Segments of Business

6 Months Ended

Sep. 30, 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 in the U.S. This segment 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 sites) 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 in the U.S.

The International segment includes the Company’s operations in Canada and Europe, bringing together non-U.S.-based drug distribution services, specialty pharmacy, retail, and infusion care services. The Company’s Canadian operations deliver medicines, supplies, and information technology solutions throughout Canada and includes Rexall Health retail pharmacies. The Company completed the divestitures of the U.K. disposal group in April 2022 and the E.U. disposal group in October 2022, as discussed in Financial Note 2, “Business Acquisitions and Divestitures.” 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.

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

	Three Months Ended September 30,				Six Months Ended September 30,
(In millions)	2023		2022		2023		2022
Segment revenues (1)
U.S. Pharmaceutical	$	69,766	$	60,059	$	136,926	$	117,006
Prescription Technology Solutions	1,140		1,018		2,384		2,084
Medical-Surgical Solutions	2,834		2,843		5,445		5,435
International	3,475		6,237		6,943		12,786
Total revenues	$	77,215	$	70,157	$	151,698	$	137,311
Segment operating profit (loss) (2)
U.S. Pharmaceutical (3)	$	593	$	896	$	1,420	$	1,592
Prescription Technology Solutions (4)	238		120		469		264
Medical-Surgical Solutions	244		299		471		555
International (5)	66		(37)		123		(43)
Subtotal	1,141		1,278		2,483		2,368
Corporate expenses, net (6)	(164)		21		(368)		(18)
Interest expense	(61)		(55)		(108)		(100)
Income from continuing operations before income taxes	$	916	$	1,244	$	2,007	$	2,250

(1)Revenues from services on a disaggregated basis represent approximately 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 1% of the International segment’s total revenues. The International segment reflects foreign revenues. Revenues for the remaining three reportable segments are derived in the U.S.

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

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

•a provision for bad debts of $210 million for the three and six months ended September 30, 2023 related to the bankruptcy of Rite Aid (as defined below) in October 2023, as discussed in more detail in Financial Note 13, “Subsequent Events;”

•cash receipts for the Company’s share of antitrust legal settlements of $79 million and $197 million for the three and six months ended September 30, 2023, respectively;

•a charge of $55 million and a credit of $23 million related to the last-in, first-out (“LIFO”) method of accounting for inventories for the three months ended September 30, 2023 and 2022, respectively, and a charge of $87 million and a credit of $36 million for the six months ended September 30, 2023 and 2022, respectively; and

•a gain of $142 million for the three and six months ended September 30, 2022 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 Condensed Consolidated Statements of Operations.

(4)The Company’s RxTS segment’s operating profit for the three and six months ended September 30, 2023 includes fair value adjustment gains of $48 million and $76 million, respectively, which reduced the Company’s contingent consideration liability related to the RxSS acquisition, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures.”

(5)The Company’s International segment’s operating loss for the three and six months ended September 30, 2022 includes charges of $143 million and $237 million, respectively, to remeasure the assets and liabilities of the E.U. disposal group to fair value less costs to sell, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures.”

(6)Corporate expenses, net includes the following:

•restructuring charges of $46 million for the six months ended September 30, 2023 for restructuring initiatives as discussed in more detail in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net;” and

•gains of $166 million and $272 million for the three and six months ended September 30, 2022, respectively, 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.”