10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-13252

McKESSON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-3207296
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Post Street, San Francisco, California	94104
(Address of principal executive offices)	(Zip Code)

(415) 983-8300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of	September 30, 2012
Common stock, $0.01 par value	236,039,739 shares

McKESSON CORPORATION

TABLE OF CONTENTS

Item		Page
	PART I—FINANCIAL INFORMATION
1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Statements of Operations Quarters and Six Months Ended September 30, 2012 and 2011	3
	Condensed Consolidated Statements of Comprehensive Income Quarters and Six Months Ended September 30, 2012 and 2011	4
	Condensed Consolidated Balance Sheets September 30, 2012 and March 31, 2012	5
	Condensed Consolidated Statements of Cash Flows Six Months Ended September 30, 2012 and 2011	6
	Financial Notes	7
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
3.	Quantitative and Qualitative Disclosures About Market Risk	28
4.	Controls and Procedures	28
	PART II—OTHER INFORMATION
1.	Legal Proceedings	28
1A.	Risk Factors	28
2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
3.	Defaults Upon Senior Securities	29
4.	Mine Safety Disclosures	29
5.	Other Information	29
6.	Exhibits	30
	Signatures	31

2

McKESSON CORPORATION

PART I—FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

	Quarter Ended September 30,						Six Months Ended September 30,
	2012			2011			2012			2011
Revenues	$	29,850		$	30,216		$	60,648		$	60,196
Cost of Sales	(28,130		)	(28,569		)	(57,328		)	(57,040		)
Gross Profit	1,720			1,647			3,320			3,156
Operating Expenses	(1,065		)	(1,051		)	(2,151		)	(2,088		)
Litigation Charges	(44		)	(118		)	(60		)	(118		)
Gain on Business Combination	—			—			81			—
Total Operating Expenses	(1,109		)	(1,169		)	(2,130		)	(2,206		)
Operating Income	611			478			1,190			950
Other Income, Net	10			6			18			14
Interest Expense	(55		)	(64		)	(111		)	(128		)
Income Before Income Taxes	566			420			1,097			836
Income Tax Expense	(165		)	(124		)	(316		)	(254		)
Net Income	$	401		$	296		$	781		$	582
Earnings Per Common Share
Diluted	$	1.67		$	1.18		$	3.25		$	2.31
Basic	$	1.70		$	1.20		$	3.31		$	2.35
Dividends Declared Per Common Share	$	0.20		$	0.20		$	0.40		$	0.40
Weighted Average Common Shares
Diluted	240			250			240			252
Basic	236			246			236			247

See Financial Notes

3

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Quarter Ended September 30,					Six Months Ended September 30,
	2012		2011			2012		2011
Net Income	$	401	$	296		$	781	$	582
Other Comprehensive Income (Loss), net of tax
Foreign currency translation adjustments, net of income tax expense (benefit) of ($2), $1, $2, and $8	71		(128		)	30		(117		)
Other, net of income tax expense of $2, $1, $5, and $4	5		4			11		9
Total Other Comprehensive Income (Loss)	76		(124		)	41		(108		)
Comprehensive Income	$	477	$	172		$	822	$	474

See Financial Notes

4

McKESSON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

(Unaudited)

	September 30, 2012			March 31, 2012
ASSETS
Current Assets
Cash and cash equivalents	$	2,831		$	3,149
Receivables, net	9,823			9,977
Inventories, net	10,070			10,073
Prepaid expenses and other	367			404
Total Current Assets	23,091			23,603
Property, Plant and Equipment, Net	1,223			1,043
Goodwill	5,128			5,032
Intangible Assets, Net	1,699			1,750
Other Assets	1,827			1,665
Total Assets	$	32,968		$	33,093
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Drafts and accounts payable	$	15,501		$	16,114
Short-term borrowings	—			400
Deferred revenue	1,528			1,423
Deferred tax liabilities	1,710			1,092
Current portion of long-term debt	508			508
Other accrued liabilities	1,503			2,149
Total Current Liabilities	20,750			21,686
Long-Term Debt	3,073			3,072
Other Noncurrent Liabilities	1,430			1,504
Commitments and Contingent Liabilities (Note 8)
Stockholders’ Equity
Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding	—			—
Common stock, $0.01 par value, 800 shares authorized at September 30, 2012 and March 31, 2012, 376 and 373 shares issued at September 30, 2012 and March 31, 2012	4			4
Additional Paid-in Capital	5,948			5,571
Retained Earnings	10,135			9,451
Accumulated Other Comprehensive Income	46			5
Other	15			4
Treasury Shares, at Cost, 140 and 138 at September 30, 2012 and March 31, 2012	(8,433		)	(8,204		)
Total Stockholders’ Equity	7,715			6,831
Total Liabilities and Stockholders’ Equity	$	32,968		$	33,093

See Financial Notes

5

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended September 30,
	2012			2011
Operating Activities
Net income	$	781		$	582
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization	282			271
Other deferred taxes	251			26
Share-based compensation expense	82			78
Gain on business combination	(81		)	—
Other non-cash items	20			26
Changes in operating assets and liabilities, net of acquisitions:
Receivables	219			(435		)
Inventories	16			(269		)
Drafts and accounts payable	(629		)	880
Deferred revenue	147			191
Taxes	(117		)	129
Litigation charges	60			118
Litigation settlement payments	(438		)	(6		)
Deferred tax expense (benefit) on litigation	147			(39		)
Other	(281		)	(157		)
Net cash provided by operating activities	459			1,395
Investing Activities
Property acquisitions	(86		)	(126		)
Capitalized software expenditures	(81		)	(101		)
Acquisitions, less cash and cash equivalents acquired	(251		)	(194		)
Other	67			72
Net cash used in investing activities	(351		)	(349		)
Financing Activities
Proceeds from short-term borrowings	1,125			—
Repayments of short-term borrowings	(1,525		)	—
Repayments of long-term debt	—			(17		)
Common stock transactions:
Issuances	80			82
Share repurchases, including shares surrendered for tax withholding	(53		)	(672		)
Dividends paid	(100		)	(97		)
Other	40			19
Net cash used in financing activities	(433		)	(685		)
Effect of exchange rate changes on cash and cash equivalents	7			(30		)
Net increase (decrease) in cash and cash equivalents	(318		)	331
Cash and cash equivalents at beginning of period	3,149			3,612
Cash and cash equivalents at end of period	$	2,831		$	3,943

See Financial Notes

6

McKESSON CORPORATION

FINANCIAL NOTES

(UNAUDITED)

1. Significant Accounting Policies

Basis of Presentation: The condensed consolidated financial statements of McKesson Corporation (“McKesson,” the “Company,” or “we” and other similar pronouns) include the financial statements of all wholly-owned subsidiaries and majority-owned or controlled companies. We also evaluate our ownership, contractual and other interests in entities to determine if they are variable interest entities (“VIEs”), if we have a variable interest in those entities and the nature and extent of those interests. These evaluations are highly complex and involve judgment and the use of estimates and assumptions based on available historical information and management's judgment, among other factors. Based on our evaluations, if we determine we are the primary beneficiary of such VIEs, we consolidate such entities into our financial statements. The consolidated VIEs are not material to our condensed consolidated financial statements. Intercompany transactions and balances have been eliminated. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in the annual consolidated financial statements.

To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these financial statements and income and expenses during the reporting period. Actual amounts may differ from these estimated amounts. In our opinion, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented.

The results of operations for the quarter and six months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year. These interim financial statements should be read in conjunction with the annual audited financial statements, accounting policies and financial notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012 previously filed with the SEC on May 2, 2012 (“2012 Annual Report”). Certain prior period amounts have been reclassified to conform to the current period presentation.

The Company's fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year shall mean the Company's fiscal year.

Recently Adopted Accounting Pronouncements

In the first quarter of 2013, we adopted amended guidance on a retrospective basis related to the presentation of other comprehensive income. The amended guidance requires that comprehensive income, the components of net income and the components of other comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. We elected to report other comprehensive income and its components in a separate statement of comprehensive income. While the new guidance changed the presentation of comprehensive income, there were no changes to the components that are recognized in net income or other comprehensive income as determined under previous accounting guidance. The amended guidance did not have a material effect on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2011, disclosure guidance related to the offsetting of assets and liabilities was issued. The guidance requires an entity to disclose information about offsetting and related arrangements for recognized financial and derivative instruments to enable users of its financial statements to understand the effect of those arrangements on its financial position. The amended guidance is effective for us on a retrospective basis commencing in the first quarter of 2014. We are currently evaluating the impact of this new guidance on our condensed consolidated financial statements.

7

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

2. Business Combinations

On April 6, 2012, we purchased the remaining 50% ownership interest in our corporate headquarters building located in San Francisco, California, for $90 million, which was funded from cash on hand.  We previously held a 50% ownership interest and were the primary tenant in this building.  This transaction was accounted for as a step acquisition, which requires that we re-measure our previously held 50% ownership interest to fair value and record the difference between the fair value and carrying value as a gain in the condensed consolidated statements of operations.  The re-measurement to fair value resulted in a non-cash pre-tax gain of $81 million ($51 million after-tax), which was recorded as a gain on business combination within Corporate in the condensed consolidated statements of operations during the first quarter of 2013.

The total fair value of the net assets acquired was $180 million, which was allocated as follows: buildings and improvements of $113 million and land of $58 million with the remainder allocated for settlement of our pre-existing lease and lease intangible assets. The fair value of the buildings and improvements was determined based on current market replacement costs less depreciation and unamortized tenant improvement costs, as well as, other relevant market information, and has a weighted average useful life of 30 years. The fair value of the land was determined using comparable sales of land within the surrounding market.

On March 25, 2012, we acquired substantially all of the assets of Drug Trading Company Limited, the independent banner business of the Katz Group Canada Inc. (“Katz Group”), and Medicine Shoppe Canada Inc., the franchise business of the Katz Group (collectively, “Katz Assets”) for $925 million, which was funded from cash on hand. The acquisition of the assets from the Drug Trading Company Limited consists of a marketing and purchasing arm of more than 850 independently owned pharmacies in Canada. The acquisition of Medicine Shoppe Canada Inc. consists of the franchise business of providing services to more than 160 independent pharmacies in Canada.

During the second quarter of 2013, the fair value measurements of assets acquired and liabilities assumed of the Katz Assets as of the acquisition date were completed. The following table summarizes the final amounts of the fair values recognized for the assets acquired and liabilities assumed as of the acquisition date, as well as measurement period adjustments made in the first six months of 2013, to the amounts initially recorded in 2012. The measurement period adjustments during the first six months of 2013 did not have a material impact on our consolidated statements of operations, balance sheets or cash flows in any period, and, therefore, we have not retrospectively adjusted our financial statements.

(In millions)	Amounts Previously Recognized as of Acquisition Date (Provisional) (1)			Measurement Period Adjustments			Amounts Recognized as of Acquisition Date (Final as Adjusted)
Current assets, net of cash acquired	$	33		$	(1	)	$	32
Goodwill	506			6			512
Intangible assets	441			1			442
Other long-term assets	15			(1		)	14
Current liabilities	(37		)	1			(36		)
Long-term deferred tax liabilities	(39		)	—			(39		)
Purchase price, less cash and cash equivalents	$	919		$	6		$	925

⁽¹⁾  As previously reported in our Form 10-K for the year ended March 31, 2012.

8

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Included in the purchase price allocation are acquired identifiable intangibles of $442 million, the fair value of which was determined by using Level 3 inputs, which are estimated using significant unobservable inputs. Acquired intangibles primarily consist of $318 million of service agreements and $114 million of trademarks and trade names. Service agreements, trademarks and trade names and total acquired intangibles assets each has an estimated weighted average life of 20 years. The excess of the purchase price over the net tangible and intangible assets of approximately $512 million was recorded as goodwill, which primarily reflects the expected future benefits to be realized upon integrating the business. The amount of goodwill expected to be deductible for tax purposes is $290 million.

Financial results for the acquired Katz Assets are included in the results of operations within our Canadian pharmaceutical distribution and services business, which is part of our Distribution Solutions segment, beginning in the first quarter of 2013.

During the last two years, we also completed a number of smaller acquisitions within both of our operating segments. Financial results for our business acquisitions have been included in our consolidated financial statements since their respective acquisition dates. Purchase prices for our business acquisitions have been allocated based on estimated fair values at the date of acquisition.

Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax purposes. However, if we acquire the assets of a company, the goodwill may be deductible for tax purposes. The pro forma results of operations for our business acquisitions and the results of operations for these acquisitions since the acquisition date have not been presented because the effects were not material to the consolidated financial statements on either an individual or an aggregate basis.

3. Income Taxes

As of September 30, 2012, we had $523 million of unrecognized tax benefits, of which $397 million would reduce income tax expense and the effective tax rate, if recognized. During the first six months of 2013, we recorded an $82 million reduction to our gross unrecognized tax benefits as a result of a change in accounting method for tax purposes, which had no impact to the effective tax rate. During the next twelve months, it is reasonably possible that audit resolutions and the expiration of statutes of limitations could potentially reduce our unrecognized tax benefits by up to $158 million. However, this amount may change because we continue to have ongoing negotiations with various taxing authorities throughout the year.

We have received tax assessments of $98 million from the U.S. Internal Revenue Service (“IRS”) relating to 2003 through 2006. We disagree with a substantial portion of the tax assessments, which primarily relate to transfer pricing. We are pursuing administrative relief through the appeals process. We have also received assessments from the Canada Revenue Agency (“CRA”) for a total of $169 million related to transfer pricing for 2003 through 2007. We have appealed the assessment for 2003 to the Tax Court of Canada and have filed a notice of objection for 2004 through 2007. The trial between McKesson Canada Corporation and the CRA, argued in the Tax Court of Canada, concluded in early February 2012, and we are waiting for the decision. We continue to believe in the merits of our tax positions and that we have adequately provided for any potential adverse results relating to these examinations in our financial statements. However, the final resolution of these issues could result in an increase or decrease to income tax expense.

In November 2011, the IRS began its examination of 2007 through 2009. In nearly all jurisdictions, the tax years prior to 2003 are no longer subject to examination. We believe that we have made adequate provision for all income tax uncertainties.

We report interest and penalties on tax deficiencies as income tax expense. At September 30, 2012, before any tax benefits, our accrued interest on unrecognized tax benefits amounted to $121 million. We recognized an income tax expense of $2 million and a reduction in income tax expense of $18 million, before any tax benefit, related to interest in our condensed consolidated statements of operations during the second quarter and first six months of 2013. The income tax benefit recognized during the first six months of 2013 was primarily due to the reversal of accrued interest resulting from the reduction of our gross unrecognized tax benefits. We have no material amounts accrued for penalties.

9

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

4. Earnings Per Common Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share are computed similar to basic earnings per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.

The computations for basic and diluted earnings per common share are as follows:

	Quarter Ended September 30,				Six Months Ended September 30,
(In millions, except per share amounts)	2012		2011		2012		2011
Net income	$	401	$	296	$	781	$	582
Weighted average common shares outstanding:
Basic	236		246		236		247
Effect of dilutive securities:
Options to purchase common stock	1		1		1		2
Restricted stock units	3		3		3		3
Diluted	240		250		240		252
Earnings per common share: (1)
Diluted	$	1.67	$	1.18	$	3.25	$	2.31
Basic	$	1.70	$	1.20	$	3.31	$	2.35

⁽¹⁾  Certain computations may reflect rounding adjustments.

Potentially dilutive securities include outstanding stock options, restricted stock units and performance-based restricted stock units. Approximately 2 million and 1 million of potentially dilutive securities were excluded from the computations of diluted net earnings per common share for second quarters of 2013 and 2012 and 5 million and 4 million for the first six months of 2013 and 2012, as they were anti-dilutive.

5. Goodwill and Intangible Assets, Net

Changes in the carrying amount of goodwill were as follows:

(In millions)	Distribution Solutions		Technology Solutions			Total
Balance, March 31, 2012	$	3,190	$	1,842		$	5,032
Goodwill acquired	86		5			91
Foreign currency translation adjustments	8		(3		)	5
Balance, September 30, 2012	$	3,284	$	1,844		$	5,128

10

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Information regarding intangible assets is as follows:

	September 30, 2012								March 31, 2012
(Dollars in millions)	Weighted Average Remaining Amortization Period (years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer lists	6	$	1,133	$	(607	)	$	526	$	1,081	$	(554	)	$	527
Service agreements	18	1,003		(80		)	923		1,022		(52		)	970
Trademarks and trade names	18	199		(42		)	157		192		(38		)	154
Technology	4	248		(197		)	51		244		(190		)	54
Other	8	77		(35		)	42		76		(31		)	45
Total		$	2,660	$	(961	)	$	1,699	$	2,615	$	(865	)	$	1,750

Amortization expense of intangible assets was $48 million and $99 million for the quarter and six months ended September 30, 2012 and $50 million and $98 million for the quarter and six months ended September 30, 2011. Estimated annual amortization expense of these assets is as follows: $202 million, $193 million, $173 million, $149 million and $128 million for 2013 through 2017 and $953 million thereafter. All intangible assets were subject to amortization as of September 30, 2012 and March 31, 2012.

6. Financing Activities

Accounts Receivable Sales Facility

In May 2012, we renewed our existing accounts receivable sales facility (the “Facility”) for a one year period under terms substantially similar to those previously in place. The committed balance of the Facility is $1.35 billion, although from time-to-time, the available amount of the Facility may be less than $1.35 billion based on accounts receivable concentration limits and other eligibility requirements. The renewed Facility will expire in May 2013.

During the six months ended September 30, 2011, there were no borrowings under the Facility. At March 31, 2012, there were $400 million in secured borrowings and $400 million of related securitized accounts receivable outstanding under the Facility, which are included in short-term borrowings and receivables in the condensed consolidated balance sheets. During the first quarter of 2013, we repaid $400 million of short-term borrowings using cash on hand. During the second quarter of 2013, there were a total of $1,125 million of short-term borrowings under the Facility all of which were repaid using cash on hand. At September 30, 2012, there were no short-term borrowings and related securitized accounts receivables outstanding under the Facility.

The Facility contains requirements relating to the performance of the accounts receivable and covenants relating to the Company. If we do not comply with these covenants, our ability to use the Facility may be suspended and repayment of any outstanding balances under the Facility may be required. At September 30, 2012 and March 31, 2012, we were in compliance with all covenants.

Revolving Credit Facility

We have a syndicated $1.3 billion five-year senior unsecured revolving credit facility, which expires in September 2016. Borrowings under this facility bear interest based upon either the London Interbank Offered Rate or a prime rate. There were no borrowings under this facility during the first six months of 2013 and 2012. As of September 30, 2012 and March 31, 2012 there were no amounts outstanding under this facility.

11

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

7. Financial Instruments and Hedging Activities

At September 30, 2012 and March 31, 2012, the carrying amounts of cash and cash equivalents, restricted cash, marketable securities, receivables, drafts and accounts payable, short-term borrowings and other current liabilities approximated their estimated fair values because of the short maturity of these financial instruments. All highly liquid debt instruments purchased with original maturity of three months or less at the date of acquisition are included in cash and cash equivalents. Included in cash and cash equivalents at September 30, 2012 and March 31, 2012 were money market fund investments of $1.1 billion and $0.8 billion, which are reported at fair value. The fair value of these investments was determined by using quoted prices for identical investments in active markets, which are considered to be Level 1 inputs under the fair value measurements and disclosure guidance. The carrying value of all other cash equivalents approximates their fair value due to their relatively short-term nature.

The carrying amounts and estimated fair values of our long-term debt and other financing were $3.6 billion and $4.2 billion at September 30, 2012, and $3.6 billion and $4.1 billion at March 31, 2012. The estimated fair value of our long-term debt and other financing was determined using quoted market prices and other inputs that were derived from available market information, which are considered to be Level 2 inputs under the fair value measurements and disclosure guidance, and may not be representative of actual values that could have been realized or that will be realized in the future.

In 2012, we entered into a number of forward contracts to hedge Canadian dollar and British pound denominated cash flows with gross notional values of $528 million and $151 million. The contracts to hedge Canadian dollar denominated cash flows mature over a period of eight years and have been designated for hedge accounting. Accordingly, changes in the fair value of these contracts are recorded to accumulated other comprehensive income and reclassified into earnings in the same period in which the hedged transaction affects earnings.  The contracts to hedge British pound denominated cash flows matured and were settled in the first quarter of 2013 and were not designated for hedge accounting. Accordingly, changes in the fair value of these contracts were recorded directly in earnings. At September 30, 2012 and March 31, 2012, the fair value of the outstanding contracts was not material.  Fair values of these derivatives were determined by using Level 2 inputs under the fair value measurements and disclosure guidance and may not be representative of actual values that could have been realized or that will be realized in the future. Amounts recorded to earnings for 2013 and 2012 were also not material.

8. Commitments and Contingent Liabilities

In addition to commitments and obligations in the ordinary course of business, we are subject to various claims, other pending and potential legal actions for damages, investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of our business. As described below, many of these proceedings are at preliminary stages and many seek an indeterminate amount of damages.

When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. Moreover, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must be reevaluated at least quarterly to determine both the likelihood of potential loss and whether it is possible to reasonably estimate a range of possible loss. When a loss is probable but a reasonable estimate cannot be made, disclosure of the proceeding is provided.

Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made. As discussed above, development of a meaningful estimate of loss or a range of potential loss is complex when the outcome is directly dependent on negotiations with or decisions by third parties, such as regulatory agencies, the court system and other interested parties. Such factors bear directly on whether it is possible to reasonably estimate a range of potential loss and boundaries of high and low estimates.

12

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Significant developments in previously reported proceedings and in other litigation and claims, since the filing of our 2012 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the period ended June 30, 2012, are set out below. Unless otherwise stated, we are currently unable to estimate a range of reasonably possible losses for the unresolved proceedings described below. Should any one or a combination of more than one of these proceedings be successful, or should we determine to settle any or a combination of these matters, we may be required to pay substantial sums, become subject to the entry of an injunction or be forced to change the manner in which we operate our business, which could have a material adverse impact on our financial position or results of operations.

I. Average Wholesale Price Litigation and Claims

The following matters involve a benchmark referred to as Average Wholesale Price (“AWP”), which is utilized by some public and private payers to calculate a portion of the amount that pharmacies and other providers are reimbursed for dispensing certain covered prescription drugs.

State AWP Medicaid Settlements

On July 30, 2012, the Company paid approximately $155 million to various states pursuant to the previously announced settlement agreements sponsored by a coalition of State Attorneys General. On August 13, 2012, the State of Indiana, pursuant to its settlement agreement with the Company, filed a notice dismissing with prejudice the claims asserted against the Company in the previously reported action filed in Indiana state court by the State of Indiana, State of Indiana v. McKesson Corp. et al., (No. 49D11-1106-PL-021595). On August 27, 2012, the State of Michigan, pursuant to its settlement agreement with the Company, filed a notice dismissing with prejudice the claims asserted against the Company in the previously reported action filed in Michigan state court by the State of Michigan, Bill Schuette ex rel. State of Michigan v. McKesson Corporation, et al., (No.11-629-CZ). On September 17, 2012, the settling states on whose behalf claims were filed against the Company in the previously reported qui tam action filed in the United States District Court for the District of New Jersey, United States et al. ex rel. Morgan v. Express Scripts et al., (No. 05-1714), filed a notice dismissing those claims to the extent those claims were encompassed by the settlement release in the parties’ agreements.

The Mississippi Action

On August 17, 2012, the court entered an order continuing the March 18, 2013 trial date to September 3, 2013, in the previously reported action filed in Mississippi state court by the State of Mississippi against the Company, State of Mississippi v. McKesson Corporation, et al., (No. 251-10-862CIV). Discovery is ongoing.

The Utah Action

On August 22, 2012, the Company entered into an agreement with the State of Utah in settlement of the previously reported action filed in the United States District Court for the Northern District of California by the State of Utah against the Company as the sole defendant, State of Utah v. McKesson Corporation, et al., (No. CV 10-4743-SC). On September 7, 2012, pursuant to the parties’ settlement agreement, the parties filed a stipulation dismissing the Utah Action with prejudice.

The Virginia Action

On August 29, 2012, the court entered an order moving the March 11, 2013 trial date to July 8, 2013 in the previously reported action filed in the United States District Court for the Northern District of California by the Commonwealth of Virginia against the Company and two of its employees, Commonwealth of Virginia v. McKesson Corporation, et al., (C11-02782-SI). Discovery is ongoing.

The Arizona Administrative Proceeding

On September 6, 2012, the Arizona court of appeals issued an order affirming the trial court’s order enjoining the Arizona Health Care Cost Containment System (“AHCCCS”) from prosecuting or reinitiating any penalty proceeding against the Company in the previously reported action filed in Arizona state court by the Company against AHCCCS and its Director, McKesson Corporation v. AHCCCS, (No. CV-2011-004446). The time for the filing of a petition for review has expired and no such petition was filed.

13

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Shareholder Derivative Action

On September 10, 2012, a derivative action was filed in California Superior Court, San Francisco County, by a shareholder purportedly on behalf of the Company against certain past and present officers and directors of the Company, alleging that they breached their fiduciary duties and wasted Company assets by failing to prevent the underlying conduct that resulted in the Company’s AWP litigation, and seeking damages, corporate governance and procedural reforms, equitable and injunctive relief, restitution, disgorgement of profits, as well as attorneys’ fees and costs of suit, all in unspecified amounts, Daniel Himmel v. John Hammergren et al., (12-524074).  To date, no response to the complaint has been filed.

The Arizona Action

On September 14, 2012, an action was filed in Arizona state court, Maricopa County, by the State of Arizona against the Company asserting claims under the Arizona Consumer Fraud Act, and seeking injunctive relief, restitution, civil penalties, as well as attorneys’ fees and costs of suit, all in unspecified amounts, State of Arizona ex rel. Thomas Horne v. McKesson Corporation, (No. CV2012-013707). The Company has not yet responded to the complaint.

The Kansas Action

On September 28, 2012, the court granted defendant First Databank’s motion to continue the May 28, 2013 trial date to December 2, 2013, in the previously reported action filed in Kansas state court by the State of Kansas against the Company, State of Kansas ex rel. Steve Six v. McKesson Corporation, et al., (No. 10CV1491).

The Wisconsin Action

On October 2, 2012, an action was filed in Wisconsin state court, Dane County, by the State of Wisconsin against the Company, First Databank, the Hearst Corporation, and Hearst Business Media asserting claims under Wisconsin consumer protection and false claims statutes, and for civil conspiracy, and seeking damages, treble damages, civil penalties, forfeitures, injunctive relief, as well as attorneys’ fees and costs of suit, all in unspecified amounts, State of Wisconsin v. McKesson Corporation, et al., (12CV3948). The Company has not yet responded to the complaint.

The Oregon Action

On October 9, 2012, the Company entered into an agreement with the State of Oregon in settlement of the previously reported action filed in the United States District Court for the Northern District of California by the State of Oregon against the Company as the sole defendant, State of Oregon v. McKesson Corporation, et al., (No. C11-05384-SI). On October 18, 2012, pursuant to the settlement agreement, the parties filed a stipulation dismissing the Oregon Action with prejudice.

The Company has a reserve relating to AWP public entity claims, which is reviewed at least quarterly and whenever events or circumstances indicate changes, including consideration of the pace and progress of discussions relating to potentially resolving other public entity claims. Following our most recent review of the reserve for estimated probable losses from current and possible future public entity AWP claims, the Company recorded pre-tax charges of $16 million and $44 million (total of $60 million) during the first and second quarters of 2013. The Company recorded a pre-tax charge of $118 million during the second quarter and first six months of 2012. Pre-tax charges relating to changes in the Company’s AWP litigation reserve, including accrued interest, are recorded in our Distribution Solutions segment. The Company’s AWP litigation reserve is included in other current liabilities in the consolidated balance sheets. In view of the number of outstanding cases and expected future claims, and the uncertainties of the timing and outcome of this type of litigation, it is possible that the ultimate costs of these matters may exceed or be less than the reserve.

14

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

The following is the activity related to the AWP litigation reserve for the first six months of 2013 and 2012:

	Six Months Ended September 30,
(In millions)	2012			2011
AWP litigation reserve at beginning of period	$	453		$	330
Charges incurred	60			118
Payments made	(438		)	(6		)
AWP litigation reserve at end of period	$	75		$	442

II. Other Litigation

On September 28, 2012, the Court entered judgment after trial in favor of the Company and its former indirect subsidiary, McKesson Medical-Surgical MediNet Inc., now merged into and doing business as McKesson Medical-Surgical MediMart Inc., finding no liability under the False Claims Act in the previously reported action, United States ex rel. Jamison v. McKesson Corporation, et al., (No. 2:08-CV-00214-SA). To date, no appeal by the United States has been filed.

9. Stockholders’ Equity

Each share of the Company’s outstanding common stock is permitted one vote on proposals presented to stockholders and is entitled to share equally in any dividends declared by the Company's Board of Directors (the “Board”).

In March 2012, we entered into an accelerated share repurchase program with a third party financial institution to repurchase $1.2 billion of the Company’s common stock. The program was funded with cash on hand. As of March 31, 2012, we had received 12.0 million shares representing the minimum number of shares due under this program.  This program was completed in multiple tranches, and we received 0.9 million additional shares during the first quarter of 2013. In July 2012, we received 0.6 million additional shares upon completion of this program. The total number of shares repurchased under this program was 13.5 million shares at an average price per share of $89.10.

In April 2012, the Board authorized the repurchase of an additional $700 million of the Company’s common stock, bringing the total authorization outstanding to $1.0 billion at September 30, 2012.

15

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

10. Segment Information

We report our operations in two operating segments: McKesson Distribution Solutions and McKesson Technology Solutions. The factors for determining the reportable segments included the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities. We evaluate the performance of our operating segments on a number of measures, including operating profit before interest expense, income taxes and results from discontinued operations.

Financial information relating to our reportable operating segments and reconciliations to the condensed consolidated totals is as follows:

	Quarter Ended September 30,						Six Months Ended September 30,
(In millions)	2012			2011			2012			2011
Revenues
Distribution Solutions (1)
Direct distribution & services	$	20,938		$	21,072		$	42,239		$	41,899
Sales to customers’ warehouses	4,806			4,909			10,153			9,800
Total U.S. pharmaceutical distribution & services	25,744			25,981			52,392			51,699
Canada pharmaceutical distribution & services	2,409			2,537			4,926			5,266
Medical-Surgical distribution & services	873			873			1,668			1,604
Total Distribution Solutions	29,026			29,391			58,986			58,569
Technology Solutions
Services	656			643			1,322			1,273
Software & software systems	142			153			287			297
Hardware	26			29			53			57
Total Technology Solutions	824			825			1,662			1,627
Total Revenues	$	29,850		$	30,216		$	60,648		$	60,196
Operating profit
Distribution Solutions (2)	$	621		$	477		$	1,121		$	952
Technology Solutions	97			108			190			208
Total	718			585			1,311			1,160
Corporate Expenses, Net (3)	(97		)	(101		)	(103		)	(196		)
Interest Expense	(55		)	(64		)	(111		)	(128		)
Income Before Income Taxes	$	566		$	420		$	1,097		$	836

⁽¹⁾  Revenues derived from services represent less than 2% of this segment’s total revenues.

⁽²⁾  For the second quarters of 2013 and 2012, operating profit includes AWP litigation charges of $44 million and $118 million, and for the first six months of 2013 and 2012, $60 million and $118 million. These charges were recorded in operating expenses. Operating profit for the second quarter and first six months of 2013 includes the receipt of $19 million representing our share of settlements of antitrust class action lawsuits brought against drug manufacturers, which was recorded as a reduction to cost of sales.

⁽³⁾  Corporate expenses for the first six months of 2013 are net of an $81 million gain on business combination.

16

McKESSON CORPORATION

FINANCIAL NOTES (CONCLUDED)

(UNAUDITED)

11. Subsequent Event

On October 25, 2012, we entered into a definitive agreement to acquire all outstanding shares of PSS World Medical, Inc. (“PSS World Medical”) of Jacksonville, Florida for $29.00 per share in cash. The total transaction, including the assumption of PSS World Medical’s outstanding debt, is valued at approximately $2.1 billion. PSS World Medical markets and distributes medical products and services throughout the United States. The acquisition is subject to customary closing conditions, including all necessary regulatory clearances and the approval of PSS World Medical’s shareholders. After the closing, the operations of PSS World Medical will be included in the results of our Medical-Surgical business, which is part of our Distribution Solutions segment.

17

McKESSON CORPORATION

FINANCIAL REVIEW

(UNAUDITED)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

GENERAL

Management’s discussion and analysis of financial condition and results of operations, referred to as the Financial Review, is intended to assist the reader in the understanding and assessment of significant changes and trends related to the results of operations and financial position of the Company together with its subsidiaries. This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and accompanying financial notes in Item 1 of Part I of this Quarterly Report on Form 10-Q and in Item 8 of Part II of our 2012 Annual Report on Form 10-K.

The Company's fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year shall mean the Company's fiscal year.

Certain statements in this report constitute forward-looking statements. See “Factors Affecting Forward-Looking Statements” included in this Quarterly Report on Form 10-Q.

Results of Operations

Financial Overview:

(In millions, except per share amounts)	Quarter Ended September 30,									Six Months Ended September 30,
	2012			2011			Change			2012			2011			Change
Revenues	$	29,850		$	30,216		(1	)	%	$	60,648		$	60,196		1		%
Litigation Charges	$	(44	)	$	(118	)	(63	)	%	$	(60	)	$	(118	)	(49	)	%
Gain on Business Combination	$	—		$	—		—		%	$	81		$	—		NM
Income Before Income Taxes	$	566		$	420		35		%	$	1,097		$	836		31		%
Income Tax Expense	(165		)	(124		)	33			(316		)	(254		)	24
Net Income	$	401		$	296		35			$	781		$	582		34
Diluted Earnings Per Common Share	$	1.67		$	1.18		42		%	$	3.25		$	2.31		41		%
Weighted Average Diluted Common Shares	240			250			(4	)	%	240			252			(5	)	%

NM – not meaningful

Revenues for 2013 approximated the same periods a year ago. Revenues were primarily impacted by price deflation associated with brand to generic drug conversions and market growth, which includes growing drug utilization and prices increases.

During the second quarters of 2013 and 2012, we recorded pre-tax litigation charges relating to our Average Wholesale Price (“AWP”) litigation of $44 million and $118 million, and for the first six months of 2013 and 2012, $60 million and $118 million. Adjustments to our AWP litigation reserves reflect our estimated probable losses for these claims.

18

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

On April 6, 2012, we purchased the remaining 50% ownership interest in our corporate headquarters building located in San Francisco, California for $90 million, which was funded from cash on hand.  We previously held a 50% ownership interest and were the primary tenant in this building.  This transaction was accounted for as a step acquisition, which requires that we re-measure our previously held 50% ownership interest to fair value and record the difference between the fair value and carrying value as a gain in the condensed consolidated statements of operations.  The re-measurement to fair value resulted in a non-cash pre-tax gain of $81 million ($51 million after-tax), which was recorded as a gain on business combination within Corporate in the condensed consolidated statements of operations during the first quarter of 2013.

Income before income taxes for the second quarter of 2013 increased 35% to $566 million and for the first six months of 2013 increased 31% to $1,097 million compared to the same periods a year ago primarily due to a lower AWP litigation charge in 2013 and growth in our Distribution Solutions segment. The first six months of 2013 were also positively impacted by the gain on business combination.

Net income for the second quarter of 2013 increased 35% to $401 million and for the first six months of 2013 increased 34% to $781 million compared to the same periods a year ago. Diluted earnings per common share for the second quarter of 2013 increased 42% to $1.67 and for the first six months of 2013 increased 41% to $3.25 compared to the same periods a year ago. Diluted earnings per common share for 2013 also benefited from our repurchase of common stock.

Revenues:

	Quarter Ended September 30,							Six Months Ended September 30,
(Dollars in millions)	2012		2011		Change			2012		2011		Change
Distribution Solutions
Direct distribution & services	$	20,938	$	21,072	(1	)	%	$	42,239	$	41,899	1		%
Sales to customers’ warehouses	4,806		4,909		(2	)		10,153		9,800		4
Total U.S. pharmaceutical distribution & services	25,744		25,981		(1	)		52,392		51,699		1
Canada pharmaceutical distribution & services	2,409		2,537		(5	)		4,926		5,266		(6	)
Medical-Surgical distribution & services	873		873		—			1,668		1,604		4
Total Distribution Solutions	29,026		29,391		(1	)		58,986		58,569		1
Technology Solutions
Services	656		643		2			1,322		1,273		4
Software & software systems	142		153		(7	)		287		297		(3	)
Hardware	26		29		(10	)		53		57		(7	)
Total Technology Solutions	824		825		—			1,662		1,627		2
Total Revenues	$	29,850	$	30,216	(1	)		$	60,648	$	60,196	1

Revenues for 2013 approximated the same periods a year ago primarily due to our Distribution Solutions segment, which accounted for approximately 97% of our consolidated revenues.

Direct distribution and services revenues for 2013 approximated the same periods a year ago. Revenues for 2013 were impacted by price deflation associated with brand to generic drug conversions, the loss of customers and one less sales day as well as market growth, which includes growing drug utilization and price increases, expanded volume with existing customers and new customers. 

Sales to customers' warehouses decreased for the second quarter of 2013 compared to the same period a year ago primarily due to price deflation associated with brand to generic drug conversions and one less sales day, partially offset by new and expanded business from existing customers. Sales to customers' warehouses increased for the first six months of 2013 compared to the same period a year ago primarily due to new and expanded business from existing customers, partially offset by price deflation associated with brand to generic drug conversions and one less sales day.

19

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Canadian pharmaceutical distribution and services revenues decreased compared to the same periods a year ago. These revenues were impacted by an unfavorable foreign currency exchange rate fluctuation of 2% and 3% for the second quarter and first six months of 2013. Excluding foreign currency exchange rate fluctuations, Canadian revenues decreased 3% for the second quarter and first six months of 2013 primarily due to changes in our customer mix, less sales days and government imposed price reduction for generic pharmaceuticals in certain provinces. The second quarter and first six months of 2013 had one and five less sales days compared to the same periods a year ago.

Medical-Surgical distribution and services revenues for the second quarter of 2013 approximated the same period a year ago and increased for the first six months of 2013 primarily reflecting market growth and new customers offset by five less sales days.

Technology Solutions revenues for the second quarter of 2013 approximated the same period a year ago primarily due to higher revenues for claims processing and an increase in maintenance revenues from new and existing customers, which were fully offset by lower revenues associated with the sale and installation of our software products. Technology Solutions revenues increased for the first six months of 2013 primarily due to higher revenues for claims processing and an increase in maintenance revenues from new and existing customers, partially offset by lower revenues associated with the sale and installation of our software products.

Gross Profit:

	Quarter Ended September 30,									Six Months Ended September 30,
(Dollars in millions)	2012			2011			Change			2012			2011			Change
Gross Profit
Distribution Solutions	$	1,339		$	1,258		6		%	$	2,554		$	2,389		7		%
Technology Solutions	381			389			(2	)		766			767			—
Total	$	1,720		$	1,647		4			$	3,320		$	3,156		5
Gross Profit Margin
Distribution Solutions	4.61		%	4.28		%	33		bp	4.33		%	4.08		%	25		bp
Technology Solutions	46.24			47.15			(91	)		46.09			47.14			(105	)
Total	5.76			5.45			31			5.47			5.24			23

bp - basis points

Gross profit and gross profit margin increased for the second quarter and first six months of 2013 compared to the same periods a year ago primarily as a result of growth in our Distribution Solutions segment.

Distribution Solutions segment’s gross profit margin increased primarily due to an increase in buy margin, increased sales of higher margin generic drugs and our acquisition of the Katz Assets (as described under the caption "Business Combinations"), partially offset by a decrease in sell margin. Buy margin primarily reflects volume and timing of compensation from branded pharmaceutical manufacturers. Our Distribution Solutions segment's 2013 gross profit margin was also favorably affected by the receipt of $19 million representing our share of  settlements of antitrust class action lawsuits brought against drug manufacturers.

Technology Solutions segment’s gross profit margin decreased primarily due to a change in product and services mix.

20

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Operating Expenses and Other Income, Net:

	Quarter Ended September 30,									Six Months Ended September 30,
(Dollars in millions)	2012			2011			Change			2012			2011			Change
Operating Expenses
Distribution Solutions (1)	$	724		$	785		(8	)	%	$	1,443		$	1,446		—		%
Technology Solutions	286			281			2			579			560			3
Corporate (2)	99			103			(4	)		108			200			(46	)
Total	$	1,109		$	1,169		(5	)		$	2,130		$	2,206		(3	)
Operating Expenses as a Percentage of Revenues
Distribution Solutions	2.49		%	2.67		%	(18	)	bp	2.45		%	2.47		%	(2	)	bp
Technology Solutions	34.71			34.06			65			34.84			34.42			42
Total	3.72			3.87			(15	)		3.51			3.66			(15	)
Other Income, Net
Distribution Solutions	$	6		$	4		50		%	$	10		$	9		11		%
Technology Solutions	2			—			—			3			1			200
Corporate	2			2			—			5			4			25
Total	$	10		$	6		67			$	18		$	14		29

⁽¹⁾  For the second quarters of 2013 and 2012, operating expenses include AWP litigation charges of $44 million and $118 million, and for the first six months of 2013 and 2012, $60 million and $118 million.

⁽²⁾   Corporate expenses for the first six months of 2013 are net of an $81 million pre-tax gain on business combination.

Operating expenses and operating expenses as a percentage of revenues decreased in 2013 compared to the same periods a year ago primarily due to a higher AWP litigation charge in 2012, partially offset by an increase associated with the addition of the Katz Assets. Operating expenses and operating expenses as a percentage of revenues for  the first six months of 2013 was also favorably impacted by the gain on business combination, partially offset by our continued investment in research and development activities and higher employee compensation and benefits costs. During the second quarters of 2013 and 2012, we recorded pre-tax litigation charges relating to our AWP litigation of $44 million and $118 million, and for the first six months of 2013 and 2012, $60 million and $118 million.

Within our operating expenses, we recorded a charge of $3 million and a net credit of $76 million for acquisition expenses and related adjustments during the second quarter and first six months of 2013 compared to charges of $8 million and  $18 million during the second quarter and first six months of 2012. The net credit in the first six months of 2013 was primarily due to the gain on business combination, and the charges in 2012 were primarily incurred to integrate our acquisition of US Oncology Holdings, Inc.

Acquisition expenses and related adjustments include transaction and integration expenses that are directly related to acquisitions by the Company and gains and losses related to business combinations. These expenses by segment were as follows:

	Quarter Ended September 30,				Six Months Ended September 30,
(In millions)	2012		2011		2012			2011
Operating Expenses
Distribution Solutions	$	2	$	8	$	3		$	16
Technology Solutions	1		—		2			2
Corporate	—		—		(81		)	—
Total Acquisition Expenses and Related Adjustments	$	3	$	8	$	(76	)	$	18

21

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Amortization expense of acquired intangible assets purchased in connection with acquisitions by the Company by segment was as follows:

	Quarter Ended September 30,				Six Months Ended September 30,
(In millions)	2012		2011		2012		2011
Cost of Sales:
Distribution Solutions	$	1	$	1	$	2	$	1
Technology Solutions	3		5		6		10
Total	$	4	$	6	$	8	$	11
Operating Expenses:
Distribution Solutions	$	31	$	31	$	66	$	62
Technology Solutions	13		13		25		25
Total	$	44	$	44	$	91	$	87
Total Amortization of Acquisition-Related Intangibles	$	48	$	50	$	99	$	98

Distribution Solutions segment’s operating expenses and operating expenses as a percentage of revenues decreased primarily due to a higher AWP litigation charge in 2012, partially offset by the addition of the Katz Assets and, for the first six months of 2013, higher employee compensation and benefits costs.

Technology Solutions segment’s operating expenses and operating expenses as a percentage of revenues increased primarily due to the addition of smaller acquisitions and other initiatives and, for the first six months of 2013, due to our continued investment in research and development activities.

Corporate expenses for the second quarter and first six months of 2013 decreased primarily due to a charitable contribution in 2012 and, for the first six months of 2013, the gain on a business combination.

Other income, net for 2013 increased primarily due to higher interest income.

Segment Operating Profit and Corporate Expenses, Net:

	Quarter Ended September 30,											Six Months Ended September 30,
(Dollars in millions)	2012				2011				Change			2012				2011				Change
Segment Operating Profit (1)
Distribution Solutions (2)	$	621			$	477			30		%	$	1,121			$	952			18		%
Technology Solutions	97				108				(10	)		190				208				(9	)
Subtotal	718				585				23			1,311				1,160				13
Corporate Expenses, Net (3)	(97		)		(101		)		(4	)		(103		)		(196		)		(47	)
Interest Expense	(55		)		(64		)		(14	)		(111		)		(128		)		(13	)
Income Before Income Taxes	$	566			$	420			35			$	1,097			$	836			31
Segment Operating Profit Margin
Distribution Solutions	2.14			%	1.62			%	52		bp	1.90			%	1.63			%	27		bp
Technology Solutions	11.77				13.09				(132	)		11.43				12.78				(135	)

⁽¹⁾  Segment operating profit includes gross profit, net of operating expenses, plus other income for our two operating segments.

⁽²⁾  For the second quarters of 2013 and 2012, operating profit includes AWP litigation charges of $44 million and $118 million, and for the first six months of 2013 and 2012, $60 million and $118 million. These charges were recorded in operating expenses.

⁽³⁾  Corporate expenses for the first six months of 2013 are net of an $81 million pre-tax gain on business combination.

22

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Operating profit margin for our Distribution Solutions segment increased primarily due to an increase in gross profit margin, and lower operating expenses as a percentage of revenues, which includes lower AWP litigation charges.

Operating profit margin for our Technology Solutions segment decreased primarily due to a decrease in gross profit margin and higher operating expenses as a percentage of revenues.

Corporate expenses, net of other income for the second quarter and first six months of 2013 decreased primarily due to a decrease in operating expenses, including for the first six months of 2013, the gain on a business combination.

Interest Expense: Interest expense for the second quarter and first six months of 2013 decreased compared to the same periods a year ago primarily due to the repayment of $400 million of the current portion of our long-term debt in February 2012.

Income Taxes: Our reported income tax rates for the second quarters of 2013 and 2012 were 29.2% and 29.5% and, for the first six months of 2013 and 2012, were 28.8% and 30.4%. Fluctuations in our reported income tax rates are primarily due to changes within our estimated business mix, including varying proportions of income attributable to foreign countries that have lower income tax rates and discrete tax items. Income tax expense for the second quarters of 2013 and 2012 included discrete tax benefits of $7 million and $2 million and, for the first six months of 2013 and 2012, included discrete tax benefits of $24 million and $5 million. Discrete tax benefits for 2013 primarily related to the reversal of accrued interest resulting from the reduction of gross unrecognized tax benefits and other tax initiatives.

Net Income: Net income was $401 million and $296 million for the second quarters of 2013 and 2012, or $1.67 and $1.18 per diluted common share. Net income was $781 million and $582 million for the first six months of 2013 and 2012, or $3.25 and $2.31 per diluted common share. Net income and diluted earnings per common share for the second quarter and first six months of 2013 include an after-tax charge of $27 million and $37 million, or $0.11 and $0.15 per diluted share, and for the second quarter and first six months of 2012, include an after-tax charge of $77 million, or $0.31 per diluted share, due to the AWP litigation. Net income and diluted earnings per common share for first six months of 2013 include an after-tax credit of $51 million, or $0.21 per diluted share, due to the gain on business combination.

Weighted Average Diluted Common Shares Outstanding:Diluted earnings per common share were calculated based on a weighted average number of shares outstanding of 240 million and 250 million for the second quarters of 2013 and 2012 and 240 million and 252 million for the first six months of 2013 and 2012. The decrease in the number of weighted average diluted common shares outstanding primarily reflects the effect of share repurchases during the last twelve months, partially offset by exercises of share-based awards.

Business Combinations

On March 25, 2012, we acquired substantially all of the assets of Drug Trading Company Limited, the independent banner business of the Katz Group Canada Inc. (“Katz Group”), and Medicine Shoppe Canada Inc., the franchise business of the Katz Group (collectively, “Katz Assets”) for $925 million, which was funded from cash on hand. The acquisition of the assets from the Drug Trading Company Limited consists of a marketing and purchasing arm of more than 850 independently owned pharmacies in Canada. The acquisition of Medicine Shoppe Canada Inc. consists of the franchise business of providing services to more than 160 independent pharmacies in Canada. Financial results for the acquired Katz Assets are included in the results of operations within our Canadian pharmaceutical distribution and services business, which is part of our Distribution Solutions segment, beginning in the first quarter of 2013.

In addition to the acquisition of our corporate headquarters building and the Katz Assets, we also completed a number of smaller acquisitions within both of our operating segments over the last two years. Financial results for our business acquisitions have been included in our consolidated financial statements since their respective acquisition dates. Purchase prices for our business acquisitions have been allocated based on estimated fair values at the date of acquisition.

Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax purposes. However, if we acquire the assets of a company, the goodwill may be deductible for tax purposes. The pro forma results of operations for our business acquisitions and the results of operations for these acquisitions since the acquisition date have not been presented because the effects were not material to the consolidated financial statements on either an individual or an aggregate basis.

23

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Refer to Financial Note 2, “Business Combinations,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q for further information.

New Accounting Pronouncements

New accounting pronouncements that we have recently adopted as well as those that have been recently issued but not yet adopted by us are included in Financial Note 1, “Significant Accounting Policies,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q.

Financial Condition, Liquidity and Capital Resources

We expect our available cash generated from operations, together with our existing sources of liquidity from our accounts receivable sales facility and short-term borrowings under the revolving credit facility and commercial paper, will be sufficient to fund our long-term and short-term capital expenditures, working capital and other cash requirements. In addition, from time-to-time, we may access the long-term debt capital markets to discharge our other liabilities.

Operating activities provided cash of $459 million and $1,395 million during the first six months of 2013 and 2012. Operating activities for 2013 include $438 million of payments made for AWP litigation settlements. Cash flows from operations can be significantly impacted by factors such as the timing of receipts from customers, inventory receipts and payments to vendors. Additionally, working capital is a function of sales activity and inventory requirements.

Investing activities utilized cash of $351 million and $349 million during the first six months of 2013 and 2012. Investing activities primarily reflect cash paid for business and property acquisitions and capitalized software.

Financing activities utilized cash of $433 million and $685 million during the first six months of 2013 and 2012. Financing activities for 2013 include $1,525 million of cash paid for repayment of short-term borrowings and $1,125 million of cash receipts from short-term borrowings. Additionally, financing activities for 2013 and 2012 included $53 million and $672 million of cash paid for stock repurchases.

In March 2012, we entered into an accelerated share repurchase program with a third party financial institution to repurchase $1.2 billion of the Company’s common stock. This program was funded with cash on hand. As of March 31, 2012, we had received 12.0 million shares representing the minimum number of shares due under this program.  This program was completed in multiple tranches, and we received 0.9 million additional shares during the first quarter of 2013. In July 2012, we received 0.6 million additional shares upon completion of this program. The total number of shares repurchased under this program was 13.5 million shares at an average price per share of $89.10.

In April 2012, the Board of Directors authorized the repurchase of an additional $700 million of the Company’s common stock, bringing the total authorization outstanding to $1.0 billion at September 30, 2012. Stock repurchases may be made from time-to-time in open market transactions, privately negotiated transactions, through accelerated share repurchase programs, or by any combination of such methods.  The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including our stock price, corporate and regulatory requirements, restrictions under our debt obligations and other market and economic conditions.

We believe that our operating cash flow, financial assets and current access to capital and credit markets, including our existing credit facilities, will give us the ability to meet our financing needs for the foreseeable future. However, there can be no assurance that future volatility and disruption in the global capital and credit markets will not impair our liquidity or increase our costs of borrowing.

24

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Selected Measures of Liquidity and Capital Resources

(Dollars in millions)	September 30, 2012			March 31, 2012
Cash and cash equivalents	$	2,831		$	3,149
Working capital	2,341			1,917
Debt, net of cash and cash equivalents	750			831
Debt to capital ratio (1)	31.7		%	36.8		%
Net debt to net capital employed (2)	8.9			10.8
Return on stockholders' equity (3)	22.0			19.7

⁽¹⁾  Ratio is computed as total debt divided by the sum of total debt and stockholders’ equity.

⁽²⁾  Ratio is computed as total debt, net of cash and cash equivalents (“net debt”), divided by the sum of net debt and stockholders’ equity (“net capital employed”).

⁽³⁾  Ratio is computed as net income for the last four quarters, divided by a five-quarter average of stockholders’ equity.

Cash is primarily held in non-interest bearing accounts and is fully insured by the Federal Deposit Insurance Corporation regardless of the dollar amount.  Cash equivalents are primarily invested in AAA rated prime money market funds denominated in US dollars, Canadian government securities and a AAA rated prime money market fund denominated in British pound sterling.

The remaining cash and cash equivalents are deposited with several financial institutions. We mitigate the risk of our short-term investment portfolio by depositing funds with reputable financial institutions and monitoring risk profiles and investment strategies of money market funds.

Our cash and cash equivalents balance as of September 30, 2012, included approximately $1.6 billion of cash held by our subsidiaries outside of the United States. Our primary intent is to utilize this cash in the foreign operations as well as to fund certain research and development activities for an indefinite period of time. Although the vast majority of cash held outside the United States is available for repatriation, doing so could subject us to U.S. federal, state and local income tax.

Working capital primarily includes cash and cash equivalents, receivables and inventories net of drafts and accounts payable, short-term borrowings, deferred revenue and other current liabilities. Our Distribution Solutions segment requires a substantial investment in working capital that is susceptible to large variations during the year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity is a function of sales activity and other requirements.

Our ratio of net debt to net capital employed decreased in 2013 primarily due to the repayment of $400 million of short-term borrowing in the first quarter of 2013.

Credit Resources

We fund our working capital requirements primarily with cash and cash equivalents, as well as, short-term borrowings under the accounts receivable sales facility, revolving credit facility and from commercial paper issuances.

Accounts Receivable Sales Facility

In May 2012, we renewed our existing accounts receivable sales facility (the “Facility”) for a one year period under terms substantially similar to those previously in place. The committed balance of the Facility is $1.35 billion, although from time-to-time, the available amount of the Facility may be less than $1.35 billion based on accounts receivable concentration limits and other eligibility requirements. The renewed Facility will expire in May 2013.

During the six months ended September 30, 2011, there were no borrowings under the Facility. At March 31, 2012, there were $400 million in secured borrowings and $400 million of related securitized accounts receivable outstanding under the Facility, which are included in short-term borrowings and receivables in the condensed consolidated balance sheets. During the first quarter of 2013, we repaid $400 million of short-term borrowings using cash on hand. During the second quarter of 2013, there were a total of $1,125 million of short-term borrowings under the Facility all of which were repaid using cash on hand. At September 30, 2012, there were no short-term borrowings and related securitized accounts receivables outstanding under the Facility.

25

McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Revolving Credit Facility

We have a syndicated $1.3 billion five-year senior unsecured revolving credit facility, which expires in September 2016. Borrowings under this facility bear interest based upon either the London Interbank Offered Rate or a prime rate. There were no borrowings under this facility during the first six months of 2013 and 2012. As of September 30, 2012 and March 31, 2012, there were no amounts outstanding under this facility.

Debt Covenants

Our various borrowing facilities and long-term debt are subject to certain covenants. Our principal debt covenant is our debt to capital ratio under our unsecured revolving credit facility, which cannot exceed 56.5%. For the purpose of calculating this ratio, borrowings under the accounts receivable sales facility are excluded. If we exceed this ratio, repayment of debt outstanding under the revolving credit facility could be accelerated. As of September 30, 2012 and March 31, 2012, we were in compliance with our financial covenants.

Funds necessary for future debt maturities and our other cash requirements are expected to be met by existing cash balances, cash flow from operations, existing credit sources and other capital market transactions.

26

McKESSON CORPORATION

FINANCIAL REVIEW (CONCLUDED)

(UNAUDITED)

FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Some of these statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or the negative of these words and other comparable terminology. The discussion of financial trends, strategy, plans or intentions may also include forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. Although it is not possible to predict or identify all such risks and uncertainties, they may include, but are not limited to, the following factors. The reader should not consider this list to be a complete statement of all potential risks and uncertainties:

▪ material adverse resolution of pending legal proceedings;

▪ changes in the U.S. healthcare industry and regulatory environment;

▪ changes in the Canadian healthcare industry and regulatory environment;

▪ competition;

▪ substantial defaults in payments or a material reduction in purchases by, or the loss of, a large customer or group purchasing organization;

▪ the loss of government contracts as a result of compliance or funding challenges;

▪ public health issues in the United States or abroad;

▪ implementation delay, malfunction, failure or breach of internal information systems;

▪ the adequacy of insurance to cover property loss or liability claims;

▪ the Company’s failure to attract and retain customers for its software products and solutions due to integration and implementation challenges, or due to an inability to keep pace with technological advances;

▪ the Company’s proprietary products and services may not be adequately protected, and its products and solutions may be found to infringe on the rights of others;

▪ system errors or failure of our technology products and solutions to conform to specifications;

▪ disaster or other event causing interruption of customer access to the data residing in our service centers;

▪ the delay or extension of our sales or implementation cycles for external software products;

▪ changes in circumstances that could impair our goodwill or intangible assets;

▪ foreign currency fluctuations or disruptions to our foreign operations;

▪ new or revised tax legislation or challenges to our tax positions;

▪ the Company’s ability to successfully identify, consummate and integrate strategic acquisitions;

▪ general economic conditions, including changes in the financial markets that may affect the availability and cost of credit to the Company, its customers or suppliers; and

▪ changes in accounting principles generally accepted in the United States of America.

These and other risks and uncertainties are described herein and in other information contained in our publicly available Securities and Exchange Commission filings and press releases. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date such statements were first made. Except to the extent required by law, we undertake no obligation to publicly release the result of any revisions to our forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

27

McKESSON CORPORATION

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We believe there has been no material change in our exposure to risks associated with fluctuations in interest and foreign currency exchange rates as disclosed in our 2012 Annual Report on Form 10-K.

Item 4. Controls and Procedures.

Our Chief Executive Officer and our Chief Financial Officer, with the participation of other members of the Company’s management, have evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the period covered by this quarterly report, and our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective based on their evaluation of these controls and procedures as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.

There were no changes in our “internal control over financial reporting” (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that occurred during our second quarter of 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The information set forth in Financial Note 8, “Commitments and Contingent Liabilities,” to the accompanying condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors.

There have been no material changes during the period covered by this Quarterly Report on Form 10-Q to the risk factors disclosed in Part I, Item 1A, of our 2012 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In March 2012, we entered into an accelerated share repurchase (“ASR”) program with a third party financial institution to repurchase $1.2 billion of the Company's common stock. The program was funded with cash on hand. As of March 31, 2012, we had received 12.0 million shares representing the minimum number of shares due under this program.  This program was completed in multiple tranches, and we received 0.9 million additional shares during the first quarter of 2013. In July 2012, we received 0.6 million additional shares upon completion of this program. The total number of shares repurchased under this program was 13.5 million shares at an average price per share of $89.10.

In April 2012, the Board of Directors authorized the repurchase of an additional $700 million of the Company’s common stock, bringing the total authorization outstanding to $1.0 billion. Stock repurchases may be made from time-to-time in open market transactions, privately negotiated transactions, through accelerated share repurchase programs, or by any combination of such methods.  The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including our stock price, corporate and regulatory requirements, restrictions under our debt obligations and other market and economic conditions.

28

McKESSON CORPORATION

The following table provides information on the Company’s share repurchases during the second quarter of 2013.

	Share Repurchases (1)
(In millions, except price per share)	Total Number of Shares Purchased		Average Price Paid Per Share	Total Number of Shares Purchased As Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
July 1, 2012 – July 31, 2012	0.6	$	89.10	0.6	$	1,000
August 1, 2012 – August 31, 2012	—		—	—		1,000
September 1, 2012 – September 30, 2012	—		—	—		1,000
Total	0.6		$89.10	0.6		1,000

⁽¹⁾  This table does not include shares tendered to satisfy the exercise price in connection with cashless exercises of employee stock options or shares tendered to satisfy tax withholding obligations in connection with employee equity awards.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information.

None

29

McKESSON CORPORATION

Item 6. Exhibits.

Exhibit Number	Description
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32†	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the McKesson Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related Financial Notes.

† Furnished herewith.

30

McKESSON CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		MCKESSON CORPORATION
Date:	October 25, 2012	/s/    Jeffrey C. Campbell
		Jeffrey C. Campbell
		Executive Vice President and Chief Financial Officer
Date:	October 25, 2012	/s/    Nigel A. Rees
		Nigel A. Rees
		Vice President and Controller

31

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a) AND RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John H. Hammergren, certify that:

1. I have reviewed this quarterly report on Form 10-Q of McKesson Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	October 25, 2012	/s/    John H. Hammergren
		John H. Hammergren
		Chairman of the Board, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a) AND RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey C. Campbell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of McKesson Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	October 25, 2012	/s/    Jeffrey C. Campbell
		Jeffrey C. Campbell
		Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of McKesson Corporation (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    John H. Hammergren

John H. Hammergren

Chairman of the Board, President and Chief Executive Officer

October 25, 2012

/s/    Jeffrey C. Campbell

Jeffrey C. Campbell

Executive Vice President and Chief Financial Officer

October 25, 2012

This certification accompanies the Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to McKesson Corporation and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Segment Information (Schedule Of Segment Information) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended
	Sep. 30, 2012		Sep. 30, 2011		Sep. 30, 2012		Sep. 30, 2011
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	$ 29,850		$ 30,216		$ 60,648		$ 60,196
Interest Expense	(55)		(64)		(111)		(128)
Income Before Income Taxes	566		420		1,097		836
Distribution Solutions [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	29,026	[1]	29,391	[1]	58,986	[1]	58,569	[1]
Operating profit	621	[2]	477	[2]	1,121	[2]	952	[2]
Distribution Solutions - Direct Distribution And Services [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	20,938		21,072		42,239		41,899
Distribution Solutions - Sales To Customers' Warehouses [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	4,806		4,909		10,153		9,800
Distribution Solutions - Domestic Pharmaceutical Distribution And Services [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	25,744		25,981		52,392		51,699
Distribution Solutions - Canada Pharmaceutical Distribution And Services [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	2,409		2,537		4,926		5,266
Distribution Solutions - Medical Surgical Distribution And Services [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	873		873		1,668		1,604
Technology Solutions [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	824		825		1,662		1,627
Operating profit	97		108		190		208
Technology Solutions - Services [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	656		643		1,322		1,273
Technology Solutions - Software And Software Systems [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	142		153		287		297
Technology Solutions - Hardware [Member]
Segment Reporting Information [Line Items]
Segment Reporting Revenue From External Customers	26		29		53		57
Total of Reportable Segments [Member]
Segment Reporting Information [Line Items]
Operating profit	718		585		1,311		1,160
Corporate [Member]
Segment Reporting Information [Line Items]
Operating profit	$ (97)		$ (101)		$ (103)	[3]	$ (196)

[1] Revenues derived from services represent less than 2% of this segment’s total revenues.

[2] perating profit includes AWP litigation charges of $44 million and $118 million, and for the first six months of 2013 and 2012, $60 million and $118 million. These charges were recorded in operating expenses. Operating profit for the second quarter and first six months of 2013 includes the receipt of $19 million representing our share of settlements of antitrust class action lawsuits brought against drug manufacturers, which was recorded as a reduction to cost of sales.

[3] Corporate expenses for the first six months of 2013 are net of an $81 million gain on business combination.

XML

Financing Activities (Details) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	May 31, 2012 Y	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Mar. 31, 2012
Line of Credit Facility [Line Items]
Borrowings Outstanding		$ 0		$ 0		$ 400,000,000
Accounts Receivable Sales Facility [Member]
Line of Credit Facility [Line Items]
Number of years for which accounts receivable sales facility was renewed	1
Facility Capacity		1,350,000,000		1,350,000,000
Facility Expiration Date				May 15, 2013
Line of Credit Facility, Increase, Additional Borrowings		1,125,000,000			0
Borrowings Outstanding		0		0		400,000,000
Securitized Receivable Balance		0		0		400,000,000
Repayments of Borrowings		1,125,000,000	400,000,000
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Facility Capacity		1,300,000,000		1,300,000,000
Facility Expiration Date		Sep. 23, 2016
Line of Credit Facility, Increase, Additional Borrowings				0	0
Borrowings Outstanding		$ 0		$ 0		$ 0

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Business Combinations (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012 Corporate Headquarters [Member]	Apr. 06, 2012 Corporate Headquarters [Member]	Sep. 30, 2012 Katz Group [Member]	Jun. 30, 2012 Building and Building Improvements [Member] Corporate Headquarters [Member]	Apr. 06, 2012 Building and Building Improvements [Member] Corporate Headquarters [Member]	Apr. 06, 2012 Land [Member] Corporate Headquarters [Member]	Mar. 25, 2012 Medicine Shoppe Canada [Member] Katz Group [Member] items	Mar. 25, 2012 Drug Trading Company [Member] Katz Group [Member] items	Sep. 30, 2012 Service Agreements [Member] Katz Group [Member]	Sep. 30, 2012 Trademarks And Trade Names [Member] Katz Group [Member]	Sep. 30, 2012 Amounts Recognized As Of Acquisition Date As Adjusted [Member] Katz Group [Member]
Business Acquisition [Line Items]
Business Acquisition, Purchase Price Allocation, Amortizable Intangible Assets													$ 318	$ 114	$ 442
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life							20 years
Currently Acquired Percentage of Building						50.00%
Cash Paid for Acquisition						90									925
Previously Held Percentage of Building						50.00%
Gain on Business Combination	0	0	81	0	81
Gain on Business Combination, Net of Tax					51
Fair Value of Assets Acquired						180			113	58
Property, Plant and Equipment, Useful Life								P30Y
Number of Independent Pharmacies											160	850
Goodwill															512
Business Acquisition, Purchase Price Allocation, Goodwill, Expected Tax Deductible Amount							$ 290

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Stockholders' Equity (Narrative) (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	1 Months Ended	3 Months Ended	6 Months Ended		1 Months Ended		3 Months Ended	5 Months Ended
	Apr. 30, 2012	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Jul. 31, 2012 ASR March 2012 [Member]	Mar. 31, 2012 ASR March 2012 [Member]	Jun. 30, 2012 ASR March 2012 [Member]	Jul. 31, 2012 ASR March 2012 [Member]
Stockholders' Equity [Line Items]
Payments for Repurchase of Common Stock			$ 53,000,000	$ 672,000,000		$ 1,200,000,000
Shares Received Under ASR Program					0.6	12.0	0.9	13.5
Authorized Amount of Common Stock Repurchase Plan	700,000,000
Accelerated Share Repurchases, Average Price Paid Per Share								$ 89.10
Share Repurchase Authorization Outstanding		$ 1,000,000,000

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Business Combinations

6 Months Ended

Sep. 30, 2012

Business Combinations [Abstract]

Business Combinations

Business Combinations

On April 6, 2012, we purchased the remaining 50% ownership interest in our corporate headquarters building located in San Francisco, California, for $90 million, which was funded from cash on hand.  We previously held a 50% ownership interest and were the primary tenant in this building.  This transaction was accounted for as a step acquisition, which requires that we re-measure our previously held 50% ownership interest to fair value and record the difference between the fair value and carrying value as a gain in the condensed consolidated statements of operations.  The re-measurement to fair value resulted in a non-cash pre-tax gain of $81 million ($51 million after-tax), which was recorded as a gain on business combination within Corporate in the condensed consolidated statements of operations during the first quarter of 2013.

The total fair value of the net assets acquired was $180 million, which was allocated as follows: buildings and improvements of $113 million and land of $58 million with the remainder allocated for settlement of our pre-existing lease and lease intangible assets. The fair value of the buildings and improvements was determined based on current market replacement costs less depreciation and unamortized tenant improvement costs, as well as, other relevant market information, and has a weighted average useful life of 30 years. The fair value of the land was determined using comparable sales of land within the surrounding market.

On March 25, 2012, we acquired substantially all of the assets of Drug Trading Company Limited, the independent banner business of the Katz Group Canada Inc. (“Katz Group”), and Medicine Shoppe Canada Inc., the franchise business of the Katz Group (collectively, “Katz Assets”) for $925 million, which was funded from cash on hand. The acquisition of the assets from the Drug Trading Company Limited consists of a marketing and purchasing arm of more than 850 independently owned pharmacies in Canada. The acquisition of Medicine Shoppe Canada Inc. consists of the franchise business of providing services to more than 160 independent pharmacies in Canada.

During the second quarter of 2013, the fair value measurements of assets acquired and liabilities assumed of the Katz Assets as of the acquisition date were completed. The following table summarizes the final amounts of the fair values recognized for the assets acquired and liabilities assumed as of the acquisition date, as well as measurement period adjustments made in the first six months of 2013, to the amounts initially recorded in 2012. The measurement period adjustments during the first six months of 2013 did not have a material impact on our consolidated statements of operations, balance sheets or cash flows in any period, and, therefore, we have not retrospectively adjusted our financial statements.

(In millions)	Amounts Previously Recognized as of Acquisition Date (Provisional) (1)			Measurement Period Adjustments			Amounts Recognized as of Acquisition Date (Final as Adjusted)
Current assets, net of cash acquired	$	33		$	(1	)	$	32
Goodwill	506			6			512
Intangible assets	441			1			442
Other long-term assets	15			(1		)	14
Current liabilities	(37		)	1			(36		)
Long-term deferred tax liabilities	(39		)	—			(39		)
Purchase price, less cash and cash equivalents	$	919		$	6		$	925

⁽¹⁾  As previously reported in our Form 10-K for the year ended March 31, 2012.

Included in the purchase price allocation are acquired identifiable intangibles of $442 million, the fair value of which was determined by using Level 3 inputs, which are estimated using significant unobservable inputs. Acquired intangibles primarily consist of $318 million of service agreements and $114 million of trademarks and trade names. Service agreements, trademarks and trade names and total acquired intangibles assets each has an estimated weighted average life of 20 years. The excess of the purchase price over the net tangible and intangible assets of approximately $512 million was recorded as goodwill, which primarily reflects the expected future benefits to be realized upon integrating the business. The amount of goodwill expected to be deductible for tax purposes is $290 million.

Financial results for the acquired Katz Assets are included in the results of operations within our Canadian pharmaceutical distribution and services business, which is part of our Distribution Solutions segment, beginning in the first quarter of 2013.

During the last two years, we also completed a number of smaller acquisitions within both of our operating segments. Financial results for our business acquisitions have been included in our consolidated financial statements since their respective acquisition dates. Purchase prices for our business acquisitions have been allocated based on estimated fair values at the date of acquisition.

Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax purposes. However, if we acquire the assets of a company, the goodwill may be deductible for tax purposes. The pro forma results of operations for our business acquisitions and the results of operations for these acquisitions since the acquisition date have not been presented because the effects were not material to the consolidated financial statements on either an individual or an aggregate basis.

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Earnings Per Common Share (Computations for Earnings Per Common Share) (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Sep. 30, 2012		Sep. 30, 2011		Sep. 30, 2012		Sep. 30, 2011
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net Income	$ 401		$ 296		$ 781		$ 582
Weighted average common shares outstanding:
Basic	236		246		236		247
Diluted	240		250		240		252
Earnings Per Common Share
Diluted	$ 1.67	[1]	$ 1.18	[1]	$ 3.25	[1]	$ 2.31	[1]
Basic	$ 1.70	[1]	$ 1.20	[1]	$ 3.31	[1]	$ 2.35	[1]
Options [Member]
Effect of dilutive securities:
Dilutive securities	1		1		1		2
Restricted Stock Units [Member]
Effect of dilutive securities:
Dilutive securities	3		3		3		3

[1] Certain computations may reflect rounding adjustments

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Earnings Per Common Share (Narrative) (Details) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Earnings Per Share [Abstract]
Potentially dilutive shares excluded from diluted earnings per share	2	1	5	4

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Goodwill And Intangible Assets, Net (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense of intangible assets	$ 48	$ 50	$ 99	$ 98
Annual Amortization Expense, 2013	202		202
Annual Amortization Expense, 2014	193		193
Annual Amortization Expense, 2015	173		173
Annual Amortization Expense, 2016	149		149
Annual Amortization Expense, 2017	128		128
Annual Amortization Expense, After 2017	$ 953		$ 953

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Goodwill And Intangible Assets, Net (Changes In The Carrying Amount Of Goodwill) (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Sep. 30, 2012
Goodwill [Line Items]
Goodwill, Beginning Balance	$ 5,032
Goodwill Acquired	91
Foreign Currency Translation Adjustments	5
Goodwill, Ending Balance	5,128
Distribution Solutions [Member]
Goodwill [Line Items]
Goodwill, Beginning Balance	3,190
Goodwill Acquired	86
Foreign Currency Translation Adjustments	8
Goodwill, Ending Balance	3,284
Technology Solutions [Member]
Goodwill [Line Items]
Goodwill, Beginning Balance	1,842
Goodwill Acquired	5
Foreign Currency Translation Adjustments	(3)
Goodwill, Ending Balance	$ 1,844

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Significant Accounting Policies

6 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

Basis of Presentation: The condensed consolidated financial statements of McKesson Corporation (“McKesson,” the “Company,” or “we” and other similar pronouns) include the financial statements of all wholly-owned subsidiaries and majority-owned or controlled companies. We also evaluate our ownership, contractual and other interests in entities to determine if they are variable interest entities (“VIEs”), if we have a variable interest in those entities and the nature and extent of those interests. These evaluations are highly complex and involve judgment and the use of estimates and assumptions based on available historical information and management's judgment, among other factors. Based on our evaluations, if we determine we are the primary beneficiary of such VIEs, we consolidate such entities into our financial statements. The consolidated VIEs are not material to our condensed consolidated financial statements. Intercompany transactions and balances have been eliminated. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in the annual consolidated financial statements.

To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these financial statements and income and expenses during the reporting period. Actual amounts may differ from these estimated amounts. In our opinion, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented.

The results of operations for the quarter and six months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year. These interim financial statements should be read in conjunction with the annual audited financial statements, accounting policies and financial notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012 previously filed with the SEC on May 2, 2012 (“2012 Annual Report”). Certain prior period amounts have been reclassified to conform to the current period presentation.

The Company's fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year shall mean the Company's fiscal year.

Recently Adopted Accounting Pronouncements

In the first quarter of 2013, we adopted amended guidance on a retrospective basis related to the presentation of other comprehensive income. The amended guidance requires that comprehensive income, the components of net income and the components of other comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. We elected to report other comprehensive income and its components in a separate statement of comprehensive income. While the new guidance changed the presentation of comprehensive income, there were no changes to the components that are recognized in net income or other comprehensive income as determined under previous accounting guidance. The amended guidance did not have a material effect on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2011, disclosure guidance related to the offsetting of assets and liabilities was issued. The guidance requires an entity to disclose information about offsetting and related arrangements for recognized financial and derivative instruments to enable users of its financial statements to understand the effect of those arrangements on its financial position. The amended guidance is effective for us on a retrospective basis commencing in the first quarter of 2014. We are currently evaluating the impact of this new guidance on our condensed consolidated financial statements.

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Goodwill And Intangible Assets, Net (Information Regarding Intangible Assets) (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Sep. 30, 2012	Mar. 31, 2012
Intangible assets
Gross Carrying Amount	$ 2,660	$ 2,615
Accumulated Amortization	(961)	(865)
Finite-Lived Intangible Assets, Net	1,699	1,750
Customer Lists [Member]
Intangible assets
Weighted Average Remaining Amortization Period (years)	P6Y
Gross Carrying Amount	1,133	1,081
Accumulated Amortization	(607)	(554)
Finite-Lived Intangible Assets, Net	526	527
Service Agreements [Member]
Intangible assets
Weighted Average Remaining Amortization Period (years)	P18Y
Gross Carrying Amount	1,003	1,022
Accumulated Amortization	(80)	(52)
Finite-Lived Intangible Assets, Net	923	970
Trademarks And Trade Names [Member]
Intangible assets
Weighted Average Remaining Amortization Period (years)	P18Y
Gross Carrying Amount	199	192
Accumulated Amortization	(42)	(38)
Finite-Lived Intangible Assets, Net	157	154
Technology [Member]
Intangible assets
Weighted Average Remaining Amortization Period (years)	P4Y
Gross Carrying Amount	248	244
Accumulated Amortization	(197)	(190)
Finite-Lived Intangible Assets, Net	51	54
Other [Member]
Intangible assets
Weighted Average Remaining Amortization Period (years)	P8Y
Gross Carrying Amount	77	76
Accumulated Amortization	(35)	(31)
Finite-Lived Intangible Assets, Net	$ 42	$ 45

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Subsequent Event Subsequent Event (Details) (PSS World Medical [Member], USD $) In Billions, except Per Share data, unless otherwise specified	Oct. 25, 2012
PSS World Medical [Member]
Subsequent Event [Line Items]
Price Per Share for Acquiring All Outstanding Shares	$ 29.00
Total Transaction Value	$ 2.1

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Condensed Consolidated Statements Of Operations (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Sep. 30, 2012		Sep. 30, 2011		Sep. 30, 2012		Sep. 30, 2011
Income Statement [Abstract]
Revenues	$ 29,850		$ 30,216		$ 60,648		$ 60,196
Cost of Sales	(28,130)		(28,569)		(57,328)		(57,040)
Gross Profit	1,720		1,647		3,320		3,156
Operating Expenses	(1,065)		(1,051)		(2,151)		(2,088)
Litigation Charges	(44)		(118)		(60)		(118)
Gain on Business Combination	0		0		81		0
Total Operating Expenses	(1,109)		(1,169)		(2,130)		(2,206)
Operating Income	611		478		1,190		950
Other Income, Net	10		6		18		14
Interest Expense	(55)		(64)		(111)		(128)
Income Before Income Taxes	566		420		1,097		836
Income Tax Expense	(165)		(124)		(316)		(254)
Net Income	$ 401		$ 296		$ 781		$ 582
Earnings Per Common Share
Diluted	$ 1.67	[1]	$ 1.18	[1]	$ 3.25	[1]	$ 2.31	[1]
Basic	$ 1.70	[1]	$ 1.20	[1]	$ 3.31	[1]	$ 2.35	[1]
Dividends Declared Per Common Share	$ 0.20		$ 0.20		$ 0.40		$ 0.40
Weighted Average Common Shares
Diluted	240		250		240		252
Basic	236		246		236		247

[1] Certain computations may reflect rounding adjustments

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Stockholders' Equity
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	100	100
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	800	800
Common stock, shares issued	376	373
Treasury stock, shares	140	138

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Commitments And Contingent Liabilities Commitments and Contingent Liabilities (Narrative (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended			6 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Loss Contingencies [Line Items]
Litigation settlement payments				$ 438	$ 6
Litigation charges	44		118	60	118
Average Wholesale Price Litigation [Member]
Loss Contingencies [Line Items]
Litigation settlement payments	155			438	6
Litigation charges	44	16	118	60	118
Operating Expense [Member] | Distribution Solutions [Member] | Average Wholesale Price Litigation [Member]
Loss Contingencies [Line Items]
Litigation charges	$ 44		$ 118	$ 60	$ 118

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Goodwill And Intangible Assets, Net (Tables)

6 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Changes In The Carrying Amount Of Goodwill

Changes in the carrying amount of goodwill were as follows:

(In millions)	Distribution Solutions		Technology Solutions			Total
Balance, March 31, 2012	$	3,190	$	1,842		$	5,032
Goodwill acquired	86		5			91
Foreign currency translation adjustments	8		(3		)	5
Balance, September 30, 2012	$	3,284	$	1,844		$	5,128

Information Regarding Intangible Assets

Information regarding intangible assets is as follows:

	September 30, 2012								March 31, 2012
(Dollars in millions)	Weighted Average Remaining Amortization Period (years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer lists	6	$	1,133	$	(607	)	$	526	$	1,081	$	(554	)	$	527
Service agreements	18	1,003		(80		)	923		1,022		(52		)	970
Trademarks and trade names	18	199		(42		)	157		192		(38		)	154
Technology	4	248		(197		)	51		244		(190		)	54
Other	8	77		(35		)	42		76		(31		)	45
Total		$	2,660	$	(961	)	$	1,699	$	2,615	$	(865	)	$	1,750

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Commitments And Contingent Liabilities (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended			6 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Loss Contingencies [Line Items]
Charges incurred	$ 44		$ 118	$ 60	$ 118
Payments Made				(438)	(6)
Average Wholesale Price Litigation [Member]
Loss Contingencies [Line Items]
AWP Litigation Reserve, Beginning Balance		453		453	330
Charges incurred	44	16	118	60	118
Payments Made	(155)			(438)	(6)
AWP Litigation Reserve, Ending Balance	$ 75		$ 442	$ 75	$ 442

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Segment Information (Tables)

6 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Schedule Of Segment Information

Financial information relating to our reportable operating segments and reconciliations to the condensed consolidated totals is as follows:

	Quarter Ended September 30,						Six Months Ended September 30,
(In millions)	2012			2011			2012			2011
Revenues
Distribution Solutions (1)
Direct distribution & services	$	20,938		$	21,072		$	42,239		$	41,899
Sales to customers’ warehouses	4,806			4,909			10,153			9,800
Total U.S. pharmaceutical distribution & services	25,744			25,981			52,392			51,699
Canada pharmaceutical distribution & services	2,409			2,537			4,926			5,266
Medical-Surgical distribution & services	873			873			1,668			1,604
Total Distribution Solutions	29,026			29,391			58,986			58,569
Technology Solutions
Services	656			643			1,322			1,273
Software & software systems	142			153			287			297
Hardware	26			29			53			57
Total Technology Solutions	824			825			1,662			1,627
Total Revenues	$	29,850		$	30,216		$	60,648		$	60,196
Operating profit
Distribution Solutions (2)	$	621		$	477		$	1,121		$	952
Technology Solutions	97			108			190			208
Total	718			585			1,311			1,160
Corporate Expenses, Net (3)	(97		)	(101		)	(103		)	(196		)
Interest Expense	(55		)	(64		)	(111		)	(128		)
Income Before Income Taxes	$	566		$	420		$	1,097		$	836

⁽¹⁾  Revenues derived from services represent less than 2% of this segment’s total revenues.

⁽²⁾  For the second quarters of 2013 and 2012, operating profit includes AWP litigation charges of $44 million and $118 million, and for the first six months of 2013 and 2012, $60 million and $118 million. These charges were recorded in operating expenses. Operating profit for the second quarter and first six months of 2013 includes the receipt of $19 million representing our share of settlements of antitrust class action lawsuits brought against drug manufacturers, which was recorded as a reduction to cost of sales.

⁽³⁾  Corporate expenses for the first six months of 2013 are net of an $81 million gain on business combination.

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Condensed Consolidated Statements Of Cash Flows (USD $) In Millions, unless otherwise specified	6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating Activities
Net Income	$ 781	$ 582
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization	282	271
Other deferred taxes	251	26
Share-based compensation expense	82	78
Gain on business combination	(81)	0
Other non-cash items	20	26
Changes in operating assets and liabilities, net of acquisitions:
Receivables	219	(435)
Inventories	16	(269)
Drafts and accounts payable	(629)	880
Deferred revenue	147	191
Taxes	(117)	129
Litigation charges	60	118
Litigation settlement payments	(438)	(6)
Deferred tax expense (benefit) on litigation charges	147	(39)
Other	(281)	(157)
Net cash provided by operating activities	459	1,395
Investing Activities
Property acquisitions	(86)	(126)
Capitalized software expenditures	(81)	(101)
Acquisitions, less cash and cash equivalents acquired	(251)	(194)
Other	67	72
Net cash used in investing activities	(351)	(349)
Financing Activities
Proceeds from short-term borrowings	1,125	0
Repayments of short-term borrowings	(1,525)	0
Repayments of long-term debt	0	(17)
Common stock transactions:
Issuances	80	82
Share repurchases, including shares surrendered for tax withholding	(53)	(672)
Dividends paid	(100)	(97)
Other	40	19
Net cash used in financing activities	(433)	(685)
Effect of exchange rate changes on cash and cash equivalents	7	(30)
Net increase (decrease) in cash and cash equivalents	(318)	331
Cash and cash equivalents at beginning of period	3,149	3,612
Cash and cash equivalents at end of period	$ 2,831	$ 3,943

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Statements of Comprehensive Income [Abstract]
Net Income	$ 401	$ 296	$ 781	$ 582
Other Comprehensive Income (Loss), net of tax
Foreign Currency Translation Adjustments, Net of Income Tax Expense (Benefit) of ($2), $1, $2 and $8	71	(128)	30	(117)
Other, Net of Income Tax Expense of $2, $1, $5 and $4	5	4	11	9
Total Other Comprehensive Income (Loss)	76	(124)	41	(108)
Comprehensive Income	$ 477	$ 172	$ 822	$ 474

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Segment Information

6 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Segment Information

Segment Information

We report our operations in two operating segments: McKesson Distribution Solutions and McKesson Technology Solutions. The factors for determining the reportable segments included the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities. We evaluate the performance of our operating segments on a number of measures, including operating profit before interest expense, income taxes and results from discontinued operations.

Financial information relating to our reportable operating segments and reconciliations to the condensed consolidated totals is as follows:

	Quarter Ended September 30,						Six Months Ended September 30,
(In millions)	2012			2011			2012			2011
Revenues
Distribution Solutions (1)
Direct distribution & services	$	20,938		$	21,072		$	42,239		$	41,899
Sales to customers’ warehouses	4,806			4,909			10,153			9,800
Total U.S. pharmaceutical distribution & services	25,744			25,981			52,392			51,699
Canada pharmaceutical distribution & services	2,409			2,537			4,926			5,266
Medical-Surgical distribution & services	873			873			1,668			1,604
Total Distribution Solutions	29,026			29,391			58,986			58,569
Technology Solutions
Services	656			643			1,322			1,273
Software & software systems	142			153			287			297
Hardware	26			29			53			57
Total Technology Solutions	824			825			1,662			1,627
Total Revenues	$	29,850		$	30,216		$	60,648		$	60,196
Operating profit
Distribution Solutions (2)	$	621		$	477		$	1,121		$	952
Technology Solutions	97			108			190			208
Total	718			585			1,311			1,160
Corporate Expenses, Net (3)	(97		)	(101		)	(103		)	(196		)
Interest Expense	(55		)	(64		)	(111		)	(128		)
Income Before Income Taxes	$	566		$	420		$	1,097		$	836

⁽¹⁾  Revenues derived from services represent less than 2% of this segment’s total revenues.

⁽²⁾  For the second quarters of 2013 and 2012, operating profit includes AWP litigation charges of $44 million and $118 million, and for the first six months of 2013 and 2012, $60 million and $118 million. These charges were recorded in operating expenses. Operating profit for the second quarter and first six months of 2013 includes the receipt of $19 million representing our share of settlements of antitrust class action lawsuits brought against drug manufacturers, which was recorded as a reduction to cost of sales.

⁽³⁾  Corporate expenses for the first six months of 2013 are net of an $81 million gain on business combination.

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Document and Entity Information Document	6 Months Ended
	Sep. 30, 2012
Document And Entity Information [Abstract]
Entity Registrant Name	MCKESSON CORP
Entity Central Index Key	0000927653
Current Fiscal Year End Date	--03-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding	236,039,739

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Subsequent Event

6 Months Ended

Sep. 30, 2012

Subsequent Event [Abstract]

Subsequent Events [Text Block]

Subsequent Event

On October 25, 2012, we entered into a definitive agreement to acquire all outstanding shares of PSS World Medical, Inc. (“PSS World Medical”) of Jacksonville, Florida for $29.00 per share in cash. The total transaction, including the assumption of PSS World Medical’s outstanding debt, is valued at approximately $2.1 billion. PSS World Medical markets and distributes medical products and services throughout the United States. The acquisition is subject to customary closing conditions, including all necessary regulatory clearances and the approval of PSS World Medical’s shareholders. After the closing, the operations of PSS World Medical will be included in the results of our Medical-Surgical business, which is part of our Distribution Solutions segment.

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Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Statements of Comprehensive Income Parentheticals [Abstract]
Foreign currency translation adjustments, tax expense (benefit)	$ (2)	$ 1	$ 2	$ 8
Other, tax expense	$ 2	$ 1	$ 5	$ 4

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Goodwill And Intangible Assets, Net

6 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill And Intangible Assets, Net

Goodwill and Intangible Assets, Net

Changes in the carrying amount of goodwill were as follows:

(In millions)	Distribution Solutions		Technology Solutions			Total
Balance, March 31, 2012	$	3,190	$	1,842		$	5,032
Goodwill acquired	86		5			91
Foreign currency translation adjustments	8		(3		)	5
Balance, September 30, 2012	$	3,284	$	1,844		$	5,128

Information regarding intangible assets is as follows:

	September 30, 2012								March 31, 2012
(Dollars in millions)	Weighted Average Remaining Amortization Period (years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer lists	6	$	1,133	$	(607	)	$	526	$	1,081	$	(554	)	$	527
Service agreements	18	1,003		(80		)	923		1,022		(52		)	970
Trademarks and trade names	18	199		(42		)	157		192		(38		)	154
Technology	4	248		(197		)	51		244		(190		)	54
Other	8	77		(35		)	42		76		(31		)	45
Total		$	2,660	$	(961	)	$	1,699	$	2,615	$	(865	)	$	1,750

Amortization expense of intangible assets was $48 million and $99 million for the quarter and six months ended September 30, 2012 and $50 million and $98 million for the quarter and six months ended September 30, 2011. Estimated annual amortization expense of these assets is as follows: $202 million, $193 million, $173 million, $149 million and $128 million for 2013 through 2017 and $953 million thereafter. All intangible assets were subject to amortization as of September 30, 2012 and March 31, 2012.

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Earnings Per Common Share

6 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share are computed similar to basic earnings per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.

The computations for basic and diluted earnings per common share are as follows:

	Quarter Ended September 30,				Six Months Ended September 30,
(In millions, except per share amounts)	2012		2011		2012		2011
Net income	$	401	$	296	$	781	$	582
Weighted average common shares outstanding:
Basic	236		246		236		247
Effect of dilutive securities:
Options to purchase common stock	1		1		1		2
Restricted stock units	3		3		3		3
Diluted	240		250		240		252
Earnings per common share: (1)
Diluted	$	1.67	$	1.18	$	3.25	$	2.31
Basic	$	1.70	$	1.20	$	3.31	$	2.35

⁽¹⁾  Certain computations may reflect rounding adjustments.

Potentially dilutive securities include outstanding stock options, restricted stock units and performance-based restricted stock units. Approximately 2 million and 1 million of potentially dilutive securities were excluded from the computations of diluted net earnings per common share for second quarters of 2013 and 2012 and 5 million and 4 million for the first six months of 2013 and 2012, as they were anti-dilutive.

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Commitments And Contingent Liabilities Commitments And Contingent Liabilities (Tables) (Average Wholesale Price Litigation [Member])

6 Months Ended

Sep. 30, 2012

Average Wholesale Price Litigation [Member]

Loss Contingencies [Line Items]

Schedule of Litigation Reserve and Expense [Table Text Block]

The following is the activity related to the AWP litigation reserve for the first six months of 2013 and 2012:

	Six Months Ended September 30,
(In millions)	2012			2011
AWP litigation reserve at beginning of period	$	453		$	330
Charges incurred	60			118
Payments made	(438		)	(6		)
AWP litigation reserve at end of period	$	75		$	442

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Significant Accounting Policies (Policy)

6 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation: The condensed consolidated financial statements of McKesson Corporation (“McKesson,” the “Company,” or “we” and other similar pronouns) include the financial statements of all wholly-owned subsidiaries and majority-owned or controlled companies. We also evaluate our ownership, contractual and other interests in entities to determine if they are variable interest entities (“VIEs”), if we have a variable interest in those entities and the nature and extent of those interests. These evaluations are highly complex and involve judgment and the use of estimates and assumptions based on available historical information and management's judgment, among other factors. Based on our evaluations, if we determine we are the primary beneficiary of such VIEs, we consolidate such entities into our financial statements. The consolidated VIEs are not material to our condensed consolidated financial statements. Intercompany transactions and balances have been eliminated. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in the annual consolidated financial statements.

Use Of Estimates

To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these financial statements and income and expenses during the reporting period. Actual amounts may differ from these estimated amounts. In our opinion, the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented.

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Commitments And Contingent Liabilities

6 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments And Contingent Liabilities

Commitments and Contingent Liabilities

In addition to commitments and obligations in the ordinary course of business, we are subject to various claims, other pending and potential legal actions for damages, investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of our business. As described below, many of these proceedings are at preliminary stages and many seek an indeterminate amount of damages.

When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. Moreover, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must be reevaluated at least quarterly to determine both the likelihood of potential loss and whether it is possible to reasonably estimate a range of possible loss. When a loss is probable but a reasonable estimate cannot be made, disclosure of the proceeding is provided.

Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. We review all contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made. As discussed above, development of a meaningful estimate of loss or a range of potential loss is complex when the outcome is directly dependent on negotiations with or decisions by third parties, such as regulatory agencies, the court system and other interested parties. Such factors bear directly on whether it is possible to reasonably estimate a range of potential loss and boundaries of high and low estimates.

Significant developments in previously reported proceedings and in other litigation and claims, since the filing of our 2012 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the period ended June 30, 2012, are set out below. Unless otherwise stated, we are currently unable to estimate a range of reasonably possible losses for the unresolved proceedings described below. Should any one or a combination of more than one of these proceedings be successful, or should we determine to settle any or a combination of these matters, we may be required to pay substantial sums, become subject to the entry of an injunction or be forced to change the manner in which we operate our business, which could have a material adverse impact on our financial position or results of operations.

I. Average Wholesale Price Litigation and Claims

The following matters involve a benchmark referred to as Average Wholesale Price (“AWP”), which is utilized by some public and private payers to calculate a portion of the amount that pharmacies and other providers are reimbursed for dispensing certain covered prescription drugs.

State AWP Medicaid Settlements

On July 30, 2012, the Company paid approximately $155 million to various states pursuant to the previously announced settlement agreements sponsored by a coalition of State Attorneys General. On August 13, 2012, the State of Indiana, pursuant to its settlement agreement with the Company, filed a notice dismissing with prejudice the claims asserted against the Company in the previously reported action filed in Indiana state court by the State of Indiana, State of Indiana v. McKesson Corp. et al., (No. 49D11-1106-PL-021595). On August 27, 2012, the State of Michigan, pursuant to its settlement agreement with the Company, filed a notice dismissing with prejudice the claims asserted against the Company in the previously reported action filed in Michigan state court by the State of Michigan, Bill Schuette ex rel. State of Michigan v. McKesson Corporation, et al., (No.11-629-CZ). On September 17, 2012, the settling states on whose behalf claims were filed against the Company in the previously reported qui tam action filed in the United States District Court for the District of New Jersey, United States et al. ex rel. Morgan v. Express Scripts et al., (No. 05-1714), filed a notice dismissing those claims to the extent those claims were encompassed by the settlement release in the parties’ agreements.

The Mississippi Action

On August 17, 2012, the court entered an order continuing the March 18, 2013 trial date to September 3, 2013, in the previously reported action filed in Mississippi state court by the State of Mississippi against the Company, State of Mississippi v. McKesson Corporation, et al., (No. 251-10-862CIV). Discovery is ongoing.

The Utah Action

On August 22, 2012, the Company entered into an agreement with the State of Utah in settlement of the previously reported action filed in the United States District Court for the Northern District of California by the State of Utah against the Company as the sole defendant, State of Utah v. McKesson Corporation, et al., (No. CV 10-4743-SC). On September 7, 2012, pursuant to the parties’ settlement agreement, the parties filed a stipulation dismissing the Utah Action with prejudice.

The Virginia Action

On August 29, 2012, the court entered an order moving the March 11, 2013 trial date to July 8, 2013 in the previously reported action filed in the United States District Court for the Northern District of California by the Commonwealth of Virginia against the Company and two of its employees, Commonwealth of Virginia v. McKesson Corporation, et al., (C11-02782-SI). Discovery is ongoing.

The Arizona Administrative Proceeding

On September 6, 2012, the Arizona court of appeals issued an order affirming the trial court’s order enjoining the Arizona Health Care Cost Containment System (“AHCCCS”) from prosecuting or reinitiating any penalty proceeding against the Company in the previously reported action filed in Arizona state court by the Company against AHCCCS and its Director, McKesson Corporation v. AHCCCS, (No. CV-2011-004446). The time for the filing of a petition for review has expired and no such petition was filed.

Shareholder Derivative Action

On September 10, 2012, a derivative action was filed in California Superior Court, San Francisco County, by a shareholder purportedly on behalf of the Company against certain past and present officers and directors of the Company, alleging that they breached their fiduciary duties and wasted Company assets by failing to prevent the underlying conduct that resulted in the Company’s AWP litigation, and seeking damages, corporate governance and procedural reforms, equitable and injunctive relief, restitution, disgorgement of profits, as well as attorneys’ fees and costs of suit, all in unspecified amounts, Daniel Himmel v. John Hammergren et al., (12-524074).  To date, no response to the complaint has been filed.

The Arizona Action

On September 14, 2012, an action was filed in Arizona state court, Maricopa County, by the State of Arizona against the Company asserting claims under the Arizona Consumer Fraud Act, and seeking injunctive relief, restitution, civil penalties, as well as attorneys’ fees and costs of suit, all in unspecified amounts, State of Arizona ex rel. Thomas Horne v. McKesson Corporation, (No. CV2012-013707). The Company has not yet responded to the complaint.

The Kansas Action

On September 28, 2012, the court granted defendant First Databank’s motion to continue the May 28, 2013 trial date to December 2, 2013, in the previously reported action filed in Kansas state court by the State of Kansas against the Company, State of Kansas ex rel. Steve Six v. McKesson Corporation, et al., (No. 10CV1491).

The Wisconsin Action

On October 2, 2012, an action was filed in Wisconsin state court, Dane County, by the State of Wisconsin against the Company, First Databank, the Hearst Corporation, and Hearst Business Media asserting claims under Wisconsin consumer protection and false claims statutes, and for civil conspiracy, and seeking damages, treble damages, civil penalties, forfeitures, injunctive relief, as well as attorneys’ fees and costs of suit, all in unspecified amounts, State of Wisconsin v. McKesson Corporation, et al., (12CV3948). The Company has not yet responded to the complaint.

The Oregon Action

On October 9, 2012, the Company entered into an agreement with the State of Oregon in settlement of the previously reported action filed in the United States District Court for the Northern District of California by the State of Oregon against the Company as the sole defendant, State of Oregon v. McKesson Corporation, et al., (No. C11-05384-SI). On October 18, 2012, pursuant to the settlement agreement, the parties filed a stipulation dismissing the Oregon Action with prejudice.

The Company has a reserve relating to AWP public entity claims, which is reviewed at least quarterly and whenever events or circumstances indicate changes, including consideration of the pace and progress of discussions relating to potentially resolving other public entity claims. Following our most recent review of the reserve for estimated probable losses from current and possible future public entity AWP claims, the Company recorded pre-tax charges of $16 million and $44 million (total of $60 million) during the first and second quarters of 2013. The Company recorded a pre-tax charge of $118 million during the second quarter and first six months of 2012. Pre-tax charges relating to changes in the Company’s AWP litigation reserve, including accrued interest, are recorded in our Distribution Solutions segment. The Company’s AWP litigation reserve is included in other current liabilities in the consolidated balance sheets. In view of the number of outstanding cases and expected future claims, and the uncertainties of the timing and outcome of this type of litigation, it is possible that the ultimate costs of these matters may exceed or be less than the reserve.

The following is the activity related to the AWP litigation reserve for the first six months of 2013 and 2012:

	Six Months Ended September 30,
(In millions)	2012			2011
AWP litigation reserve at beginning of period	$	453		$	330
Charges incurred	60			118
Payments made	(438		)	(6		)
AWP litigation reserve at end of period	$	75		$	442

II. Other Litigation

On September 28, 2012, the Court entered judgment after trial in favor of the Company and its former indirect subsidiary, McKesson Medical-Surgical MediNet Inc., now merged into and doing business as McKesson Medical-Surgical MediMart Inc., finding no liability under the False Claims Act in the previously reported action, United States ex rel. Jamison v. McKesson Corporation, et al., (No. 2:08-CV-00214-SA). To date, no appeal by the United States has been filed.

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Financing Activities

6 Months Ended

Sep. 30, 2012

Debt Disclosure [Abstract]

Financing Activities

Financing Activities

Accounts Receivable Sales Facility

In May 2012, we renewed our existing accounts receivable sales facility (the “Facility”) for a one year period under terms substantially similar to those previously in place. The committed balance of the Facility is $1.35 billion, although from time-to-time, the available amount of the Facility may be less than $1.35 billion based on accounts receivable concentration limits and other eligibility requirements. The renewed Facility will expire in May 2013.

During the six months ended September 30, 2011, there were no borrowings under the Facility. At March 31, 2012, there were $400 million in secured borrowings and $400 million of related securitized accounts receivable outstanding under the Facility, which are included in short-term borrowings and receivables in the condensed consolidated balance sheets. During the first quarter of 2013, we repaid $400 million of short-term borrowings using cash on hand. During the second quarter of 2013, there were a total of $1,125 million of short-term borrowings under the Facility all of which were repaid using cash on hand. At September 30, 2012, there were no short-term borrowings and related securitized accounts receivables outstanding under the Facility.

The Facility contains requirements relating to the performance of the accounts receivable and covenants relating to the Company. If we do not comply with these covenants, our ability to use the Facility may be suspended and repayment of any outstanding balances under the Facility may be required. At September 30, 2012 and March 31, 2012, we were in compliance with all covenants.

Revolving Credit Facility

We have a syndicated $1.3 billion five-year senior unsecured revolving credit facility, which expires in September 2016. Borrowings under this facility bear interest based upon either the London Interbank Offered Rate or a prime rate. There were no borrowings under this facility during the first six months of 2013 and 2012. As of September 30, 2012 and March 31, 2012 there were no amounts outstanding under this facility.

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Financial Instruments and Hedging Activities

6 Months Ended

Sep. 30, 2012

Financial Instruments and Hedging Activity [Abstract]

Financial Instruments and Hedging Activities

Financial Instruments and Hedging Activities

At September 30, 2012 and March 31, 2012, the carrying amounts of cash and cash equivalents, restricted cash, marketable securities, receivables, drafts and accounts payable, short-term borrowings and other current liabilities approximated their estimated fair values because of the short maturity of these financial instruments. All highly liquid debt instruments purchased with original maturity of three months or less at the date of acquisition are included in cash and cash equivalents. Included in cash and cash equivalents at September 30, 2012 and March 31, 2012 were money market fund investments of $1.1 billion and $0.8 billion, which are reported at fair value. The fair value of these investments was determined by using quoted prices for identical investments in active markets, which are considered to be Level 1 inputs under the fair value measurements and disclosure guidance. The carrying value of all other cash equivalents approximates their fair value due to their relatively short-term nature.

The carrying amounts and estimated fair values of our long-term debt and other financing were $3.6 billion and $4.2 billion at September 30, 2012, and $3.6 billion and $4.1 billion at March 31, 2012. The estimated fair value of our long-term debt and other financing was determined using quoted market prices and other inputs that were derived from available market information, which are considered to be Level 2 inputs under the fair value measurements and disclosure guidance, and may not be representative of actual values that could have been realized or that will be realized in the future.

In 2012, we entered into a number of forward contracts to hedge Canadian dollar and British pound denominated cash flows with gross notional values of $528 million and $151 million. The contracts to hedge Canadian dollar denominated cash flows mature over a period of eight years and have been designated for hedge accounting. Accordingly, changes in the fair value of these contracts are recorded to accumulated other comprehensive income and reclassified into earnings in the same period in which the hedged transaction affects earnings.  The contracts to hedge British pound denominated cash flows matured and were settled in the first quarter of 2013 and were not designated for hedge accounting. Accordingly, changes in the fair value of these contracts were recorded directly in earnings. At September 30, 2012 and March 31, 2012, the fair value of the outstanding contracts was not material.  Fair values of these derivatives were determined by using Level 2 inputs under the fair value measurements and disclosure guidance and may not be representative of actual values that could have been realized or that will be realized in the future. Amounts recorded to earnings for 2013 and 2012 were also not material.

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Stockholders' Equity

6 Months Ended

Sep. 30, 2012

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

Each share of the Company’s outstanding common stock is permitted one vote on proposals presented to stockholders and is entitled to share equally in any dividends declared by the Company's Board of Directors (the “Board”).

In March 2012, we entered into an accelerated share repurchase program with a third party financial institution to repurchase $1.2 billion of the Company’s common stock. The program was funded with cash on hand. As of March 31, 2012, we had received 12.0 million shares representing the minimum number of shares due under this program.  This program was completed in multiple tranches, and we received 0.9 million additional shares during the first quarter of 2013. In July 2012, we received 0.6 million additional shares upon completion of this program. The total number of shares repurchased under this program was 13.5 million shares at an average price per share of $89.10.

In April 2012, the Board authorized the repurchase of an additional $700 million of the Company’s common stock, bringing the total authorization outstanding to $1.0 billion at September 30, 2012.

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Financial Instruments and Hedging Activities (Details) (USD $)							6 Months Ended
	Sep. 30, 2012	Mar. 31, 2012	Sep. 30, 2012 Fair Value, Inputs, Level 1 [Member] Money Market Funds [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 1 [Member] Money Market Funds [Member]	Sep. 30, 2012 Fair Value, Inputs, Level 2 [Member]	Mar. 31, 2012 Fair Value, Inputs, Level 2 [Member]	Sep. 30, 2012 Designated as Hedging Instrument [Member]	Mar. 31, 2012 Designated as Hedging Instrument [Member] Fair Value, Inputs, Level 2 [Member]	Mar. 31, 2012 Not Designated as Hedging Instrument [Member] Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Money market fund investments			$ 1,100,000,000	$ 800,000,000
Long-term debt and other financing, carrying value	3,600,000,000	3,600,000,000
Long-term debt and other financing, fair value					4,200,000,000	4,100,000,000
Maturity Period, Years							8 years
Notional Amount of Foreign Currency Derivatives								$ 528,000,000	$ 151,000,000

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Earnings Per Common Share (Tables)

6 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Basic And Diluted Earnings Per Common Share

The computations for basic and diluted earnings per common share are as follows:

	Quarter Ended September 30,				Six Months Ended September 30,
(In millions, except per share amounts)	2012		2011		2012		2011
Net income	$	401	$	296	$	781	$	582
Weighted average common shares outstanding:
Basic	236		246		236		247
Effect of dilutive securities:
Options to purchase common stock	1		1		1		2
Restricted stock units	3		3		3		3
Diluted	240		250		240		252
Earnings per common share: (1)
Diluted	$	1.67	$	1.18	$	3.25	$	2.31
Basic	$	1.70	$	1.20	$	3.31	$	2.35

⁽¹⁾  Certain computations may reflect rounding adjustments.

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Business Combinations (Fair Value Of Assets Acquired And Liabilities Assumed) (Details) (Katz Group [Member], USD $) In Millions, unless otherwise specified	Mar. 31, 2012 Amounts Previously Recognized As Of Acquisition Date (Provisional) [Member]		Sep. 30, 2012 Purchase Price Allocation Adjustments [Member]	Sep. 30, 2012 Amounts Recognized As Of Acquisition Date As Adjusted [Member]
Business Acquisition [Line Items]
Current assets, net of cash acquired	$ 33	[1]	$ (1)	$ 32
Business Acquisition, Purchase Price Allocation, Goodwill Amount	506	[1]	6	512
Intangible assets	441	[1]	1	442
Other long-term assets	15	[1]	(1)	14
Current liabilities	(37)	[1]	1	(36)
Long-term deferred tax liabilities	(39)	[1]	0	(39)
Purchase Price, Less Cash and Cash Equivalents	$ 919	[1]	$ 6	$ 925

[1] As previously reported in our Form 10-K for the year ended March 31, 2012.

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Condensed Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Sep. 30, 2012	Mar. 31, 2012
Current Assets
Cash and cash equivalents	$ 2,831	$ 3,149
Receivables, net	9,823	9,977
Inventories, net	10,070	10,073
Prepaid expenses and other	367	404
Total Current Assets	23,091	23,603
Property, Plant and Equipment, Net	1,223	1,043
Goodwill	5,128	5,032
Intangible Assets, Net	1,699	1,750
Other Assets	1,827	1,665
Total Assets	32,968	33,093
Current Liabilities
Drafts and accounts payable	15,501	16,114
Short-term borrowings	0	400
Deferred revenue	1,528	1,423
Deferred tax liabilities	1,710	1,092
Current portion of long-term debt	508	508
Other accrued liabilities	1,503	2,149
Total Current Liabilities	20,750	21,686
Long-term Debt	3,073	3,072
Other Noncurrent Liabilities	1,430	1,504
Commitments and Contingent Liabilities (Note 8)
Stockholders' Equity
Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding	0	0
Common stock, $0.01 par value, 800 shares authorized at September 30, 2012 and March 31, 2012, 376 and 373 shares issued at September 30, 2012 and March 31, 2012	4	4
Additional Paid-in Capital	5,948	5,571
Retained Earnings	10,135	9,451
Accumulated Other Comprehensive Income	46	5
Other	15	4
Treasury Shares, at Cost, 140 and 138 at September 30, 2012 and March 31, 2012	(8,433)	(8,204)
Total Stockholders' Equity	7,715	6,831
Total Liabilities and Stockholders' Equity	$ 32,968	$ 33,093

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Income Taxes

6 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

As of September 30, 2012, we had $523 million of unrecognized tax benefits, of which $397 million would reduce income tax expense and the effective tax rate, if recognized. During the first six months of 2013, we recorded an $82 million reduction to our gross unrecognized tax benefits as a result of a change in accounting method for tax purposes, which had no impact to the effective tax rate. During the next twelve months, it is reasonably possible that audit resolutions and the expiration of statutes of limitations could potentially reduce our unrecognized tax benefits by up to $158 million. However, this amount may change because we continue to have ongoing negotiations with various taxing authorities throughout the year.

We have received tax assessments of $98 million from the U.S. Internal Revenue Service (“IRS”) relating to 2003 through 2006. We disagree with a substantial portion of the tax assessments, which primarily relate to transfer pricing. We are pursuing administrative relief through the appeals process. We have also received assessments from the Canada Revenue Agency (“CRA”) for a total of $169 million related to transfer pricing for 2003 through 2007. We have appealed the assessment for 2003 to the Tax Court of Canada and have filed a notice of objection for 2004 through 2007. The trial between McKesson Canada Corporation and the CRA, argued in the Tax Court of Canada, concluded in early February 2012, and we are waiting for the decision. We continue to believe in the merits of our tax positions and that we have adequately provided for any potential adverse results relating to these examinations in our financial statements. However, the final resolution of these issues could result in an increase or decrease to income tax expense.

In November 2011, the IRS began its examination of 2007 through 2009. In nearly all jurisdictions, the tax years prior to 2003 are no longer subject to examination. We believe that we have made adequate provision for all income tax uncertainties.

We report interest and penalties on tax deficiencies as income tax expense. At September 30, 2012, before any tax benefits, our accrued interest on unrecognized tax benefits amounted to $121 million. We recognized an income tax expense of $2 million and a reduction in income tax expense of $18 million, before any tax benefit, related to interest in our condensed consolidated statements of operations during the second quarter and first six months of 2013. The income tax benefit recognized during the first six months of 2013 was primarily due to the reversal of accrued interest resulting from the reduction of our gross unrecognized tax benefits. We have no material amounts accrued for penalties.

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
Income Tax [Line Items]
Unrecognized tax benefits	$ 523	$ 523
Unrecognized tax benefits that would impact income tax expense and the effective tax rate	397	397
Unrecognized Tax Benefits, Decreases Resulting from Prior Period Tax Positions		82
Potential reduction of unrecognized benefits due to audit resolutions and expiration of statutes of limitations	(158)	(158)
Accrued interest on unrecognized tax benefits	121	121
Income Tax Benefit Related to Accrued Interest Expense	2	(18)
Canada Revenue Agency Assessments [Member]
Income Tax [Line Items]
Tax assessments received relating to transfer pricing issues		169
Periods For Which Tax Assessments Were Received		2003 through 2007
Year for which assessment is appealed		2003
Periods For Which Tax Assessments Are Objected		2004 through 2007
Internal Revenue Service (IRS) [Member]
Income Tax [Line Items]
Tax assessments received relating to transfer pricing issues		$ 98
Periods For Which Tax Assessments Were Received		2003 through 2006
Periods Of Examination		2007 through 2009

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Segment Information (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended			6 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Segment Reporting Information [Line Items]
Litigation charges	$ 44		$ 118	$ 60	$ 118
Gain on Business Combination	0		0	81	0
Distribution Solutions [Member]
Segment Reporting Information [Line Items]
Percentage of revenue derived from services for Distributions Solutions segment	less than 2%		less than 2%	less than 2%	less than 2%
Corporate [Member]
Segment Reporting Information [Line Items]
Gain on Business Combination				81
Average Wholesale Price Litigation [Member]
Segment Reporting Information [Line Items]
Litigation charges	44	16	118	60	118
Operating Expense [Member] | Average Wholesale Price Litigation [Member] | Distribution Solutions [Member]
Segment Reporting Information [Line Items]
Litigation charges	44		118	60	118
Cost of Sales [Member] | Distribution Solutions [Member]
Segment Reporting Information [Line Items]
Proceeds from Legal Settlements	$ 19			$ 19

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Business Combinations (Tables) (Katz Group [Member])

6 Months Ended

Sep. 30, 2012

Katz Group [Member]

Business Acquisition [Line Items]

Fair Value Of Assets Acquired And Liabilities Assumed

(In millions)	Amounts Previously Recognized as of Acquisition Date (Provisional) (1)			Measurement Period Adjustments			Amounts Recognized as of Acquisition Date (Final as Adjusted)
Current assets, net of cash acquired	$	33		$	(1	)	$	32
Goodwill	506			6			512
Intangible assets	441			1			442
Other long-term assets	15			(1		)	14
Current liabilities	(37		)	1			(36		)
Long-term deferred tax liabilities	(39		)	—			(39		)
Purchase price, less cash and cash equivalents	$	919		$	6		$	925

⁽¹⁾  As previously reported in our Form 10-K for the year ended March 31, 2012.