Segments of Business

3 Months Ended

Jun. 30, 2019

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.