other comprehensive income	—			6
Reclassification of recurring compensation to other accrued liabilities	—			(11		)
Payments to noncontrolling interests	(39		)	—
Other	(3		)	—
Balance, June 30, 2019	$	194		$	1,399

Changes in redeemable noncontrolling interests and noncontrolling interests for the first quarter of 2019 were as follows:

(In millions)	Noncontrolling Interests			Redeemable Noncontrolling Interests
Balance, March 31, 2018	$	253		$	1,459
Net income attributable to noncontrolling interests	46			12
Other comprehensive income	—			(37		)
Reclassification of recurring compensation to other accrued liabilities	—			(12		)
Payments to noncontrolling interests	(64		)	—
Other	5			—
Balance, June 30, 2018	$	240		$	1,422

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Earnings Per Common Share (Tables)

3 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of computations for basic and diluted earnings per common share

The computations for basic and diluted earnings or loss per common share are as follows:

	Quarter Ended June 30,
(In millions, except per share amounts)	2019			2018
Income (Loss) from continuing operations	$	483		$	(81	)
Net income attributable to noncontrolling interests	(54		)	(58		)
Income (Loss) from continuing operations attributable to McKesson	429			(139		)
Income (Loss) from discontinued operations, net of tax	(6		)	1
Net income (loss) attributable to McKesson	$	423		$	(138	)
Weighted average common shares outstanding:
Basic	188			202
Effect of dilutive securities:
Restricted stock units	1			—
Diluted	189			202
Earnings (Loss) per common share attributable to McKesson: (1)
Diluted
Continuing operations	$	2.27		$	(0.69	)
Discontinued operations	(0.03		)	0.01
Total	$	2.24		$	(0.68	)
Basic
Continuing operations	$	2.28		$	(0.69	)
Discontinued operations	(0.03		)	0.01
Total	$	2.25		$	(0.68	)

(1)

Certain computations may reflect rounding adjustments.

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Goodwill and Intangible Assets, Net (Tables)

3 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in the carrying amount of goodwill

Changes in the carrying amount of goodwill were as follows:

(In millions)	U.S. Pharmaceutical and Specialty Solutions		European Pharmaceutical Solutions		Medical-Surgical Solutions		Other		Total
Balance, March 31, 2019	$	4,078	$	—	$	2,451	$	2,829	$	9,358
Goodwill acquired	—		39		—		—		39
Acquisition accounting, transfers and other adjustments	1		1		7		—		9
Foreign currency translation adjustments, net	9		—		—		26		35
Balance, June 30, 2019	$	4,088	$	40	$	2,458	$	2,855	$	9,441

Schedule of information regarding intangible assets

Information regarding intangible assets is as follows:

	June 30, 2019								March 31, 2019
(Dollars in millions)	Weighted Average Remaining Amortization Period (years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	12	$	3,831	$	(1,871	)	$	1,960	$	3,818	$	(1,801	)	$	2,017
Service agreements	11	1,022		(447		)	575		1,017		(430		)	587
Pharmacy licenses	26	513		(210		)	303		513		(209		)	304
Trademarks and trade names	13	893		(244		)	649		887		(232		)	655
Technology	4	141		(98		)	43		141		(94		)	47
Other	5	282		(212		)	70		288		(209		)	79
Total		$	6,682	$	(3,082	)	$	3,600	$	6,664	$	(2,975	)	$	3,689

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Leases (Tables)

3 Months Ended

Jun. 30, 2019

Leases [Abstract]

Supplemental Balance Sheet Information

Supplemental balance sheet information related to leases was as follows:

(In millions, except lease term and discount rate)	June 30, 2019
Operating leases
Operating Lease Right-of-Use Assets	$	2,031
Current portion of operating lease liabilities	$	373
Long-Term Operating Lease Liabilities	1,805
Total operating lease liabilities	$	2,178
Finance Leases
Property, Plant and Equipment, net	$	67
Current portion of long-term debt	$	7
Long-Term Debt	86
Total finance lease liabilities	$	93
Weighted Average Remaining Lease Term (Years)
Operating leases	8.56
Finance leases	11.76
Weighted Average Discount Rate
Operating leases	3.61		%
Finance leases	3.99		%

Components of Lease Cost and Supplemental Cash Flow Information

The components of lease cost were as follows:

	Quarter Ended June 30,
(In millions)	2019
Short-term lease cost	$	8
Operating lease cost	115
Finance lease cost:
Amortization of right-of-use assets	2
Interest on lease liabilities	1
Total finance lease cost	3
Variable lease cost (1)	31
Sublease income	(8		)
Total lease cost (2)	$	149

(1) These amounts include payments for maintenance, taxes, payments affected by the consumer price index and other similar metrics and payments contingent on usage.

(2) These amounts were primarily recorded within operating expenses in the accompanying condensed consolidated statement of operations.

Supplemental cash flow information related to leases was as follows:

	Quarter Ended June 30,
(In millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(99	)
Operating cash flows from finance leases	—
Financing cash flows from finance leases	(3		)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (1)	$	2,290
Finance leases	55

(1) These amounts include the transition adjustment for the adoption of the amended leasing guidance discussed in Financial Note 1, “Significant Accounting Policies.”

Maturity of Lease Liabilities

Maturities of lease liabilities as of June 30, 2019 were as follows:

(In millions)	Operating Leases			Finance Leases			Total
The remainder of 2020	$	319		$	8		$	327
2021	401			10			411
2022	344			10			354
2023	286			10			296
2024	232			10			242
Thereafter	900			69			969
Total lease payments (1)	$	2,482		$	117		$	2,599
Less imputed interest	(304		)	(24		)	(328		)
Present value of lease liabilities	$	2,178		$	93		$	2,271

(1)

Total lease payments have not been reduced by minimum sublease income of $191 million due under future noncancelable subleases.

Maturity of Lease Liabilities

Maturities of lease liabilities as of June 30, 2019 were as follows:

(In millions)	Operating Leases			Finance Leases			Total
The remainder of 2020	$	319		$	8		$	327
2021	401			10			411
2022	344			10			354
2023	286			10			296
2024	232			10			242
Thereafter	900			69			969
Total lease payments (1)	$	2,482		$	117		$	2,599
Less imputed interest	(304		)	(24		)	(328		)
Present value of lease liabilities	$	2,178		$	93		$	2,271

(1)

Total lease payments have not been reduced by minimum sublease income of $191 million due under future noncancelable subleases.

Schedule of Future Minimum Rental Payments under Operating Leases

As previously disclosed in our 2019 Annual Report and under the previous lease accounting, the minimum lease payments required under operating leases were as follows as of March 31, 2019:

(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.

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Hedging Activities (Tables)

3 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of information regarding the fair value of derivatives on a gross basis

Information regarding the fair value of derivatives on a gross basis is as follows:

	Balance Sheet Caption	June 30, 2019						March 31, 2019
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
(In millions)		Asset		Liability				Asset		Liability
Derivatives designated for hedge accounting
Foreign exchange contracts (current)	Prepaid expenses and other	$	16	$	—	$	81	$	17	$	—	$	81
Foreign exchange contracts (non-current)	Other Noncurrent Assets	—		—		—		—		—		—
Cross-currency swaps (current)	Prepaid expenses and other/Other Accrued Liabilities	37		8		355		—		18		—
Cross-currency swaps (non-current)	Other Noncurrent Assets/Liabilities	15		61		3,681		91		33		5,283
Total		$	68	$	69			$	108	$	51
Derivatives not designated for hedge accounting
Foreign exchange contracts (current)	Prepaid expenses and other	$	—	$	—	$	655	$	—	$	—	$	14
Foreign exchange contracts (current)	Other accrued liabilities	—		—		3		—		—		14
Total		$	—	$	—			$	—	$	—

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Stockholders' Equity (Tables)

3 Months Ended

Jun. 30, 2019

Equity [Abstract]

Schedule of information regarding other comprehensive income (loss) including noncontrolling and redeemable noncontrolling interests, net of tax, by component

Information regarding other comprehensive income (loss) including noncontrolling interests and redeemable noncontrolling interests, net of tax, by component is as follows:

	Quarter Ended June 30,
(In millions)	2019			2018
Foreign currency translation adjustments (1)
Foreign currency translation adjustments arising during period, net of income tax benefit of nil and nil (2) (3)	$	70		$	(273	)
Reclassified to income statement, net of income tax expense of nil and nil	—			—
	70			(273		)
Unrealized gains (losses) on net investment hedges arising during period, net of income tax (expense) benefit of $9 and ($51) (4)	(26		)	144
Reclassified to income statement, net of income tax expense of nil and nil	—			—
	(26		)	144
Unrealized gains on cash flow hedges
Unrealized gains on cash flow hedges arising during period, net of income tax expense of $6 and nil	12			—
Reclassified to income statement, net of income tax expense of nil and nil	—			—
	12			—
Changes in retirement-related benefit plans (5)
Net actuarial gain and prior service cost arising during the period, net of income tax expense of $1 and nil	6			—
Amortization of actuarial loss, prior service cost and transition obligation, net of income tax expense of nil and nil (6)	1			1
Foreign currency translation adjustments and other, net of income tax expense of nil and nil	2			7
Reclassified to income statement, net of income tax expense of $5 and nil (7)	12			—
	21			8
Other comprehensive income (loss), net of tax	$	77		$	(121	)

(1) Foreign currency translation adjustments primarily result from the conversion of non-U.S. dollar financial statements of our foreign subsidiary, McKesson Europe, into the Company’s reporting currency, U.S. dollars, during the first quarters of 2020 and 2019.

(2) During the first quarter of 2020, the net foreign currency translation gains were primarily due to the strengthening of the Canadian dollar and Euro against the U.S. dollar from April 1, 2019 to June 30, 2019. During the first quarter of 2019, the net foreign currency translation losses were primarily due to the weakening of the Euro and British pound sterling against the U.S. dollar from April 1, 2018 to June 30, 2018.

(3) The first quarter of 2020 includes net foreign currency translation gains of $6 million attributable to redeemable noncontrolling interests and the first quarter of 2019 includes net foreign currency translation losses of $39 million attributable to redeemable noncontrolling interests.

(4) The first quarter of 2020 includes foreign currency losses of $24 million on the net investment hedges from the €1.95 billion Euro-denominated notes and £450 million British pound sterling-denominated notes and losses of $11 million on the net investment hedges from the cross-currency swaps. The first quarter of 2019 includes foreign currency gains of $161 million on the net investment hedges from the €1.95 billion Euro-denominated notes and £450 million British pound sterling-denominated notes and gains of $34 million on the net investment hedges from cross-currency swaps.

(5) The first quarters of 2020 and 2019 include net actuarial losses of nil and $2 million which are attributable to redeemable noncontrolling interests.

(6) Pre-tax amount reclassified into cost of sales and operating expenses in our condensed consolidated statements of operations. The related tax expense was reclassified into income tax expense in our condensed consolidated statements of operations.

(7)

The first quarter of 2020 reflects a reclassification of a pension settlement charge from accumulated other comprehensive loss to other income, net in our condensed consolidated statement of operations.  

Schedule of information regarding changes in accumulated other comprehensive income (loss), net of tax, by component

Information regarding changes in our accumulated other comprehensive income (loss), net of tax, by component for the first quarters of 2020 and 2019 are as follows:

	Foreign Currency Translation Adjustments
(In millions)	Foreign Currency Translation Adjustments, Net of Tax			Unrealized Gains (Losses) on Net Investment Hedges, Net of Tax			Unrealized Gains (Losses) on Cash Flow Hedges, Net of Tax			Unrealized Net Gains (Losses) and Other Components of Benefit Plans, Net of Tax			Total Accumulated Other Comprehensive Income (Loss)
Balance at March 31, 2019	$	(1,628	)	$	53		$	(37	)	$	(237	)	$	(1,849	)
Other comprehensive income (loss) before reclassifications	70			(26		)	12			8			64
Amounts reclassified to earnings and other	—			—			—			13			13
Other comprehensive income (loss)	70			(26		)	12			21			77
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	6			—			—			—			6
Other comprehensive income (loss) attributable to McKesson	64			(26		)	12			21			71
Balance at June 30, 2019	$	(1,564	)	$	27		$	(25	)	$	(216	)	$	(1,778	)

	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	(273		)	144			—			8			(121		)
Amounts reclassified to earnings and other	—			—			—			—			—
Other comprehensive income (loss)	(273		)	144			—			8			(121		)
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	(39		)	—			—			2			(37		)
Other comprehensive income (loss) attributable to McKesson	(234		)	144			—			6			(84		)
Balance at June 30, 2018	$	(1,492	)	$	(44	)	$	(61	)	$	(204	)	$	(1,801	)

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Segments of Business (Tables)

3 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of financial information relating to reportable operating segments and reconciliations to the condensed consolidated totals

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

	Quarter Ended June 30,
(In millions)	2019			2018
Revenues
U.S. Pharmaceutical and Specialty Solutions (1)	$	44,165		$	40,977
European Pharmaceutical Solutions (1)	6,710			6,935
Medical-Surgical Solutions (1)	1,903			1,703
Other	2,950			2,992
Total Revenues	$	55,728		$	52,607
Operating profit (2)
U.S. Pharmaceutical and Specialty Solutions (3)	$	579		$	543
European Pharmaceutical Solutions (4)	5			(560		)
Medical-Surgical Solutions	125			93
Other (5) (6)	141			114
Total	850			190
Corporate Expenses, Net (7)	(175		)	(123		)
Interest Expense	(56		)	(61		)
Income from Continuing Operations Before Income Taxes	$	619		$	6
Revenues, net by geographic area
United States	$	46,321		$	42,890
Foreign	9,407			9,717
Total Revenues	$	55,728		$	52,607

(1) Revenues derived from services represent less than 1% of our U.S. Pharmaceutical and Specialty Solutions segment’s total revenues, less than 10% of our European Pharmaceutical Solutions segment’s total revenues and less than 2% of our Medical-Surgical Solutions segment’s total revenues.

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

(3) Our U.S. Pharmaceutical and Specialty Solutions segment’s operating profit for the first quarters of 2020 and 2019 includes $15 million and $21 million pre-tax credits related to our last-in, first-out (“LIFO”) method of accounting for inventories. Operating profit for the first quarter of 2019 also include $35 million of cash receipts for our share of antitrust legal settlements.

(4) European Pharmaceutical Solutions segment’s operating profit for the first quarter of 2019 includes non-cash goodwill impairment charges of $570 million (pre-tax and after-tax).

(5) Operating profit for Other for the first quarter of 2019 includes pre-tax restructuring charges of $38 million (pre-tax and after-tax) primarily associated with the closure of retail pharmacy stores within our Canadian business and an escrow settlement gain of $97 million (pre-tax and after-tax) representing certain indemnity and other claims related to our 2017 third quarter acquisition of Rexall Health.

(6) Operating profit for Other also includes our proportionate share of income of $4 million and loss of $56 million from Change Healthcare JV for the first quarters of 2020 and 2019.

(7)

Corporate expenses, net, for the first quarter of 2020 include pre-tax net settlement gains of $25 million from our net investment hedges and forward contracts and a pre-tax settlement charge of $17 million from the termination of our defined benefit pension plan.

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Significant Accounting Policies Narrative (Details) $ in Millions		3 Months Ended
	Apr. 01, 2019 USD ($)	Jun. 30, 2019 USD ($) segment	Apr. 01, 2018 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of reportable segments | segment		3
Present value of lease liabilities		$ 2,178
ROU assets		$ 2,031
Cumulative-effect adjustment to beginning retained earnings	$ 11		$ 154
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative-effect adjustment to beginning retained earnings	11		$ 154
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Present value of lease liabilities	2,200
ROU assets	2,100
Impairment charge to ROU assets	89
ASU 2016-02 | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative-effect adjustment to beginning retained earnings	$ 69

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Equity Method Investment in Change Healthcare Joint Venture (Details) - USD ($)		3 Months Ended
	Jul. 01, 2019	Sep. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Apr. 01, 2019	Mar. 31, 2019	Apr. 01, 2018	Mar. 31, 2017
Schedule of Equity Method Investments [Line Items]
Cumulative-effect adjustment to beginning retained earnings					$ 11,000,000		$ 154,000,000
Net income (loss) from Change Healthcare			$ 4,000,000	$ (56,000,000)
Carrying value of investment			3,617,000,000			$ 3,513,000,000
Change Healthcare JV | Tax Receivable Agreement (“TRA”)
Schedule of Equity Method Investments [Line Items]
Noncurrent liability			0			0
Joint Venture
Schedule of Equity Method Investments [Line Items]
Ownership interest (percent)								70.00%
Carrying value of investment			3,617,000,000			3,513,000,000
Excess of carrying amount over book value of investment			4,091,000,000			$ 4,158,000,000
Change Healthcare JV | Joint Venture
Schedule of Equity Method Investments [Line Items]
Net income (loss) from Change Healthcare			$ 4,000,000	$ (56,000,000)
Retained Earnings
Schedule of Equity Method Investments [Line Items]
Cumulative-effect adjustment to beginning retained earnings					11,000,000		$ 154,000,000
Change Healthcare, Inc. | Joint Venture
Schedule of Equity Method Investments [Line Items]
Ownership interest (percent)								30.00%
Subsequent Event | Joint Venture
Schedule of Equity Method Investments [Line Items]
Ownership interest (percent)	58.50%
Subsequent Event | Change Healthcare, Inc.
Schedule of Equity Method Investments [Line Items]
IPO cash proceeds	$ 888,000,000
Proceeds from concurrent offering of other securities	$ 279,000,000
Subsequent Event | Change Healthcare, Inc. | Change Healthcare JV
Schedule of Equity Method Investments [Line Items]
Ownership interest (percent)	41.50%
Contributions made in exchange of additional interest	$ 609,000,000
Expect | Joint Venture
Schedule of Equity Method Investments [Line Items]
Loss expected to be recognized		$ 246,000,000
ASU 2014-09 | Retained Earnings | Change Healthcare JV | Joint Venture
Schedule of Equity Method Investments [Line Items]
Cumulative-effect adjustment to beginning retained earnings					$ 80,000,000
Initial public offering | Subsequent Event | Change Healthcare, Inc.
Schedule of Equity Method Investments [Line Items]
Offering price	$ 13

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Restructuring and Asset Impairment Charges - Narrative (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2019
Restructuring Cost and Reserve [Line Items]
Pre-tax restructuring and asset impairment charges	$ 23	$ 96
After-tax restructuring and asset impairment charges	17	85
Pre-tax impairment charge		20
After-tax impairment charges		16
Strategic Growth Initiative Plan
Restructuring Cost and Reserve [Line Items]
Net restructuring charges recognized	4
Net restructuring charges recognized, after tax	3
Pre-tax charges recorded to-date	139
Strategic Growth Initiative Plan | Minimum
Restructuring Cost and Reserve [Line Items]
Expected total pre-tax charges	140
Strategic Growth Initiative Plan | Maximum
Restructuring Cost and Reserve [Line Items]
Expected total pre-tax charges	180
Strategic Growth Initiative Plan - Relocation of Corporate Headquarters
Restructuring Cost and Reserve [Line Items]
Pre-tax charges recorded to-date	41
Strategic Growth Initiative Plan - Relocation of Corporate Headquarters | Employee retention
Restructuring Cost and Reserve [Line Items]
Net restructuring charges recognized	8
Net restructuring charges recognized, after tax	6
Strategic Growth Initiative Plan - Relocation of Corporate Headquarters | Minimum
Restructuring Cost and Reserve [Line Items]
Expected total pre-tax charges	80
Strategic Growth Initiative Plan - Relocation of Corporate Headquarters | Maximum
Restructuring Cost and Reserve [Line Items]
Expected total pre-tax charges	130
Strategic Growth Initiative Plan - Other
Restructuring Cost and Reserve [Line Items]
Pre-tax charges recorded to-date	174
Strategic Growth Initiative Plan - Other | Project consulting fee
Restructuring Cost and Reserve [Line Items]
Net restructuring charges recognized	11
Net restructuring charges recognized, after tax	8
Strategic Growth Initiative Plan - Other | Minimum
Restructuring Cost and Reserve [Line Items]
Expected total pre-tax charges	300
Strategic Growth Initiative Plan - Other | Maximum
Restructuring Cost and Reserve [Line Items]
Expected total pre-tax charges	350
Fiscal 2019 Initiatives
Restructuring Cost and Reserve [Line Items]
Net restructuring charges recognized	23	$ 69
Restructuring liabilities	133		$ 150
Fiscal 2019 Initiatives | Other accrued liabilities
Restructuring Cost and Reserve [Line Items]
Restructuring liabilities	107		117
Fiscal 2019 Initiatives | Other noncurrent liabilities
Restructuring Cost and Reserve [Line Items]
Restructuring liabilities	26		33
Other plans
Restructuring Cost and Reserve [Line Items]
Restructuring liabilities	$ 60		$ 87

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Restructuring and Asset Impairment Charges - Summary of Restructuring Charges (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Fiscal 2019 Initiatives
Restructuring Cost and Reserve [Line Items]
Severance and employee-related costs, net	$ 4	$ 14
Exit-related costs	14	35
Asset impairments and accelerated depreciation and amortization	5	20
Net restructuring charges recognized	23	69
Strategic Growth Initiative Plan
Restructuring Cost and Reserve [Line Items]
Net restructuring charges recognized	4
Operating Segments | U.S. Pharmaceutical and Specialty Solutions | Fiscal 2019 Initiatives
Restructuring Cost and Reserve [Line Items]
Severance and employee-related costs, net	(1)	3
Exit-related costs	0	1
Asset impairments and accelerated depreciation and amortization	0	4
Net restructuring charges recognized	(1)	8
Operating Segments | European Pharmaceutical Solutions | Fiscal 2019 Initiatives
Restructuring Cost and Reserve [Line Items]
Severance and employee-related costs, net	(1)
Exit-related costs	1
Asset impairments and accelerated depreciation and amortization	3
Net restructuring charges recognized	3
Operating Segments | Medical-Surgical Solutions | Fiscal 2019 Initiatives
Restructuring Cost and Reserve [Line Items]
Severance and employee-related costs, net	0	10
Exit-related costs	2	2
Asset impairments and accelerated depreciation and amortization	1	0
Net restructuring charges recognized	3	12
Operating Segments | Other | Fiscal 2019 Initiatives
Restructuring Cost and Reserve [Line Items]
Severance and employee-related costs, net	0	1
Exit-related costs	1	21
Asset impairments and accelerated depreciation and amortization	0	16
Net restructuring charges recognized	1	38
Corporate | Fiscal 2019 Initiatives
Restructuring Cost and Reserve [Line Items]
Severance and employee-related costs, net	6	0
Exit-related costs	10	11
Asset impairments and accelerated depreciation and amortization	1	0
Net restructuring charges recognized	$ 17	$ 11

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Restructuring and Asset Impairment Charges - Summary of Restructuring Activity (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Fiscal 2019 Initiatives
Restructuring Reserve [Roll Forward]
Beginning balance	$ 150
Net restructuring charges recognized	23	$ 69
Non-cash charges	(5)
Cash Payments	(27)
Other	(8)
Ending balance	133
Strategic Growth Initiative Plan
Restructuring Reserve [Roll Forward]
Net restructuring charges recognized	4
Operating Segments | U.S. Pharmaceutical and Specialty Solutions | Fiscal 2019 Initiatives
Restructuring Reserve [Roll Forward]
Beginning balance	31
Net restructuring charges recognized	(1)	8
Non-cash charges	0
Cash Payments	(1)
Other	0
Ending balance	29
Operating Segments | European Pharmaceutical Solutions | Fiscal 2019 Initiatives
Restructuring Reserve [Roll Forward]
Beginning balance	38
Net restructuring charges recognized	3
Non-cash charges	(3)
Cash Payments	(7)
Other	1
Ending balance	32
Operating Segments | Medical-Surgical Solutions | Fiscal 2019 Initiatives
Restructuring Reserve [Roll Forward]
Beginning balance	15
Net restructuring charges recognized	3	12
Non-cash charges	(1)
Cash Payments	0
Other	0
Ending balance	17
Operating Segments | Other | Fiscal 2019 Initiatives
Restructuring Reserve [Roll Forward]
Beginning balance	29
Net restructuring charges recognized	1	38
Non-cash charges	0
Cash Payments	(12)
Other	(6)
Ending balance	12
Corporate | Fiscal 2019 Initiatives
Restructuring Reserve [Roll Forward]
Beginning balance	37
Net restructuring charges recognized	17	$ 11
Non-cash charges	(1)
Cash Payments	(7)
Other	(3)
Ending balance	$ 43

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Goodwill Impairment Charges (Details)	3 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($) reporting_unit	Mar. 31, 2019 USD ($)
Goodwill [Line Items]
Pretax goodwill impairment charges	$ 0	$ 570,000,000
Goodwill	9,441,000,000		$ 9,358,000,000
European Pharmaceutical Solutions
Goodwill [Line Items]
Pretax goodwill impairment charges		570,000,000
After-tax goodwill impairment		$ 570,000,000
Number of reporting units | reporting_unit		2
Goodwill	$ 40,000,000		$ 0
European Pharmaceutical Solutions | Pharmaceutical Distributions Reporting Unit
Goodwill [Line Items]
Pretax goodwill impairment charges		$ 238,000,000
After-tax goodwill impairment		$ 238,000,000
Discount rate (percent)		8.00%
Terminal growth rate (percent)		1.25%
European Pharmaceutical Solutions | Retail Pharmacy Reporting Unit
Goodwill [Line Items]
Pretax goodwill impairment charges		$ 332,000,000
After-tax goodwill impairment		$ 332,000,000
Discount rate (percent)		8.50%
Terminal growth rate (percent)		1.25%

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Business Combinations (Details) $ in Millions					1 Months Ended		3 Months Ended
	Jun. 01, 2018 USD ($)	May 23, 2018 USD ($)	May 23, 2018 CAD ($)	Apr. 03, 2017 USD ($)	May 31, 2019 USD ($)	May 31, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2016 USD ($) pharmacy	Dec. 31, 2016 CAD ($) pharmacy	Mar. 31, 2019 USD ($)
Business Acquisition [Line Items]
Goodwill							$ 9,441,000,000				$ 9,358,000,000
Net purchase consideration							46,000,000	$ 826,000,000
Medical Specialties Distributors LLC (“MSD”)
Business Acquisition [Line Items]
Consideration transferred to acquire business	$ 784,000,000
Assets acquired as of the acquisition date, excluding goodwill and intangibles							239,000,000
Liabilities assumed as of the acquisition date							169,000,000
Goodwill							388,000,000
Intangible assets							$ 326,000,000
Weighted average life of intangibles							18 years
CoverMyMeds, LLC (CMM)
Business Acquisition [Line Items]
Net purchase consideration				$ 1,300,000,000
Rexall Health | Canada
Business Acquisition [Line Items]
Net purchase consideration									$ 2,100,000,000	$ 2,900
Number of retail pharmacies | pharmacy									400	400
Estimate of Fair Value | CoverMyMeds, LLC (CMM)
Business Acquisition [Line Items]
Contingent consideration							$ 0				$ 69,000,000
Payment for contingent consideration liability					$ 69,000,000	$ 68,000,000
Third Party Seller of Rexall Health | Rexall Health | Canada
Business Acquisition [Line Items]
Proceeds from prior acquisitions		$ 97,000,000	$ 125

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Income Taxes (Details) - USD ($)	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Income tax expense related to continuing operations	$ 136,000,000	$ 87,000,000
Tax benefit recognized resulting from goodwill impairment		0
Pretax goodwill impairment charges	0	570,000,000
Unrecognized tax benefits	1,071,000,000
Unrecognized tax benefits that would reduce income tax expense and the effective tax rate	$ 887,000,000
European Pharmaceutical Solutions
Segment Reporting Information [Line Items]
Pretax goodwill impairment charges		$ 570,000,000

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Redeemable Noncontrolling Interests and Noncontrolling Interests - Narrative (Details)	3 Months Ended
	Jun. 30, 2019 € / shares	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 02, 2014 € / shares
Noncontrolling Interest [Line Items]
Put right redemption price per share (in euros per share) | € / shares	€ 22.99
Put right value, interest rate spread (as a percent)				5.00%
Carrying value of redeemable noncontrolling interests				$ 1,399,000,000	$ 1,393,000,000
Noncontrolling Interests				194,000,000	193,000,000
Net income attributable to noncontrolling interests		$ 54,000,000	$ 58,000,000
Mckesson Europe Subsidiary
Noncontrolling Interest [Line Items]
Dividend (in euro per share) | € / shares	€ 0.83
Mckesson Europe Subsidiary
Noncontrolling Interest [Line Items]
One-time guaranteed dividend (in euro per share) | € / shares						€ 0.83
Net income attributable to noncontrolling interests		11,000,000	12,000,000
Carrying value of redeemable noncontrolling interests				1,400,000,000	1,390,000,000
Maximum redemption value of redeemable noncontrolling interest				$ 1,250,000,000	$ 1,230,000,000
Ownership percentage (as a percent)				77.00%	77.00%
Vantage and ClarusOne Sourcing Services LLC
Noncontrolling Interest [Line Items]
Noncontrolling Interests				$ 194,000,000	$ 193,000,000
Net income attributable to noncontrolling interests		$ 43,000,000	$ 46,000,000

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Redeemable Noncontrolling Interests and Noncontrolling Interests - Schedule of Changes in Redeemable Noncontrolling Interests and Noncontrolling Interests (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Noncontrolling Interests
Beginning balance	$ 193
Net income attributable to noncontrolling interests	54	$ 58
Other comprehensive income (loss)	6	(37)
Payments to noncontrolling interests	(39)	(64)
Ending balance	194
Redeemable Noncontrolling Interests
Beginning balance	1,393
Other comprehensive income (loss)	6	(37)
Payments to noncontrolling interests	(39)	(64)
Ending balance	1,399
Noncontrolling Interests
Noncontrolling Interests
Beginning balance	193	253
Net income attributable to noncontrolling interests	43	46
Other comprehensive income (loss)	0	0
Payments to noncontrolling interests		(64)
Payments to noncontrolling interests	(39)	(64)
Other	(3)	5
Ending balance	194	240
Redeemable Noncontrolling Interests
Other comprehensive income (loss)	0	0
Payments to noncontrolling interests	(39)	(64)
Purchase of noncontrolling interests		(64)
Other	(3)	5
Redeemable Noncontrolling Interest
Noncontrolling Interests
Other comprehensive income (loss)	6	(37)
Payments to noncontrolling interests		0
Payments to noncontrolling interests	0
Other	0	0
Redeemable Noncontrolling Interests
Beginning balance	1,393	1,459
Net income attributable to noncontrolling interests	11	12
Other comprehensive income (loss)	6	(37)
Reclassification of recurring compensation to other accrued liabilities	(11)	(12)
Payments to noncontrolling interests	0
Purchase of noncontrolling interests		0
Other	0	0
Ending balance	$ 1,399	$ 1,422

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Earnings Per Common Share - Schedule of Computation for Basic and Diluted Earnings per Common Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Income (Loss) from continuing operations	$ 483	$ (81)
Net income attributable to noncontrolling interests	(54)	(58)
Income (Loss) from continuing operations attributable to McKesson	429	(139)
Income (Loss) from discontinued operations, net of tax	(6)	1
Net Income (Loss) Attributable to McKesson Corporation	$ 423	$ (138)
Weighted average common shares outstanding:
Basic (in shares)	188	202
Effect of dilutive securities:
Restricted stock units (in shares)	1	0
Diluted (in shares)	189	202
Diluted
Continuing operations (in dollars per share)	$ 2.27	$ (0.69)
Discontinued operations (in dollars per share)	(0.03)	0.01
Total (in dollars per share)	2.24	(0.68)
Basic
Continuing operations (in dollars per share)	2.28	(0.69)
Discontinued operations (in dollars per share)	(0.03)	0.01
Total (in dollars per share)	$ 2.25	$ (0.68)

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Earnings Per Common Share - Narrative (Details) - shares shares in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Potentially dilutive securities excluded from computations of diluted net earnings per common share (in shares)	3	2

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Goodwill and Intangible Assets, Net - Schedule of Changes in the Carrying Amount of Goodwill and Narrative (Details) $ in Millions	3 Months Ended
	Jun. 30, 2019 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 9,358
Goodwill acquired	39
Acquisition accounting, transfers and other adjustments	9
Foreign currency translation adjustments, net	35
Ending balance	9,441
U.S. Pharmaceutical and Specialty Solutions
Goodwill [Roll Forward]
Beginning balance	4,078
Goodwill acquired	0
Acquisition accounting, transfers and other adjustments	1
Foreign currency translation adjustments, net	9
Ending balance	4,088
European Pharmaceutical Solutions
Goodwill [Roll Forward]
Beginning balance	0
Goodwill acquired	39
Acquisition accounting, transfers and other adjustments	1
Foreign currency translation adjustments, net	0
Ending balance	40
Medical-Surgical Solutions
Goodwill [Roll Forward]
Beginning balance	2,451
Goodwill acquired	0
Acquisition accounting, transfers and other adjustments	7
Foreign currency translation adjustments, net	0
Ending balance	2,458
Other
Goodwill [Roll Forward]
Beginning balance	2,829
Goodwill acquired	0
Acquisition accounting, transfers and other adjustments	0
Foreign currency translation adjustments, net	26
Ending balance	$ 2,855

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Goodwill and Intangible Assets, Net - Schedule of Information Regarding Intangible Assets (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 6,682	$ 6,664
Accumulated Amortization	(3,082)	(2,975)
Net Carrying Amount	$ 3,600	3,689
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Weighted Average Remaining Amortization Period (years)	12 years
Gross Carrying Amount	$ 3,831	3,818
Accumulated Amortization	(1,871)	(1,801)
Net Carrying Amount	$ 1,960	2,017
Service agreements
Finite-Lived Intangible Assets [Line Items]
Weighted Average Remaining Amortization Period (years)	11 years
Gross Carrying Amount	$ 1,022	1,017
Accumulated Amortization	(447)	(430)
Net Carrying Amount	$ 575	587
Pharmacy licenses
Finite-Lived Intangible Assets [Line Items]
Weighted Average Remaining Amortization Period (years)	26 years
Gross Carrying Amount	$ 513	513
Accumulated Amortization	(210)	(209)
Net Carrying Amount	$ 303	304
Trademarks and trade names
Finite-Lived Intangible Assets [Line Items]
Weighted Average Remaining Amortization Period (years)	13 years
Gross Carrying Amount	$ 893	887
Accumulated Amortization	(244)	(232)
Net Carrying Amount	$ 649	655
Technology
Finite-Lived Intangible Assets [Line Items]
Weighted Average Remaining Amortization Period (years)	4 years
Gross Carrying Amount	$ 141	141
Accumulated Amortization	(98)	(94)
Net Carrying Amount	$ 43	47
Other
Finite-Lived Intangible Assets [Line Items]
Weighted Average Remaining Amortization Period (years)	5 years
Gross Carrying Amount	$ 282	288
Accumulated Amortization	(212)	(209)
Net Carrying Amount	$ 70	$ 79

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Goodwill and Intangible Assets, Net - Narrative - Intangible Assets (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2019
Goodwill [Line Items]
Amortization expense of intangible assets	$ 112	$ 122
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
Estimated annual amortization expense, remainder of 2020	298
Estimated annual amortization expense, 2021	389
Estimated annual amortization expense, 2022	365
Estimated annual amortization expense, 2023	277
Estimated annual amortization expense, 2024	248
Estimated annual amortization expense, thereafter	2,023
European Pharmaceutical Solutions
Goodwill [Line Items]
Accumulated goodwill impairment losses	2,913		$ 2,943
Other
Goodwill [Line Items]
Accumulated goodwill impairment losses	$ 470		$ 461

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Debt and Financing Activities - Long Term Debt (Details) - USD ($) $ in Millions	Jun. 30, 2019	Mar. 31, 2019
Debt Instrument [Line Items]
Long-term debt outstanding	$ 7,692	$ 7,595
Current Portion of Long-term Debt
Debt Instrument [Line Items]
Long-term debt outstanding	$ 310	$ 330

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Debt and Financing Activities - Revolving Credit Facilities (Details)	3 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2019 USD ($)
Revolving Credit Facility | Senior Unsecured Revolving Credit Facility (Global Facility)
Line of Credit Facility [Line Items]
Syndicated senior unsecured revolving credit facility	$ 3,500,000,000
Syndicated senior unsecured revolving credit facility term	5 years
Credit facility, aggregate sublimit	$ 3,150,000,000
Debt to capital covenant ratio (no greater than)	0.65
Borrowings under facility	$ 0	$ 0
Amounts outstanding under facility	0		$ 0
Line of Credit
Line of Credit Facility [Line Items]
Committed balance	9,000,000
Uncommitted balance	$ 199,000,000

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Debt and Financing Activities - Commercial Paper (Details) - Commercial Paper - USD ($)	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2019
Debt Instrument [Line Items]
Outstanding notes (up to)	$ 3,500,000,000
Proceeds from issuance of commercial paper	2,600,000,000	$ 9,000,000,000.0
Repayments of commercial paper	2,600,000,000	$ 7,000,000,000.0
Commercial paper	$ 0		$ 0

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Leases (Details) $ in Millions	Jun. 30, 2019 USD ($)
Lessee, Lease, Description [Line Items]
Expected future lease payments for leases not yet commenced	$ 275
Total lease receivables	$ 303
Real Property
Lessee, Lease, Description [Line Items]
Lease renewal term	5 years
Minimum
Lessee, Lease, Description [Line Items]
Noncancelable lease term of leases not yet commenced	5 years
Minimum | Facilities
Lessee, Lease, Description [Line Items]
Typical remaining lease terms	1 year
Minimum | Equipment
Lessee, Lease, Description [Line Items]
Typical remaining lease terms	1 year
Maximum
Lessee, Lease, Description [Line Items]
Noncancelable lease term of leases not yet commenced	20 years
Maximum | Facilities
Lessee, Lease, Description [Line Items]
Typical remaining lease terms	15 years
Maximum | Equipment
Lessee, Lease, Description [Line Items]
Typical remaining lease terms	6 years

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Leases - Supplemental Balance Sheet Information (Details) $ in Millions	Jun. 30, 2019 USD ($)
Leases [Abstract]
Operating Lease Right-of-Use Assets	$ 2,031
Current portion of operating lease liabilities	373
Long-Term Operating Lease Liabilities	1,805
Total operating lease liabilities	2,178
Property, Plant and Equipment, net	67
Current portion of long-term debt	7
Long-Term Debt	86
Total finance lease liabilities	$ 93
Weighted Average Remaining Lease Term - Operating leases	8 years 6 months 21 days
Weighted Average Remaining Lease Term - Finance leases	11 years 9 months 3 days
Weighted Average Discount Rate - Operating leases (percent)	3.61%
Weighted Average Discount Rate - Finance leases (percent)	3.99%

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Leases - Components of Lease Cost (Details) $ in Millions	3 Months Ended
	Jun. 30, 2019 USD ($)
Leases [Abstract]
Short-term lease cost	$ 8
Operating lease cost	115
Amortization of right-of-use assets	2
Interest on lease liabilities	1
Total finance lease cost	3
Variable lease cost	31
Sublease income	(8)
Total lease cost (2)	$ 149

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Leases - Supplemental Cash Flow Information (Details) $ in Millions	3 Months Ended
	Jun. 30, 2019 USD ($)
Leases [Abstract]
Operating cash flows from operating leases	$ (99)
Operating cash flows from finance leases	0
Financing cash flows from finance leases	(3)
Right-of-use assets obtained in exchange for lease obligations: Operating leases	2,290
Right-of-use assets obtained in exchange for lease obligations: Finance leases	$ 55

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Leases - Maturity of Lease Liabilities (Details) $ in Millions	Jun. 30, 2019 USD ($)
Operating Leases
The remainder of 2020	$ 319
2021	401
2022	344
2023	286
2024	232
Thereafter	900
Total lease payments	2,482
Less imputed interest	(304)
Present value of lease liabilities	2,178
Finance Leases
The remainder of 2020	8
2021	10
2022	10
2023	10
2024	10
Thereafter	69
Total lease payments	117
Less imputed interest	(24)
Present value of lease liabilities	93
Total
The remainder of 2020	327
2021	411
2022	354
2023	296
2024	242
Thereafter	969
Total lease payments	2,599
Less imputed interest	328
Present value of lease liabilities	2,271
Minimum sublease income under future noncancelable leases	$ 191

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Leases - Schedule of Future Minimum Rental Payments under Operating Leases (Details) $ in Millions	Mar. 31, 2019 USD ($)
Leases [Abstract]
2020	$ 454
2021	397
2022	343
2023	290
2024	236
Thereafter	936
Total minimum lease payments	2,656
Future minimum lease payments for sale-leaseback transaction	49
Minimum sublease income due under noncancelable subleases	$ 133

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Pension Benefits - Narrative (Details) - Pension Plan $ in Millions	1 Months Ended	3 Months Ended
	Jun. 30, 2019 USD ($) participant	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2019 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Net periodic pension expense		$ 24	$ 5
Cash contributions to the plans		$ 6	$ 3
Percentage threshold of greater of projected benefit obligation or market value of assets (percent)	10.00%	10.00%
United States
Defined Benefit Plan Disclosure [Line Items]
Number of participants elected to receive settlement | participant	1,300
Lump sum payments under settlement	$ 49
Pre-tax settlement expense		$ 17
Accumulated comprehensive loss	$ 95	$ 95		$ 121

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Hedging Activities - Narrative (Details) £ in Millions, $ in Millions, $ in Millions	3 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 CAD ($)	Jun. 30, 2019 EUR (€)	Jun. 30, 2019 GBP (£)	Mar. 31, 2019 USD ($)	Mar. 31, 2019 CAD ($)	Mar. 31, 2019 EUR (€)	Mar. 31, 2019 GBP (£)	Jun. 30, 2018 EUR (€)
Derivative [Line Items]
Long-term debt outstanding	$ 7,692					$ 7,595
Gain (loss) from net investment hedges recorded in earnings	10
Derivatives used in net investment hedge, gains (loss) gross	(24)	$ 161
Forward Contracts | Derivatives designated for hedge accounting
Derivative [Line Items]
Notional values of financial instruments						81
Forward Contracts to Hedge Euro Against British Pound Cash Flows [Member] | Derivatives not Designated for Hedge Accounting
Derivative [Line Items]
Notional values of financial instruments	28					28
Forward Contracts to Offset Impact of Ineffectiveness of Net investment Hedges [Member] | Derivatives not Designated for Hedge Accounting
Derivative [Line Items]
Gain (loss) from net investment hedges recorded in earnings	(19)
Notional values of financial instruments	630
Net Investment Hedging | Derivatives designated for hedge accounting
Derivative [Line Items]
Derivatives used in net investment hedge, gains (loss) gross	(11)	$ 34
Net Investment Hedging | November 2018 Cross Currency Swaps | Derivatives designated for hedge accounting
Derivative [Line Items]
Gain (loss) from net investment hedges recorded in earnings	34
Notional values of financial instruments			$ 1,499				$ 1,499		£ 932
Proceeds from termination of derivative instruments	84
Cash Flow Hedging | Cross Currency Swap | Derivatives designated for hedge accounting
Derivative [Line Items]
Notional values of financial instruments	2,908					$ 2,908
Cash Flow Hedging | Forward Contracts | Derivatives designated for hedge accounting
Derivative [Line Items]
Notional values of financial instruments	$ 81
Euro Denominated Notes | Term Loan
Derivative [Line Items]
Long-term debt outstanding | €				€ 1,950,000,000				€ 1,950,000,000		€ 1,950,000,000
British Pound Sterling Denominated Notes | Term Loan
Derivative [Line Items]
Long-term debt outstanding | £					£ 450				£ 450

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Hedging Activities - Derivative Instruments Fair Value (Details) - USD ($) $ in Millions	Jun. 30, 2019	Mar. 31, 2019
Derivatives designated for hedge accounting
Derivatives, Fair Value [Line Items]
Fair value of derivative, asset	$ 68	$ 108
Fair value of derivative, liability	69	51
Derivatives designated for hedge accounting | Foreign Exchange Contract | Prepaid expenses and other
Derivatives, Fair Value [Line Items]
Fair value of derivative, asset	16	17
Fair value of derivative, liability	0	0
U.S. Dollar notional amount, asset	81	81
Derivatives designated for hedge accounting | Foreign Exchange Contract | Other noncurrent assets
Derivatives, Fair Value [Line Items]
Fair value of derivative, asset	0	0
Fair value of derivative, liability	0	0
U.S. Dollar notional amount, asset	0	0
Derivatives designated for hedge accounting | Cross Currency Swap | Prepaid expenses and other
Derivatives, Fair Value [Line Items]
Fair value of derivative, asset	37	0
Derivatives designated for hedge accounting | Cross Currency Swap | Other noncurrent assets
Derivatives, Fair Value [Line Items]
Fair value of derivative, asset	15	91
Derivatives designated for hedge accounting | Cross Currency Swap | Other accrued liabilities
Derivatives, Fair Value [Line Items]
Fair value of derivative, liability	8	18
Derivatives designated for hedge accounting | Cross Currency Swap | Prepaid expenses and other/Other Accrued Liabilities
Derivatives, Fair Value [Line Items]
U.S. Dollar notional amount, asset	355	0
Derivatives designated for hedge accounting | Cross Currency Swap | Other noncurrent liabilities
Derivatives, Fair Value [Line Items]
Fair value of derivative, liability	61	33
Derivatives designated for hedge accounting | Cross Currency Swap | Non-current Asset / Liability
Derivatives, Fair Value [Line Items]
U.S. Dollar notional amount, asset	3,681	5,283
Derivatives not designated for hedge accounting
Derivatives, Fair Value [Line Items]
Fair value of derivative, asset	0	0
Fair value of derivative, liability	0	0
Derivatives not designated for hedge accounting | Foreign Exchange Contract | Prepaid expenses and other
Derivatives, Fair Value [Line Items]
Fair value of derivative, asset	0	0
Fair value of derivative, liability	0	0
U.S. Dollar notional amount, asset	655	14
Derivatives not designated for hedge accounting | Foreign Exchange Contract | Other accrued liabilities
Derivatives, Fair Value [Line Items]
Fair value of derivative, asset	0	0
Fair value of derivative, liability	0	0
U.S. Dollar, notional amount, liability	$ 3	$ 14

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Fair Value Measurements (Details) - USD ($)	Jun. 30, 2019	Mar. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying amount of liabilities	$ 7,692,000,000	$ 7,595,000,000
Recurring | Fair value, inputs, level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair values of liabilities	8,100,000,000	7,900,000,000
Recurring | Fair value, inputs, level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments in money market funds	460,000,000	1,205,000,000
Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value	0
Liabilities measured at fair value	$ 0	$ 0

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Commitments and Contingent Liabilities - Narrative (Details) complaint in Thousands				3 Months Ended
	Apr. 03, 2018 state	Apr. 03, 2018 city	May 17, 2013 USD ($)	Jun. 30, 2019 state_attorney complaint	Jun. 30, 2019 state complaint	Jun. 30, 2019 municipality	Jun. 30, 2019 case
In re: National Prescription Opiate Litigation
Loss Contingencies [Line Items]
Complaints filed against the entity				2	2	21	245
Number of plaintiffs				19	30
United States ex rel. Omni Healthcare Inc. v. McKesson Corporation, et al.
Loss Contingencies [Line Items]
Number of plaintiffs	30	2
Minimum | True Health Chiropractic Inc., et al. v. McKesson Corporation, et al.
Loss Contingencies [Line Items]
Loss Contingency, Damages Sought, Value			$ 500
Maximum | True Health Chiropractic Inc., et al. v. McKesson Corporation, et al.
Loss Contingencies [Line Items]
Loss Contingency, Damages Sought, Value			$ 1,500

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Stockholders' Equity - Narrative (Details) $ / shares in Units, shares in Millions	1 Months Ended	3 Months Ended
	Jul. 31, 2019 $ / shares	Jun. 30, 2019 USD ($) vote $ / shares shares	Jun. 30, 2018 $ / shares	May 31, 2019 USD ($)
Accelerated Share Repurchases [Line Items]
Number of votes per share of common stock permitted on proposals presented to stockholders (vote) | vote		1
Dividends declared per common share (in dollars per share)		$ 0.39	$ 0.34
Accelerated Share Repurchase
Accelerated Share Repurchases [Line Items]
Authorized repurchase amount (up to) | $				$ 600,000,000
Common stock repurchased (shares) | shares		4.7
Average price per share of shares repurchased (in usd per share)		$ 127.68
Authorized amount available for future repurchases | $		$ 2,800,000,000
Open Market Transactions
Accelerated Share Repurchases [Line Items]
Common stock repurchased (shares) | shares		0.7
Value of shares repurchased under the ASR program | $		$ 84,000,000
Average price per share of shares repurchased (in usd per share)		$ 128.64
Subsequent Event
Accelerated Share Repurchases [Line Items]
Dividends declared per common share (in dollars per share)	$ 0.41

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Stockholders' Equity - Schedule of Other Comprehensive Income (Loss), Net of Tax (Details) £ in Millions	3 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 EUR (€)	Jun. 30, 2019 GBP (£)	Mar. 31, 2019 USD ($)	Mar. 31, 2019 EUR (€)	Mar. 31, 2019 GBP (£)	Jun. 30, 2018 EUR (€)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassifications	$ 64,000,000	$ (121,000,000)
Reclassified to income statement, net of income tax expense	13,000,000	0
Other Comprehensive Income (Loss), Net of Tax	77,000,000	(121,000,000)
Foreign currency translation adjustments arising during period, tax	0	0
Reclassified to income statement, tax	0	0
Unrealized gains on cash flow hedges arising during period, tax	6,000,000	0
Net actuarial loss and prior service cost arising during the period, tax	1,000,000	0
Amortization of actuarial loss and prior service costs, tax	0	0
Foreign currency translation adjustments and other, tax	0	0
Long-term debt outstanding	7,692,000,000				$ 7,595,000,000
Derivatives used in net investment hedge, gains (loss) gross	(24,000,000)	161,000,000
Net actuarial losses attributable to redeemable noncontrolling interest	0	2,000,000
Foreign Currency Translation Adjustments, Net of Tax
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassifications	70,000,000	(273,000,000)
Reclassified to income statement, net of income tax expense	0	0
Other Comprehensive Income (Loss), Net of Tax	70,000,000	(273,000,000)
Translation gain (loss) attributable to redeemable noncontrolling interest	6,000,000	(39,000,000)
Unrealized Gains (Losses) on Net Investment Hedges, Net of Tax
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassifications	(26,000,000)	144,000,000
Reclassified to income statement, net of income tax expense	0	0
Other Comprehensive Income (Loss), Net of Tax	(26,000,000)	144,000,000
Unrealized gains (losses) on net investment hedges arising during period, tax	9,000,000	(51,000,000)
Reclassified to income statement, tax	0	0
Unrealized Gains (Losses) on Cash Flow Hedges, Net of Tax
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassifications	12,000,000	0
Reclassified to income statement, net of income tax expense	0	0
Other Comprehensive Income (Loss), Net of Tax	12,000,000	0
Reclassified to income statement, tax	0	0
Accumulated Defined Benefit Plans Adjustment, Net Prior Service and Net Gain (Loss) Including Portion Attributable to Noncontrolling Interest
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassifications	6,000,000	0
Accumulated Defined Benefit Plans Adjustment, Amortization of Actuarial Loss, Prior Service Cost and Transition Obligation, Including Portion Attributable to Noncontrolling Interest
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassifications	1,000,000	1,000,000
Accumulated Defined Benefit Plans, Foreign Currency Adjustment Including Portion Attributable to Noncontrolling Interest
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss) before reclassifications	2,000,000	7,000,000
Accumulated Defined Benefit Plans Adjustment Including Portion Attributable to Noncontrolling Interest
Accumulated Other Comprehensive Income (Loss) [Line Items]
Reclassified to income statement, net of income tax expense	12,000,000	0
Other Comprehensive Income (Loss), Net of Tax	21,000,000	8,000,000
Reclassified to income statement, tax	5,000,000	0
Term Loan | Unrealized Gains (Losses) on Net Investment Hedges, Net of Tax
Accumulated Other Comprehensive Income (Loss) [Line Items]
Derivatives used in net investment hedge, gains (loss) gross	(11,000,000)	161,000,000
Euro Denominated Notes | Term Loan
Accumulated Other Comprehensive Income (Loss) [Line Items]
Long-term debt outstanding | €			€ 1,950,000,000			€ 1,950,000,000		€ 1,950,000,000
British Pound Sterling Denominated Notes | Term Loan
Accumulated Other Comprehensive Income (Loss) [Line Items]
Long-term debt outstanding | £				£ 450			£ 450
Derivatives designated for hedge accounting | Net Investment Hedging
Accumulated Other Comprehensive Income (Loss) [Line Items]
Derivatives used in net investment hedge, gains (loss) gross	$ (11,000,000)	$ 34,000,000

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Stockholders' Equity - Schedule of Changes in Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	$ 8,287	$ 10,057
Other comprehensive income (loss) before reclassifications	64	(121)
Amounts reclassified to earnings	13	0
Other Comprehensive Income (Loss), Net of Tax	77	(121)
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	6	(37)
Other comprehensive income (loss) attributable to McKesson	71	(84)
Ending balance	8,068	9,647
Foreign Currency Translation Adjustments, Net of Tax
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(1,628)	(1,258)
Other comprehensive income (loss) before reclassifications	70	(273)
Amounts reclassified to earnings	0	0
Other Comprehensive Income (Loss), Net of Tax	70	(273)
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	6	(39)
Other comprehensive income (loss) attributable to McKesson	64	(234)
Ending balance	(1,564)	(1,492)
Unrealized Gains (Losses) on Net Investment Hedges, Net of Tax
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	53	(188)
Other comprehensive income (loss) before reclassifications	(26)	144
Amounts reclassified to earnings	0	0
Other Comprehensive Income (Loss), Net of Tax	(26)	144
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	0	0
Other comprehensive income (loss) attributable to McKesson	(26)	144
Ending balance	27	(44)
Unrealized Gains (Losses) on Cash Flow Hedges, Net of Tax
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(37)	(61)
Other comprehensive income (loss) before reclassifications	12	0
Amounts reclassified to earnings	0	0
Other Comprehensive Income (Loss), Net of Tax	12	0
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	0	0
Other comprehensive income (loss) attributable to McKesson	12	0
Ending balance	(25)	(61)
Unrealized Net Gains (Losses) and Other Components of Benefit Plans, Net of Tax
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(237)	(210)
Other comprehensive income (loss) before reclassifications	8	8
Amounts reclassified to earnings	13	0
Other Comprehensive Income (Loss), Net of Tax	21	8
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests	0	2
Other comprehensive income (loss) attributable to McKesson	21	6
Ending balance	(216)	(204)
Total Accumulated Other Comprehensive Income (Loss)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(1,849)	(1,717)
Other comprehensive income (loss) attributable to McKesson	71	(84)
Ending balance	$ (1,778)	$ (1,801)

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Related Party Balances and Transactions (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2018	Mar. 31, 2018
California Foundation | Other accrued liabilities
Related Party Transaction [Line Items]
Pledge payable balance		$ 100
Pledge payable balance, after tax		$ 64
California Foundation
Related Party Transaction [Line Items]
Pledge payment made to Foundation	$ 100
Pledge payment made to Foundation, net of tax	$ 64

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Segments of Business (Details)	3 Months Ended
	Jun. 30, 2019 USD ($) segment country	Jun. 30, 2018 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment	3
Revenues
Total Revenues	$ 55,728,000,000	$ 52,607,000,000
Operating profit
Total operating profit	634,000,000	83,000,000
Corporate Expenses, Net	(175,000,000)	(123,000,000)
Interest Expense	(56,000,000)	(61,000,000)
Income from Continuing Operations Before Income Taxes	619,000,000	6,000,000
Pre-tax credits related to LIFO accounting	15,000,000	21,000,000
Proceeds from legal settlements		35,000,000
Pretax goodwill impairment charges	0	570,000,000
Net income (loss) from Change Healthcare	4,000,000	$ (56,000,000)
Gain (loss) from net investment hedges recorded in earnings	$ 10,000,000
U.S. Pharmaceutical and Specialty Solutions
Operating profit
Revenue derived from services, percentage (less than)	1.00%	1.00%
Pre-tax credits related to LIFO accounting	$ 15,000,000	$ 21,000,000
European Pharmaceutical Solutions
Segment Reporting Information [Line Items]
Number of countries in which entity segment operates | country	13
Operating profit
Revenue derived from services, percentage (less than)	10.00%
Pretax goodwill impairment charges		570,000,000
Medical-Surgical Solutions
Operating profit
Revenue derived from services, percentage (less than)	2.00%
Operating Segments
Revenues
Total Revenues	$ 55,728,000,000	52,607,000,000
Operating profit
Total operating profit	850,000,000	190,000,000
Operating Segments | U.S. Pharmaceutical and Specialty Solutions
Revenues
Total Revenues	44,165,000,000	40,977,000,000
Operating profit
Total operating profit	579,000,000	543,000,000
Operating Segments | European Pharmaceutical Solutions
Revenues
Total Revenues	6,710,000,000	6,935,000,000
Operating profit
Total operating profit	5,000,000	$ (560,000,000)
Revenue derived from services, percentage (less than)		10.00%
Operating Segments | Medical-Surgical Solutions
Revenues
Total Revenues	1,903,000,000	$ 1,703,000,000
Operating profit
Total operating profit	125,000,000	$ 93,000,000
Revenue derived from services, percentage (less than)		2.00%
Operating Segments | Other
Revenues
Total Revenues	2,950,000,000	$ 2,992,000,000
Operating profit
Total operating profit	141,000,000	114,000,000
Joint Venture | Change Healthcare JV
Operating profit
Net income (loss) from Change Healthcare	4,000,000	(56,000,000)
United States
Revenues
Total Revenues	46,321,000,000	42,890,000,000
Foreign
Revenues
Total Revenues	9,407,000,000	9,717,000,000
Canada | Other
Operating profit
Net restructuring charges recognized		38,000,000
Net restructuring charges recognized, after tax		38,000,000
Third Party Seller of Rexall Health | Rexall Health | Canada
Operating profit
Gain on escrow settlement, after tax		97,000,000
Gain on escrow settlement		97,000,000
Mckesson Europe Reporting Unit | Operating Segments | European Pharmaceutical Solutions
Operating profit
Pretax goodwill impairment charges		$ 570,000,000
Net Investment Hedge and Forward Contracts
Operating profit
Gain (loss) from net investment hedges recorded in earnings	25,000,000
United States | Pension Plan
Operating profit
Pre-tax settlement expense	$ 17,000,000

XML

Label	Element	Value
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	$ 10,211,000,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	8,298,000,000
Retained Earnings [Member]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	12,420,000,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	13,140,000,000
Noncontrolling Interest [Member]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	193,000,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	253,000,000
Treasury Stock [Member]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	(8,902,000,000)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	(7,655,000,000)
Common Stock [Member]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	3,000,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	3,000,000
AOCI Attributable to Parent [Member]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	(1,717,000,000)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	(1,849,000,000)
Other Additional Capital [Member]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	(2,000,000)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	(1,000,000)
Additional Paid-in Capital [Member]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	6,435,000,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance	us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1	$ 6,188,000,000