Segments of Business

12 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segments of Business

Segments of Business

The Company reports its financial results in four reportable segments: U.S. Pharmaceutical, RxTS, Medical-Surgical Solutions, and International. The organizational structure also includes Corporate, which consists of income and expenses associated with administrative functions and projects, and the results of certain investments. The factors for determining the reportable segments include the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities. The Company evaluates the performance of its operating segments on a number of measures, including revenues and operating profit (loss) before interest expense and income taxes. Assets by operating segment are not reviewed by management for the purpose of assessing performance or allocating resources.

The U.S. Pharmaceutical segment distributes branded, generic, specialty, biosimilar, and over-the-counter pharmaceutical drugs and other healthcare-related products. This segment also provides practice management, technology, clinical support, and business solutions to community-based oncology and other specialty practices. In addition, the segment sells financial, operational, and clinical solutions to pharmacies (retail, hospital, alternate site) and provides consulting, outsourcing, technological, and other services.

The RxTS segment helps solve medication access, affordability, and adherence challenges for patients by working across healthcare to connect patients, pharmacies, providers, pharmacy benefit managers, health plans, and biopharma companies. RxTS serves our biopharma and life sciences partners, delivering innovative solutions that help people get the medicine they need to live healthier lives. RxTS also offers prescription price transparency, benefit insight, dispensing support services, third-party logistics, and wholesale distribution support across various therapeutic categories and temperature ranges to biopharma customers throughout the product lifecycle.

The Medical-Surgical Solutions segment provides medical-surgical supply distribution, logistics, and other services to healthcare providers, including physician offices, surgery centers, nursing homes, hospital reference labs, and home health care agencies. This segment offers national brand medical-surgical products as well as McKesson’s own line of high-quality products through a network of distribution centers within the U.S.

The International segment includes the Company’s operations in Europe and Canada, bringing together non-U.S.-based drug distribution services, specialty pharmacy, retail, and infusion care services. The Company completed the divestitures of its Austrian business in January 2022, the U.K. disposal group in April 2022, and the E.U. disposal group in October 2022. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for more information. The Company’s remaining operations in Europe provide distribution and services to wholesale, institutional, and retail customers in Norway where it owns, partners, or franchises with retail pharmacies. The Company’s Canadian operations deliver vital medicines, supplies, and information technology solutions throughout Canada and includes Rexall Health retail pharmacies.

Financial information relating to the Company’s reportable operating segments and reconciliations to the consolidated totals was as follows:

	Years Ended March 31,
(In millions)	2023		2022		2021
Segment revenues (1)
U.S. Pharmaceutical	$	240,616	$	212,149	$	189,274
Prescription Technology Solutions	4,387		3,864		2,890
Medical-Surgical Solutions	11,110		11,608		10,099
International	20,598		36,345		35,965
Total revenues	$	276,711	$	263,966	$	238,228
Segment operating profit (loss) (2)
U.S. Pharmaceutical (3)	$	3,206	$	2,879	$	2,763
Prescription Technology Solutions (4)	566		500		395
Medical-Surgical Solutions (5)	1,117		959		707
International (6)	136		(968)		(37)
Subtotal	5,025		3,370		3,828
Corporate expenses, net (7)	(147)		(1,073)		(8,645)
Loss on debt extinguishment (8)	—		(191)		—
Interest expense	(248)		(178)		(217)
Income (loss) from continuing operations before income taxes	$	4,630	$	1,928	$	(5,034)
Segment depreciation and amortization (9)
U.S. Pharmaceutical	$	212	$	228	$	211
Prescription Technology Solutions	77		82		87
Medical-Surgical Solutions	80		129		130
International	115		204		334
Corporate	124		117		125
Total depreciation and amortization	$	608	$	760	$	887
Segment expenditures for long-lived assets (10)
U.S. Pharmaceutical	$	154	$	137	$	246
Prescription Technology Solutions	35		10		22
Medical-Surgical Solutions	117		74		57
International	79		177		212
Corporate	173		137		104
Total expenditures for long-lived assets	$	558	$	535	$	641

(1)Revenues from services on a disaggregated basis represent less than 1% of the U.S. Pharmaceutical segment’s total revenues, less than 40% of the RxTS segment’s total revenues, less than 2% of the Medical-Surgical Solutions segment’s total revenues, and less than 8% of the International segment’s total revenues. The International segment reflects foreign revenues. Revenues for the remaining three reportable segments are domestic.

(2)Segment operating profit (loss) includes gross profit, net of total operating expenses, as well as other income (expense), net, for the Company’s reportable segments.

(3)The Company’s U.S. Pharmaceutical segment’s operating profit includes the following:

•cash receipts for the Company’s share of antitrust legal settlements were $129 million, $46 million, and $181 million for the years ended March 31, 2023, 2022, 2021, respectively;

•a charge of $1 million for the year ended March 31, 2023 and credits of $23 million and $38 million for the years ended March 31, 2022 and 2021, respectively, related to the LIFO method of accounting for inventories;

•a gain of $142 million for the year ended March 31, 2023 related to the exit of one of the Company’s investments in equity securities in July 2022 for proceeds of $179 million, which is reflected within “Other income, net” in the Company’s Consolidated Statement of Operations; and

•charges of $18 million and $50 million for fiscal 2023 and fiscal 2021, respectively, recorded in connection with the Company’s estimated liability under the State of New York’s OSA, as further discussed in Financial Note 17, “Commitments and Contingent Liabilities.”

(4)The Company’s RxTS segment’s operating profit for fiscal 2023 includes restructuring charges of $43 million primarily for severance and employee-related costs, as well as asset impairments and accelerated depreciation. Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net” for further information.

(5)The Company’s Medical-Surgical Solutions segment’s operating profit for fiscal 2022 and fiscal 2021 includes inventory charges of $164 million and $136 million, respectively, on certain personal protective equipment and other related products.

(6)The Company’s International segment’s operating profit (loss) includes the following:

•charges of $240 million and $383 million for the years ended March 31, 2023 and 2022, respectively, to remeasure the assets and liabilities of the E.U. disposal group to fair value less costs to sell and, in fiscal 2022, to impair certain assets, including internal-use software that will not be utilized in the future, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures;”

•a charge of $1.1 billion for the year ended March 31, 2022 to remeasure the assets and liabilities of the U.K. disposal group to fair value less costs to sell, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures;”

•a gain of $59 million for the year ended March 31, 2022 related to the sale of the Company’s Canadian health benefit claims management and plan administrative services business;

•a gain of $42 million for the year ended March 31, 2022 related to the sale of the Company’s previously held 30% interest in its German pharmaceutical wholesale joint venture to WBA. See Financial Note 2, “Business Acquisitions and Divestitures,” and Financial Note 5, “Other Income, Net,” for further details;

•a goodwill impairment charge of $69 million for the year ended March 31, 2021 related to one of the Company’s reporting units in Europe, as discussed in more detail in Financial Note 10, “Goodwill and Intangible Assets, Net;” and

•a long-lived asset impairment charge of $115 million for the year ended March 31, 2021 primarily related to the retail pharmacy businesses in Canada and Europe, as discussed in more detail in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net.”

(7)Corporate expenses, net, includes the following:

•a gain of $126 million for the year ended March 31, 2023 related to a cash payment received for the early termination of a TRA exercised by Change in October 2022 and was recorded within “Other income, net” in the Consolidated Statement of Operations, as discussed in more detail in Financial Note 5, “Other Income, Net;”

•a gain of $306 million in fiscal 2023 and a charge of $55 million in fiscal 2022 primarily related to the effect of accumulated other comprehensive loss components from the E.U. disposal group, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures;”

•a gain of $97 million for the year ended March 31, 2023 from the termination of certain forward starting fixed interest rate swaps, as discussed in more detail in Financial Note 14, “Hedging Activities;”

•a charge of $42 million in fiscal 2022 primarily related to the effect of accumulated other comprehensive loss components from the U.K. disposal group, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures;”

•a credit of $8 million, and charges of $274 million and $8.1 billion for the years ended March 31, 2023, 2022, and 2021, respectively, related to the estimated liability for opioid-related claims, as discussed in more detail in Financial Note 17, “Commitments and Contingent Liabilities;"

•charges of $36 million, $130 million, and $153 million for the years ended March 31, 2023, 2022, and 2021, respectively, of opioid-related costs, primarily litigation expenses;

•charges of $83 million, $100 million, and $105 million for the years ended March 31, 2023, 2022, and 2021, respectively, for restructuring initiatives as discussed in more detail in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net;”

•a net loss of $36 million, and net gains of $98 million and $133 million for the years ended March 31, 2023, 2022, and 2021, respectively, associated with certain of the Company’s equity investments, as discussed in more detail in Financial Note 15, “Fair Value Measurements;” and

•a net gain of $131 million in fiscal 2021 recorded in connection with insurance proceeds received from the settlement of the shareholder derivative action related to the Company’s controlled substances monitoring program.

(8)Loss on debt extinguishment for fiscal 2022 consists of a charge of $191 million related to the Company’s July 2021 tender offer to redeem a portion of its existing debt, as discussed in more detail in Financial Note 11, “Debt and Financing Activities.”

(9)Amounts primarily consist of amortization of acquired intangible assets purchased in connection with business acquisitions and capitalized software for internal use as well as depreciation and amortization of property, plant, and equipment, net.

(10)Long-lived assets consist of property, plant, and equipment, net and capitalized software.

Segment assets and long-lived assets by geographic areas were as follows:

	March 31,
(In millions)	2023		2022
Segment assets
U.S. Pharmaceutical	$	41,793	$	38,346
Prescription Technology Solutions	4,168		3,528
Medical-Surgical Solutions	5,780		5,830
International (1)	6,226		13,717
Corporate	4,353		1,877
Total assets	$	62,320	$	63,298
Long-lived assets (2)
United States	$	2,207	$	2,060
Foreign	323		352
Total long-lived assets	$	2,530	$	2,412

(1)The decrease in assets within the International segment is due to the completed divestitures of the U.K. disposal group in April 2022 and the E.U. disposal group in October 2022. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for more information.

(2)Long-lived assets consist of property, plant, and equipment, net and capitalized software and fiscal 2022 excludes amounts classified as assets held for sale.