Leases

12 Months Ended

Mar. 31, 2022

Leases, Operating [Abstract]

Leases

LeasesIn the first quarter of 2020, the Company adopted amended guidance for leases using the modified retrospective method. Upon adoption of this amended guidance, the Company 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 opening retained earnings as of April 1, 2019. The adjustment to 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 the Company’s U.K. and Canadian businesses, partially offset by the derecognition of an existing deferred gain on the Company’s sale-leaseback transaction related to its former corporate headquarters building. The Company also elected to adopt the transition package of practical expedients provided within the amended guidance which eliminated the requirements to reassess lease identification, lease classification, and initial direct costs for leases which commenced before April 1, 2019. The adoption of this guidance did not have a material impact on the Company’s consolidated statements of operations and cash flows.

Lessee

Supplemental balance sheet information related to leases was as follows:

	March 31,
(In millions, except lease term and discount rate)	2022			2021
Operating leases (1)
Operating lease right-of-use assets (2)	$	1,548		$	2,100
Current portion of operating lease liabilities	$	297		$	390
Long-term operating lease liabilities	1,366			1,867
Total operating lease liabilities (3)	$	1,663		$	2,257
Finance leases
Property, plant and equipment, net	$	206		$	237
Current portion of long-term debt	$	25		$	22
Long-term debt	185			206
Total finance lease liabilities	$	210		$	228
Weighted-average remaining lease term (Years) (4)
Operating leases	6.9			7.8
Finance leases	8.8			10.1
Weighted-average discount rate (4)
Operating leases	2.47		%	2.53		%
Finance leases	2.50		%	2.71		%

(1)As discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” the Company rationalized its office space, including certain property leases, in North America during 2022. Where the Company ceased using office space, it exited the portion of the facility no longer used and repurposed other office locations which resulted in changes to certain lease agreements. This initiative did not have a material financial impact to the Company’s operating lease ROU assets and liabilities.

(2)Excludes operating lease right-of-use assets of approximately $494 million as of March 31, 2022 related to the European divestiture activities discussed in more detail in Financial Note 2, “Held for Sale.” These amounts were included under the caption “Assets held for sale” in the Consolidated Balance Sheet as of March 31, 2022. Amortization of these assets ceased upon classification as held for sale.

(3)Excludes current and long-term operating lease liabilities of approximately $83 million and $442 million, respectively, as of March 31, 2022 related to the European divestiture activities discussed in more detail in Financial Note 2, “Held for Sale.” These amounts were included under the caption “Liabilities held for sale” in the Consolidated Balance Sheet as of March 31, 2022.

(4)Lease terms and discount rates as of March 31, 2022 exclude leases classified as held for sale in the Consolidated Balance Sheet related to the European divestiture activities discussed in more detail in Financial Note 2, “Held for Sale.”

The components of lease cost were as follows:

	Years Ended March 31,
(In millions)	2022		2021		2020
Short-term lease cost	$	43	$	32	$	29
Operating lease cost	431		465		459
Finance lease cost:
Amortization of right-of-use assets	33		23		14
Interest on lease liabilities	5		6		5
Total finance lease cost	38		29		19
Variable lease cost (1)	127		125		125
Sublease income	(41)		(36)		(33)
Total lease cost (2)	$	598	$	615	$	599

(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 in “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations.

Supplemental cash flow information related to leases was as follows:

	Years Ended March 31,
(In millions)	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(356)	$	(362)	$	(377)
Operating cash flows from finance leases	—		(4)		(3)
Financing cash flows from finance leases	(31)		(31)		(18)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (1)	$	286	$	321	$	2,378
Finance leases	32		75		166

(1)     The amount for the year ended March 31, 2020 includes the transition adjustment of $2.1 billion for operating lease right-of-use assets recorded as of April 1, 2019 upon adoption of the amended leasing guidance included in ASU 2016-02, Leases.

Maturities of lease liabilities as of March 31, 2022 were as follows:

(In millions)	Operating Leases		Finance Leases		Total
2023	$	328	$	29	$	357
2024	310		29		339
2025	268		27		295
2026	223		25		248
2027	180		24		204
Thereafter	506		103		609
Total lease payments (1)	1,815		237		2,052
Less imputed interest	(152)		(27)		(179)
Present value of lease liabilities	$	1,663	$	210	$	1,873

(1)Total lease payments are not reduced by minimum sublease income of $201 million which are due under future noncancellable subleases.

As of March 31, 2022, the Company entered into additional leases primarily for facilities that have not yet commenced with future lease payments of $285 million that are not reflected in the table above. These operating leases will commence between 2023 and 2024 with noncancellable lease terms of five to 15 years.

Lessor

The Company leases certain owned equipment, classified as direct financing or sales-type leases, to physician practices. As of March 31, 2022 and 2021, the total lease receivable was $298 million, respectively, with a weighted-average remaining lease term of approximately seven years. Interest income from these leases was not material for the years ended March 31, 2022, 2021, and 2020.

Leases

LeasesIn the first quarter of 2020, the Company adopted amended guidance for leases using the modified retrospective method. Upon adoption of this amended guidance, the Company 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 opening retained earnings as of April 1, 2019. The adjustment to 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 the Company’s U.K. and Canadian businesses, partially offset by the derecognition of an existing deferred gain on the Company’s sale-leaseback transaction related to its former corporate headquarters building. The Company also elected to adopt the transition package of practical expedients provided within the amended guidance which eliminated the requirements to reassess lease identification, lease classification, and initial direct costs for leases which commenced before April 1, 2019. The adoption of this guidance did not have a material impact on the Company’s consolidated statements of operations and cash flows.

Lessee

Supplemental balance sheet information related to leases was as follows:

	March 31,
(In millions, except lease term and discount rate)	2022			2021
Operating leases (1)
Operating lease right-of-use assets (2)	$	1,548		$	2,100
Current portion of operating lease liabilities	$	297		$	390
Long-term operating lease liabilities	1,366			1,867
Total operating lease liabilities (3)	$	1,663		$	2,257
Finance leases
Property, plant and equipment, net	$	206		$	237
Current portion of long-term debt	$	25		$	22
Long-term debt	185			206
Total finance lease liabilities	$	210		$	228
Weighted-average remaining lease term (Years) (4)
Operating leases	6.9			7.8
Finance leases	8.8			10.1
Weighted-average discount rate (4)
Operating leases	2.47		%	2.53		%
Finance leases	2.50		%	2.71		%

(1)As discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” the Company rationalized its office space, including certain property leases, in North America during 2022. Where the Company ceased using office space, it exited the portion of the facility no longer used and repurposed other office locations which resulted in changes to certain lease agreements. This initiative did not have a material financial impact to the Company’s operating lease ROU assets and liabilities.

(2)Excludes operating lease right-of-use assets of approximately $494 million as of March 31, 2022 related to the European divestiture activities discussed in more detail in Financial Note 2, “Held for Sale.” These amounts were included under the caption “Assets held for sale” in the Consolidated Balance Sheet as of March 31, 2022. Amortization of these assets ceased upon classification as held for sale.

(3)Excludes current and long-term operating lease liabilities of approximately $83 million and $442 million, respectively, as of March 31, 2022 related to the European divestiture activities discussed in more detail in Financial Note 2, “Held for Sale.” These amounts were included under the caption “Liabilities held for sale” in the Consolidated Balance Sheet as of March 31, 2022.

(4)Lease terms and discount rates as of March 31, 2022 exclude leases classified as held for sale in the Consolidated Balance Sheet related to the European divestiture activities discussed in more detail in Financial Note 2, “Held for Sale.”

The components of lease cost were as follows:

	Years Ended March 31,
(In millions)	2022		2021		2020
Short-term lease cost	$	43	$	32	$	29
Operating lease cost	431		465		459
Finance lease cost:
Amortization of right-of-use assets	33		23		14
Interest on lease liabilities	5		6		5
Total finance lease cost	38		29		19
Variable lease cost (1)	127		125		125
Sublease income	(41)		(36)		(33)
Total lease cost (2)	$	598	$	615	$	599

(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 in “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations.

Supplemental cash flow information related to leases was as follows:

	Years Ended March 31,
(In millions)	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(356)	$	(362)	$	(377)
Operating cash flows from finance leases	—		(4)		(3)
Financing cash flows from finance leases	(31)		(31)		(18)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (1)	$	286	$	321	$	2,378
Finance leases	32		75		166

(1)     The amount for the year ended March 31, 2020 includes the transition adjustment of $2.1 billion for operating lease right-of-use assets recorded as of April 1, 2019 upon adoption of the amended leasing guidance included in ASU 2016-02, Leases.

Maturities of lease liabilities as of March 31, 2022 were as follows:

(In millions)	Operating Leases		Finance Leases		Total
2023	$	328	$	29	$	357
2024	310		29		339
2025	268		27		295
2026	223		25		248
2027	180		24		204
Thereafter	506		103		609
Total lease payments (1)	1,815		237		2,052
Less imputed interest	(152)		(27)		(179)
Present value of lease liabilities	$	1,663	$	210	$	1,873

(1)Total lease payments are not reduced by minimum sublease income of $201 million which are due under future noncancellable subleases.

As of March 31, 2022, the Company entered into additional leases primarily for facilities that have not yet commenced with future lease payments of $285 million that are not reflected in the table above. These operating leases will commence between 2023 and 2024 with noncancellable lease terms of five to 15 years.

Lessor

The Company leases certain owned equipment, classified as direct financing or sales-type leases, to physician practices. As of March 31, 2022 and 2021, the total lease receivable was $298 million, respectively, with a weighted-average remaining lease term of approximately seven years. Interest income from these leases was not material for the years ended March 31, 2022, 2021, and 2020.

Leases

LeasesIn the first quarter of 2020, the Company adopted amended guidance for leases using the modified retrospective method. Upon adoption of this amended guidance, the Company 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 opening retained earnings as of April 1, 2019. The adjustment to 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 the Company’s U.K. and Canadian businesses, partially offset by the derecognition of an existing deferred gain on the Company’s sale-leaseback transaction related to its former corporate headquarters building. The Company also elected to adopt the transition package of practical expedients provided within the amended guidance which eliminated the requirements to reassess lease identification, lease classification, and initial direct costs for leases which commenced before April 1, 2019. The adoption of this guidance did not have a material impact on the Company’s consolidated statements of operations and cash flows.

Lessee

Supplemental balance sheet information related to leases was as follows:

	March 31,
(In millions, except lease term and discount rate)	2022			2021
Operating leases (1)
Operating lease right-of-use assets (2)	$	1,548		$	2,100
Current portion of operating lease liabilities	$	297		$	390
Long-term operating lease liabilities	1,366			1,867
Total operating lease liabilities (3)	$	1,663		$	2,257
Finance leases
Property, plant and equipment, net	$	206		$	237
Current portion of long-term debt	$	25		$	22
Long-term debt	185			206
Total finance lease liabilities	$	210		$	228
Weighted-average remaining lease term (Years) (4)
Operating leases	6.9			7.8
Finance leases	8.8			10.1
Weighted-average discount rate (4)
Operating leases	2.47		%	2.53		%
Finance leases	2.50		%	2.71		%

(1)As discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” the Company rationalized its office space, including certain property leases, in North America during 2022. Where the Company ceased using office space, it exited the portion of the facility no longer used and repurposed other office locations which resulted in changes to certain lease agreements. This initiative did not have a material financial impact to the Company’s operating lease ROU assets and liabilities.

(2)Excludes operating lease right-of-use assets of approximately $494 million as of March 31, 2022 related to the European divestiture activities discussed in more detail in Financial Note 2, “Held for Sale.” These amounts were included under the caption “Assets held for sale” in the Consolidated Balance Sheet as of March 31, 2022. Amortization of these assets ceased upon classification as held for sale.

(3)Excludes current and long-term operating lease liabilities of approximately $83 million and $442 million, respectively, as of March 31, 2022 related to the European divestiture activities discussed in more detail in Financial Note 2, “Held for Sale.” These amounts were included under the caption “Liabilities held for sale” in the Consolidated Balance Sheet as of March 31, 2022.

(4)Lease terms and discount rates as of March 31, 2022 exclude leases classified as held for sale in the Consolidated Balance Sheet related to the European divestiture activities discussed in more detail in Financial Note 2, “Held for Sale.”

The components of lease cost were as follows:

	Years Ended March 31,
(In millions)	2022		2021		2020
Short-term lease cost	$	43	$	32	$	29
Operating lease cost	431		465		459
Finance lease cost:
Amortization of right-of-use assets	33		23		14
Interest on lease liabilities	5		6		5
Total finance lease cost	38		29		19
Variable lease cost (1)	127		125		125
Sublease income	(41)		(36)		(33)
Total lease cost (2)	$	598	$	615	$	599

(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 in “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations.

Supplemental cash flow information related to leases was as follows:

	Years Ended March 31,
(In millions)	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(356)	$	(362)	$	(377)
Operating cash flows from finance leases	—		(4)		(3)
Financing cash flows from finance leases	(31)		(31)		(18)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (1)	$	286	$	321	$	2,378
Finance leases	32		75		166

(1)     The amount for the year ended March 31, 2020 includes the transition adjustment of $2.1 billion for operating lease right-of-use assets recorded as of April 1, 2019 upon adoption of the amended leasing guidance included in ASU 2016-02, Leases.

Maturities of lease liabilities as of March 31, 2022 were as follows:

(In millions)	Operating Leases		Finance Leases		Total
2023	$	328	$	29	$	357
2024	310		29		339
2025	268		27		295
2026	223		25		248
2027	180		24		204
Thereafter	506		103		609
Total lease payments (1)	1,815		237		2,052
Less imputed interest	(152)		(27)		(179)
Present value of lease liabilities	$	1,663	$	210	$	1,873

(1)Total lease payments are not reduced by minimum sublease income of $201 million which are due under future noncancellable subleases.

As of March 31, 2022, the Company entered into additional leases primarily for facilities that have not yet commenced with future lease payments of $285 million that are not reflected in the table above. These operating leases will commence between 2023 and 2024 with noncancellable lease terms of five to 15 years.

Lessor

The Company leases certain owned equipment, classified as direct financing or sales-type leases, to physician practices. As of March 31, 2022 and 2021, the total lease receivable was $298 million, respectively, with a weighted-average remaining lease term of approximately seven years. Interest income from these leases was not material for the years ended March 31, 2022, 2021, and 2020.