Redeemable Noncontrolling Interests and Noncontrolling Interests

6 Months Ended

Sep. 30, 2020

Redeemable Noncontrolling Interests and Noncontrolling Interests

Redeemable Noncontrolling Interests

The Company’s redeemable noncontrolling interests primarily relate to its 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. As a result, the Company recorded a total attribution of net income to the noncontrolling shareholders of McKesson Europe of $10 million and $21 million during the three and six months ended September 30, 2020, respectively, and $11 million and $22 million during the three and six months ended September 30, 2019, respectively. All amounts were recorded in Net income attributable to noncontrolling interests in the Company’s Condensed Consolidated Statements of Operations and the corresponding liability balance was recorded in Other accrued liabilities in the Company’s 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 five 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 six months ended September 30, 2020, the Company paid $49 million to purchase 1.8 million shares of McKesson Europe through exercises of the Put Right by the noncontrolling shareholders. This decreased the carrying value of the noncontrolling interests by $49 million, and the associated effect of the increase in the Company’s ownership interest on its equity of $3 million was recorded as a net increase to McKesson’s stockholders paid-in capital during 2021. During the three months ended September 30, 2020 and the three and six months ended September 30, 2019, there were no material exercises of the Put Right. The balance of the associated liability for 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 for exchange rate fluctuations each period. The Redeemable noncontrolling interest is also adjusted each period for the proportion of other comprehensive income, primarily due to changes in foreign currency exchange rates, attributable to the noncontrolling shareholders. At September 30, 2020 and March 31, 2020, the carrying value of redeemable noncontrolling interests of $1.3 billion and $1.4 billion, respectively, exceeded the maximum redemption value of $1.2 billion. At September 30, 2020 and March 31, 2020, the Company owned approximately 78% and 77%, respectively, of McKesson Europe’s outstanding common shares.

Noncontrolling Interests

Noncontrolling interests represent third-party equity interests in the Company’s consolidated entities primarily related to ClarusONE Sourcing Services LLP, Vantage Oncology Holdings, LLC, and McKesson Europe, which were $200 million and $217 million at September 30, 2020 and March 31, 2020, respectively, in the Company’s Condensed Consolidated Balance Sheets. The Company allocated a total of $40 million and $79 million of net income to noncontrolling interests during the three and six months ended September 30, 2020, respectively, and $42 million and $85 million during the three and six months ended September 30, 2019, respectively.

Changes in redeemable noncontrolling interests and noncontrolling interests for the three and six months ended September 30, 2020 were as follows:


(In millions)	Noncontrolling Interests		Redeemable Noncontrolling Interests
Balance, June 30, 2020	$	207	$	1,414
Net income attributable to noncontrolling interests	40		10
Other comprehensive loss	—		(151)
Reclassification of recurring compensation to other accrued liabilities	—		(10)
Payments to noncontrolling interests	(50)		—

Other	3		2
Balance, September 30, 2020	$	200	$	1,265


(In millions)	Noncontrolling Interests		Redeemable Noncontrolling Interests
Balance, March 31, 2020	$	217	$	1,402
Net income attributable to noncontrolling interests	79		21
Other comprehensive loss	—		(90)
Reclassification of recurring compensation to other accrued liabilities	—		(21)
Payments to noncontrolling interests	(93)		—
Exercises of Put Right	—		(49)
Other	(3)		2
Balance, September 30, 2020	$	200	$	1,265

Changes in redeemable noncontrolling interests and noncontrolling interests for the three and six months ended September 30, 2019 were as follows:


(In millions)	Noncontrolling Interests		Redeemable Noncontrolling Interests
Balance, June 30, 2019	$	194	$	1,399
Net income attributable to noncontrolling interests	42		11
Other comprehensive loss	—		(18)
Reclassification of recurring compensation to other accrued liabilities	—		(11)
Payments to noncontrolling interests	(37)		—
Other	11		3
Balance, September 30, 2019	$	210	$	1,384


(In millions)	Noncontrolling Interests		Redeemable Noncontrolling Interests
Balance, March 31, 2019	$	193	$	1,393
Net income attributable to noncontrolling interests	85		22
Other comprehensive loss	—		(12)
Reclassification of recurring compensation to other accrued liabilities	—		(22)
Payments to noncontrolling interests	(76)		—
Other	8		3
Balance, September 30, 2019	$	210	$	1,384