Restructuring, Impairment and Related Charges

9 Months Ended

Dec. 31, 2020

Restructuring and Related Activities [Abstract]

Restructuring, Impairment and Related Charges

Restructuring, Impairment, and Related Charges

The Company recorded restructuring, impairment, and related charges of $155 million and $271 million during the three and nine months ended December 31, 2020, respectively, and $136 million and $204 million during the three and nine months ended December 31, 2019, respectively. These charges are included under the caption, “Restructuring, impairment, and related charges” in Operating expenses in the Condensed Consolidated Statements of Operations. In addition, charges related to restructuring initiatives are included under the caption “Cost of sales” in its Condensed Consolidated Statements of Operations and were not material for the three and nine months ended December 31, 2020 and 2019.

Restructuring Initiatives

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. The Company expects to record total charges of approximately $105 million to $125 million, of which $104 million of charges were recorded to date. The Company recorded charges of $14 million and $27 million, respectively, during the three and nine months ended December 31, 2020 and $14 million and $34 million, respectively, during the three and nine months ended December 31, 2019, consisting primarily of employee retention expenses, severance, accelerated depreciation, and long-lived asset impairments. The relocation was substantially complete in January 2021 and the estimated remaining charges primarily relate to lease costs.

During the fourth quarter of 2019, the Company committed to certain programs to continue its operating model and cost optimization efforts. The Company continues to implement centralization of certain functions and outsourcing through an expanded arrangement with a third-party vendor to achieve operational efficiency. The programs also include reorganization and consolidation of business operations, related headcount reductions, the further closures of retail pharmacy stores in Europe, and closures of other facilities. The Company expects to incur total charges of approximately $310 million to $320 million for these programs, of which $288 million of charges were recorded to date. The Company recorded charges of $17 million and $53 million, respectively, during the three and nine months ended December 31, 2020 and $20 million and $59 million, respectively, during the three and nine months ended December 31, 2019, consisting primarily of employee severance, accelerated depreciation expense, and project consulting fees. The Company anticipates these additional programs will be substantially completed in 2022. The estimated remaining charges primarily consist of facility and other exit costs and employee-related costs.

During the first quarter of 2021, the Company committed to an initiative within the United Kingdom (“U.K.”), which is included in the Company’s International segment, to further drive transformational changes in technologies and business processes, operational efficiencies, and cost savings. The initiative includes reducing the number of retail pharmacy stores, decommissioning obsolete technologies and processes, reorganizing and consolidating certain business operations, and related headcount reductions. The Company expects to incur total charges of approximately $100 million to $120 million. The Company recorded charges of $9 million and $50 million, respectively, in the three and nine months ended December 31, 2020, primarily related to asset impairments and accelerated depreciation expense as well as employee severance and other employee-related costs. The initiative is expected to be substantially complete by the end of 2021 and estimated remaining charges primarily consist of accelerated amortization of long-lived assets, facility and other exit costs, and employee-related costs.

Fiscal 2021

Restructuring, impairment, and related charges during the three and nine months ended December 31, 2020 consisted of the following:

	Three Months Ended December 31, 2020
(In millions)	U.S. Pharmaceutical		International (1)		Medical-Surgical Solutions		Prescription Technology Solutions		Corporate (2)		Total
Severance and employee-related costs, net	$	3	$	2	$	(3)	$	—	$	7	$	9
Exit and other-related costs (3)	3		5		1		—		6		15
Asset impairments and accelerated depreciation	—		9		—		—		7		16
Total	$	6	$	16	$	(2)	$	—	$	20	$	40

(1)Primarily represents costs associated with the operating model and cost optimization efforts described above.

(2)Represents costs associated with the operating model cost optimization efforts and with the relocation of the Company’s corporate headquarters described above.

(3)Exit and other-related costs primarily consist of project consulting fees.

	Nine Months Ended December 31, 2020
(In millions)	U.S. Pharmaceutical		International (1)		Medical-Surgical Solutions		Prescription Technology Solutions		Corporate (2)		Total
Severance and employee-related costs, net	$	10	$	22	$	—	$	—	$	31	$	63
Exit and other-related costs (3)	8		12		3		—		20		43
Asset impairments and accelerated depreciation	—		40		1		—		9		50
Total	$	18	$	74	$	4	$	—	$	60	$	156

(1)Primarily represents costs associated with the operating model and cost optimization efforts described above.

(2)Represents costs associated with the operating model cost optimization efforts and with the relocation of the Company’s corporate headquarters described above.

(3)Exit and other-related costs primarily consist of project consulting fees.

Fiscal 2020

Restructuring, impairment, and related charges during the three and nine months ended December 31, 2019 consisted of the following:

	Three Months Ended December 31, 2019
(In millions)	U.S. Pharmaceutical (1)		International (2)		Medical-Surgical Solutions (3)		Prescription Technology Solutions		Corporate (4)		Total
Severance and employee-related costs, net	$	7	$	1	$	1	$	—	$	7	$	16
Exit and other-related costs (5)	—		3		5		—		13		21
Asset impairments and accelerated depreciation	—		2		—		—		3		5
Total	$	7	$	6	$	6	$	—	$	23	$	42

(1)Represents exit costs associated with a disposition and costs related to the relocation of the Company’s corporate headquarters described above.

(2)Primarily represents costs associated with the operating model and cost optimization efforts described above.

(3)Primarily represents costs associated with a growth initiative which included a reduction in workforce, facility consolidation, and store closures. These initiatives were substantially completed in the year ended March 31, 2020.

(4)Represents costs associated with the operating model cost optimization efforts described above. Additionally, includes costs associated with a growth initiative, substantially completed in the year ended March 31, 2020, which included a reduction in workforce and facility consolidation.

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

	Nine Months Ended December 31, 2019
(In millions)	U.S. Pharmaceutical (1)		International (2)		Medical-Surgical Solutions (3)		Prescription Technology Solutions		Corporate (4)		Total
Severance and employee-related costs, net	$	9	$	5	$	2	$	—	$	23	$	39
Exit and other-related costs (5)	—		9		9		—		36		54
Asset impairments and accelerated depreciation	—		8		1		—		8		17
Total	$	9	$	22	$	12	$	—	$	67	$	110

(1)Represents exit costs associated with a disposition and costs related to the relocation of the Company’s corporate headquarters described above.

(2)Primarily represents costs associated with the operating model and cost optimization efforts described above.

(3)Primarily represents costs associated with a growth initiative which included a reduction in workforce, facility consolidation, and store closures. These initiatives were substantially completed in the year ended March 31, 2020.

(4)Represents costs associated with the operating model cost optimization efforts and with the relocation of the Company’s corporate headquarters described above. Additionally, includes costs associated with a growth initiative, substantially completed in the year ended March 31, 2020, which included a reduction in workforce and facility consolidation.

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

The following table summarizes the activity related to the restructuring liabilities associated with the Company’s restructuring initiatives for the nine months ended December 31, 2020:

(In millions)	U.S. Pharmaceutical		International		Medical-Surgical Solutions		Prescription Technology Solutions		Corporate		Total
Balance, March 31, 2020 (1)	$	29	$	66	$	22	$	1	$	39	$	157
Restructuring, impairment, and related charges	18		74		4		—		60		156
Non-cash charges	—		(40)		(1)		—		(9)		(50)
Cash payments	(24)		(24)		(19)		(1)		(64)		(132)
Other	—		(1)		—		—		2		1
Balance, December 31, 2020 (2)	$	23	$	75	$	6	$	—	$	28	$	132

(1)As of March 31, 2020, the total reserve balance was $157 million, of which $118 million was recorded in Other accrued liabilities and $39 million was recorded in Other non-current liabilities.

(2)As of December 31, 2020, the total reserve balance was $132 million, of which $101 million was recorded in Other accrued liabilities and $31 million was recorded in Other non-current liabilities.

Long-Lived Asset Impairments

During the third quarter of 2021, the Company recognized charges of $115 million to impair certain long-lived assets within the Company’s International segment. These charges primarily related to long-lived assets associated with the Company’s retail pharmacy businesses in Canada and Europe and were due to declines in estimated future cash flows partially driven by a revised outlook regarding the impacts of COVID-19. The Company used both an income approach (a discounted cash flow (“DCF”) method) and a market approach to estimate the fair value of the long-lived assets.

During the third quarter of 2020, the Company recognized charges of $94 million to impair certain long-lived assets within the Company’s International segment. These charges primarily related to long-lived assets associated with the Company’s retail pharmacy businesses in the U.K. and Canada due to declines in estimated future cash flows driven by government reimbursement reductions and lower than expected growth in both prescription volume and sales of non-prescription goods, respectively. The Company used both income (DCF) and market approaches to estimate the fair value of the long-lived assets.

The fair value of the long-lived assets is considered a Level 3 fair value measurement due to the significance of unobservable inputs developed using company specific information. Refer to Financial Note 12, “Fair Value Measurements,” for more information on nonrecurring fair value measurements.