Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September~~June 30, ~~2022~~2023


☐			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.)

6555 State Hwy 161,

Irving, TX 75039

(Address of principal executive offices, including zip code)

(972) 446-4800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)
Common stock, $0.01 par value	MCK	New York Stock Exchange
1.500% Notes due 2025	MCK25	New York Stock Exchange
1.625% Notes due 2026	MCK26	New York Stock Exchange
3.125% Notes due 2029	MCK29	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. ~~141,793,480~~134,902,380 shares of the issuer’s common stock were outstanding as of ~~September~~June 30, ~~2022.~~2023.

Table of Contents

McKESSON CORPORATION

TABLE OF CONTENTS


Item	Item		Page	Item		Page

		PART I—FINANCIAL INFORMATION			PART I—FINANCIAL INFORMATION

1	1	Condensed Consolidated Financial Statements		1	Condensed Consolidated Financial Statements

		Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2022 and 2021	3

		Condensed Consolidated Statements of Comprehensive Income for the three and six months ended September 30, 2022 and 2021	4

		Condensed Consolidated Balance Sheets as of September 30, 2022 and March 31, 2022	5		Condensed Consolidated Statements of Operations for the three months ended June 30, 2023 and 2022	3

		Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and six months ended September 30, 2022 and 2021	6		Condensed Consolidated Statements of Comprehensive Income for the three months ended June 30, 2023 and 2022	4

		Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2022 and 2021	8		Condensed Consolidated Balance Sheets as of June 30, 2023 and March 31, 2023	5

		Financial Notes	9		Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended June 30, 2023 and 2022	6

		Note 1 - Significant Accounting Policies	9		Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2023 and 2022	7

		Note 2 - Business Acquisitions and Divestitures	10		Financial Notes	8

		Note 3 - Restructuring, Impairment, and Related Charges, Net	13		Note 1 - Significant Accounting Policies	8

		Note 4 - Income Taxes	16		Note 2 - Business Acquisitions and Divestitures	9

		Note 5 - Redeemable Noncontrolling Interests and Noncontrolling Interests	17		Note 3 - Restructuring, Impairment, and Related Charges, Net	12

		Note 6 - Earnings (Loss) per Common Share	19		Note 4 - Income Taxes	13

		Note 7 - Goodwill and Intangible Assets, Net	20		Note 5 - Earnings P er Common Share	14

		Note 8 - Debt and Financing Activities	22		Note 6 - Goodwill and Intangible Assets, Net	15

		Note 9 - Pension Benefits	23		Note 7 - Debt and Financing Activities	17

		Note 10 - Hedging Activities	23		Note 8 - Hedging Activities	19

		Note 11 - Fair Value Measurements	27		Note 9 - Fair Value Measurements	22

		Note 12 - Commitments and Contingent Liabilities	29		Note 10 - Commitments and Contingent Liabilities	24

		Note 13 - Stockholders’ Equity (Deficit)	32		Note 11 - Stockholders’ Deficit	26

		Note 14 - Segments of Business	36		Note 12 - Segments of Business	29

2	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

3	3	Quantitative and Qualitative Disclosures About Market Risk	58	3	Quantitative and Qualitative Disclosures About Market Risk	44

4	4	Controls and Procedures	59	4	Controls and Procedures	45

		PART II—OTHER INFORMATION			PART II—OTHER INFORMATION

1	1	Legal Proceedings	60	1	Legal Proceedings	46

1A	1A	Risk Factors	60	1A	Risk Factors	46

2	2	Unregistered Sales of Equity Securities and Use of Proceeds	60	2	Unregistered Sales of Equity Securities and Use of Proceeds	46

3	3	Defaults Upon Senior Securities	60	3	Defaults Upon Senior Securities	47

4	4	Mine Safety Disclosures	61	4	Mine Safety Disclosures	47

5	5	Other Information	61	5	Other Information	47

6	6	Exhibits	62	6	Exhibits	48

		Signatures	63		Signatures	49

Table of Contents

McKESSON CORPORATION

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended June 30,
		2022		2021		2022		2021			2023		2022
Revenues	Revenues	$	70,157	$	66,576	$	137,311	$	129,250	Revenues	$	74,483	$	67,154
Cost of sales	Cost of sales	(67,062)		(63,224)		(131,193)		(122,866)		Cost of sales	(71,461)		(64,131)
Gross profit	Gross profit	3,095		3,352		6,118		6,384		Gross profit	3,022		3,023
Selling, distribution, general, and administrative expenses	Selling, distribution, general, and administrative expenses	(1,950)		(2,669)		(3,909)		(4,901)		Selling, distribution, general, and administrative expenses	(1,870)		(1,959)
Claims and litigation charges, net	Claims and litigation charges, net	9		(112)		4		(186)		Claims and litigation charges, net	—		(5)

Restructuring, impairment, and related charges, net	Restructuring, impairment, and related charges, net	(30)		(32)		(53)		(190)		Restructuring, impairment, and related charges, net	(52)		(23)
Total operating expenses	Total operating expenses	(1,971)		(2,813)		(3,958)		(5,277)		Total operating expenses	(1,922)		(1,987)
Operating income	Operating income	1,124		539		2,160		1,107		Operating income	1,100		1,036
Other income, net	Other income, net	175		139		190		182		Other income, net	38		15
Loss on debt extinguishment		—		(191)		—		(191)

Interest expense	Interest expense	(55)		(45)		(100)		(94)		Interest expense	(47)		(45)
Income from continuing operations before income taxes	Income from continuing operations before income taxes	1,244		442		2,250		1,004		Income from continuing operations before income taxes	1,091		1,006
Income tax expense	Income tax expense	(271)		(132)		(470)		(158)		Income tax expense	(94)		(199)
Income from continuing operations	Income from continuing operations	973		310		1,780		846		Income from continuing operations	997		807
Loss from discontinued operations, net of tax		(6)		—		(4)		(3)
Income from discontinued operations, net of tax										Income from discontinued operations, net of tax	—		2
Net income	Net income	967		310		1,776		843		Net income	997		809
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(41)		(43)		(82)		(90)		Net income attributable to noncontrolling interests	(39)		(41)
Net income attributable to McKesson Corporation	Net income attributable to McKesson Corporation	$	926	$	267	$	1,694	$	753	Net income attributable to McKesson Corporation	$	958	$	768

Earnings (loss) per common share attributable to McKesson Corporation
Earnings per common share attributable to McKesson Corporation										Earnings per common share attributable to McKesson Corporation
Diluted	Diluted									Diluted
Continuing operations	Continuing operations	$	6.46	$	1.71	$	11.71	$	4.82	Continuing operations	$	7.02	$	5.25
Discontinued operations	Discontinued operations	(0.04)		—		(0.03)		(0.02)		Discontinued operations	—		0.01
Total	Total	$	6.42	$	1.71	$	11.68	$	4.80	Total	$	7.02	$	5.26
Basic	Basic									Basic
Continuing operations	Continuing operations	$	6.51	$	1.73	$	11.81	$	4.87	Continuing operations	$	7.07	$	5.31
Discontinued operations	Discontinued operations	(0.04)		—		(0.02)		(0.02)		Discontinued operations	—		0.01
Total	Total	$	6.47	$	1.73	$	11.79	$	4.85	Total	$	7.07	$	5.32

Weighted-average common shares outstanding	Weighted-average common shares outstanding									Weighted-average common shares outstanding
Diluted	Diluted	144.1		155.8		145.0		156.9		Diluted	136.6		145.9
Basic	Basic	143.1		154.1		143.7		155.1		Basic	135.5		144.2

See Financial Notes

Table of Contents

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended June 30,
		2022		2021		2022		2021			2023		2022
Net income	Net income	$	967	$	310	$	1,776	$	843	Net income	$	997	$	809

Other comprehensive income (loss), net of tax
Other comprehensive income, net of tax										Other comprehensive income, net of tax
Foreign currency translation adjustments	Foreign currency translation adjustments	(192)		(48)		390		(24)		Foreign currency translation adjustments	52		582
Unrealized gains on cash flow hedges		18		8		36		8
Unrealized gains on cash flow and other hedges										Unrealized gains on cash flow and other hedges	7		18
Changes in retirement-related benefit plans	Changes in retirement-related benefit plans	2		2		38		4		Changes in retirement-related benefit plans	(2)		36
Other comprehensive income (loss), net of tax		(172)		(38)		464		(12)
Other comprehensive income, net of tax										Other comprehensive income, net of tax	57		636

Comprehensive income	Comprehensive income	795		272		2,240		831		Comprehensive income	1,054		1,445
Comprehensive income attributable to noncontrolling interests	Comprehensive income attributable to noncontrolling interests	(35)		(43)		(126)		(93)		Comprehensive income attributable to noncontrolling interests	(39)		(91)
Comprehensive income attributable to McKesson Corporation	Comprehensive income attributable to McKesson Corporation	$	760	$	229	$	2,114	$	738	Comprehensive income attributable to McKesson Corporation	$	1,015	$	1,354

See Financial Notes

Table of Contents

McKESSON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

(Unaudited)


		September 30, 2022		March 31, 2022			June 30, 2023		March 31, 2023
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	2,916	$	3,532	Cash and cash equivalents	$	2,636	$	4,678
Receivables, net	Receivables, net	20,109		18,583		Receivables, net	21,860		19,410
Inventories, net	Inventories, net	19,876		18,702		Inventories, net	20,510		19,691
Assets held for sale		2,825		4,516

Prepaid expenses and other	Prepaid expenses and other	722		898		Prepaid expenses and other	533		513
Total current assets	Total current assets	46,448		46,231		Total current assets	45,539		44,292
Property, plant, and equipment, net	Property, plant, and equipment, net	2,071		2,092		Property, plant, and equipment, net	2,172		2,177
Operating lease right-of-use assets	Operating lease right-of-use assets	1,548		1,548		Operating lease right-of-use assets	1,693		1,635
Goodwill	Goodwill	9,239		9,451		Goodwill	9,971		9,947
Intangible assets, net	Intangible assets, net	1,872		2,059		Intangible assets, net	2,221		2,277
Other non-current assets	Other non-current assets	1,903		1,917		Other non-current assets	2,500		1,992
Total assets	Total assets	$	63,081	$	63,298	Total assets	$	64,096	$	62,320

LIABILITIES AND DEFICIT	LIABILITIES AND DEFICIT					LIABILITIES AND DEFICIT
Current liabilities	Current liabilities					Current liabilities
Drafts and accounts payable	Drafts and accounts payable	$	41,003	$	38,086	Drafts and accounts payable	$	43,982	$	42,490

Current portion of long-term debt	Current portion of long-term debt	800		799		Current portion of long-term debt	50		968
Current portion of operating lease liabilities	Current portion of operating lease liabilities	284		297		Current portion of operating lease liabilities	300		299
Liabilities held for sale		1,991		4,741

Other accrued liabilities	Other accrued liabilities	4,279		4,543		Other accrued liabilities	4,090		4,200
Total current liabilities	Total current liabilities	48,357		48,466		Total current liabilities	48,422		47,957
Long-term debt	Long-term debt	4,813		5,080		Long-term debt	5,611		4,626
Long-term deferred tax liabilities	Long-term deferred tax liabilities	1,660		1,418		Long-term deferred tax liabilities	1,139		1,387
Long-term operating lease liabilities	Long-term operating lease liabilities	1,315		1,366		Long-term operating lease liabilities	1,462		1,402
Long-term litigation liabilities	Long-term litigation liabilities	6,644		7,220		Long-term litigation liabilities	6,628		6,625
Other non-current liabilities	Other non-current liabilities	1,541		1,540		Other non-current liabilities	2,074		1,813

McKesson Corporation stockholders’ deficit	McKesson Corporation stockholders’ deficit					McKesson Corporation stockholders’ deficit
Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding	Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding	—		—		Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding	—		—
Common stock, $0.01 par value, 800 shares authorized, 277 and 275 shares issued at September 30, 2022 and March 31, 2022, respectively		3		2
Common stock, $0.01 par value, 800 shares authorized, 278 and 277 shares issued at June 30, 2023 and March 31, 2023, respectively						Common stock, $0.01 par value, 800 shares authorized, 278 and 277 shares issued at June 30, 2023 and March 31, 2023, respectively	3		3
Additional paid-in capital	Additional paid-in capital	7,609		7,275		Additional paid-in capital	7,824		7,747
Retained earnings	Retained earnings	10,579		9,030		Retained earnings	13,182		12,295
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,114)		(1,534)		Accumulated other comprehensive loss	(848)		(905)

Treasury shares, at cost, 135 and 130 shares at September 30, 2022 and March 31, 2022, respectively		(18,844)		(17,045)
Treasury shares, at cost, 143 and 141 shares at June 30, 2023 and March 31, 2023, respectively						Treasury shares, at cost, 143 and 141 shares at June 30, 2023 and March 31, 2023, respectively	(21,763)		(20,997)
Total McKesson Corporation stockholders’ deficit	Total McKesson Corporation stockholders’ deficit	(1,767)		(2,272)		Total McKesson Corporation stockholders’ deficit	(1,602)		(1,857)
Noncontrolling interests	Noncontrolling interests	518		480		Noncontrolling interests	362		367
Total deficit	Total deficit	(1,249)		(1,792)		Total deficit	(1,240)		(1,490)
Total liabilities and deficit	Total liabilities and deficit	$	63,081	$	63,298	Total liabilities and deficit	$	64,096	$	62,320

See Financial Notes

Table of Contents

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ ~~EQUITY (DEFICIT)~~DEFICIT

(In millions, except per share amounts)

(Unaudited)


		Three Months Ended September 30, 2022																	Three Months Ended June 30, 2023
		Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury			Noncontrolling Interests		Total Deficit						Common Stock							Additional Paid-in Capital						Retained Earnings			Accumulated Other Comprehensive Loss				Treasury							Noncontrolling Interests			Total Deficit
		Shares	Amount				Common Shares					Amount	Noncontrolling Interests						Amount				Additional Paid-in Capital			Common Shares								Accumulated Other Comprehensive Loss									Total Deficit
Balance, June 30, 2022		277	$	3	$	7,350		$	9,732	$	(948)	(133)			$	532	$	(1,472)
Balance, March 31, 2023																				Balance, March 31, 2023		277						$	3			$	7,747								$	12,295					$	(905)			(141)			$	(20,997)	$	367	$	(1,490)
Issuance of shares under employee plans, net of forfeitures	Issuance of shares under employee plans, net of forfeitures	—	—		36			—		—		—	(2)		—		34				Issuance of shares under employee plans, net of forfeitures			1			—				27						—			—				—			(93)				—			(66)
Share-based compensation	Share-based compensation	—	—		46			—		—		—	—		—		46				Share-based compensation		—			—				43						—			—				—			—				—			43
Repurchase of common stock	Repurchase of common stock	—	—		177			—		—		(2)	(701)		—		(524)				Repurchase of common stock		—			—				—						—			—				(2)			(673)				—			(673)
Net income	Net income	—	—		—			926		—		—	—		41		967				Net income		—			—				—						958			—				—			—				39			997
Other comprehensive loss		—	—		—			—		(166)		—	—		(6)		(172)
Other comprehensive income																				Other comprehensive income		—			—				—						—			57				—			—				—			57
Cash dividends declared, $0.54 per common share	Cash dividends declared, $0.54 per common share	—	—		—			(78)		—		—	—		—		(78)				Cash dividends declared, $0.54 per common share		—			—				—						(73)			—				—			—				—			(73)
Payments to noncontrolling interests	Payments to noncontrolling interests	—	—		—			—		—		—	—		(41)		(41)				Payments to noncontrolling interests		—			—				—						—			—				—			—				(39)			(39)
Reclassification of recurring compensation to other accrued liabilities		—	—		—			—		—		—	—		(2)		(2)

Other	Other	—	—		—			(1)		—		—	—		(6)		(7)				Other		—			—				7						2			—				—			—				(5)			4
Balance, September 30, 2022		277	$	3	$	7,609		$	10,579	$	(1,114)	(135)	$	(18,844)	$	518	$	(1,249)
Balance, June 30, 2023																				Balance, June 30, 2023		278			$	3			$	7,824					$	13,182		$	(848)			(143)			$	(21,763)			$	362		$	(1,240)


		Three Months Ended September 30, 2021															Three Months Ended June 30, 2022
		Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury			Noncontrolling Interests			Total Deficit			Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury				Noncontrolling Interests		Total Deficit
		Shares	Amount				Common Shares					Amount	Noncontrolling Interests								Amount	Additional Paid-in Capital				Retained Earnings					Noncontrolling Interests		Total Deficit
Balance, June 30, 2021		274	$	2	$	7,057		$	8,618	$	(1,627)	(119)			$	484		$	(45)
Balance, March 31, 2022																				Balance, March 31, 2022	275			$	2		$	7,275			$	9,030	$	(1,534)	(130)		$	(17,045)	$	480	$	(1,792)
Issuance of shares under employee plans, net of forfeitures	Issuance of shares under employee plans, net of forfeitures	1	—		40			—		—		—	(1)		—			39		Issuance of shares under employee plans, net of forfeitures	2	1		91			—		—		—		(152)		—		(60)
Share-based compensation	Share-based compensation	—	—		43			—		—		—	—		—			43		Share-based compensation	—	—		40			—		—		—		—		—		40
Repurchase of common stock	Repurchase of common stock	—	—		171			—		—		(3)	(451)		—			(280)		Repurchase of common stock	—	—		(56)			—		—		(3)		(944)		—		(1,000)
Net income	Net income	—	—		—			267		—		—	—		43			310		Net income	—	—		—			768		—		—		—		41		809
Other comprehensive loss		—	—		—			—		(38)		—	—		—			(38)
Other comprehensive income																				Other comprehensive income	—	—		—			—		586		—		—		50		636
Cash dividends declared, $0.47 per common share	Cash dividends declared, $0.47 per common share	—	—		—			(74)		—		—	—		—			(74)		Cash dividends declared, $0.47 per common share	—	—		—			(67)		—		—		—		—		(67)
Payments to noncontrolling interests	Payments to noncontrolling interests	—	—		—			—		—		—	—		(40)			(40)		Payments to noncontrolling interests	—	—		—			—		—		—		—		(36)		(36)
Reclassification of recurring compensation to other accrued liabilities	Reclassification of recurring compensation to other accrued liabilities	—	—		—			—		—		—	—		(2)			(2)		Reclassification of recurring compensation to other accrued liabilities	—	—		—			—		—		—		—		(2)		(2)
Other	Other	—	—		—			1		—		—	—		(1)			—		Other	—	—		—			1		—		—		—		(1)		—
Balance, September 30, 2021		275	$	2	$	7,311		$	8,812	$	(1,665)	(122)	$	(15,031)	$	484		$	(87)
Balance, June 30, 2022																				Balance, June 30, 2022	277	$	3	$	7,350		$	9,732	$	(948)	(133)		$	(18,141)	$	532	$	(1,472)

See Financial Notes

~~Table of Contents~~

~~McKESSON CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)~~

~~(In millions, except per share amounts)~~

~~(Unaudited)~~

Six Months Ended September 30, 2022
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Noncontrolling
Interests Total
Deficit
Shares Amount Common Shares Amount
Balance, March 31, 2022 275 $ 2 $ 7,275 $ 9,030 $ (1,534) (130) $ (17,045) $ 480 $ (1,792)
Issuance of shares under employee plans, net of forfeitures 2 1 127 — — — (154) — (26)
Share-based compensation — — 86 — — — — — 86
Repurchase of common stock — — 121 — — (5) (1,645) — (1,524)
Net income — — — 1,694 — — — 82 1,776
Other comprehensive income — — — — 420 — — 44 464
Cash dividends declared, $1.01 per common share — — — (145) — — — — (145)
Payments to noncontrolling interests — — — — — — — (77) (77)
Reclassification of recurring compensation to other accrued liabilities — — — — — — — (4) (4)
Other — — — — — — — (7) (7)
Balance, September 30, 2022 277 $ 3 $ 7,609 $ 10,579 $ (1,114) (135) $ (18,844) $ 518 $ (1,249)

Six Months Ended September 30, 2021
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Noncontrolling
Interests Total
Equity (Deficit)
Shares Amount Common Shares Amount
Balance, March 31, 2021 273 $ 2 $ 6,925 $ 8,202 $ (1,480) (115) $ (13,670) $ 196 $ 175
Issuance of shares under employee plans, net of forfeitures 2 — 111 — — — (60) — 51
Share-based compensation — — 76 — — — — — 76
Repurchase of common stock — — 21 — — (7) (1,301) — (1,280)
Net income — — — 753 — — — 82 835
Other comprehensive loss — — — — (15) — — — (15)
Cash dividends declared, $0.89 per common share — — — (139) — — — — (139)
Payments to noncontrolling interests — — — — — — — (79) (79)
Exercise of put right by noncontrolling shareholders of McKesson Europe AG — — 178 — (170) — — — 8
Reclassification of McKesson Europe AG redeemable noncontrolling interests — — — — — — — 287 287
Reclassification of recurring compensation to other accrued liabilities — — — — — — — (2) (2)
Other — — — (4) — — — — (4)
Balance, September 30, 2021 275 $ 2 $ 7,311 $ 8,812 $ (1,665) (122) $ (15,031) $ 484 $ (87)

~~See Financial Notes~~

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McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


		Six Months Ended September 30,					Three Months Ended June 30,
		2022		2021			2023		2022
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income	Net income	$	1,776	$	843	Net income	$	997	$	809
Adjustments to reconcile to net cash provided by operating activities:
Adjustments to reconcile to net cash used in operating activities:						Adjustments to reconcile to net cash used in operating activities:
Depreciation	Depreciation	124		148		Depreciation	64		61
Amortization	Amortization	175		265		Amortization	95		87
Long-lived asset impairment charges	Long-lived asset impairment charges	11		127		Long-lived asset impairment charges	28		—
Deferred taxes	Deferred taxes	170		(18)		Deferred taxes	(235)		109
Credits associated with last-in, first-out inventory method	Credits associated with last-in, first-out inventory method	(36)		(46)		Credits associated with last-in, first-out inventory method	32		(13)
Non-cash operating lease expense	Non-cash operating lease expense	126		152		Non-cash operating lease expense	58		63
Gain from sales of businesses and investments	Gain from sales of businesses and investments	(148)		(101)		Gain from sales of businesses and investments	(19)		(33)
European businesses held for sale	European businesses held for sale	(35)		470		European businesses held for sale	—		20
Other non-cash items	Other non-cash items	157		381		Other non-cash items	41		102
Changes in assets and liabilities, net of acquisitions:	Changes in assets and liabilities, net of acquisitions:					Changes in assets and liabilities, net of acquisitions:
Receivables	Receivables	(1,883)		(2,311)		Receivables	(2,380)		(1,584)
Inventories	Inventories	(1,453)		(1,164)		Inventories	(826)		(955)
Drafts and accounts payable	Drafts and accounts payable	2,292		1,431		Drafts and accounts payable	1,473		1,006
Operating lease liabilities	Operating lease liabilities	(174)		(186)		Operating lease liabilities	(80)		(94)
Taxes	Taxes	82		40		Taxes	236		37
Litigation liabilities	Litigation liabilities	(915)		151		Litigation liabilities	—		(370)
Other	Other	(103)		(12)		Other	(536)		(186)
Net cash provided by operating activities		166		170
Net cash used in operating activities						Net cash used in operating activities	(1,052)		(941)

INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Payments for property, plant, and equipment	Payments for property, plant, and equipment	(157)		(186)		Payments for property, plant, and equipment	(78)		(71)
Capitalized software expenditures	Capitalized software expenditures	(65)		(93)		Capitalized software expenditures	(46)		(29)
Acquisitions, net of cash, cash equivalents, and restricted cash acquired	Acquisitions, net of cash, cash equivalents, and restricted cash acquired	(23)		(4)		Acquisitions, net of cash, cash equivalents, and restricted cash acquired	—		(1)
Proceeds from sales of businesses and investments, net	Proceeds from sales of businesses and investments, net	496		179		Proceeds from sales of businesses and investments, net	39		240
Other	Other	(135)		(53)		Other	(64)		(100)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	116		(157)		Net cash provided by (used in) investing activities	(149)		39

FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Proceeds from short-term borrowings	Proceeds from short-term borrowings	100		3,020		Proceeds from short-term borrowings	65		—
Repayments of short-term borrowings	Repayments of short-term borrowings	(100)		(3,020)		Repayments of short-term borrowings	(65)		—
Proceeds from issuances of long-term debt	Proceeds from issuances of long-term debt	—		498		Proceeds from issuances of long-term debt	991		—
Repayments of long-term debt	Repayments of long-term debt	(4)		(1,636)		Repayments of long-term debt	(268)		(2)
Payments for debt extinguishments		—		(184)
Purchase of U.S. government obligations for the satisfaction and discharge of long-term debt						Purchase of U.S. government obligations for the satisfaction and discharge of long-term debt	(647)		—

Common stock transactions:	Common stock transactions:					Common stock transactions:
Issuances	Issuances	127		111		Issuances	27		91
Share repurchases	Share repurchases	(1,484)		(1,272)		Share repurchases	(696)		(1,000)
Dividends paid	Dividends paid	(139)		(134)		Dividends paid	(74)		(71)
Exercise of put right by noncontrolling shareholders of McKesson Europe AG		—		(1,031)

Other	Other	(253)		(246)		Other	(176)		(199)
Net cash used in financing activities	Net cash used in financing activities	(1,753)		(3,894)		Net cash used in financing activities	(843)		(1,181)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	24		18		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	2		18
Change in cash, cash equivalents, and restricted cash classified within Assets held for sale		470		—
Change in cash, cash equivalents, and restricted cash classified as Assets held for sale						Change in cash, cash equivalents, and restricted cash classified as Assets held for sale	—		470
Net decrease in cash, cash equivalents, and restricted cash	Net decrease in cash, cash equivalents, and restricted cash	(977)		(3,863)		Net decrease in cash, cash equivalents, and restricted cash	(2,042)		(1,595)
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	3,935		6,396		Cash, cash equivalents, and restricted cash at beginning of period	4,679		3,935
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	2,958		2,533		Cash, cash equivalents, and restricted cash at end of period	2,637		2,340
Less: Restricted cash at end of period included in Prepaid expenses and other	Less: Restricted cash at end of period included in Prepaid expenses and other	(42)		(382)		Less: Restricted cash at end of period included in Prepaid expenses and other	(1)		(107)

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	2,916	$	2,151	Cash and cash equivalents at end of period	$	2,636	$	2,233

See Financial Notes

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McKESSON CORPORATION

FINANCIAL NOTES

(UNAUDITED)

1. Significant Accounting Policies

Nature of Operations: McKesson Corporation (“McKesson,” or the “Company,”) is a diversified healthcare services leader dedicated to advancing health outcomes for patients everywhere. McKesson partners with biopharma companies, care providers, pharmacies, manufacturers, governments, and others to deliver insights, products, and services to help make quality care more accessible and affordable. The Company reports its financial results in four reportable segments: U.S. Pharmaceutical, Prescription Technology Solutions (“RxTS”), Medical-Surgical Solutions, and International. Refer to Financial Note ~~14,~~12, “Segments of Business,” for additional information.

Basis of Presentation: The condensed consolidated financial statements and accompanying notes are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“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 disclosures normally included in the annual consolidated financial statements.

The condensed consolidated financial statements of McKesson include the financial statements of all wholly-owned subsidiaries and majority-owned or controlled companies. For those consolidated subsidiaries where the Company’s ownership is less than 100%, the portion of the net income or loss allocable to the noncontrolling interests is reported as “Net income attributable to noncontrolling interests” in the Condensed Consolidated Statements of Operations. All significant intercompany balances and transactions have been eliminated in consolidation, including the intercompany portion of transactions with equity method investees.

Net income attributable to noncontrolling interests includes third-party equity interests in the Company’s consolidated entities, including ClarusONE Sourcing Services LLP, Vantage Oncology Holdings, LLC, and SCRI Oncology, LLC. Net income attributable to noncontrolling interests also included recurring compensation that the Company was obligated to pay to the noncontrolling shareholders of McKesson Europe AG (“McKesson Europe”). The Company’s noncontrolling interest in McKesson Europe was included in the divestiture of certain of the Company’s businesses in the European Union (“E.U.”) in October 2022, which is discussed further in Financial Note 2, “Business Acquisitions and Divestitures.”

The Company considers itself to control an entity if it is the majority owner of or has voting control over such entity. The Company also assesses control through means other than voting rights and determines which business entity is the primary beneficiary of the variable interest entity (“VIE”). The Company consolidates VIEs when it is determined that it is the primary beneficiary of the VIE. Investments in business entities in which the Company does not have control, but ~~can~~instead has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method.

Fiscal Period: 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.

Reclassifications: Certain prior period amounts have been reclassified to conform to the current year presentation.

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires the Company to 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 could differ from those estimated amounts. The Company continues to evaluate the ongoing impacts, including the economic consequences, of the pandemic caused by the SARS-CoV-2 coronavirus (“COVID-19”), and therefore the Company’s accounting estimates and assumptions may change over time and may change materially in future periods. In the opinion of management, the unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the results of operations, financial position, and cash flows of McKesson for the interim periods presented.

The results of operations for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of the results that may be ~~expected~~anticipated 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 the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022,~~2023, previously filed with the SEC on May 9, ~~2022 (“2022~~2023 (the “2023 Annual Report”).

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the ~~“IR Act”~~“IRA”). Among other provisions, the ~~IR Act~~IRA includes a 15% corporate minimum tax, a 1% excise tax on certain repurchases of an entity’s own common stock after December 31, 2022, and various drug pricing reforms. ~~Based on its preliminary assessment, the~~The Company does not ~~currently expect the IR Act to~~anticipate that this guidance will have a material impact on its ~~results of operations,~~consolidated financial ~~position,~~statements or ~~cash flows in the foreseeable future; however, the~~related disclosures. The Company will continue to evaluate the full impact of these legislative ~~changes.~~

~~Table of Contents~~

~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

changes as they are announced and implemented. Refer to Financial Note 11, “Stockholders' Deficit,” for further details regarding excise taxes incurred on the Company’s share repurchases during the three months ended June 30, 2023.

Recently Adopted Accounting Pronouncements

There were no ~~adopted~~ accounting standards adopted by the Company during the ~~first half of fiscal 2023 that had a material impact to the Company’s results of operations, financial position, cash flows, or notes to the financial statements upon their adoption.~~three months ended June 30, 2023.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies the guidance when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of ~~the~~such equity security, and requires additional disclosure requirements. ASU 2022-03 is effective for the Company on a prospective basis for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company does not ~~expect~~anticipate that this guidance will have a material impact on its consolidated financial statements or related disclosures.

2. Business Acquisitions and Divestitures

Acquisitions

Rx Savings Solutions, LLC

On November 1, 2022, the Company completed its acquisition of 100% of the shares of Rx Savings Solutions, LLC (“RxSS”), a privately-owned company headquartered in Overland Park, Kansas, to ~~expand on connecting~~further connect biopharma and payer services to patients. RxSS is a prescription price transparency and benefit insight company that offers affordability and adherence solutions to health plans and employers. The purchase consideration included a payment of ~~approximately~~ $600 million in cash made upon closing and a maximum of $275 million of contingent consideration based on RxSS’ operational and financial performance through calendar year 2025. The payment made upon closing was funded from cash on hand. The financial results of RxSS ~~will be~~are included in the Company’s RxTS segment as of the acquisition ~~date in the third quarter of fiscal 2023.~~date. The transaction ~~will be~~was accounted for as a business ~~combination~~combination.

The Company recorded a liability for the contingent consideration at its fair value of $92 million as of the acquisition date. The fair value of the contingent consideration liability was estimated using a Monte Carlo simulation model, utilizing internal cash flow projections which are Level 3 inputs under Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures. The contingent liability will be remeasured to fair value at each reporting date until the liability is settled with changes in fair value being recognized within “Selling, distribution, general, and administrative expenses” in the Company’s Condensed Consolidated Statements of Operations. During the three months ended June 30, 2023, the Company recognized a fair value adjustment gain of $28 million, which reduced its contingent consideration liability, based on the estimated amount and timing of projected operational and financial information and the ~~analysis to assign~~probability of achievement of certain performance milestones. As of June 30, 2023 and March 31, 2023, the current portion of $45 million and $83 million, respectively, is included within “Other accrued liabilities” and the long-term portion of $19 million and $9 million, respectively, is included within “Other non-current liabilities” in the Company’s Condensed Consolidated Balance Sheets. Recognition of the initial fair ~~values~~value of this contingent consideration was a non-cash investing activity.

The purchase price allocation included acquired identifiable intangible assets of $229 million, primarily representing customer relationships and technology with a weighted average amortization period of 12 years, and goodwill of $463 million. Goodwill has been allocated to the Company’s RxTS segment, which reflects the expected future benefits from certain synergies and intangible assets ~~acquired and liabilities assumed~~that do not qualify for separate recognition. Goodwill attributable to the acquisition is ~~currently underway.~~deductible for tax purposes.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

The following table summarizes the preliminary purchase price allocation for this acquisition:


(In millions)	Amounts Recognized as of Acquisition Date (As Adjusted)
Purchase consideration:
Cash	$	600
Contingent consideration	92
Total purchase consideration	$	692

Identifiable assets acquired and liabilities assumed:
Current assets	$	5
Intangible assets	229
Other non-current assets	3
Current liabilities	(8)

Total identifiable net assets	229
Goodwill	463
Net assets acquired	$	692

SCRI Oncology, ~~Research Business~~LLC

On October 31, 2022, the Company completed a transaction with HCA Healthcare, Inc. (“HCA”) to form SCRI Oncology, LLC (“SCRI Oncology”), an oncology research business combining McKesson’s U.S. Oncology Research (“USOR”) and HCA’s Sarah Cannon Research Institute (“SCRI”), based in Nashville, Tennessee, to advance cancer care and increase access to oncology clinical research. Upon consummation of the transaction, McKesson owns a 51% controlling interest in the combined business, and the financial results ~~will be~~are consolidated by the Company and reported within its U.S. Pharmaceutical segment as of the acquisition ~~date in the third quarter of fiscal 2023.~~date. Transaction consideration included the transfer of full ownership interest in USOR to the combined business and ~~$173~~$166 million of net cash paid to ~~HCA.~~HCA, which was funded from cash on hand. The transaction ~~will be~~was accounted for as a business ~~combination~~combination.

The purchase price allocation included acquired identifiable intangible assets of $177 million, primarily representing customer relationships as well as trademarks and ~~the analysis to assign fair values~~trade names with a weighted average amortization period of 17 years, and goodwill of $113 million. Goodwill has been allocated to the ~~assets acquired, liabilities assumed, and noncontrolling interest is currently underway.~~

Separately, on October 31, 2022, McKesson acquired Genospace, SCRI’s personalized medicine platform. Genospace is a leading innovator in precision medicine and clinical trial matching and will enhance McKesson’s oncology data and analytics capabilities. The acquisition of Genospace will be accounted for as a business combination and its financial results will be included in theCompany’s U.S. Pharmaceutical segment, ~~as of~~which reflects the expected future benefits from certain synergies and intangible assets that do not qualify for separate recognition. Goodwill attributable to the acquisition ~~date~~of $46 million is deductible for tax purposes. The Company recorded noncontrolling interest of $222 million as a component of equity, which includes HCA’s proportionate interest in the ~~third quarter~~identifiable net assets of ~~2023.~~SCRI at fair value of $202 million and its proportionate interest in the contributed net assets of USOR at carrying value of $20 million. The ~~analysis to assign~~difference between the fair ~~values to the assets acquired and liabilities assumed is currently underway.~~

~~Divestitures~~

In July 2021, the Company announced its intention to exit its businesses in Europe resulting in classification of certain assets and liabilities as held for sale. Assets and liabilities of $2.8 billion and $2.0 billion, respectively, at September 30, 2022, and $4.5 billion and $4.7 billion, respectively, at March 31, 2022, met the criteria for classification as held for sale, primarily consisting of disposal groups related to the Company’s European divestiture activities discussed below. The decrease in assets and liabilities held for sale during fiscal 2023 was driven by the divestiturevalue of the Company’s ~~U.K. disposal group~~acquired interest in ~~April 2022,~~SCRI net assets and the $166 million of net cash paid to HCA was recognized as ~~discussed~~additional paid in ~~more detail below.~~capital, as well as the Company’s reduction in ownership interest in USOR net assets.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

~~Assets and liabilities to be disposed of by sale (“disposal groups”) are classified as “held~~The following table summarizes the preliminary purchase price allocation for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The classification occurs when the disposal group is available for immediate sale and the sale is probable. These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying amount or fair value less costs to sell, and long-lived assets included within the disposal group are not depreciated or amortized. this acquisition:


(In millions)	Amounts Recognized as of Acquisition Date (As Adjusted)
Purchase consideration:
Cash	$	166
Contribution of USOR	40
Total purchase consideration	$	206

Identifiable assets acquired and liabilities assumed:
Receivables	$	224

Property, plant, and equipment	22
Operating lease right-of-use assets	31
Intangible assets	177

Current liabilities	(42)
Long-term operating lease liabilities	(29)
Other non-current liabilities	(43)
Total identifiable net assets	340
Noncontrolling interest	(222)
Additional paid-in capital	(25)
Goodwill	113
Net assets acquired	$	206

The fair value of the acquired identifiable intangible assets from the acquisitions discussed above were determined by applying the income approach, using a ~~disposal group, less any costs~~discounted cash flow model in which cash flows anticipated over several periods are discounted to ~~sell,~~their present value using an appropriate rate that is ~~assessed each reporting period it remains classified~~commensurate with the risk inherent with the transaction. These inputs are considered Level 3 inputs under the fair value measurements and disclosure guidance. The amounts presented above are subject to change as ~~held for sale and any remeasurement~~the Company’s fair value assessments are finalized. There have been no material changes to the ~~lower~~purchase price allocation of ~~carrying value~~these acquisitions since the acquisition date. Pro forma financial information has not been provided as these acquisitions did not have a material impact, individually, or ~~fair value less costs to sell is reported as an adjustment~~in the aggregate, to the ~~carrying value~~Company’s consolidated results of the disposal group. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was classified as held for sale. The Company determined that the disposal groups classified as held for sale do not meet the criteria for classification as discontinued operations.

Divestitures

European Divestiture Activities

OnIn July 5, 2021, the Company ~~entered into an agreement~~announced its intention to exit its businesses in Europe. On October 31, 2022, the Company completed its previously announced transaction to sell certain of its businesses in the European Union (“E.U.”) located in France, Italy, Ireland, Portugal, Belgium, and Slovenia, along with its German headquarters and wound-care business, part of a shared services center in Lithuania, and its ownership stake in a joint venture in the Netherlands (“E.U. disposal group”) to the PHOENIX Group for a purchase price of €1.2 billion (or, approximately $1.2 billion) adjusted for certain items, including cash, net debt and working capital adjustments, and reduced by the value of the noncontrolling interest held by minority shareholders of McKesson Europe AG (“McKesson Europe”) at the transaction closing date. The transaction closed on October 31, 2022, and the Company received net cash proceeds of $892 million after the adjustments listed above. As of September 30, 2022 and March 31, 2022, the E.U. disposal group within the Company’s International segment, was classified as “Assets held for sale” and “Liabilities held for sale,” respectively, in the Condensed Consolidated Balance Sheets.

Group. During the three ~~and six~~ months ended ~~September~~June 30, 2022, the Company recorded a gain of ~~$23 million and $35 million, respectively, and during the three and six months ended September 30, 2021, recorded charges totaling $491~~$12 million to remeasure ~~the assets and liabilities of~~ the E.U. disposal group to fair value less costs to sell. The fiscal 2022 charges also included impairments of individual assets, such as certain internal-use software that will not be utilized in the future, prior to adjusting the E.U. disposal group as a whole. The remeasurement adjustment in the three and six months ended September 30, 2021 included a $226 million loss related to the accumulated other comprehensive income balances associated with the E.U. disposal group. These amounts weresell which was recorded within “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated ~~Statements~~Statement of Operations. The Company’s measurement of the fair value of the E.U. disposal group was based on the total consideration expected to be received by the Company as outlined in the transaction agreement. Certain components of the total consideration included fair value measurements that fall within Level 3 of the fair value hierarchy.

~~Table of Contents~~

~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

~~The total assets and liabilities of the E.U. disposal group that have met the classification of held for sale in the Company’s Condensed Consolidated Balance Sheets are as follows:~~

(In millions) September 30, 2022 March 31, 2022
Assets
Current assets
Receivables, net $ 1,175 $ 1,322
Inventories, net 810 809
Prepaid expenses and other 68 72
Property, plant, and equipment, net 278 304
Operating lease right-of-use assets 206 224
Intangible assets, net 236 267
Other non-current assets 297 328
Remeasurement of assets of businesses held for sale to fair value less costs to sell (1)
(245) (302)
Total assets held for sale $ 2,825 $ 3,024
Liabilities
Current liabilities
Drafts and accounts payable $ 1,258 $ 1,826
Current portion of long-term debt 4 4
Current portion of operating lease liabilities 28 33
Other accrued liabilities 360 473
Long-term debt 10 11
Long-term deferred tax liabilities 64 55
Long-term operating lease liabilities 153 180
Other non-current liabilities 114 138
Total liabilities held for sale $ 1,991 $ 2,720

~~(1)~~Excludes charges in fiscal 2022 related to the impairment of individual assets, including a $113 million impairment of internally developed software recorded directly against the gross value of the assets impacted.

On April 6, 2022, the Company completed the previously announced sale of its retail and distribution businesses in the United Kingdom (“U.K. disposal group”) to Aurelius Elephant Limited for a purchase price of £110 million (or, approximately $144 million), including certain adjustments. As part of the transaction, the Company divested net assets of $615 million and released $731 million of accumulated other comprehensive loss, within the International segment, and the buyer assumed and repaid a note payable to the Company of ~~approximately~~ $118 million.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

~~Following~~At June 30, 2023 and March 31, 2023, the ~~completion of the transaction on April 6, 2022, there were~~Company had no assets or liabilities ofrelated to these European divestiture activities that met the ~~U.K. disposal group classified~~criteria for classification as held for ~~sale in~~sale. Subsequent to the divestiture activities discussed above, the Company’s ~~Condensed Consolidated Balance Sheets. The total assets~~European operations primarily consist of its retail and ~~liabilities of the U.K. disposal group that met the classification of held for sale~~distribution businesses in ~~the Company’s Condensed Consolidated Balance Sheet at March 31, 2022 were as follows:~~Norway.


~~(In millions)~~	~~March 31, 2022~~
~~Assets~~
~~Current assets~~
~~Cash and cash equivalents~~	$	~~531~~
~~Receivables, net~~	~~931~~
~~Inventories, net~~	~~563~~
~~Prepaid expenses and other~~	50
~~Property, plant, and equipment, net~~	91
~~Operating lease right-of-use assets~~	~~270~~
~~Intangible assets, net~~	~~117~~
~~Other non-current assets~~	88
~~Remeasurement of assets of businesses held for sale to fair value less costs to sell~~	~~(1,159)~~
~~Total assets held for sale~~	$	~~1,482~~

~~Liabilities~~
~~Current liabilities~~
~~Drafts and accounts payable~~	$	~~1,593~~

~~Current portion of operating lease liabilities~~	50
~~Other accrued liabilities~~	59

~~Long-term deferred tax liabilities~~	16
~~Long-term operating lease liabilities~~	~~262~~
~~Other non-current liabilities~~	38
~~Total liabilities held for sale~~	$	~~2,018~~

Other

For the periods presented, the Company also completed de minimis acquisitions and divestitures within its operating segments. Financial results for the Company’s business acquisitions have been included in its consolidated financial statements as of their respective acquisition dates. Purchase prices for business acquisitions have been allocated based on estimated fair values at the respective acquisition dates.

3. Restructuring, Impairment, and Related Charges, Net

The Company recorded restructuring, impairment, and related charges, net of ~~$30~~$52 million and ~~$32~~$23 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively, and $53 million and $190 million for the six months ended September 30,~~ 2022, ~~and 2021,~~ respectively. These charges were included in “Restructuring, impairment, and related charges, net” in the Condensed Consolidated Statements of Operations.

~~Table of Contents~~

~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

Restructuring Initiatives

During the ~~first~~fourth quarter of fiscal ~~2022,~~2023, the Company approved ~~an initiative~~a broad set of initiatives to ~~increase~~drive operational efficiencies and ~~flexibility by transitioning~~increase cost optimization efforts, with the intent of simplifying its infrastructure and realizing long-term sustainable growth. These initiatives include headcount reductions and the exit or downsizing of certain facilities. The Company anticipates total charges of approximately $125 million across its RxTS and U.S. Pharmaceutical segments as well as Corporate, consisting primarily of employee severance and other employee-related costs, facility and other exit-related costs, as well as long-lived asset impairments. Of this amount, $96 million of charges were recorded to ~~a partial remote work model for certain employees. This initiative primarily included~~date. For the ~~rationalization of~~three months ended June 30, 2023, the Company’s office space in North America. Where the Company ceased using office space, it exited the portion of the facility no longer used. It also retained and repurposed certain other office locations. The Company recorded charges of ~~$15~~$36 million ~~and $110 million for the three and six months ended September 30, 2021, respectively, primarily~~ related to ~~lease right-of-use~~this program, which primarily includes real estate and other ~~long-lived~~related asset impairments ~~lease exit~~and facility costs ~~and accelerated depreciation and amortization.~~within Corporate. This ~~initiative was~~restructuring program is anticipated to be substantially complete inby the end of fiscal ~~2022 and remaining costs the Company recorded and expects to record under this initiative are not material.~~2024.

Restructuring, impairment, and related charges, net for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 consisted of the following:

Three Months Ended September 30, 2022
(In millions) U.S. Pharmaceutical Prescription Technology Solutions Medical-Surgical Solutions
International
Corporate Total
Severance and employee-related costs, net $ — $ — $ — $ 2 $ (5) $ (3)
Exit and other-related costs (1)
— 1 1 6 14 22
Asset impairments and accelerated depreciation 3 6 — 1 1 11
Total $ 3 $ 7 $ 1 $ 9 $ 10 $ 30

~~(1)Exit and other-related costs consist of accruals for costs to be incurred without future economic benefits, project consulting fees, and other exit costs expensed as incurred.~~


		Three Months Ended September 30, 2021													Three Months Ended June 30, 2023
(In millions)	(In millions)	U.S. Pharmaceutical (1)		Prescription Technology Solutions		Medical-Surgical Solutions		International		Corporate (1)		Total		(In millions)	U.S. Pharmaceutical		Prescription Technology Solutions (1)		Medical-Surgical Solutions		International		Corporate (1)		Total
Severance and employee-related costs, net	Severance and employee-related costs, net	$	—	$	(1)	$	1	$	(2)	$	1	$	(1)	Severance and employee-related costs, net	$	1	$	—	$	—	$	—	$	1	$	2
Exit and other-related costs (2)	Exit and other-related costs (2)	2		1		—		1		6		10		Exit and other-related costs (2)	1		2		2		5		12		22
Asset impairments and accelerated depreciation	Asset impairments and accelerated depreciation	8		—		1		2		12		23		Asset impairments and accelerated depreciation	—		—		—		1		27		28
Total	Total	$	10	$	—	$	2	$	1	$	19	$	32	Total	$	2	$	2	$	2	$	6	$	40	$	52

(1)Includes costs related to operational efficiencies and cost optimization efforts described above to support the ~~transition to a partial remote work model described above.~~Company’s technology solutions.

(2)Exit and other-related costs consist of accruals for costs to be incurred without future economic benefits, project consulting fees, and other exit costs expensed as incurred.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

~~Restructuring, impairment, and related charges, net, for the six months ended September 30, 2022 and 2021 consisted of the following:~~


		Six Months Ended September 30, 2022													Three Months Ended June 30, 2022
(In millions)	(In millions)	U.S. Pharmaceutical		Prescription Technology Solutions		Medical-Surgical Solutions		International		Corporate		Total		(In millions)	U.S. Pharmaceutical		Prescription Technology Solutions		Medical-Surgical Solutions		International		Corporate		Total
Severance and employee-related costs, net	Severance and employee-related costs, net	$	3	$	—	$	—	$	2	$	(6)	$	(1)	Severance and employee-related costs, net	$	3	$	—	$	—	$	—	$	(1)	$	2
Exit and other-related costs (1)	Exit and other-related costs (1)	1		3		2		8		29		43		Exit and other-related costs (1)	1		2		1		2		15		21
Asset impairments and accelerated depreciation	Asset impairments and accelerated depreciation	3		11		—		1		(4)		11		Asset impairments and accelerated depreciation	—		5		—		—		(5)		—
Total	Total	$	7	$	14	$	2	$	11	$	19	$	53	Total	$	4	$	7	$	1	$	2	$	9	$	23

(1)Exit and other-related costs consist of accruals for costs to be incurred without future economic benefits, project consulting fees, and other exit costs expensed as incurred.

Six Months Ended September 30, 2021
(In millions)
U.S. Pharmaceutical (1)
Prescription Technology Solutions (1)
Medical-Surgical Solutions (1)
International (2)
Corporate (1)
Total
Severance and employee-related costs, net $ 2 $ (1) $ 1 $ 10 $ 1 $ 13
Exit and other-related costs (3)
4 2 2 15 27 50
Asset impairments and accelerated depreciation 16 17 5 36 53 127
Total $ 22 $ 18 $ 8 $ 61 $ 81 $ 190

~~(1)Includes costs related to the transition to a partial remote work model described above.~~

~~(2)Includes costs related to the transition to a partial remote work model described above, U.K. operating model and cost optimization efforts, and costs for optimization programs in Canada.~~

~~(3)Exit and other-related costs consist of accruals for costs to be incurred without future economic benefits, project consulting fees, and other exit costs expensed as incurred.~~

~~Table of Contents~~

~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

The following table summarizes the activity related to the liabilities associated with the Company’s restructuring initiatives for the ~~six~~three months ended ~~September~~June 30, ~~2022:~~2023:


(In millions)	(In millions)	U.S. Pharmaceutical		Prescription Technology Solutions		Medical-Surgical Solutions		International		Corporate		Total		(In millions)	U.S. Pharmaceutical		Prescription Technology Solutions		Medical-Surgical Solutions		International		Corporate		Total
Balance, March 31, 2022 (1)		$	11	$	3	$	1	$	56	$	59	$	130
Balance, March 31, 2023 (1)														Balance, March 31, 2023 (1)	$	15	$	26	$	3	$	13	$	35	$	92
Restructuring, impairment, and related charges, net	Restructuring, impairment, and related charges, net	7		14		2		11		19		53		Restructuring, impairment, and related charges, net	2		2		2		6		40		52
Non-cash charges	Non-cash charges	(3)		(11)		—		(1)		4		(11)		Non-cash charges	—		—		—		(1)		(27)		(28)
Cash payments	Cash payments	(3)		(3)		(2)		(6)		(25)		(39)		Cash payments	(5)		(13)		(2)		(2)		(15)		(37)
Other (2)	Other (2)	(1)		—		—		(24)		1		(24)		Other (2)	—		—		—		(5)		—		(5)
Balance, September 30, 2022 (3)		$	11	$	3	$	1	$	36	$	58	$	109
Balance, June 30, 2023 (3)														Balance, June 30, 2023 (3)	$	12	$	15	$	3	$	11	$	33	$	74

(1)As of March 31, ~~2022,~~2023, the total reserve balance was ~~$130~~$92 million, of which ~~$58~~$66 million was recorded in “Other accrued ~~liabilities,” $36 million was recorded in “Liabilities held for sale,”~~liabilities” and ~~$36~~$26 million was recorded in “Other non-current liabilities” in the Company’s Condensed Consolidated Balance Sheet.

(2)Other primarily includes cumulative translation adjustments and transfers to certain other liabilities. For the Company’s International segment, other also includes a reduction of the liability related to the sale of the U.K. disposal group in April 2022, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures.”

(3)As of ~~September~~June 30, ~~2022,~~2023, the total reserve balance was ~~$109~~$74 million, of which ~~$60~~$44 million was recorded in “Other accrued ~~liabilities,” $22 million was recorded in “Liabilities held for sale,”~~liabilities” and ~~$27~~$30 million was recorded in “Other non-current liabilities” in the Company’s Condensed Consolidated Balance Sheet.

4. Income Taxes

Income tax expense related to continuing operations was as follows:


		Three Months Ended September 30,						Six Months Ended September 30,							Three Months Ended June 30,
(Dollars in millions)	(Dollars in millions)	2022			2021			2022			2021			(Dollars in millions)	2023			2022
Income tax expense	Income tax expense	$	271		$	132		$	470		$	158		Income tax expense	$	94		$	199
Reported income tax rate	Reported income tax rate	21.8		%	29.9		%	20.9		%	15.7		%	Reported income tax rate	8.6		%	19.8		%

Fluctuations in the Company’s reported income tax rates were primarily due to ~~non-cash charges related to remeasuring the value of the E.U. disposal group in the second quarter of fiscal 2022,~~ changes in the mix of earnings between various taxing jurisdictions and discrete ~~benefits~~items recognized in the quarters.

During the three months ended ~~September~~June 30, ~~2022 and 2021,~~2023, the Company ~~recognized~~repatriated certain intellectual property between McKesson wholly-owned legal entities that are based in different tax jurisdictions. The transferor entity of the intellectual property was not subject to income tax on this transaction. The recipient entity of the intellectual property is entitled to amortize the fair value of the assets for tax purposes. As a result of this repatriation, and in accordance with ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, a net discrete tax benefit ~~primarily related to increased tax credits~~ of ~~$16~~$147 million ~~and a decrease~~was recognized in the global intangible low-tax income (“GILTI”) of $55 million, respectively. During the six months ended September 30, 2022, the Company recognized a net discrete tax benefit primarily related to the tax impact of share-based compensation of $53 million. During the six months ended September 30, 2021, the Company also recognized a net discrete tax benefit primarily related to statute of limitation expirations of $97 million in various taxing jurisdictions.

~~During the second~~first quarter of fiscal 2022, the Company recorded non-cash pre-tax charges totaling $491 million primarily to remeasure the assets and liabilities of the E.U. disposal group to fair value less costs to sell, as described in Financial Note 2, “Business Acquisitions and Divestitures.” The Company’s reported income tax rates for the three and six months ended September 30, 2021 were unfavorably impacted by this due to the non-deductible nature of the majority of these charges for income tax purposes.2024.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

~~As of September~~During the three months ended June 30, 2022, the Company recognized a net discrete tax benefit of $45 million primarily related to the tax impact of share-based compensation.

As of June 30, 2023, the Company had ~~$1.5~~$1.4 billion of unrecognized tax benefits, of which $1.3 billion would reduce income tax expense and the effective tax rate if recognized. During the next twelve months, ~~it is reasonably possible that our~~the Company does not anticipate any material reduction in its unrecognized tax benefits ~~may decrease by as much as $150 million to $180 million due to settlements of tax examinations and statute of limitation expirations~~ based on the information currently available. However, this may change as the Company continues to have ongoing discussions with various taxing authorities throughout the year, and if the ultimate resolution of unrecognized tax benefits differs from this estimated range, the Company will record any additional income tax expense or benefit as necessary in the appropriate period. The unrecognized tax benefit may also increase or decrease due to future developments in opioid-related litigation and claims, as discussed in Financial Note 12, “Commitments and Contingent Liabilities.”year.

The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, and various foreign jurisdictions. The ~~Internal Revenue Service (“IRS”) is currently examining the Company’s U.S. corporation income tax returns for 2018 and 2019. The~~ Company is generally subject to audit by taxing authorities in various U.S. states and in foreign jurisdictions for fiscal years ~~2014~~2016 through the current fiscal year.

~~The Company is a party to a certain tax receivable agreement (“TRA”) entered into as part of~~During the formation of the joint venture with Change Healthcare Inc. (“Change”), from which McKesson has since exited. The TRA generally requires Change to pay McKesson 85% of the net cash tax savings realized, or deemed to be realized, by Change resulting from the amortization allocated to Change by the joint venture. In October 2022, Change exercised its right pursuant to the TRA to terminate the agreement. The Company received $126 million in the thirdfourth quarter of fiscal 2023, ~~due~~the Internal Revenue Service (“IRS”) communicated proposed adjustments to ~~early termination of the TRA, which will result in a gain within “Other~~taxable income ~~net”~~reported in the ~~Condensed Consolidated Statements~~Company’s fiscal 2018 and fiscal 2019 U.S. Federal Corporate Income Tax returns. The adjustments would increase the Company’s federal income tax liability in the range of ~~Operations.~~$600 million to $700 million. The Company disagrees with the proposed adjustments and intends to pursue resolution through the administrative process with the IRS Independent Office of Appeals and, if necessary, through judicial remedies. During the first quarter of fiscal 2024, the Company filed a formal protest with the IRS. The Company does not anticipate a final resolution of these matters until fiscal 2026 or after. Although the final resolution of these matters is uncertain, the Company believes in the merits of its tax positions and believes that it has adequately reserved for any adjustments to the provision of income taxes that may ultimately result. However, if the IRS prevails in these matters, the assessed tax and interest could have a material adverse effect on the Company’s financial position, results of operations, and cash flows in future periods.

5.~~Redeemable Noncontrolling Interests and Noncontrolling Interests~~

~~Redeemable Noncontrolling Interests~~

The Company’s previously recognized redeemable noncontrolling interests primarily related to its consolidated subsidiary, McKesson Europe. Under the December 2014 domination and profit and loss transfer agreement (the “Domination Agreement”), the noncontrolling shareholders of McKesson Europe are entitled to receive an annual recurring compensation amount of €0.83 per share. As a result, the Company recorded a total attribution of net income to the noncontrolling shareholders of McKesson Europe of $8 million during the six months ended September 30, 2021. This amount was recorded in “Net income attributable to noncontrolling interests” in the Company’s Condensed Consolidated Statement of Operations and the corresponding liability balance was recorded in “Other accrued liabilities” in the Company’s Condensed Consolidated Balance Sheet.

Under the Domination Agreement, the noncontrolling shareholders of McKesson Europe had a right to put (“Put Right”) their noncontrolling shares at €22.99 per share, increased annually for interest in the amount of five percentage points above a base rate published by the German Bundesbank semi-annually, less any compensation amount or guaranteed dividend already paid by McKesson with respect to the relevant time period (“Put Amount”). During the six months ended September 30, 2021, the Company paid $1.0 billion to purchase 34.5 million shares of McKesson Europe through exercises of the Put Right by the noncontrolling shareholders. This decreased the carrying value of the redeemable noncontrolling interests by $983 million for the six months ended September 30, 2021, and the Company recorded the associated effect of the increase in the Company’s ownership interest of $178 million as an increase to McKesson stockholders’ additional paid-in capital. The Put Right expired on June 15, 2021, at which point the remaining shares owned by the minority shareholders, with a carrying value of $287 million, were transferred from “Redeemable noncontrolling interests” to “Noncontrolling interests” in the Condensed Consolidated Balance Sheet.

~~Table of Contents~~

~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

~~Noncontrolling Interests~~

Noncontrolling interests represent third-party equity interests in the Company’s consolidated entities primarily related to ClarusONE Sourcing Services LLP and Vantage Oncology Holdings, LLC. As discussed above, after June 15, 2021, noncontrolling interests also represent minority shareholder equity interests in McKesson Europe. The Company’s noncontrolling interest in McKesson Europe, with a carrying value of $382 million at September 30, 2022, was included in the sale of the E.U. disposal group, as discussed in Financial Note 2, “Business Acquisitions and Divestitures.” The Company allocated $41 million and $43 million of net income to noncontrolling interests during the three months ended September 30, 2022 and 2021, respectively, and $82 million during each of the six months ended September 30, 2022 and 2021, which was recorded in “Net income attributable to noncontrolling interests” in the Company’s Condensed Consolidated Statements of Operations.

~~Changes in noncontrolling interests for the three and six months ended September 30, 2022 were as follows:~~


~~(In millions)~~	~~Noncontrolling Interests~~
~~Balance, June 30, 2022~~	$	~~532~~
~~Net income attributable to noncontrolling interests~~	41
~~Other comprehensive loss~~	~~(6)~~
~~Payments to noncontrolling interests~~	~~(41)~~
~~Reclassification of recurring compensation to other accrued liabilities~~	~~(2)~~


~~Other~~	~~(6)~~
~~Balance, September 30, 2022~~	$	~~518~~


~~(In millions)~~	~~Noncontrolling Interests~~
~~Balance, March 31, 2022~~	$	~~480~~
~~Net income attributable to noncontrolling interests~~	82
~~Other comprehensive income~~	44
~~Payments to noncontrolling interests~~	~~(77)~~
~~Reclassification of recurring compensation to other accrued liabilities~~	~~(4)~~


~~Other~~	~~(7)~~
~~Balance, September 30, 2022~~	$	~~518~~

~~Table of Contents~~

~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

~~Changes in redeemable noncontrolling interests and noncontrolling interests for the three and six months ended September 30, 2021 were as follows:~~

(In millions) Noncontrolling Interests Redeemable Noncontrolling Interests
Balance, June 30, 2021 $ 484 $ 7
Net income attributable to noncontrolling interests 43 —
Payments to noncontrolling interests (40) —
Reclassification of recurring compensation to other accrued liabilities (2) —
Other (1) (7)
Balance, September 30, 2021 $ 484 $ —

(In millions) Noncontrolling Interests Redeemable Noncontrolling Interests
Balance, March 31, 2021 $ 196 $ 1,271
Net income attributable to noncontrolling interests 82 8
Other comprehensive income — 3
Payments to noncontrolling interests (79) —
Reclassification of recurring compensation to other accrued liabilities (2) (8)
Exercises of Put Right — (983)
Reclassification of McKesson Europe redeemable noncontrolling interests 287 (287)
Other — (4)
Balance, September 30, 2021 $ 484 $ —

6. Earnings ~~(Loss)~~ Per Common Share

Basic earnings per common share ~~are~~is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. The computation of diluted earnings per common share is similar to that of basic earnings per common share, except that the former reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Potentially dilutive securities include outstanding stock options, restricted stock units, and performance-based restricted stock units. Less than 11.0 million of potentially dilutive securities for ~~each of~~ the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were excluded from the computation of diluted earnings per common share as they were anti-dilutive.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

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


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended June 30,
(In millions, except per share amounts)	(In millions, except per share amounts)	2022		2021		2022		2021		(In millions, except per share amounts)	2023		2022
Income from continuing operations	Income from continuing operations	$	973	$	310	$	1,780	$	846	Income from continuing operations	$	997	$	807
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(41)		(43)		(82)		(90)		Net income attributable to noncontrolling interests	(39)		(41)
Income from continuing operations attributable to McKesson Corporation	Income from continuing operations attributable to McKesson Corporation	932		267		1,698		756		Income from continuing operations attributable to McKesson Corporation	958		766
Loss from discontinued operations, net of tax		(6)		—		(4)		(3)
Income from discontinued operations, net of tax										Income from discontinued operations, net of tax	—		2
Net income attributable to McKesson Corporation	Net income attributable to McKesson Corporation	$	926	$	267	$	1,694	$	753	Net income attributable to McKesson Corporation	$	958	$	768

Weighted-average common shares outstanding:	Weighted-average common shares outstanding:									Weighted-average common shares outstanding:
Basic	Basic	143.1		154.1		143.7		155.1		Basic	135.5		144.2
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Stock options	Stock options	0.2		0.2		0.3		0.2		Stock options	0.2		0.3
Restricted stock units (1)	Restricted stock units (1)	0.8		1.5		1.0		1.6		Restricted stock units (1)	0.9		1.4
Diluted	Diluted	144.1		155.8		145.0		156.9		Diluted	136.6		145.9

Earnings (loss) per common share attributable to McKesson Corporation: (2)
Earnings per common share attributable to McKesson Corporation: (2)										Earnings per common share attributable to McKesson Corporation: (2)
Diluted	Diluted									Diluted
Continuing operations	Continuing operations	$	6.46	$	1.71	$	11.71	$	4.82	Continuing operations	$	7.02	$	5.25
Discontinued operations	Discontinued operations	(0.04)		—		(0.03)		(0.02)		Discontinued operations	—		0.01
Total	Total	$	6.42	$	1.71	$	11.68	$	4.80	Total	$	7.02	$	5.26
Basic	Basic									Basic
Continuing operations	Continuing operations	$	6.51	$	1.73	$	11.81	$	4.87	Continuing operations	$	7.07	$	5.31
Discontinued operations	Discontinued operations	(0.04)		—		(0.02)		(0.02)		Discontinued operations	—		0.01
Total	Total	$	6.47	$	1.73	$	11.79	$	4.85	Total	$	7.07	$	5.32

(1)Includes dilutive effect from restricted stock units and performance-based stock units.

(2)Certain computations may reflect rounding adjustments.

7.6. Goodwill and Intangible Assets, Net

Goodwill

The Company evaluates goodwill for impairment on an annual basis in the first fiscal quarter, and ~~at an interim date,~~more frequently if indicators offor potential impairment exist. ~~The Company voluntarily changed its annual goodwill~~Goodwill impairment testing ~~date from October 1~~st ~~to April 1~~st ~~to align with~~is conducted at the reporting unit level, which is generally defined as an operating segment or one level below an operating segment (also known as a ~~change in timing~~component), for which discrete financial information is available and segment management regularly reviews the operating results of ~~the Company’s annual long-term planning process. Accordingly, management determined~~ that the change in accounting principle is preferable under the circumstance. This change has been applied prospectively from April 1, 2022 as retrospective application is deemed impracticable due to the inability to objectively determine the assumptions and significant estimates used in earlier periods without the benefit of hindsight. This change was not material to the Company’s consolidated financial statements as it did not delay, accelerate, or avoid any potential goodwill impairment charge.reporting unit. The annual impairment testing performed ~~as of April 1, 2022~~in fiscal 2024 and fiscal 2023 did not indicate anany impairment of goodwill.

2015

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Changes in the carrying amount of goodwill were as follows:


(In millions)	(In millions)	U.S. Pharmaceutical		Prescription Technology Solutions		Medical-Surgical Solutions		International		Total		(In millions)	U.S. Pharmaceutical (1)		Prescription Technology Solutions		Medical-Surgical Solutions		International		Total
Balance, March 31, 2022		$	3,923	$	1,542	$	2,453	$	1,533	$	9,451
Goodwill acquired		11		—		—		1		12
Balance, March 31, 2023												Balance, March 31, 2023	$	4,050	$	2,005	$	2,453	$	1,439	$	9,947

Foreign currency translation adjustments, net	Foreign currency translation adjustments, net	(72)		—		—		(150)		(222)		Foreign currency translation adjustments, net	—		—		—		29		29
Other adjustments(2)	Other adjustments(2)	(2)		—		—		—		(2)		Other adjustments(2)	(5)		—		—		—		(5)
Balance, September 30, 2022		$	3,860	$	1,542	$	2,453	$	1,384	$	9,239
Balance, June 30, 2023												Balance, June 30, 2023	$	4,045	$	2,005	$	2,453	$	1,468	$	9,971

(1)The goodwill balance allocated to the U.S. Pharmaceutical segment related to McKesson Europe’s Celesio AG acquisition no longer reflects foreign currency translation adjustments as its functional currency was changed from Euros to U.S. dollars with the completion of the sale of the E.U. disposal group.

(2)Includes purchase price allocation adjustments related to the formation of SCRI Oncology, which is discussed in Financial Note 2, “Business Acquisitions and Divestitures.”

Intangible Assets

Information regarding intangible assets iswas as follows:


		September 30, 2022							March 31, 2022							June 30, 2023							March 31, 2023
(Dollars in millions)	(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		(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 relationships	Customer relationships	12	$	2,710	$	(1,703)	$	1,007	$	2,777	$	(1,691)	$	1,086	Customer relationships	12	$	2,984	$	(1,801)	$	1,183	$	2,971	$	(1,765)	$	1,206
Service agreements	Service agreements	9	1,063		(591)		472		1,085		(573)		512		Service agreements	10	1,141		(641)		500		1,137		(623)		514

Trademarks and trade names	Trademarks and trade names	11	765		(402)		363		819		(386)		433		Trademarks and trade names	12	843		(446)		397		833		(430)		403
Technology	Technology	3	132		(120)		12		128		(116)		12		Technology	11	264		(133)		131		264		(129)		135
Other	Other	9	190		(172)		18		187		(171)		16		Other	6	184		(174)		10		193		(174)		19
Total	Total		$	4,860	$	(2,988)	$	1,872	$	4,996	$	(2,937)	$	2,059	Total		$	5,416	$	(3,195)	$	2,221	$	5,398	$	(3,121)	$	2,277

Amortization expense of intangible assets was $57 million and $84 million for the three months ended September 30, 2022 and 2021, respectively, and $113 million and $182 million for the six months ended September 30, 2022 and 2021, respectively. Estimated amortization expense of these assets is as follows: $108 million, $208 million, $202 million, $170 million, and $164 million for the remainder of fiscal 2023 and each of the succeeding years through fiscal 2027, respectively, and $1.0 billion thereafter. All intangible assets were subject to amortization as of ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022.~~2023. Amortization expense of intangible assets was $62 million and $56 million for the three months ended June 30, 2023 and 2022, respectively. Estimated amortization expense of the ~~E.U. disposal group classified as held for sale ceased~~assets listed in the ~~second quarter~~table above is as follows: $185 million, $240 million, $208 million, $202 million, and $198 million for the remainder of fiscal ~~2022.~~2024 and each of the succeeding years through fiscal 2028, respectively, and $1.2 billion thereafter.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

8.7. Debt and Financing Activities

Long-term debt consisted of the following:


(In millions)	(In millions)	September 30, 2022		March 31, 2022		(In millions)	June 30, 2023		March 31, 2023
U.S. Dollar notes (1) (2)	U.S. Dollar notes (1) (2)					U.S. Dollar notes (1) (2)
2.70% Notes due December 15, 2022		$	400	$	400
2.85% Notes due March 15, 2023		360		360
3.80% Notes due March 15, 2024	3.80% Notes due March 15, 2024	918		918		3.80% Notes due March 15, 2024	$	—	$	918
0.90% Notes due December 3, 2025	0.90% Notes due December 3, 2025	500		500		0.90% Notes due December 3, 2025	500		500
5.25% Notes due February 15, 2026						5.25% Notes due February 15, 2026	499		499
1.30% Notes due August 15, 2026	1.30% Notes due August 15, 2026	498		498		1.30% Notes due August 15, 2026	499		498
7.65% Debentures due March 1, 2027	7.65% Debentures due March 1, 2027	150		150		7.65% Debentures due March 1, 2027	150		150
3.95% Notes due February 16, 2028	3.95% Notes due February 16, 2028	343		343		3.95% Notes due February 16, 2028	343		343
4.90% Notes due July 15, 2028						4.90% Notes due July 15, 2028	399		—
4.75% Notes due May 30, 2029	4.75% Notes due May 30, 2029	196		196		4.75% Notes due May 30, 2029	196		196
5.10% Notes due July 15, 2033						5.10% Notes due July 15, 2033	596		—
6.00% Notes due March 1, 2041	6.00% Notes due March 1, 2041	217		217		6.00% Notes due March 1, 2041	218		218
4.88% Notes due March 15, 2044	4.88% Notes due March 15, 2044	255		255		4.88% Notes due March 15, 2044	255		255
Foreign currency notes (1) (3)	Foreign currency notes (1) (3)					Foreign currency notes (1) (3)
1.50% Euro Notes due November 17, 2025	1.50% Euro Notes due November 17, 2025	586		662		1.50% Euro Notes due November 17, 2025	653		649
1.63% Euro Notes due October 30, 2026	1.63% Euro Notes due October 30, 2026	490		554		1.63% Euro Notes due October 30, 2026	545		542
3.13% Sterling Notes due February 17, 2029	3.13% Sterling Notes due February 17, 2029	503		582		3.13% Sterling Notes due February 17, 2029	571		555

Lease and other obligations	Lease and other obligations	197		244		Lease and other obligations	237		271
Total debt	Total debt	5,613		5,879		Total debt	5,661		5,594
Less: Current portion	Less: Current portion	800		799		Less: Current portion	50		968
Total long-term debt	Total long-term debt	$	4,813	$	5,080	Total long-term debt	$	5,611	$	4,626

(1)These notes are unsecured and unsubordinated obligations of the Company.

(2)Interest on these U.S. dollar notes is payable semi-annually.

(3)Interest on these foreign currency notes is payable annually.

Long-Term Debt

The Company’s long-term debt includes both U.S. dollar and foreign currency-denominated borrowings. ~~Debt outstanding totaled $5.6 billion and $5.9 billion at September~~At June 30, ~~2022~~2023 and March 31, ~~2022,~~2023, $5.7 billion and $5.6 billion, respectively, of total debt was outstanding, of which ~~$800~~$50 million and ~~$799~~$968 million, respectively, was included under the caption “Current portion of long-term debt” ~~within~~in the Company’s Condensed Consolidated Balance ~~Sheets at September 30, 2022 and March 31, 2022, respectively.~~Sheets.

Notes Offerings

On ~~July 23, 2021,~~June 15, 2023, the Company completed a ~~cash tender offer~~public offering of 4.90% Notes due July 15, 2028 in a principal amount of $400 million (the “2028 Notes”) and a public offering of 5.10% Notes due July 15, 2033 in a principal amount of $600 million (the “2033 Notes” and, together with the 2028 Notes, the “Notes”). Interest on the Notes is payable semi-annually on January 15th and July 15th of each year, commencing on January 15, 2024. Proceeds received from the issuance of the Notes, net of discounts and offering expenses, were $397 million for the 2028 Notes and $592 million for the 2033 Notes. The Company utilized a portion of ~~its existing~~the net proceeds from the offerings of the Notes to fund the purchase price payable with respect to the portion of the Company’s then outstanding ~~(i) 2.85% Notes due 2023, (ii)~~ 3.80% Notes due March 15, 2024 ~~(iii) 7.65% Debentures due 2027, (iv) 3.95% Notes due 2028, (v) 4.75% Notes due 2029, (vi) 6.00% Notes due 2041,~~(the “2024 Notes”) that was validly tendered and ~~(vii) 4.88% Notes due 2044 (collectively referred~~accepted for purchase pursuant to ~~herein as~~ the ~~“Tender~~Concurrent Tender Offer ~~Notes”). In connection with~~(as defined below) and to effect the ~~tender offer, the Company paid an aggregate consideration of $1.1 billion to redeem $922 million principal amount~~satisfaction and discharge of the ~~notes at a redemption price equal to 100%~~remaining portion of the ~~principal amount and premiums~~2024 Notes, all of ~~$182 million, plus accrued and unpaid interest of $14 million.~~which is described further below. The ~~redemption~~remaining net proceeds from the offerings of the ~~Tender Offer~~ Notes ~~was accounted~~is available for as a debt extinguishment. As a result of the redemption, the Company incurred a pre-tax loss on debt extinguishment of $191 million, which included premiums of $182 million as well as the write-off of unamortized debt issuance costs and transaction fees incurred totaling $9 million.general corporate purposes.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Each series of the Notes is an unsecured and unsubordinated obligation of the Company and ranks equally with all of the Company’s existing, and future unsecured and unsubordinated indebtedness that may be outstanding from time-to-time. The Notes are governed by an indenture and officers’ certificate that are materially similar to those of other series of notes issued by the Company. Upon at least 10 days’ and not more than 60 days’ notice to holders of the applicable series of the Notes, the Company may redeem either series of the Notes for cash in whole, at any time, or in part, from time to time, at redemption prices that include accrued and unpaid interest and a make-whole premium before a specified date, and at par plus accrued and unpaid interest thereafter until maturity, each as specified in the indenture and the officers’ certificate. If there were to occur both (1) a change of control of the Company and (2) a downgrade of the applicable series of the Notes below an investment grade rating by each of the Ratings Agencies (as defined in the officers’ certificate) within a specified period, then the Company would be required to make an offer to purchase those Notes at a price equal to 101% of the then outstanding principal amount of such Notes, plus accrued and unpaid interest to, but not including, the date of repurchase. The indenture and the related officers’ certificate for the Notes, subject to the exceptions and in compliance with the conditions as applicable, specify that the Company may not consolidate, merge or sell all or substantially all of its assets, incur liens, or enter into sale-leaseback transactions exceeding specific terms, without the lenders’ consent. The indenture also contains customary events of default provisions.

Concurrent Tender Offer

On June 16, 2023, the Company completed a cash tender offer for any and all of its then outstanding 2024 Notes, which was made concurrently with the offerings of the Notes (the “Concurrent Tender Offer”). The Company paid an aggregate consideration of $268 million in the Concurrent Tender Offer to repurchase $271 million principal amount of the 2024 Notes at a repurchase price equal to 98.75% of the principal amount plus accrued and unpaid interest. The repurchase of the 2024 Notes accepted for purchase in the Concurrent Tender Offer was accounted for as a debt extinguishment.

Satisfaction and Discharge of the 2024 Notes

On June 16, 2023, after completing the Concurrent Tender Offer, the Company irrevocably deposited with the trustee under the indenture governing the 2024 Notes (the “2024 Notes Indenture”) U.S. government obligations in an amount sufficient to fund the payment of accrued and unpaid interest of the remaining $647 million principal amount of the 2024 Notes as it becomes due, and of the principal amount of those 2024 Notes on their March 15, 2024 maturity date. The U.S. government obligations were purchased using a portion of the net proceeds from the offerings of the Notes. After the deposit of such funds with the trustee, the Company’s obligations under the 2024 Notes Indenture with respect to the 2024 Notes were satisfied and discharged and the transaction was accounted for as a debt extinguishment.

The total gain recognized on the debt extinguishments described above for the three months ended June 30, 2023 was $9 million and included within “Interest expense” in the Company’s Condensed Consolidated Statement of Operations.

Revolving Credit Facilities

~~The~~On November 7, 2022, the Company ~~has~~entered into a Credit Agreement ~~dated as of September 25, 2019, as amended~~ (the ~~“2020~~“2022 Credit Facility”), that provides a syndicated $4.0 billion five-year senior unsecured credit facility with a $3.6 billion aggregate sublimit of availability in Canadian dollars, British pound sterling, and Euro. ~~Borrowings~~The 2022 Credit Facility is scheduled to mature in November 2027. The 2022 Credit Facility replaced the Company’s previous syndicated $4.0 billion five-year senior unsecured credit facility, dated as of September 25, 2019, as amended (the “2020 Credit Facility”), which was scheduled to mature in September 2024. The 2020 Credit Facility was terminated in connection with the execution of the 2022 Credit Facility. There were no borrowings under the 2020 Credit Facility bear interest based upon the London Interbank Offered Rate (“LIBOR”), Canadian Dealer Offered Rate for credit extensions denominated in Canadian dollars, a prime rate, or alternative overnight rates as applicable, plus agreed upon margins. The 2020 Credit Facility matures in September 2024 and had no borrowings during the ~~six~~three months ended ~~September~~June 30, 2022, ~~and 2021~~ and no amounts outstanding asat the time of ~~September 30,~~its termination. There were no borrowings under the 2022 ~~and March 31, 2022.~~

~~The 2020~~ Credit Facility ~~contains various customary investment grade covenants, including a financial covenant which obligates~~during the Company to maintain a maximum Total Debt to Consolidated EBITDA ratio, as defined in the amended credit agreement. If the Company does not comply with these covenants, its ability to use the 2020 Credit Facility may be suspendedthree months ended June 30, 2023 and ~~repayment of any~~no amounts outstanding ~~balances under the 2020 Credit Facility may be required.~~at June 30, 2023. At ~~September~~June 30, ~~2022,~~2023, the Company was in compliance with all ~~covenants.~~

The Company also maintains bilateral credit facilities primarily denominated in Euros with no committed amount and an uncommitted amount of $99 million as of September 30, 2022. Borrowings and repayments were not material duringcovenants under the ~~six months ended September 30,~~ 2022 ~~and 2021. Amounts outstanding under these credit lines were not material as of September 30, 2022 and March 31, 2022.~~Credit Facility.

Commercial Paper

The Company maintains a commercial paper program to support its working capital requirements and for other general corporate purposes. Under the program, the Company can issue up to $4.0 billion in outstanding commercial paper notes. During the ~~six~~three months ended ~~September~~June 30, ~~2022,~~2023, the Company borrowed ~~$100 million~~ and repaid ~~$100~~$65 million under the program. During the ~~six~~three months ended ~~September~~June 30, ~~2021, the Company borrowed $3.0 billion and repaid $3.0 billion~~2022, there were no material borrowings under the program. At ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022,~~2023, there were no commercial paper notes outstanding.

Table of Contents

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

9.~~Pension Benefits~~

The net periodic expense for defined benefit pension plans was not material for each of the three and six months ended September 30, 2022 and 2021. Cash contributions to these plans were $2 million and $5 million for the three and six months ended September 30, 2022, respectively, and $3 million and $17 million for the three and six months ended September 30, 2021, respectively. The projected unit credit method is utilized in measuring net periodic pension expense over the employees’ service life for the pension plans. Unrecognized actuarial losses exceeding 10% of the greater of the projected benefit obligation or the market value of assets are amortized on a straight-line basis over the average remaining future service periods and estimated life expectancy.

As part of the European divestiture activities discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures,” pension liabilities of $74 million and $85 million as of September 30, 2022 and March 31, 2022, respectively, were included under the caption “Liabilities held for sale,” in the Condensed Consolidated Balance Sheets as part of the E.U. disposal group. During the first quarter of fiscal 2023, the Company derecognized pension assets of $49 million and released $30 million of accumulated other comprehensive loss related to the sale of its U.K. disposal group. The pension assets were included within “Assets held for sale” in the Condensed Consolidated Balance Sheet as of March 31, 2022.

~~10.~~8. Hedging Activities

In the normal course of business, the Company is exposed to interest rate and foreign currency exchange rate fluctuations. At times, the Company limits these risks through the use of derivatives as described below. In accordance with the Company’s policy, derivatives are only used for hedging purposes. It does not use derivatives for trading or speculative purposes. The Company uses different counterparties for its derivative contracts to minimize the exposure to credit risk but does not anticipate non-performance by these parties.

~~Table of Contents~~

~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

Foreign Currency Exchange Risk

The Company conducts its business worldwide in U.S. dollars and the functional currencies of its foreign subsidiaries, including Canadian dollars, Euro, and British ~~pound sterling, and Canadian dollars.~~pounds sterling. Changes in foreign currency exchange rates could have a material adverse impact on the Company’s financial results that are reported in U.S. dollars. The Company is also exposed to foreign currency exchange rate risk related to its foreign subsidiaries, including intercompany loans denominated in non-functional currencies. The Company has certain foreign currency exchange rate risk programs that use ~~foreign currency forward contracts and~~ cross-currency swaps. These forward contracts and cross-currency swaps are generally used to offset the potential income statement effects from intercompany loans and other obligations denominated in non-functional currencies. These programs reduce but do not entirely eliminate foreign currency exchange rate risk. Subsequent to the completion of the U.K. divestiture in April 2022 as discussed in Financial Note 2, “Business Acquisitions and Divestitures,” the Company’s foreign currency exchange rate risk is limited to the Euro and Canadian dollar.

Non-Derivative Instruments Designated as Hedges

~~At September 30, 2022 and March 31, 2022,~~Prior to the divestiture of the E.U. disposal group, the Company had €1.1 billion of Euro-denominated notes designated as non-derivative net investment hedges. These hedges ~~are~~were utilized to hedge portions of the Company’s net investments in non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For all notes that ~~are~~were designated as net investment hedges and ~~meet~~met effectiveness requirements, the changes in carrying value of the notes attributable to the change in spot rates ~~are~~were recorded as foreign currency translation adjustments in “Accumulated other comprehensive loss” ~~in the Condensed Consolidated Statements of Stockholders’ Equity (Deficit)~~ where they offset foreign currency translation gains and losses recorded on the Company’s net investments. To the extent foreign currency denominated notes designated as net investment hedges ~~are~~were ineffective, changes in carrying value attributable to the change in spot rates ~~are~~were recorded in earnings.

In connection with the divestiture of the E.U. disposal group in October 2022, the Euro-denominated notes described above were de-designated as net investment hedges.

In connection with the sale of the U.K. disposal group in April 2022, the Company reclassified $26 million of gains from accumulated other comprehensive loss ~~and recorded in~~to “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated ~~Statements~~Statement of Operations for the ~~six~~three months ended ~~September~~June 30, 2022. This amount related to the Company’s £450 million of British pound sterling-denominated notes, which were previously accounted for as net investment hedges until de-designated in fiscal 2020, and was included in the fiscal 2022 calculation of charges to remeasure the assets and liabilities of the disposal group to fair value less costs to sell.

Foreign currency gains (losses) from non-derivative instruments included in other comprehensive income in the Condensed Consolidated Statements of Comprehensive Income were as follows:


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended June 30,
(In millions)	(In millions)	2022		2021		2022		2021		(In millions)		2023		2022
Non-derivatives designated as net investment hedges: (1)	Non-derivatives designated as net investment hedges: (1)									Non-derivatives designated as net investment hedges: (1)
Euro-denominated notes	Euro-denominated notes	$	75	$	33	$	139	$	11	Euro-denominated notes		$	—	$	64

(1)There was no ineffectiveness in these hedges for the three ~~and six~~ months ended ~~September~~June 30, ~~2022 and 2021.~~2022.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Derivative Instruments

At ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022,~~2023, the notional amounts of the Company’s outstanding derivatives were as follows:

September 30, 2022 March 31, 2022
(In millions) Currency Maturity Date Notional
Derivatives designated as net investment hedges: (1)
Cross-currency swaps (2)
CAD Nov-24 $ 500 $ 500
Derivatives designated as fair value hedges: (1)
Cross-currency swaps (3)
GBP Feb-23 £ 450 £ 450
Floating interest rate swaps (4)
USD Aug-27 to Sep-29 $ 750 $ —
Derivatives designated as cash flow hedges: (1)
Cross-currency swaps (2)
CAD Jul-22 to Jan-24 $ 1,532 $ 1,678
Fixed interest rate swaps (5)
USD Mar-23 $ 500 $ 500

June 30, 2023

March 31, 2023

(In millions)

Currency

Maturity Date (1)

Notional

Derivatives designated as net investment hedges: (2)

Cross-currency swaps (3)

CAD

Nov-24 to Mar-25

1,500

Derivatives designated as fair value hedges: (2)

Cross-currency swaps (4)

GBP

Nov-28

450

Cross-currency swaps (4)

EUR

Aug-25 to Jul-26

€

1,100

€

1,100

Floating interest rate swaps (5)

USD

Feb-26 to Sep-29

1,250

Derivatives designated as cash flow hedges: (2)

Cross-currency swaps (3)

CAD

Jan-24

400

Fixed interest rate swaps (6)

USD

Jun-23

—

450

(1)The maturity date reflected is for outstanding derivatives as of June 30, 2023.

(2)There was no ineffectiveness in these hedges for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

~~(2)~~(3)The Company agreed with third parties to exchange fixed interest payments in one currency for fixed interest payments in another currency at specified intervals and to exchange principal in one currency for principal in another currency, calculated by reference to agreed-upon notional amounts.

~~(3)~~(4)~~The Company agreed with third parties~~Represents cross-currency fixed-to-fixed interest rate swaps to mitigate the foreign currency exchange ~~fixed interest payments in British pound sterling for floating interest payments in U.S. dollars based~~fluctuations on ~~three-month LIBOR plus a spread.~~its foreign currency-denominated notes.

~~(4)~~(5)~~The Company entered into~~Represents fixed-to-floating interest rate swaps to hedge the changes in fair value caused by fluctuations in the benchmark interest rates.

~~(5)~~(6)The Company entered into agreements with financial institutions to lock into the fixed benchmark interest rates for future bond ~~issuance.~~issuance, which were terminated during the first quarter of fiscal 2024 as discussed further below.

Net Investment Hedges

The Company uses cross-currency swaps to hedge portions of the Company’s net investments denominated in Canadian dollars against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. The changes in the fair value of these derivatives attributable to the changes in spot currency exchange rates and differences between spot and forward interest rates are recorded in accumulated other comprehensive loss and offset foreign currency translation gains and losses recorded on the Company’s net investments denominated in Canadian dollars. To the extent cross-currency swaps designated as hedges are ineffective, changes in carrying value attributable to the change in spot rates are recorded in earnings.

Fair Value Hedges

The Company uses cross-currency swaps to hedge the changes in the fair value of ~~British pound sterling~~its foreign currency notes resulting from changes in benchmark interest rates and foreign currency exchange rates. The changes in the fair value of these derivatives and the offsetting changes in the fair value of the hedged notes are recorded in earnings. Gains from the changes in the Company’s fair value hedges recorded in earnings were largely offset by the losses recorded in earnings on the hedged item.

~~During~~ For components excluded from the ~~three~~assessment of hedge effectiveness, the initial value of the excluded component is recognized in accumulated other comprehensive loss and ~~six months ended September 30, 2022,~~then released into earnings over the ~~Company entered into floating interest rate swaps to convert $570 million and $750 million, respectively,~~life of ~~its fixed rate debt to floating interest rate in order to hedge~~ the ~~changes in fair value caused by fluctuations in~~hedging instrument. The difference between the ~~benchmark interest rate. The changes~~change in the fair value of ~~these derivatives are~~the excluded component and the amount amortized into earnings during the period is recorded in ~~“Interest expense” in the Condensed Consolidated Statements of Operations.~~other comprehensive income (loss).

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Cash Flow Hedges

From time to time, the Company enters into cross-currency swaps to hedge intercompany loans denominated in non-functional currencies to reduce the income statement effects arising from fluctuations in foreign currency rates and also enters into forward contracts to hedge the variability of future benchmark interest rates on planned bond issuances. The effective portion of changes in the fair value of these hedges is recorded in accumulated other comprehensive loss and reclassified into earnings in the same period in which the hedged transaction affects earnings. Changes in fair values representing hedge ineffectiveness are recognized in current earnings. Gains or losses reclassified from accumulated other comprehensive loss and recorded in “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations were not material for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

The Company entered into forward-starting fixed interest rate swaps designated as cash flow hedges in fiscal 2023 with a notional amount of $450 million, and in the first quarter of fiscal 2024 with a notional amount of $50 million, to hedge the variability of future benchmark interest rates on a planned bond issuance. On June 15, 2023, the Company completed a public offering of the 2033 Notes, at which point the $500 million cash flow hedges were terminated and the proceeds are amortized to interest expense over the life of the 2033 Notes, or 10 years. Refer to Financial Note 7, “Debt and Financing Activities,” for additional information on the public offering of the 2033 Notes.

Derivatives Not Designated as Hedges

Derivative instruments not designated as hedges are marked-to-market at the end of each accounting period with the change in fair value included in earnings. ~~From time to time, the Company enters into forward contracts to hedge the Euro against cash flows denominated in British pound sterling and other European currencies.~~ Changes in the fair values for contracts not designated as hedges are recorded directly into earnings in “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations. ~~Changes in the fair values were not material for the three and six months ended September 30, 2021 and the~~The Company did not have any outstanding derivative instruments not designated as hedges during ~~fiscal 2023. Gains or losses from these contracts are largely offset by changes in~~ the ~~value of the underlying intercompany obligations.~~periods presented.

Other Information on Derivative Instruments

Gains (losses) offrom derivatives included in other comprehensive income ~~(loss)~~ in the Condensed Consolidated Statements of Comprehensive Income were as follows:


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended June 30,
(In millions)	(In millions)	2022		2021		2022		2021		(In millions)		2023		2022
Derivatives designated as net investment hedges:	Derivatives designated as net investment hedges:									Derivatives designated as net investment hedges:
Cross-currency swaps	Cross-currency swaps	$	21	$	10	$	33	$	5	Cross-currency swaps		$	(20)	$	12

Derivatives designated as cash flow hedges:
Derivatives designated as cash flow and other hedges:										Derivatives designated as cash flow and other hedges:
Cross-currency swaps(1)	Cross-currency swaps(1)	$	(3)	$	1	$	(5)	$	(1)	Cross-currency swaps(1)		$	(6)	$	(2)
Fixed interest rate swaps	Fixed interest rate swaps	28		10		55		12		Fixed interest rate swaps		16		27

(1)Includes other comprehensive income (loss) related to the excluded component of certain fair value hedges.

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McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Information regarding the fair value of derivatives on a gross basis were as follows:


		Balance Sheet Caption	September 30, 2022							March 31, 2022											Balance Sheet Caption			June 30, 2023								March 31, 2023
			Fair Value of Derivative				U.S. Dollar Notional			Fair Value of Derivative									U.S. Dollar Notional					Fair Value of Derivative						U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
(In millions)	(In millions)		Asset		Liability			Asset				Liability				(In millions)		Asset						Liability					Asset			Liability
Derivatives designated for hedge accounting:	Derivatives designated for hedge accounting:																			Derivatives designated for hedge accounting:

Cross-currency swaps (current)	Cross-currency swaps (current)	Prepaid expenses and other/Other accrued liabilities	$	43	$	62		$	1,417			$	30			$	39					$	1,537		Cross-currency swaps (current)	Prepaid expenses and other/Other accrued liabilities	$	—		$	2	$	301	$	5	$	—	$	301
Cross-currency swaps (non-current)	Cross-currency swaps (non-current)	Other non-current assets/liabilities	26		—		679			—				36					679	Cross-currency swaps (non-current)	Other non-current assets/liabilities			84			12			2,760		74		2		2,760
Fixed interest rate swaps (current)		Prepaid expenses and other	85		—		500			31				—					500

Floating interest rate swaps (non-current)		Other non-current liabilities	—		34		750			—				—					—

Interest rate swaps (non-current)																				Interest rate swaps (non-current)	Other non-current assets/liabilities			—			39			1,250		1		15		1,700
Total	Total		$	154	$	96				$	61			$	75					Total				$	84		$	53				$	80	$	17

Refer to Financial Note ~~11,~~9, "Fair Value Measurements," for more information on these recurring fair value measurements.

~~11.~~9. Fair Value Measurements

The Company measures certain assets and liabilities at fair value in accordance with ~~Accounting Standards Codification (“ASC”)~~ASC Topic 820, Fair Value Measurements and Disclosures. The fair value hierarchy consists of three levels of inputs that may be used to measure fair value as follows:

Level 1 - quoted prices in active markets for identical assets or liabilities.

Level 2 - significant other observable market-based inputs.

Level 3 - significant unobservable inputs for which little or no market data exists and requires considerable assumptions that are significant to the fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Cash and cash equivalents at ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022~~2023 included investments in money market funds of ~~$772~~$806 million and ~~$981 million,~~$1.4 billion, respectively, which are reported at fair value. The fair value of money market funds was determined 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 Company’s marketable securities were not material at September 30, 2022 and March 31, 2022.~~

Fair values of the Company’s interest rate swaps and cross-currency swaps ~~and foreign currency forward contracts~~ were determined using observable inputs from available market information, including quoted interest rates, foreign currency exchange rates, and other observable inputs from available market information. These inputs are considered Level 2 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. Refer to Financial Note ~~10,~~8, “Hedging Activities,” for fair ~~value~~values and other information on the Company’s ~~derivatives including interest rate swaps, cross-currency swaps, and foreign currency forward contracts.~~

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~~(UNAUDITED)~~

derivatives.

The Company holds investments in equity securities of U.S. growth stage companies that address both current and emerging business challenges in the healthcare industry and which had a carrying ~~values~~value of ~~$252 million and $346~~$237 million at ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022, respectively.~~2023. These investments primarily consist of equity securities without readily determinable fair values and are included in “Other non-current assets” in the Condensed Consolidated Balance Sheets. During the six months ended September 30, 2022, the Company recognized impairment charges and realized gains on the exit of certain investments. During the three months ended September 30, 2021, certain of the Company’s investments in equity securities without readily determinable fair values were remeasured to fair value based on transactions which resulted in changes in the observable price of those securities. Net gains (losses) related to the Company’s investments in these equity securities were $(3) million and $97 million for the three months ended September 30, 2022 and 2021, respectively, and $(25) million and $104 million for the six months ended September 30, 2022 and 2021, respectively. These amounts were recorded in “Other income, net” in the Condensed Consolidated Statements of Operations. The carrying value of publicly-traded investments, which was not material for the periods presented, was determined using quoted prices for identical investments in active markets and are considered to be Level 1 inputs. The net realized and unrealized gains as well as impairment charges related to these investments are included within “Other income, net” in the Condensed Consolidated Statements of Operations and were not material for the three months ended June 30, 2023 and 2022.

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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company’s assets and liabilities are also subject to nonrecurring fair value measurements. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment ~~charges.~~

~~At September 30, 2022 and March 31, 2022, the~~charges or as a result of charges to remeasure assets ~~and liabilities associated with the disposal groups in Europe~~ classified as held for sale ~~were measured at the lower of carrying value or~~to fair value less costs to ~~sell, as discussed in more detail in Financial Note 2, “Business Acquisitions~~sell.

At June 30, 2023 and ~~Divestitures." At~~ March 31, 2023, the contingent consideration liability related to the Company’s acquisition of RxSS in November 2022 ~~assets~~was measured at fair value on a nonrecurring ~~basis also included certain long-lived assets within the International segment related~~basis. Refer to ~~the Company’s previous operations in Denmark~~Financial Note 2, “Business Acquisitions and ~~its retail pharmacy businesses in Canada.~~Divestitures," for more information on this transaction.

The aforementioned investments in equity securities of U.S. growth stage companies include the carrying value of investments without readily determinable fair values, which were determined using a measurement alternative and are recorded at cost less impairment, plus or minus any changes in observable price from orderly transactions of the same or similar security of the same issuer. ~~The~~These inputs related to changes in observable price are considered Level 2 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. Inputs related to impairments of investments are generally considered Level 3 fair value measurements due to their inherently unobservable nature based on significant assumptions by management and use of company-specific information.

There were no other material assets or liabilities measured at fair value on a nonrecurring basis at ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022.~~2023.

Other Fair Value Disclosures

At ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022,~~2023, the carrying amounts of cash, certain cash equivalents, restricted cash, ~~marketable securities,~~ receivables, drafts and accounts payable, short-term borrowings, and other current assets and liabilities approximated their estimated fair values because of the short-term maturity of these financial instruments.

The Company determines the fair value of commercial paper using quoted prices in active markets for identical instruments, which are considered Level 1 inputs under the fair value measurements and disclosure guidance.

The Company’s long-term debt is recorded at amortized cost. The carrying value and fair value of the Company’s long-term debt was as follows:

September 30, 2022 March 31, 2022
(In millions) Carrying Value Fair Value Carrying Value Fair Value
Long-term debt, including current maturities $ 5,613 $ 5,321 $ 5,879 $ 5,999

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~~(UNAUDITED)~~


	June 30, 2023				March 31, 2023
(In millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current maturities	$	5,661	$	5,335	$	5,594	$	5,386

The estimated fair value of the Company’s long-term debt was determined using quoted market prices in a less active market and other observable inputs from available market information, which are considered to be Level 2 inputs, and may not be representative of actual values that could have been realized or that will be realized in the future.

~~Restricted Cash~~

Restricted cash, included within “Prepaid expenses and other” in the Company’s Condensed Consolidated Balance Sheets primarily consists of $35 million and $395 million as of September 30, 2022 and March 31, 2022, respectively, held in escrow related to obligations under settlement agreements for opioid-related claims of governmental entities, as discussed in more detail in Financial Note 12, “Commitments and Contingent Liabilities.”

Goodwill

Fair value assessments of the reporting unit and the reporting unit's net assets, which are performed for goodwill impairment tests, are considered a Level 3 measurement due to the significance of unobservable inputs developed using company-specific information. The Company considered a market approach as well as an income approach using a ~~DCF~~discounted cash flow (“DCF”) model to determine the fair value of each reporting unit.

Long-lived Assets

The Company measures certain long-lived and intangible assets at fair value on a nonrecurring basis when events occur that indicate an asset group may not be recoverable. If the carrying amount of an asset group is not recoverable, an impairment charge is recorded to reduce the carrying amount by the excess over its fair value.

The Company utilizes multiple approaches, including the DCF model and market approaches, for estimating the fair value of intangible assets. The future cash flows used in the analysis are based on internal cash flow projections from its long-range plans and include significant assumptions by management. Accordingly, the fair value assessment of long-lived assets is considered a Level 3 fair value measurement.

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~~12.~~10. Commitments and Contingent Liabilities

In addition to commitments and obligations incurred in the ordinary course of business, the Company is subject to a variety of claims and legal proceedings, including claims from customers and vendors, pending and potential legal actions for damages, governmental investigations, and other matters. The Company and its affiliates are parties to the legal claims and proceedings described below and in Financial Note 181 7 to the Company’s ~~2022~~202 3 Annual Report, which disclosure is incorporated in this footnote by this reference. The Company is vigorously defending itself against those claims and in those proceedings. Significant developments in those matters are described below. If the Company is unsuccessful in defending, or if it determines to settle, any of these matters, it may be required to pay substantial sums, be subject to injunction and/or be forced to change how it operates its business, which could have a material adverse impact on its financial position or results of operations.

Unless otherwise stated, the Company is unable to reasonably estimate the loss or a range of possible loss for the matters described below. Often, the Company is unable to determine that a loss is probable, or to reasonably estimate the amount of loss or a range of loss, for a claim because of the limited information available and the potential effects of future events and decisions by third parties, such as courts and regulators, that will determine the ultimate resolution of the claim. Many of the matters described are at preliminary stages, raise novel theories of liability, or seek an indeterminate amount of damages. It is not uncommon for claims to remain unresolved over many years. The Company reviews loss contingencies at least quarterly to determine whether the likelihood of loss has changed and whether it can make a reasonable estimate of the loss or range of loss. When the Company determines that a loss from a claim is probable and reasonably estimable, it records a liability for an estimated amount. The Company also provides disclosure when it is reasonably possible that a loss may be incurred or when it is reasonably possible that the amount of a loss will exceed its recorded liability. Amounts included within “Claims and litigation charges, net” in the Condensed Consolidated Statements of Operations consist of estimated loss contingencies related to opioid-related litigation matters.

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~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

I. Litigation and Claims Involving Distribution of Controlled Substances

The Company and its affiliates have been sued as defendants in many cases asserting claims related to distribution of controlled substances. They have been named as defendants along with other pharmaceutical wholesale distributors, pharmaceutical manufacturers, and retail ~~pharmacy chains.~~pharmacies. The plaintiffs in these actions have included state attorneys general, county and municipal governments, school districts, tribal nations, hospitals, health and welfare funds, third-party payors, and individuals. These actions have been filed in state and federal courts throughout the U.S., and in Puerto Rico and Canada. They ~~seek~~have sought monetary damages and other forms of relief based on a variety of causes of action, including negligence, public nuisance, unjust enrichment, and civil conspiracy, as well as alleging violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), state and federal controlled substances laws, and other statutes. Because of the many uncertainties associated with opioid-related litigation matters, the Company is not able to conclude that a liability is probable or provide a reasonable estimate for the range of ultimate possible loss for opioid-related litigation matters other than those for which an accrual is described below.

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State and Local Government Claims

The Company and two other national pharmaceutical distributors (collectively “Distributors”) ~~settled~~entered into a settlement agreement (the “Settlement”) and consent judgment with ~~46 of 49 eligible~~48 states and their participating subdivisions, as well as the District of Columbia and all eligible territories ~~(collectively,~~(the “Settling Governmental Entities”) ~~effective on April 2, 2022 (“Settlement”)~~. Approximately 2,300 cases have been dismissed. The Distributors did not admit liability or wrongdoing and do not waive any defenses pursuant to the Settlement. Under the Settlement, the ~~Distributors~~Company has paid the Settling Governmental Entities approximately $1.0 billion as of June 30, 2023, and additionally will pay the Settling Governmental Entities up to approximately ~~$19.5~~$6.8 billion ~~over 18 years, with up to approximately $7.4 billion to be paid by the Company for its 38.1% portion.~~through 2038. A minimum of 85% of the Settlement payments must be used by state and local governmental entities to remediate the opioid ~~epidemic. Most of~~epidemic, while the ~~remaining percentage~~remainder relates to plaintiffs’ attorneys’ fees and costs and ~~would~~will be ~~payable over a shorter time period.~~paid out through 2030. Under the Settlement, the Distributors will establish a clearinghouse to consolidate their controlled-substance distribution data, which will be available to the settling U.S. states to use as part of their anti-diversion efforts. ~~The Distributors do~~Alabama and West Virginia did not ~~admit liability or wrongdoing and do not waive any defenses pursuant to~~participate in the Settlement. ~~Consent judgments have been entered in all participating states~~Under a separate settlement agreement with Alabama and ~~territories, and approximately 2,000 cases have been dismissed pursuant to the Settlement.~~

Three eligible states, Alabama, Washington, and Oklahoma did not join the Settlement, but they have all now reached agreements with the Company. With respect to the claims of the Alabama attorney general,its subdivisions, the Company has ~~negotiated an agreement under which the Company~~paid approximately $42 million as of June 30, 2023, and additionally will pay ~~$141~~approximately $132 million in ten equal annual installments and an additional approximately $33 million in attorney fees and costs to resolve the opioid-related claims of the state of Alabama and its subdivisions. On May 3, 2022, the Distributors announced an agreement with the attorney general of Washington to settle the claims of the state of Washington and its subdivisions. Under that agreement, Washington and its subdivisions would be paid up to $518 million over 18 years, of which the Company’s portion would be 38.1% (or approximately $197 million), consistent with Washington’s allocation under the comprehensive framework, as well as certain additional attorneys’ fees and costs. On June 27, 2022, an agreement was announced between the Distributors and the attorney general of Oklahoma to settle claims of the state of Oklahoma and its subdivisions. Under that agreement, Oklahoma and its subdivisions will be paid up to approximately $308 million over 18 years, of which the Company’s portion would be 38.1% (or approximately $117 million), consistent with Oklahoma’s allocation under the comprehensive framework. The Company’s loss contingency accruals for these three states and their subdivisions reflect the amounts of these agreements.

through 2031. The Company previously settled with the state of West Virginia ~~and~~in 2018, so West Virginia and its subdivisions were not eligible to participate in the ~~comprehensive~~ Settlement. ~~Trial in~~Under a separate settlement agreement, the case of Cabell County and the City of Huntington occurred in the U.S. District Court for the Southern District of West Virginia and concluded on July 28, 2021. On July 4, 2022, the court entered judgment in defendants’ favor. On August 2, 2022, the plaintiffs filed an appeal. The claims ofCompany has paid certain ~~other~~ West Virginia subdivisions ~~were pending in the federal Multi-district Litigation~~approximately $38 million as of June 30, 2023, and before the state Mass Litigation Panel. On July 5, 2022, the Mass Litigation Panel entered an order noting an agreement in principle between a group of plaintiffs’ attorneys representing the municipalities and the Distributors. Under the settlement agreement with the participating West Virginia municipalities, the Distributorsadditionally will pay ~~$400~~approximately $114 million over approximately 11 years, with the Company responsible for 38.1% of the total amount (or approximately $152 million). All participating litigating subdivisions have dismissed their claims against the Company. Thethrough 2033. That agreement does not include school districts or the claims of Cabell County and the City of Huntington. After a trial, the claims of Cabell County and the City of Huntington, were decided in the Company’s favor on July 4, 2022. Those subdivisions appealed that decision.

Some other state and local governmental subdivisions did not participate in the Settlement, including certain municipal governments, government hospitals, school districts, and government-affiliated third-party payors. The ~~Company’s loss contingency accruals~~Company contends that those subdivisions’ claims are foreclosed by the Settlement or other dispositive defenses, but the subdivisions contend that their claims are not foreclosed. The City of Baltimore, Maryland, is one such subdivision, and a trial of its claims is scheduled to begin September 26, 2024. An accrual for the ~~West Virginia subdivisions are~~remaining governmental subdivision claims is reflected in the total estimated liability for ~~the~~ opioid-related claims ~~as of September 30, 2022.~~in a manner consistent with how Settlement amounts were allocated to Settling Governmental Entities.

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~~With respect to the claims of~~ Native American ~~tribes, on September 28, 2021, the~~Tribe Claims

The Company ~~announced that the Distributors reached an agreement with the Cherokee Nation to pay approximately $75 million over 6.5 years to resolve~~also entered into settlement agreements for opioid-related claims of which the Company’s portion would be 38.1% (or, approximately $29 million). The Company has also negotiated an agreement to resolve opioid-related claims brought by Native American tribes. Under that agreement, which was executed on October 26, 2022, the Distributors will pay the Native American tribes, other than the Cherokee Nation, approximately $440 million over 6 years, of which the Company’s portion would be 38.1% (or, approximately $167 million). The agreement achieves broad resolution of opioid-related claims brought against the Distributors by federally recognized Native American tribes. Under ~~these~~those agreements, athe Company has paid the settling Native American tribes approximately $56 million as of June 30, 2023, and additionally will pay approximately $140 million through 2027. A minimum of 85% of the total settlement payments must be used by the settling Native American tribes to remediate the opioid epidemic. ~~The Company’s loss-contingency accruals for the Native American tribes reflect these amounts and are reflected in the estimated liability for the opioid-related claims as of September 30, 2022.~~

Although the Settlement terminated the substantial majority of opioid-related suits by governmental entities pending against the Company, a small number of subdivisions have opted not to participate in the settlements described above. The Company continues to prepare for trial in these pending matters and believes that it has valid defenses to the claims pending against it, and it intends to vigorously defend against all such claims if acceptable settlement terms are not achieved. The Company’s loss contingency accruals for these subdivisions are reflected in the estimated liability for the opioid-related claims consistent with what would be allocated under the framework of the settlement.

In the three and six months ended September 30, 2022, the Company paid $535 million and $910 million, respectively, associated with the Settlement and separate settlement agreements of opioid-related claims of participating states, subdivisions, and the Cherokee Nation.

The Company’s estimated accrued liability for the opioid-related claims of U.S. governmental entities, isincluding Native American tribes, was as follows:


(In millions)	(In millions)	September 30, 2022		March 31, 2022		(In millions)	June 30, 2023		March 31, 2023
Current litigation liabilities (1)	Current litigation liabilities (1)	$	703	$	1,046	Current litigation liabilities (1)	$	545	$	548
Long-term litigation liabilities	Long-term litigation liabilities	6,644		7,220		Long-term litigation liabilities	6,628		6,625

Total litigation liabilities	Total litigation liabilities	$	7,347	$	8,266	Total litigation liabilities	$	7,173	$	7,173

(1)These amounts, ~~as of September 30, 2022 and March 31, 2022,~~ recorded in “Other accrued liabilities” in the Condensed Consolidated Balance Sheets, are the amounts estimated to be paid within the next twelve months following each respective period end date.

During the ~~six~~three months ended ~~September~~June 30, ~~2022,~~2023, the Company ~~paid $45 million into, and released $406 million from, escrow consistent~~made no payments associated with the ~~terms of~~Settlement and the ~~opioid~~separate settlement ~~agreements. The remaining escrow amounts,~~agreements for opioid-related claims discussed above. In July 2023, the Company made payments totaling ~~$35~~$529 million ~~were presented as restricted cash within “Prepaid expenses~~associated with the Settlement and other” in our Condensed Consolidated Balance Sheet as of September 30, 2022. The Settlement created a binding obligation to release the funds from escrow upon entry of consent judgments and establishment of aseparate settlement ~~administrator.~~agreements.

~~Although the vast majority of opioid claims have been brought by governmental entities in the U.S., the~~Non-Governmental Plaintiff Claims

The Company is also a defendant in approximately 400 opioid-related cases brought in the U.S. by private plaintiffs, such as hospitals, health and welfare funds, third-party payors, and ~~individuals, as well as four cases brought in Canada (three by governmental or tribal entities and one by an individual).~~individuals. These claims, and those of private entities generally, are not included in the ~~Settlement~~settlement agreements described above or in the charges recorded by the Company.

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Canadian Plaintiff Claims

The Company ~~described above.~~ and its Canadian affiliate are also defendants in four opioid-related cases pending in Canada. These cases involve the claims of the provincial governments, a group representing indigenous people, as well as one case brought by an individual.

Defense of Opioids Claims

The Company believes it has valid legal defenses in ~~these~~all opioid-related matters, including claims not covered by settlement agreements, and it intends to mount a vigorous ~~defense. One~~defense in such case was brought by a group of individual plaintiffs in Glynn County, Georgia Superior Court. These plaintiffs seek to recover for damages allegedly arising from their family members’ abuse of prescription opioids. ~~Poppell v. Cardinal Health, Inc. et al., CE19-00472. Although trial began in this case on July 18, 2022,~~matters. Other than the ~~court declared a mistrial on July 22, 2022; a new trial has been set for January 23, 2023. The~~settlement agreements and the U.S. governmental subdivision claims described above, the Company has not concluded a loss is probable in any of ~~these~~the matters; nor is any possible loss or range of loss reasonably estimable.

Because of the many uncertainties associated with the remaining opioid-related litigation matters, the Company is not able to reasonably estimate the upper or lower ends of the range of ultimate possible loss for all opioid-related litigation matters. An adverse judgment or negotiated resolution in any of these matters could have a material adverse impact on the Company’s financial position, cash flows or liquidity, or results of operations.

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II. Other Litigation and Claims

On December 12, 2018, the Company received a purported class action complaint in the United States District Court for the Northern District of California, alleging that McKesson and two of its former officers, CEO John Hammergren and CFO James Beer, violated the Securities Exchange Act of 1934 by reporting profits and revenues from 2013 until early 2017 that were false and misleading, due to an alleged undisclosed conspiracy to fix the prices of generic drugs. Evanston Police Pension Fund v. McKesson Corporation, No. 3:18-06525. The complaint seeks relief including damages, attorney fees, and costs in unspecified amounts. On February 8, 2019, the court appointed the Pension Trust Fund for Operating Engineers as the lead plaintiff. On April 10, 2019, the lead plaintiff filed an amended complaint that added insider trading allegations against defendant Hammergren. On April 8, 2021, the court granted plaintiff’s motion for class certification. On October 21, 2021, the court granted defendants’ motion for partial summary judgment and shortened the class period. On December 29, 2021, plaintiff filed an amended complaint, which defendants have moved to dismiss. In October 2022, the parties reached an agreement in principle to settle this class action lawsuit for an amount covered in full by the Company’s insurance policy. ~~The settlement is subject to, among other things, approval by the court.~~ This settlement does not include any admission of liability, and defendants expressly ~~den~~ydeny wrongdoing. ~~Accordingly, the~~The Company’s estimated probable loss, entirely offset by probable loss recovery from the Company’s insurers, iswas $141 million, both of which ~~have been~~were recognized in the Condensed Consolidated Balance Sheet as of September 30, 2022 within “Other accrued liabilities” and “Prepaid expenses and other.” In February 2023, the insurance carriers funded the settlement, and the probable loss and loss recovery of $141 million have been reversed in the Consolidated Balance Sheet as of March 31, 2023. On July 14, 2023, the court granted the motion for final approval of the settlement.

~~On December 9, 2019,~~In July 2020, the Company was served with a first amended qui tam complaint filed in the United States District Court for the ~~Eastern~~Southern District of New York ~~ordered the unsealing of a complaint filed~~ by a relator ~~purportedly~~ on behalf of the ~~United States, 30~~U.S., 27 states and the District of Columbia against McKesson Corporation, McKesson Specialty Distribution LLC, and ~~two cities, against US Oncology, Inc.~~McKesson Specialty Care Distribution Corporation, alleging that ~~from 2001 through 2010~~defendants violated the ~~Company repackaged and sold single-dose syringes of oncology medications in a manner that violated the~~Anti-Kickback Statute, federal False Claims Act, and various state ~~and local~~ false claims statutes by providing certain business analytical tools to oncology practice customers, United States ex rel. Hart v. McKesson Corporation, et al., 15-cv-00903-RA. The U.S. and ~~seeking~~the named states have declined to intervene in the case. The complaint seeks relief including damages, treble damages, civil penalties, ~~attorneys’~~attorney fees, and costs of suit, all in unspecified ~~amounts,~~ ~~United States ex rel. Omni Healthcare, Inc. v. US Oncology, Inc., 19-cv-05125. The United States and~~amounts. On May 5, 2022, the ~~named states declined to intervene in~~district court granted the ~~case. On July 21, 2022, US Oncology, Inc.’s~~Company’s motion to dismiss ~~was~~the complaint, but granted ~~without prejudice. Relator~~the plaintiff leave to amend the complaint. The relator filed anthe second amended complaint on ~~August 19, 2022. The related case against other Company defendants remains pending,~~ June 7, 2022, which was dismissed on March 28, 2023. On April 26, 2023, the relator filed a notice of appeal to the United States ~~ex rel. Omni Healthcare Inc. v. McKesson Corporation, et al., 12-CV-06440 (NG).~~Court of Appeals for the Second Circuit.

III. Government Subpoenas and Investigations

From time to time, the Company receives subpoenas or requests for information from various government agencies. The Company generally responds to such subpoenas and requests in a cooperative, thorough, and timely manner. These responses sometimes require time and effort and can result in considerable costs being incurred by the Company. Such subpoenas and requests can lead to the assertion of claims or the commencement of civil or criminal legal proceedings against the Company and other members of the health care industry, as well as to settlements of claims against the Company. The Company responds to these requests in the ordinary course of business.

~~IV. Antitrust Settlements~~

In October 2022, the Company received proceeds of $129 million related to its share of an antitrust settlement. A lawsuit was filed against a brand manufacturer alleging that the manufacturer, by itself or in concert with others, took improper actions to delay or prevent generic drugs from entering the market. The Company was not a named party to the litigation but was a member of the class of those who purchased directly from the pharmaceutical manufacturer. The Company will recognize a gain in that amount within "Cost of sales" in the Condensed Consolidated Statement of Operations in the third quarter of fiscal 2023 related to the settlement.

~~13.~~11. Stockholders' ~~Equity (Deficit)~~Deficit

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

In July ~~2022,~~2023, the quarterly dividend was raised from ~~$0.47~~$0.54 to ~~$0.54~~$0.62 per share of common ~~share~~stock for dividends declared on or after such date by the Board. The Company anticipates that it will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon the Company's future earnings, financial condition, capital requirements, legal requirements, and other factors.

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FINANCIAL NOTES (CONTINUED)

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Share Repurchase Plans

~~Stock~~The Board has authorized the repurchase of McKesson’s common stock. The Company may effect stock repurchases ~~may be made~~ from time-to-time inthrough open market transactions, privately negotiated transactions, ~~through~~ accelerated share repurchase (“ASR”) programs, or by combinations of such methods, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1(c) of the Securities Exchange Act of ~~1934.~~1934, as amended. The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price, corporate and regulatory requirements, tax implications, restrictions under the Company’s debt obligations, other uses for capital, impacts on the value of remaining shares, and ~~other~~ market and economic conditions. The ASR programs discussed below were designed to comply with Rule 10b5-1(c).

Effective January 1, 2023, the Company’s repurchase of McKesson’s common stock, adjusted for allowable items, are subject to a 1% excise tax as a result of the IRA. Excise taxes incurred on share repurchases of an entity’s own common stock are direct and incremental costs to purchase treasury stock, and accordingly are included in the total cost basis of the common stock acquired and reflected as a reduction of stockholders’ equity within “Treasury shares” in the Company’s Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Stockholders’ Deficit. Excise taxes are not reflected in the Company’s remaining authorization for the repurchase of McKesson’s common stock.

In May 2022, the Company entered into an ASR program with a third-party financial institution to repurchase $1.0 billion of the Company’s common stock. The total number of shares repurchased under this ASR program was 3.1 million shares at an average price per share of $321.05. The Company received 2.6 million shares as the initial share settlement, and in August 2022, the Company received an additional 0.5 million shares upon the completion of this ASR program.

In February 2022, the Company entered into an ASR program with a third-party financial institution to repurchase $1.5 billion of the Company’s common stock. The total number of shares repurchased under this ASR program was 5.1 million shares at an average price per share of $295.16. The Company received 4.8 million shares as the initial share settlement ~~during~~in the fourth quarter of fiscal 2022, and in May 2022, the Company received an additional 0.3 million shares upon the completion of this ASR program.

In May 2021, the Company entered into an ASR program with a third-party financial institution to repurchase $1.0 billion of the Company’s common stock. The total number of shares repurchased under this ASR program was 5.2 million shares at an average price per share of $193.22. The Company received 4.3 million shares as the initial share settlement, and in August 2021, the Company received an additional 0.9 million shares upon the completion of this ASR program.

During the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, the Company repurchased ~~1.5~~1.8 million of the Company’s shares of common stock for ~~$524~~$673 million through open market transactions at an average price per share of ~~$355.75, of which $40~~$379.14. Of the total dollar value, $4 million was accrued within “Other ~~accrued~~non-current liabilities” in the Company’s Condensed Consolidated Balance ~~Sheets~~Sheet for excise taxes incurred during the three months ended June 30, 2023. As of March 31, 2023, the Company had $27 million accrued within “Other accrued liabilities” for share repurchases that were executed in late ~~September 2022 and~~March 2023, which settled in early ~~October 2022. During~~April 2023. There were no open market share repurchases during the three ~~and six~~ months ended ~~September~~June 30, 2021, the Company repurchased 1.4 million of the Company’s shares of common stock for $280 million through open market transactions at an average price per share of $203.20, of which $16 million was accrued within “Other accrued liabilities” in the Company’s Condensed Consolidated Balance Sheets for the period ended September 30, 2021 for share repurchases that were executed in late September 2021 and settled in early October 2021.2022.

~~In July 2022, the Board approved an increase of $4.0 billion in the authorization for repurchase of McKesson’s common stock.~~ The total remaining authorization outstanding for repurchases of the Company’s common stock at ~~September~~June 30, ~~2022~~2023 was ~~$5.8~~$2.9 billion. In July 2023, the Board approved an increase of $6.0 billion in the authorization for repurchase of McKesson’s common stock.

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FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Accumulated Other Comprehensive Loss

Information regarding changes in accumulated other comprehensive loss, including noncontrolling interests, by components for the three ~~and six~~ months ended ~~September~~June 30, 2023 and 2022 ~~are~~were as follows:


		Foreign Currency Translation Adjustments												Foreign Currency Translation Adjustments
(In millions)	(In millions)	Foreign Currency Translation Adjustments, Net of Tax (1)		Unrealized Gains on Net Investment Hedges, Net of Tax			Unrealized Gains on Cash Flow Hedges, Net of Tax		Unrealized Gains (Losses) and Other Components of Benefit Plans, Net of Tax		Total Accumulated Other Comprehensive Loss		(In millions)	Foreign Currency Translation Adjustments, Net of Tax (1)		Unrealized Losses on Net Investment Hedges, Net of Tax			Unrealized Gains (Losses) on Cash Flow and Other Hedges, Net of Tax		Unrealized Losses and Other Components of Benefit Plans, Net of Tax		Total Accumulated Other Comprehensive Loss
Balance at June 30, 2022		$	(997)	$	38		$	45	$	(34)	$	(948)
Balance, March 31, 2023													Balance, March 31, 2023	$	(847)	$	(14)		$	(36)	$	(8)	$	(905)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(280)		71		⁽²⁾	18		2		(189)		Other comprehensive income (loss) before reclassifications	67		(15)		⁽²⁾	7		(2)		57
Amounts reclassified to earnings and other	Amounts reclassified to earnings and other	17		—			—		—		17		Amounts reclassified to earnings and other	—		—			—		—		—
Other comprehensive income (loss)	Other comprehensive income (loss)	(263)		71			18		2		(172)		Other comprehensive income (loss)	67		(15)			7		(2)		57
Less: amounts attributable to noncontrolling interests	Less: amounts attributable to noncontrolling interests	(6)		—			—		—		(6)		Less: amounts attributable to noncontrolling interests	—		—			—		—		—
Other comprehensive income (loss) attributable to McKesson	Other comprehensive income (loss) attributable to McKesson	(257)		71			18		2		(166)		Other comprehensive income (loss) attributable to McKesson	67		(15)			7		(2)		57
Balance at September 30, 2022		$	(1,254)	$	109		$	63	$	(32)	$	(1,114)

Balance, June 30, 2023													Balance, June 30, 2023	$	(780)	$	(29)		$	(29)	$	(10)	$	(848)

(1)Primarily results from the conversion of non-U.S. dollar financial statements of the Company’s operations in ~~Europe~~Canada and ~~Canada~~Europe into the Company’s reporting currency, U.S. dollars.

(2)Amounts recorded for the three months ended ~~September~~June 30, 2023 include losses of $20 million related to net investment hedges from cross-currency swaps, which are net of income tax benefit of $5 million.


	Foreign Currency Translation Adjustments
(In millions)	Foreign Currency Translation Adjustments, Net of Tax (1)		Unrealized Gains (Losses) on Net Investment Hedges, Net of Tax			Unrealized Gains on Cash Flow and Other Hedges, Net of Tax		Unrealized Gains (Losses) and Other Components of Benefit Plans, Net of Tax		Total Accumulated Other Comprehensive Loss
Balance, March 31, 2022	$	(1,504)	$	10		$	27	$	(67)	$	(1,534)
Other comprehensive income (loss) before reclassifications	(176)		45		⁽²⁾	18		12		(101)
Amounts reclassified to earnings and other (3)	730		(17)			—		24		737
Other comprehensive income	554		28			18		36		636
Less: amounts attributable to noncontrolling interests	47		—			—		3		50
Other comprehensive income attributable to McKesson	507		28			18		33		586

Balance, June 30, 2022	$	(997)	$	38		$	45	$	(34)	$	(948)

(1)Primarily results from the conversion of non-U.S. dollar financial statements of the Company’s operations in Canada and Europe into the Company’s reporting currency, U.S. dollars.

(2)Amounts recorded for the three months ended June 30, 2022 include gains of ~~$75~~$64 million related to net investment hedges from Euro-denominated notes and gains of ~~$21~~$12 million related to net investment hedges from cross-currency swaps. These amounts are net of income tax expense of ~~$25~~$31 million.

Foreign Currency Translation Adjustments
(In millions)
Foreign Currency Translation Adjustments, Net of Tax (1)
Unrealized Gains (Losses) on Net Investment Hedges,
Net of Tax Unrealized Gains on Cash Flow Hedges,
Net of Tax Unrealized Gains (Losses) and Other Components of Benefit Plans, Net of Tax Total Accumulated Other Comprehensive Loss
Balance at March 31, 2022 $ (1,504) $ 10 $ 27 $ (67) $ (1,534)
Other comprehensive income (loss) before reclassifications (456) 116 ⁽²⁾ 36 14 (290)
Amounts reclassified to earnings and other (3)
747 (17) — 24 754
Other comprehensive income 291 99 36 38 464
Less: amounts attributable to noncontrolling interests 41 — — 3 44
Other comprehensive income attributable to McKesson 250 99 36 35 420
Balance at September 30, 2022 $ (1,254) $ 109 $ 63 $ (32) $ (1,114)

~~(1)Primarily results from the conversion of non-U.S. dollar financial statements of the Company’s operations in Europe and Canada into the Company’s reporting currency, U.S. dollars.~~

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FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

~~(2)~~Amounts recorded for the six months ended September 30, 2022 include gains of $139 million related to net investment hedges from Euro-denominated notes and gains of $33 million related to net investment hedges from cross-currency swaps. These amounts are net of income tax expense of $56 million.

(3)Primarily ~~includes~~included adjustments for amounts related to the sale of the U.K. disposal group, ~~in April 2022,~~ as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures.” These amounts were included in the fiscal 2022 calculation of charges to remeasure the assets and liabilities held for sale to fair value less costs to sell recorded within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations.

Information regarding changes in accumulated other comprehensive loss, including noncontrolling interests and redeemable noncontrolling interests, by components for the three and six months ended September 30, 2021 are as follows:

Foreign Currency Translation Adjustments
(In millions)
Foreign Currency Translation Adjustments, Net of Tax (1)
Unrealized Gains (Losses) on Net Investment Hedges,
Net of Tax Unrealized Gains on Cash Flow Hedges,
Net of Tax Unrealized Gains (Losses) and Other Components of Benefit Plans, Net of Tax Total Accumulated Other Comprehensive Loss
Balance at June 30, 2021 $ (1,477) $ (57) $ 13 $ (106) $ (1,627)
Other comprehensive income (loss) before reclassifications (81) 32 ⁽²⁾ 3 1 (45)
Amounts reclassified to earnings and other 1 — 5 1 7
Other comprehensive income (loss) (80) 32 8 2 (38)
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests — — — — —
Other comprehensive income (loss) attributable to McKesson (80) 32 8 2 (38)
Balance at September 30, 2021 $ (1,557) $ (25) $ 21 $ (104) $ (1,665)

~~(1)Primarily results from the conversion of non-U.S. dollar financial statements of the Company’s operations in Europe and Canada into the Company’s reporting currency, U.S. dollars.~~

~~(2)~~Amounts recorded for the three months ended September 30, 2021 include gains of $33 million related to net investment hedges from Euro-denominated notes and gains of $10 million related to net investment hedges from cross-currency swaps. These amounts are net of income tax expense of $11 million.

~~Table of Contents~~

~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

Foreign Currency Translation Adjustments
(In millions)
Foreign Currency Translation Adjustments, Net of Tax (1)
Unrealized Gains (Losses) on Net Investment Hedges,
Net of Tax Unrealized Gains on Cash Flow Hedges,
Net of Tax Unrealized Gains (Losses) and Other Components of Benefit Plans, Net of Tax Total Accumulated Other Comprehensive Loss
Balance at March 31, 2021 $ (1,361) $ (36) $ 13 $ (96) $ (1,480)
Other comprehensive income (loss) before reclassifications (47) 5 ⁽²⁾ 3 6 (33)
Amounts reclassified to earnings and other 18 — 5 (2) 21
Other comprehensive income (loss) (29) 5 8 4 (12)
Less: amounts attributable to noncontrolling and redeemable noncontrolling interests 9 (6) — — 3
Other comprehensive income (loss) attributable to McKesson (38) 11 8 4 (15)
Exercise of put right by noncontrolling shareholders of McKesson Europe AG (158) — — (12) (170)
Balance at September 30, 2021 $ (1,557) $ (25) $ 21 $ (104) $ (1,665)

~~(1)Primarily results from the conversion of non-U.S. dollar financial statements of the Company’s operations in Europe and Canada into the Company’s reporting currency, U.S. dollars.~~

~~(2)~~Amounts recorded for the six months ended September 30, 2021 include gains of $11 million related to net investment hedges from Euro-denominated notes and gains of $5 million related to net investment hedges from cross-currency swaps. These amounts are net of income tax expense of $5 million.

~~14.~~12. Segments of Business

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

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

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

The Medical-Surgical Solutions segment provides medical-surgical supply distribution, logistics, and other services to healthcare providers, including physician offices, surgery centers, nursing homes, hospital reference labs, and home health care agencies. This segment offers ~~more than 285,000~~ national brand medical-surgical products as well as McKesson’s own line of high-quality products through a network of distribution centers ~~within~~in the U.S.

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~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONTINUED)~~

~~(UNAUDITED)~~

The International segment includes the Company’s operations in ~~Europe~~Canada and ~~Canada,~~Europe, bringing together non-U.S.-based drug distribution services, specialty pharmacy, retail, and infusion care services. The Company’s Canadian operations deliver medicines, supplies, and information technology solutions throughout Canada and includes Rexall Health retail pharmacies. The Company completed the divestitures of the U.K. disposal group in April 2022 and the E.U. disposal group in October 2022, as discussed in Financial Note 2, “Business Acquisitions and Divestitures.” The Company’s remaining operations in Europe provide distribution and services to wholesale, institutional, and retail customers in ~~nine European countries~~Norway where it owns, partners, or franchises with retail pharmacies and operates through two businesses: Pharmaceutical Distribution and Retail Pharmacy. The Company’s Canadian operations deliver vital medicines, supplies, and information technology solutions throughout Canada and includes Rexall Health retail pharmacies. ~~In the second quarter~~

Table of fiscal 2022, the Company entered into an agreement to sell the E.U. disposal group which closed on October 31, 2022. International segment assets at September 30, 2022 were $9.6 billion, a decrease from the end of fiscal 2022 primarily due to the completed the sale of the U.K. disposal group in April 2022 and unfavorable effects of foreign currency exchange fluctuations. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for more information.Contents

McKESSON CORPORATION

FINANCIAL NOTES (CONCLUDED)

(UNAUDITED)

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


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended June 30,
(In millions)	(In millions)	2022		2021		2022		2021		(In millions)		2023		2022
Segment revenues (1)	Segment revenues (1)									Segment revenues (1)
U.S. Pharmaceutical	U.S. Pharmaceutical	$	60,059	$	53,411	$	117,006	$	103,430	U.S. Pharmaceutical		$	67,160	$	56,947
Prescription Technology Solutions	Prescription Technology Solutions	1,018		932		2,084		1,813		Prescription Technology Solutions		1,244		1,066
Medical-Surgical Solutions	Medical-Surgical Solutions	2,843		3,124		5,435		5,652		Medical-Surgical Solutions		2,611		2,592
International	International	6,237		9,109		12,786		18,355		International		3,468		6,549
Total revenues	Total revenues	$	70,157	$	66,576	$	137,311	$	129,250	Total revenues		$	74,483	$	67,154

Segment operating profit (loss) (2)	Segment operating profit (loss) (2)									Segment operating profit (loss) (2)
U.S. Pharmaceutical (3)	U.S. Pharmaceutical (3)	$	896	$	760	$	1,592	$	1,442	U.S. Pharmaceutical (3)		$	827	$	696
Prescription Technology Solutions(4)	Prescription Technology Solutions(4)	120		128		264		232		Prescription Technology Solutions(4)		231		144
Medical-Surgical Solutions ~~(4)~~	Medical-Surgical Solutions ~~(4)~~	299		296		555		371		Medical-Surgical Solutions ~~(4)~~		227		256
International (5)	International (5)	(37)		(146)		(43)		(93)		International (5)		57		(6)
Subtotal	Subtotal	1,278		1,038		2,368		1,952		Subtotal		1,342		1,090
Corporate expenses, net (6)	Corporate expenses, net (6)	21		(360)		(18)		(663)		Corporate expenses, net (6)		(204)		(39)
Loss on debt extinguishment (7)		—		(191)		—		(191)

Interest expense	Interest expense	(55)		(45)		(100)		(94)		Interest expense		(47)		(45)
Income from continuing operations before income taxes	Income from continuing operations before income taxes	$	1,244	$	442	$	2,250	$	1,004	Income from continuing operations before income taxes		$	1,091	$	1,006

(1)Revenues from services on a disaggregated basis represent ~~less than~~approximately 1% of the U.S. Pharmaceutical segment’s total revenues, less than 37% of the RxTS segment’s total revenues, less than 3%1% of the Medical-Surgical Solutions segment’s total revenues, and less than 8%1% of the International segment’s total revenues. The International segment reflects foreign revenues. Revenues for the remaining three reportable segments are derived in the U.S.

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

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

•~~a gain~~cash receipts for the Company’s share of ~~$142~~antitrust legal settlements of $118 million for the three ~~and six~~ months ended ~~September~~June 30, 2022 related to the exit of one of the Company’s investments in equity securities in July 2022 for proceeds of $179 million, which is reflected within “Other income, net” in the Company’s Condensed Consolidated Statements of Operations;2023; and

•~~credits~~a charge of $32 million and a credit of $13 million related to the last-in, first-out (“LIFO”) method of accounting for inventories ~~of $23 million~~ for ~~each of~~ the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, and $36 million and $46 million for the six months ended September 30,~~ 2022, ~~and 2021, respectively; and~~

•~~cash receipts for the Company’s share of antitrust legal settlements of $34 million and $46 million for the three and six months ended September 30, 2021,~~ respectively.

(4)The Company’s ~~Medical-Surgical Solutions~~RxTS segment’s operating profit for the ~~six~~three months ended ~~September~~June 30, ~~2021~~2023 includes ~~$164~~a fair value adjustment gain of $28 million, ~~of inventory charges on certain personal protective equipment~~which reduced the Company’s contingent consideration liability related to the RxSS acquisition, as discussed in more detail in Financial Note 2, “Business Acquisitions and ~~other related products.~~Divestitures.”

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~~McKESSON CORPORATION~~

~~FINANCIAL NOTES (CONCLUDED)~~

~~(UNAUDITED)~~

(5)The Company’s International segment’s operating loss ~~includes the following:~~

•~~charges of $143 million and $237 million~~ for the three ~~and six~~ months ended ~~September~~June 30, 2022 ~~respectively, and~~includes charges of ~~$342~~$94 million ~~for the three and six months ended September 30, 2021,~~ to remeasure the assets and liabilities of the E.U. disposal group to fair value less costs to sell, ~~and, in fiscal 2022, to impair certain assets, including internal-use software that will not be utilized in the future,~~ as discussed in more detail in Financial Note 2, “Business Acquisitions and ~~Divestitures;~~Divestitures.” ~~and~~

•~~a gain of $59 million for the three and six months ended September 30, 2021 related to the sale of the Company’s Canadian health benefit claims management and plan administrative services business.~~

(6)Corporate expenses, net includes the following:

•~~gains~~restructuring charges of ~~$166 million and $272~~$40 million for the three ~~and six~~ months ended ~~September~~June 30, ~~2022, respectively,~~2023 for restructuring initiatives as discussed in more detail in Financial Note 3, “Restructuring, Impairment, and ~~charges~~Related Charges, Net;” and

•a gain of ~~$149~~$106 million for the three ~~and six~~ months ended ~~September~~June 30, ~~2021,~~2022 primarily related to the effect of accumulated other comprehensive loss components from the E.U. disposal group, as discussed in more detail in Financial Note 2, “Business Acquisitions and ~~Divestitures;”~~

•charges of $112 million and $186 million for the three and six months ended September 30, 2021, respectively, related to the Company’s estimated liability for opioid-related claims, as discussed in more detail in Financial Note 12, “Commitments and Contingent Liabilities;”

•charges of $9 million and $36 million for the three months ended September 30, 2022 and 2021, respectively, and charges of $28 million and $71 million for the six months ended September 30, 2022 and 2021, respectively, of opioid-related costs, primarily litigation expenses;

•restructuring charges of $19 million and $81 million for the three and six months ended September 30, 2021, respectively, primarily due to the transition to a partial remote work model for certain employees; and

•net gains (losses) of $(3) million and $97 million for three months ended September 30, 2022 and 2021, respectively, and $(25) million and $104 million for the six months ended September 30, 2022 and 2021, respectively, associated with certain of the Company’s equity investments.

~~(7)~~Loss on debt extinguishment for the three and six months ended September 30, 2021 consists of a charge of $191 million related to the Company’s July 2021 tender offer to redeem a portion of its existing debt, as discussed in more detail in Financial Note 8, “Debt and Financing Activities.Divestitures.”

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FINANCIAL REVIEW

(UNAUDITED)

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

INDEX TO MANAGEMENT’S DISCUSSION AND ANALYSIS

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 McKesson Corporation together with its subsidiaries (collectively, the “Company,” “McKesson,” “we,” “our,” or “us,” and other similar pronouns). 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 (“Quarterly Report”) and in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022~~2023 previously filed with the Securities and Exchange Commission (the “SEC”) on May 9, ~~2022~~2023 (“~~2022~~2023 Annual Report”).

Our fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references to a particular year shall mean our fiscal year.

Certain statements in this report constitute forward-looking statements. See “Cautionary Notice About Forward-Looking Statements” included in this Quarterly Report.

Overview of our Business:

We are a diversified healthcare services leader dedicated to advancing health outcomes for patients everywhere. Our teams partner with biopharma companies, care providers, pharmacies, manufacturers, governments, and others to deliver insights, products, and services to help make quality care more accessible and affordable.

We report our financial results in four reportable segments: U.S. Pharmaceutical, Prescription Technology Solutions (“RxTS”), Medical-Surgical Solutions, and International. Our organizational structure also includes Corporate, which consists of income and expenses associated with administrative functions and projects ~~and~~as well as the results of certain investments. The factors for determining the reportable segments include the manner in which management evaluates the performance of the Company combined with the nature of individual business activities. We evaluate the performance of our operating segments on a number of measures, including revenues and operating profit (loss) before interest expense and income taxes.

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McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

The following summarizes our four reportable segments. Refer to Financial Note ~~14,~~12, “Segments of Business,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for further information regarding our reportable segments.

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

•Prescription Technology Solutions is a reportable segment that combines automation and our ability to navigate the healthcare ~~ecosystem~~ecosystems to connect patients, pharmacies, providers, ~~payers,~~pharmacy benefit managers, health plans, and biopharma companies to address patients’ medication access, affordability, and adherence ~~challenges~~challenges. RxTS also offers prescription price transparency, benefit insight, dispensing support services, third-party logistics, and wholesale distribution support across various therapeutic categories and temperature ranges to ~~help people get~~biopharma customers throughout the ~~medicine they need to live healthier lives.~~product lifecycle.

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

•International is a reportable segment that includes our operations in ~~Europe~~Canada and ~~Canada,~~Europe, bringing together non-U.S.-based drug distribution services, specialty pharmacy, retail, and infusion care services. Our operations in Canada deliver medicines, supplies, and information technology solutions throughout Canada and includes Rexall Health pharmacies. During fiscal ~~2022,~~2023, we ~~entered into agreements~~completed transactions to sell certain of our businesses in the European Union (“E.U.” disposal group”), and our retail and distribution businesses in the United Kingdom (“U.K.~~”), as well as completed the sale of our Austrian business. In April 2022, we completed the sale of our retail and distribution businesses in the U.K. These divestitures are further described in the~~ ~~“European Divestiture Activities”~~ ~~section below.~~

~~European Divestiture Activities~~

On July 5, 2021, we entered into an agreement to sell certain of our businesses in the E.U. located in France, Italy, Ireland, Portugal, Belgium, and Slovenia, along with our German headquarters and wound-care business, part of a shared services center in Lithuania, and our ownership stake in a joint venture in the Netherlands (“E.U. disposal group”). Our remaining operations in Europe provide distribution and services to ~~the PHOENIX Group for a purchase price of €1.2 billion (or, approximately $1.2 billion) adjusted for certain items, including cash, net debt~~wholesale, institutional, and working capital adjustments, and reduced by the value of the noncontrolling interest held by minority shareholders of McKesson Europe AG (“McKesson Europe”) at the transaction closing date. For the three and six months ended September 30, 2022,retail customers in Norway where we recorded net gains of $23 million and $35 million, respectively, and for the three and six months ended September 30, 2021, we recorded charges of $491 million in total operating expenses to remeasure the assets and liabilities of our E.U. disposal group to fair value less costs to sell. The fiscal 2022 charges also included impairments of certain internal-use software that will not be utilized in the future, prior to adjusting the E.U. disposal group as a whole, and a $226 million loss related to the accumulated other comprehensive income balances associatedown, partner, or franchise with ~~our E.U. disposal group. The transaction closed on October 31, 2022 and we received net cash proceeds of $892 million after the adjustments listed above.~~

~~On April 6, 2022, we completed the previously announced sale of our~~ retail and distribution businesses in the U.K. (“U.K. disposal group”) to Aurelius Elephant Limited for a purchase price of £110 million (or, approximately $144 million), including certain adjustments. As part of the transaction, we divested net assets of $615 million and released $731 million of accumulated other comprehensive loss.

As of September 30, 2022, we had $2.8 billion of assets and $2.0 billion of liabilities classified as “Assets held for sale” and “Liabilities held for sale,” respectively, in the Condensed Consolidated Balance Sheet related to our E.U. disposal group described above.pharmacies. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more ~~information.~~

information regarding these divestiture transactions.


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~~McKESSON CORPORATION~~

~~FINANCIAL REVIEW (CONTINUED)~~

~~(UNAUDITED)~~

Executive Summary:

The following summary provides highlights and key factors that impacted our business, operating results, financial condition, and liquidity for the three ~~and six~~ months ended ~~September~~June 30, ~~2022.~~

•On November 1, 2022, we completed our acquisition of Rx Savings Solutions, LLC (“RxSS”) to expand on connecting biopharma and payer services to patients. RxSS is a prescription price transparency and benefit insight company that offers affordability and adherence solutions to health plans and employers. Transaction consideration included a payment of approximately $600 million made upon closing and a maximum of $275 million of contingent consideration based on RxSS’ financial performance through calendar year 2025. The financial results of RxSS will be reported within our RxTS segment as of the acquisition date in the third quarter of fiscal 2023;

•On October 31, 2022, we completed a transaction with HCA Healthcare, Inc. (“HCA”) to form an oncology research business, combining McKesson’s U.S. Oncology Research (“USOR”) and HCA’s Sarah Cannon Research Institute (“SCRI”), to advance cancer care and increase access to oncology clinical research. Transaction consideration included the transfer of full ownership interest in USOR to the combined business and $173 million of cash paid to HCA. The financial results of the combined business, in which we have a 51% controlling financial interest, will be reported within our U.S. Pharmaceutical segment as of the acquisition date in the third quarter of fiscal 2023. Separately, on October 31, 2022, we acquired Genospace, SCRI’s personalized medicine platform. Genospace is a leading innovator in precision medicine and clinical trial matching and will enhance McKesson’s oncology data and analytics capabilities;

•~~On October 31, 2022, we completed the sale of our E.U. disposal group and received net cash proceeds of $892 million, as discussed in further detail in the~~ ~~“European Divestitures Activities”~~ ~~section above;~~

•In July 2022, we exited one of our investments in equity securities within our U.S. Pharmaceutical segment for proceeds of $179 million and recognized a gain of $142 million within other income, net during the second quarter of fiscal 2023;

•McKesson continues to play a leading role in the fight against the pandemic disease caused by the SARS-CoV-2 coronavirus (“COVID-19”). For a more in-depth discussion of how COVID-19 impacted our business, operations, financial results, and outlook, refer to the COVID-19 section of ~~"Trends and Uncertainties"~~ ~~included below;~~2023:

•For the three months ended ~~September~~June 30, ~~2022~~2023 compared to the prior year, revenues increased by 5%11%, gross profit ~~decreased by 8%,~~was flat, total operating expenses decreased by ~~30%~~3%, and other income, net increased by 26%. For the six months ended September 30, 2022 compared to the prior year, revenues increased by 6%, gross profit decreased by 4%, total operating expenses decreased by 25%, and other income, net increased by 4%.$23 million. Refer to the ~~“Overview~~“Overview of Consolidated Results” section below for an analysis of these changes;

•Diluted earnings per common share from continuing operations attributable to McKesson Corporation increased ~~278%~~ to ~~$6.46 and 143% to $11.71 for~~$7.02 from $5.25 in the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 compared to the prior year respectively, primarily driven by year over year favorability from fair value remeasurements of our E.U. disposal group since it was classified as held for sale in July 2022 and a lower share count due to the cumulative effect of share repurchases; andperiod;

•~~We returned $1.6 billion of cash to shareholders during~~For the ~~six~~three months ended ~~September~~June 30, ~~2022 through $1.5 billion~~2023, we recognized a net discrete tax benefit of ~~common stock repurchases both under an accelerated~~$147 million related to the repatriation of certain intellectual property between McKesson wholly-owned legal entities that are based in different tax jurisdictions;

•For the three months ended June 30, 2023, we received $118 million related to our share ~~repurchase (“ASR”) program completed in August 2022~~of antitrust settlements. This amount was recorded as ~~well as through open market transactions and $139 million~~a gain within "Cost of ~~dividend payments. In July 2022, our Board of Directors (the “Board”) approved an increase of $4.0 billion~~sales" in the ~~authorization~~Condensed Consolidated Statement of Operations within our U.S. Pharmaceutical segment;

•On June 15, 2023, we completed a public offering of 4.90% Notes due June 15, 2028 in a principal amount of $400 million and 5.10% Notes due July 15, 2033 in a principal amount of $600 million, for ~~repurchases~~proceeds received, net of ~~McKesson’s common stock~~discounts and ~~raised our quarterly dividend from $0.47 to $0.54 per common share. The total remaining authorization outstanding for repurchases~~offering expenses, of $397 million and $592 million, respectively. A portion of the ~~Company’s common stock at September 30, 2022~~net proceeds from these offerings was ~~$5.8 billion.~~

~~Trends and Uncertainties:~~

~~Legislative Developments~~

~~On August 16, 2022,~~utilized to fund the ~~U.S. government enacted~~repurchase of our 3.80% Notes due March 15, 2024 (the “2024 Notes”) discussed below, while the ~~Inflation Reduction Act of 2022 (the “IR Act”). Among other provisions, the IR Act includes a 15%~~remaining net proceeds is available for general corporate minimum tax, a 1% excise tax on certain repurchases of an entity’s own common stock after December 31, 2022, and various drug pricing reforms. Based on our preliminary assessment, we do not currently expect the IR Act to have a material impact on our results of operations, financial position, or cash flows in the foreseeable future; however, we will continue to evaluate the full impact of these legislative changes.purposes;

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~~The Impact~~•On June 16, 2023, we completed a cash tender offer for any and all of ~~Inflationary and Global Events~~

~~Our business and results~~our 2024 Notes with a principal amount of ~~operations, financial condition, and liquidity are impacted by broad economic conditions including inflation, increased competition for talent, and disruption~~$918 million. Using a portion of the ~~supply chain, as well as by political or civil unrest or military action, including indirect results such as commodity price increases~~net proceeds from the ~~conflict between Russia~~June 15, 2023 notes offering described above, we paid an aggregate consideration of $268 million to repurchase $271 million of principal amount of the 2024 Notes plus any accrued and ~~Ukraine (“Russo-Ukrainian War”~~unpaid interest;

•Following the consummation of the cash tender offer discussed above, on June 16, 2023, we irrevocably deposited U.S. government obligations with the trustee under the indenture governing the 2024 Notes sufficient to fund the payment of accrued and unpaid interest of the remaining $647 million principal amount of the 2024 Notes as it becomes due, and of the principal amount of those 2024 Notes on their March 15, 2024 maturity date. Refer to Financial Note 7, “Debt and Financing Activities,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information;

•We returned $770 million of cash to shareholders during the three months ended June 30, 2023 through $696 million of common stock repurchases through open market transactions and $74 million of dividend payments. The total remaining authorization outstanding for repurchases of the Company’s common stock at June 30, 2023 was $2.9 billion; and

•In July 2023, our Board of Directors (the “Board”) approved an increase of $6.0 billion in the authorization for repurchase of the Company’s common stock and raised our quarterly dividend from $0.54 to $0.62 per share of common stock.

Trends and Uncertainties:

Legislative Developments

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”). ~~Cost inflation generally affects us by increasing transportation, operational,~~Among other provisions, the IRA includes a 15% corporate minimum tax, a 1% excise tax on certain repurchases of an entity’s own common stock after December 31, 2022, and other administrative costs associated with our business operations which we might not be able to fully pass along to our customers. Although it is difficult to predict the impact that these factors may havevarious drug pricing reforms. Based on our ~~business in the future, they did~~ongoing assessment, we do not anticipate that this guidance will have a material impact on our ~~results of operations,~~consolidated financial ~~condition,~~statements or ~~liquidity for the three and six months ended September 30, 2022.~~

~~COVID-19~~

~~COVID-19 has continued to evolve since it was declared a global pandemic by the World Health Organization on March 11, 2020. We~~related disclosures; however, we will continue to evaluate the ~~nature~~full impact of these legislative changes as they are announced and ~~extent~~implemented. Refer to Financial Note 11, “Stockholders' Deficit,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for further details regarding excise taxes incurred on our share repurchases during the three months ended June 30, 2023.

COVID-19

The U.S. federal government and World Health Organization suspended their respective public health emergencies in regards to the SARS-CoV-2 coronavirus (“COVID-19”) in May 2023. We have experienced a decrease in revenues and operating profit within our U.S. Pharmaceutical segment from COVID-19 vaccine distribution, and within our Medical-Surgical Solutions segment from COVID-19 tests and the assembly and distribution of ~~the ongoing~~ancillary supply kits needed to administer COVID-19 vaccines. These decreases were driven by a decline in demand and we anticipate these decreases to persist throughout fiscal 2024. The impacts of these programs and COVID-19 ~~on our business, operations,~~tests were not material to revenues and ~~financial results. Refer~~operating profit for the three months ended June 30, 2023. For additional disclosure of trends and uncertainties due to COVID-19, refer to Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of our ~~2022~~2023 Annual Report for additional disclosure of trends and uncertainties due to COVID-19. The disclosures below include significant updates that occurred during the first half of fiscal 2023 and the financial impacts compared to fiscal 2022.

~~Our Role in the Distribution of COVID-19 Vaccines and Ancillary Supply Kits~~

As a diversified healthcare services leader, we are well positioned to respond to the COVID-19 pandemic in the U.S., Canada, and Europe. We work closely with national and local governments, agencies, and industry partners to ensure that available supplies, including personal protective equipment (“PPE”), and medicine reach our customers and their patients.

In December 2020, we began distributing certain COVID-19 vaccines in support of the U.S. government through a contract with the Centers for Disease Control and Prevention (“CDC”). In July 2022, we renewed our relationship with the CDC, under which we serve as a centralized distributor of COVID-19 vaccines and ancillary supplies used to administer vaccines. The results of operations related to our vaccine distribution are reflected in our U.S. Pharmaceutical segment. We also extended our contract to manage the assembly, storage, and distribution of ancillary supply kits as directed by the Department of Health and Human Services (“HHS”), the results of which are reflected in our Medical-Surgical Solutions segment.

McKesson Canada and McKesson Europe support governments and public health entities through distributing COVID-19 vaccines and administering them in pharmacies as well as distributing COVID-19 tests and certain PPE.

~~Trends in our Business~~

We observed stability in prescription volumes within our U.S. Pharmaceutical segment and patient visits in our primary care business within our Medical-Surgical Solutions segment during the three and six months ended September 30, 2022 compared to the same prior year periods. The contributions from COVID-19 tests and our vaccine and related kitting distribution programs have decreased year over year primarily driven by lower demand.

~~Impacts to our Supply Chain~~

We continue to monitor and address the COVID-19 pandemic impacts on our supply chain. Although the availability of various products is dependent on our suppliers, their locations, and the extent to which they are impacted by the COVID-19 pandemic, we proactively work with manufacturers, industry partners, and government agencies to meet the needs of our customers. During the first half of fiscal 2023, we had an increase in supply chain costs primarily related to transportation and labor; however, this did not materially impact our results of operations for the three and six months ended September 30, 2022. As potential shortages or disruptions of any products are identified, we address supply continuity which includes securing additional products when available, sourcing back-up products when needed, and following allocation procedures to maintain and protect supply as much as possible. We utilize business continuity action planning to maintain and protect operations across all locations and facilities.Report.

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~~Impact to our Results of Operations, Financial Condition, and Liquidity~~

For the three months ended September 30, 2022, COVID-19 tests and the kitting and distribution of ancillary supplies for COVID-19 vaccines in our Medical-Surgical Solutions segment contributed approximately $227 million and $65 million to segment revenues and segment operating profit, respectively, and for the three months ended September 30, 2021, contributed approximately $545 million and $93 million to segment revenues and segment operating profit, respectively. For the six months ended September 30, 2022, the contribution was approximately $428 million and $114 million to segment revenues and segment operating profit, respectively, and for the six months ended September 30, 2021, the contribution was approximately $868 million to segment revenues and including total inventory charges that are further described below, increased our segment operating profit by approximately 1%.

The distribution of COVID-19 vaccines in our U.S. Pharmaceutical segment decreased during the second quarter and first half of fiscal 2023 when compared to the same prior year periods. The contribution was less than 10% to segment operating profit for each of the three and six months ended September 30, 2022 and 2021. The financial impact from our COVID-19 response efforts in the International segment during the three and six months ended September 30, 2022 and 2021 was not material to our consolidated or segment operating results.

Additionally, we recorded inventory charges totaling $164 million on certain PPE and other related products in our Medical-Surgical Solutions segment during the six months ended September 30, 2021. We have taken measures to mitigate risks for market price volatility and changes to anticipated customer demand that may require additional write-downs in future periods of other PPE and related product categories.

Excluding the prior year inventory charges on certain PPE and other related products for the six months ended September 31, 2021 mentioned above, these COVID-19 related items had a net unfavorable impact on consolidated income from continuing operations before income taxes for the three and six months ended September 30, 2022 compared to the same prior year periods, primarily driven by lower demand for COVID-19 tests as well as COVID-19 vaccines and related ancillary supply kits.

During the three and six months ended September 30, 2022 and 2021, we maintained appropriate labor and overall vendor supply levels and experienced no material impacts to our liquidity or net working capital due to the COVID-19 pandemic.

Opioid-Related Litigation and Claims

WeAs described in the discussion of opioid-related matters in Financial Note 10, “Commitments and Contingent Liabilities,” to the financial statements accompanying this Quarterly Report, we are a defendant in many legal proceedings asserting claims related to the distribution of controlled substances (opioids) in federal and state courts throughout the U.S., and in Puerto Rico and Canada. The plaintiffs in these actions have included state attorneys general, county and municipal governments, tribal nations, hospitals, health and welfare funds, third-party payors, and individuals.

The Company believes it has valid legal defenses in all opioid-related matters, including claims not covered by settlement agreements, and ~~two other national pharmaceutical distributors (collectively “Distributors”) settled with 46 of 49 eligible states~~it intends to mount a vigorous defense. Other than as to the settlement agreements and ~~their participating subdivisions, as well as~~ the District of Columbia and all eligible territories (collectively, “Settling Governmental Entities”) effective on April 2, 2022 (“Settlement”). Under the Settlement, the Distributors will pay the Settling Governmental Entities up to approximately $19.5 billion over 18 years, with up to approximately $7.4 billion to be paid byU.S. governmental subdivision claims described in Financial Note 10, the Company ~~for its 38.1% portion. Consent judgments have been entered~~has not concluded a loss is probable in ~~all participating states and territories, and approximately 2,000 cases have been dismissed pursuant to the Settlement. A minimum of 85%~~any of the ~~Settlement payments must be used by state and local governmental entities to remediate the opioid epidemic. Most~~matters; nor is any possible loss or range of the remaining percentage relates to plaintiffs’ attorneys’ fees and costs, and is payable over a shorter time period. Under the Settlement, the Distributors will establish a clearinghouse to consolidate their controlled-substance distribution data, which will be available to the settling U.S. states to use as part of their anti-diversion efforts. The Settlement provides that the Distributors do not admit liabilityloss reasonably estimable. An adverse judgment or ~~wrongdoing and do not waive~~negotiated resolution in any ~~defenses.~~

The Settlement only addresses the claims of attorneys general of U.S. states and territories and political subdivisions in participating states and territories. Governmental entities not participating in the Settlement may continue to pursue their claims. The states of Alabama, Oklahoma and Washington chose not to participate in the Settlement, but, since the announcement of the Settlement, we have reached separate agreements with the attorneys general of these ~~states to settle~~matters could have a material adverse impact on the ~~claims~~Company’s financial position, cash flows or liquidity, or results of ~~the states and their subdivisions. The Distributors previously settled with the Cherokee Nation and reached an agreement to settle the claims of federally recognized Native American Tribes.~~


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~~McKESSON CORPORATION~~

~~FINANCIAL REVIEW (CONTINUED)~~

~~(UNAUDITED)~~

operations. Our total estimated liability for opioid-related claims was ~~$7.3~~$7.2 billion as of ~~September~~June 30, ~~2022,~~2023, of which ~~$703~~$545 million was included in “Other accrued liabilities” for the amount estimated to be paid within the next twelve months, and the remaining liability was included in “Long-term litigation liabilities” in our Condensed Consolidated Balance Sheet.

~~Although the vast majority of opioid claims have been brought by governmental entities in the U.S.,~~ In July 2023, the Company is also a defendant in cases brought in the U.S. by private plaintiffs, such as hospitals, health and welfare funds, third-party payors, and individuals, as well as four cases brought in Canada (three by governmental or tribal entities and one by an individual). These claims, and those of private individuals or entities generally, are not included in the Settlement or in the charges recorded by the Company, described above. The Company believes it has valid legal defenses in these matters and intends to mount a vigorous defense.

~~Because of the many uncertainties~~made payments totaling $529 million associated with ~~ongoing~~various settlement agreements for opioid-related ~~litigation matters, we are not able to reasonably estimate the upper or lower ends~~claims of ~~the range of ultimate possible loss for all opioid-related litigation matters. In light of the uncertainty, the amount of any ultimate loss may differ materially from the amount accrued.~~states, subdivisions, and Native American tribes.

Notwithstanding the Settlement, we also continue to prepare for trial in pending matters. We believe that we have valid defenses to the claims pending against us and, absent an acceptable settlement, intend to vigorously defend against all such claims. An adverse judgment or negotiated resolution in any of these matters could have a material adverse impact on our financial position, cash flows or liquidity, or results of operations. Refer to Financial Note 12, “Commitments and Contingent Liabilities,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information.

~~Risks and Forward-Looking Information~~

Recent events such as the COVID-19 pandemic, the Russo-Ukrainian War, and associated economic impacts have disrupted the global economy and exacerbated uncertainties inherent in estimates, judgments, and assumptions used in our forecasts. We have experienced and may experience difficulties in sourcing products and changes in costs and pricing due to the effects of these events on supply chains. Our participation in government-sponsored vaccination distribution and related ancillary supply kit programs with the CDC and HHS exposes us to various uncertainties, such as the scope and length of related agreements and the amount of COVID-19 vaccines and ancillary supply kits that we are contracted to distribute, which could materially impact our future financial performance. Additionally, we periodically review our intangible and other long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Key assumptions and estimates about future values in our impairment assessments can be affected by a variety of factors, including the impacts of socio-political events on industry and economic trends as well as on our business strategy and internal forecasts. Impairment charges have been recognized in prior periods due to the impact from the COVID-19 pandemic. Material changes to key assumptions and estimates could decrease the projected cash flows or increase the discount rates that could potentially result in future impairment charges. Refer to Item 1A - Risk Factors in Part I of our 2022 Annual Report for a discussion of risk factors that could cause our actual results to differ materially from our projections.


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~~FINANCIAL REVIEW (CONTINUED)~~

~~(UNAUDITED)~~

RESULTS OF OPERATIONS

Overview of Consolidated Results:

(Dollars in millions, except per share data) Three Months Ended September 30, Six Months Ended September 30,
2022 2021 Change 2022 2021 Change
Revenues $ 70,157 $ 66,576 5 % $ 137,311 $ 129,250 6 %
Gross profit 3,095 3,352 (8) 6,118 6,384 (4)
Gross profit margin 4.41 % 5.03 % (62) bp 4.46 % 4.94 % (48) bp
Total operating expenses $ (1,971) $ (2,813) (30) % $ (3,958) $ (5,277) (25) %
Total operating expenses as a percentage of revenues 2.81 % 4.23 % (142) bp 2.88 % 4.08 % (120) bp
Other income, net $ 175 $ 139 26 % $ 190 $ 182 4 %
Loss on debt extinguishment — (191) (100) — (191) (100)
Interest expense (55) (45) 22 (100) (94) 6
Income from continuing operations before income taxes 1,244 442 181 2,250 1,004 124
Income tax expense (271) (132) 105 (470) (158) 197
Reported income tax rate (21.8) % (29.9) % 810 bp (20.9) % (15.7) % (520) bp
Income from continuing operations $ 973 $ 310 214 % $ 1,780 $ 846 110 %
Loss from discontinued operations, net of tax (6) — — (4) (3) 33
Net income 967 310 212 1,776 843 111
Net income attributable to noncontrolling interests (41) (43) (5) (82) (90) (9)
Net income attributable to McKesson Corporation $ 926 $ 267 247 % $ 1,694 $ 753 125 %
Diluted earnings (loss) per common share attributable to McKesson Corporation
Continuing operations $ 6.46 $ 1.71 278 % $ 11.71 $ 4.82 143 %
Discontinued operations (0.04) — — (0.03) (0.02) 50
Total $ 6.42 $ 1.71 275 % $ 11.68 $ 4.80 143 %
Weighted-average diluted common shares outstanding 144.1 155.8 (8) % 145.0 156.9 (8) %

~~All percentage changes displayed above which are not meaningful are displayed as zero percent.~~


(Dollars in millions, except per share data)	Three Months Ended June 30,
	2023			2022			Change
Revenues	$	74,483		$	67,154		11	%
Gross profit	3,022			3,023			—
Gross profit margin	4.06		%	4.50		%	(44)	bp
Total operating expenses	$	(1,922)		$	(1,987)		(3)	%
Total operating expenses as a percentage of revenues	2.58		%	2.96		%	(38)	bp
Other income, net	$	38		$	15		153	%

Interest expense	(47)			(45)			4
Income from continuing operations before income taxes	1,091			1,006			8
Income tax expense	(94)			(199)			(53)
Reported income tax rate	8.6		%	19.8		%	(1,120)	bp
Income from continuing operations	$	997		$	807		24	%
Income from discontinued operations, net of tax	—			2			(100)
Net income	997			809			23
Net income attributable to noncontrolling interests	(39)			(41)			(5)
Net income attributable to McKesson Corporation	$	958		$	768		25	%

Diluted earnings per common share attributable to McKesson Corporation
Continuing operations	$	7.02		$	5.25		34	%
Discontinued operations	—			0.01			(100)
Total	$	7.02		$	5.26		33	%

Weighted-average diluted common shares outstanding	136.6			145.9			(6)	%

bp - basis points

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Revenues

Revenues increased for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 compared to the same prior year ~~periods primarily~~period largely due to market growth in our U.S. Pharmaceutical ~~segment.~~segment, including higher volumes from retail national account customers and growth in specialty pharmaceuticals. Market growth includes growing drug utilization, price increases, and newly launched products, partially offset by price deflation associated with branded to generic drug conversion. This revenue growth was partially offset by lower revenues in our International segment driven by the completed divestiture of our ~~U.K.~~E.U. disposal group ~~in April 2022~~ and unfavorable effects of foreign currency exchange fluctuations.

Gross Profit

Gross profit ~~decreased~~was flat for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 compared to the same prior year ~~periods~~period primarily ~~in our International segment~~ driven by the completed divestiture of our ~~U.K.~~E.U. disposal group ~~in April 2022~~ and unfavorable effects of foreign currency exchange ~~fluctuations. For the six months ended September 30, 2022, this was~~fluctuations in our International segment, partially offset by ~~an increase~~our share of antitrust settlements received in ~~gross profit in our Medical-Surgical Solutions segment due to prior year inventory charges on certain PPE and other related products and favorability in our primary care business. Gross profit for~~ the ~~six months ended September 30, 2022 was also favorably impacted by~~first quarter of fiscal 2024, growth of specialty pharmaceuticals and increased contributions from our generics programs in our U.S. Pharmaceutical segment, ~~as well as~~and increased ~~volume~~volumes with new and existing customers in our RxTS segment.

~~Last-in,~~For the three months ended June 30, 2023, we recognized a gain of $118 million related to our share of antitrust settlements. We recognized this amount within "Cost of sales" in the Condensed Consolidated Statement of Operations within our U.S. Pharmaceutical segment.

A last-in, first-out (“LIFO”) inventory ~~credits~~charge of $32 million and a credit of $13 million were ~~$23 million for each of~~recognized during the three months ended ~~September~~June 30, 2023 and 2022, ~~and 2021, and $36 million and $46 million for the six months ended September 30, 2022 and 2021,~~ respectively. A LIFO ~~credits were lower~~charge in the first ~~half~~quarter of fiscal ~~2023~~2024 compared toa LIFO credit in the same prior year period was primarily due to higher ~~expected~~estimated brand ~~inflation.~~ inflation and higher brand inventory levels as well as lower estimated generics deflation, partially offset by higher estimated off patent launch activity.

Our U.S. Pharmaceutical business uses the LIFO method of accounting for the majority of its inventories, which results in cost of sales that more closely reflects replacement cost than under other accounting methods. The business’ practice is to pass on to customers published price changes from suppliers. Manufacturers generally provide us with price protection, which limits price related inventory losses. A LIFO ~~expense~~charge is recognized when the net effect of price increases on pharmaceutical and non-pharmaceutical products held in inventory exceeds the impact of price declines, including the effect of branded pharmaceutical products that have lost market exclusivity. A LIFO credit is recognized when the net effect of price declines exceeds the impact of price increases on pharmaceutical and non-pharmaceutical products held in inventory. Our quarterly LIFO ~~credit~~adjustment is based on our estimates of the annual LIFO credit which is impacted by expected changes in year-end inventory quantities, product mix, and manufacturer pricing practices, which may be influenced by market and other external factors. Changes to any of the above factors could have a material impact to our annual LIFO ~~credit.~~adjustment. The actual valuation of inventory under the LIFO method is calculated at the end of the fiscal year.

In October 2022, we received proceeds of $129 million related to our share of an antitrust settlement. A lawsuit was filed against a brand manufacturer alleging that the manufacturer, by itself or in concert with others, took improper actions to delay or prevent generic drugs from entering the market. We were not a named party to the litigation but were a member of the class of those who purchased directly from the pharmaceutical manufacturer. We will recognize a gain in that amount within "Cost of sales" in the Condensed Consolidated Statement of Operations in the third quarter of fiscal 2023 related to the settlement within our U.S. Pharmaceutical segment.

Total Operating Expenses

A summary of the components of our total operating expenses for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 is as follows:

•Selling, distribution, general, and administrative expenses (“SDG&A”): SDG&A consists of personnel costs, transportation costs, depreciation and amortization, lease costs, professional fee expenses, administrative expenses, remeasurement charges to the lower of carrying value or fair value less costs to sell, and other general charges.

•Claims and litigation charges, net: These charges include adjustments for estimated probable settlements related to our controlled substance monitoring and reporting, and opioid-related claims, as well as any applicable income items or credit adjustments due to subsequent changes in estimates. Legal fees to defend claims, which are expensed as incurred, are included within SDG&A.

•Restructuring, impairment, and related charges, net: ~~Restructuring charges are~~Charges recorded under this component include those incurred for programs in which we change our operations, the scope of a business undertaken by our business units, or the manner in which that business is conducted, as well as long-lived asset impairments.

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Three Months Ended September 30, Six Months Ended September 30,
(Dollars in millions) 2022 2021 Change 2022 2021 Change
Selling, distribution, general, and administrative expenses $ 1,950 $ 2,669 (27) % $ 3,909 $ 4,901 (20) %
Claims and litigation charges, net (9) 112 108 (4) 186 102
Restructuring, impairment, and related charges, net 30 32 (6) 53 190 (72)
Total operating expenses $ 1,971 $ 2,813 (30) % $ 3,958 $ 5,277 (25) %
Percent of revenues 2.81 % 4.23 % (142) bp 2.88 % 4.08 % (120) bp

~~All percentage changes displayed above which are not meaningful are displayed as zero percent.~~


	Three Months Ended June 30,
(Dollars in millions)	2023			2022			Change
Selling, distribution, general, and administrative expenses	$	1,870		$	1,959		(5)	%
Claims and litigation charges, net	—			5			(100)

Restructuring, impairment, and related charges, net	52			23			126
Total operating expenses	$	1,922		$	1,987		(3)	%
Percent of revenues	2.58		%	2.96		%	(38)	bp

bp - basis points

For the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, total operating expenses and total operating expenses as a percentage of revenues decreased compared to the same prior year ~~periods.~~period. Total operating expenses were impacted by the following significant items:

•SDG&A for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 reflects lower operating expenses due to the completed divestiture of our ~~U.K.~~E.U. disposal group in ~~April 2022;~~

•SDG&A for the three and six months ended September 30, 2022 includes gains of $23 million and $35 million, respectively, and for the three and six months ended September 30, 2021 includes charges of $491 million to remeasure the assets and liabilities of our E.U. disposal group to fair value less costs to sell. The fiscal 2022 charges also includes impairments of individual assets, such as certain internal-use software that will not be utilized in the future. The fiscal 2022 remeasurement adjustment includes a $226 million loss related to the accumulated other comprehensive income balances associated with our E.U. disposal group;

•SDG&A for the for the three and six months ended September 30, 2021 includes a gain of $59 million related to the sale of our Canadian health benefit claims management and plan administrative services business;

•SDG&A for the three months ended September 30, 2022 and 2021 includes charges of $9 million and $36 million, respectively, and for the six months ended September 30, 2022 and 2021 includes charges of $28 million and $71 million, respectively, of opioid-related costs, primarily litigation expenses;2023;

•Claims and litigation charges, net ~~for fiscal 2023~~ was not material and for the three and six months ended September 30, 2021 includes $112 million related to our estimated liability for opioid-related claims of government entities, including Native American tribes. Claims and litigation charges, net for the six months ended September 30, 2021 also includes a charge of $27 million related to an agreement to settle opioid-related claims with the State of New York and its participating subdivisions, including Nassau and Suffolk Counties, and a charge of $47 million related to our estimated liability for a comprehensive proposed agreement to settle opioid-related claims of participating states, their political subdivisions, and other governmental entities.material. Refer to the Opioid-Related Litigation and Claims section of "Trends and Uncertainties" for further discussion;

•Restructuring, impairment, and related charges, net for ~~fiscal 2023 was not material and for the~~ three ~~and six~~ months ended ~~September~~June 30, ~~2021 includes charges of $15~~2023 and 2022 were $52 million and ~~$110~~$23 million, respectively, ~~related to our transition to a partial remote work model approved during the first quarter of fiscal 2022~~ as ~~further described below;~~discussed in more detail below under “Restructuring Initiatives;” and

•Total operating expenses were favorably impacted by foreign currency exchange fluctuations for the three ~~and six~~ months ended ~~September~~June 30, 2023 and 2022.


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~~FINANCIAL REVIEW (CONTINUED)~~

~~(UNAUDITED)~~

Goodwill Impairment

We evaluate goodwill for impairment on an annual basis in the first fiscal quarter, and at an interim date if indicators of potential impairment exist. ~~We voluntarily changed our annual goodwill impairment testing date from October 1~~st ~~to April 1~~st to align with the change in timing of our annual long-term planning process. This change was not material to our consolidated financial statements as it did not delay, accelerate, or avoid any potential goodwill impairment charge. Refer to Financial Note 7, “Goodwill and Intangible Assets, Net,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information.

The annual impairment testing performed in fiscal ~~2023~~2024 and fiscal ~~2022~~2023 did not indicate any impairment of goodwill and no goodwill impairment charges were recorded during the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. However, other risks, expenses, and future developments, such as additional government actions, increased regulatory uncertainty, and material changes in key market assumptions limit our ability to estimate projected cash flows, which could adversely affect the fair value of various reporting units in future periods, including our McKesson Canada reporting unit within our International segment, where the risk of a material goodwill impairment is higher than other reporting units.

Restructuring Initiatives ~~and Long-Lived Asset Impairments~~

During the first quarter of fiscal 2022, we approved an initiative to increase operational efficiencies and flexibility by transitioning to a partial remote work model for certain employees. This initiative primarily included the rationalization of our office space in North America. Where we ceased using office space, we exited the portion of the facility no longer used. We also retained and repurposed certain other office locations. We recorded restructuring, impairment, and related charges of ~~$15~~$52 million and ~~$110~~$23 million for the three ~~and six~~ months ended ~~September~~June 30, ~~2021, respectively,~~2023 and 2022, respectively. These charges were included in “Restructuring, impairment, and related charges, net” in the Condensed Consolidated Statements of Operations.

During the fourth quarter of fiscal 2023, we approved a broad set of initiatives to drive operational efficiencies and increase cost optimization efforts, with the intent of simplifying our infrastructure and realizing long-term sustainable growth. These initiatives include headcount reductions and the exit or downsizing of certain facilities. We anticipate total charges of approximately $125 million across our RxTS and U.S. Pharmaceutical segments as well as Corporate, consisting primarily of employee severance and other employee-related costs, facility and other exit-related costs, as well as long-lived asset impairments. Of this amount, $96 million of charges were recorded to date. For the three months ended June 30, 2023, we recorded charges of $36 million related to ~~lease right-of-use~~this program, which primarily includes real estate and other ~~long-lived~~related asset impairments ~~lease exit~~and facility costs ~~and accelerated depreciation and amortization.~~within Corporate. This ~~initiative was~~restructuring program is anticipated to be substantially complete inby the end of fiscal ~~2022 and remaining costs we recorded and expect to record under this initiative are not material.~~2024.

Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for further information on our restructuring initiatives.

~~Other Income, Net~~

Other income, net increased for the three and six months ended September 30, 2022 compared to the same prior year periods primarily due to a gain of $142 million recognized in July 2022 related to the exit of one of our investments in equity securities held within our U.S. Pharmaceutical segment.

This was partially offset by prior year net gains from our equity investments held within Corporate of $97 million and $104 million recognized for the three and six months ended September 30, 2021, respectively, compared to net losses of $3 million and $25 million recognized for the three and six months ended September 30, 2022, respectively.

We are a party to a certain tax receivable agreement (“TRA”) entered into as part of the formation of the joint venture with Change Healthcare Inc. (“Change”), from which McKesson has since exited. The TRA generally requires Change to pay McKesson 85% of the net cash tax savings realized, or deemed to be realized, by Change resulting from the amortization allocated to Change by the joint venture. In October 2022, Change exercised its right pursuant to the TRA to terminate the agreement. We received $126 million in the third quarter of fiscal 2023 due to early termination of the TRA, which will result in a gain within “Other income, net” in the Condensed Consolidated Statements of Operations within Corporate.

~~Loss on Debt Extinguishment~~

The loss on debt extinguishment recorded for the three and six months ended September 30, 2021 of $191 million includes premiums of $182 million as well as the write-off of unamortized debt issuance costs and transaction fees incurred of $9 million, and was driven by our July 2021 tender offer to redeem a portion of our existing debt. Refer to Financial Note 8, “Debt and Financing Activities,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information.

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Other Income, Net

Other income, net increased for the three months ended June 30, 2023 compared to the same prior year period primarily due to a favorable impact to interest income from higher interest rates on certain of our cash balances compared to the prior year period.

Interest Expense

Interest expense increased for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 compared to the same prior year ~~periods, which includes unfavorable impacts from changes in~~period primarily due to the impact of higher interest rates on our derivative portfolio, ~~as a result of our European divestiture activities. This was~~ partially offset by a ~~decrease~~$9 million gain on debt extinguishment in ~~interest expense driven by lower existing debt due~~the first quarter of fiscal 2024, as discussed in more detail in Financial Note 7, “Debt and Financing Activities,” to ~~our tender offer~~the accompanying condensed consolidated financial statements included in ~~late July 2021.~~this Quarterly Report. Interest expense may fluctuate based on timing, amounts, and interest rates of term debt repaid and new term debt issued, as well as amounts incurred associated with financing fees.

Income Tax Expense

For the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, we recorded an income tax expense of $271 million and $132 million, respectively. For the six months ended September 30,~~ 2022, ~~and 2021,~~ we recorded income tax expense of ~~$470~~$94 million and ~~$158~~$199 million, respectively. Our reported income tax rates were ~~21.8%~~8.6% and ~~29.9%~~19.8% for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively, and 20.9% and 15.7% for the six months ended September 30,~~ 2022, ~~and 2021,~~ respectively. Fluctuations in our reported income tax rates are primarily due to ~~non-cash charges related to remeasuring the value of our E.U. disposal group held for sale,~~ changes in our business mix of earnings between various taxing jurisdictions, and discrete tax benefits recognized in the ~~quarters.~~quarters, including a net discrete tax benefit of $147 million recognized in the first quarter of fiscal 2024 related to the repatriation of certain intellectual property between McKesson wholly-owned legal entities that are based in different tax jurisdictions. Refer to Financial Note 4, “Income Taxes,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information.

Income from Discontinued Operations, Net of Tax

Income from discontinued operations, net of tax, was $2 million for the three months ended June 30, 2022. Subsequent to our divestiture of the E.U. disposal group in October 2022, we no longer have discontinued operations.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 primarily represents the proportionate results of third-party equity interests in the Company’s consolidated entities of ClarusONE Sourcing Services LLP and Vantage Oncology Holdings, ~~LLC, and~~LLC. For the ~~accrual of the annual recurring compensation amount of €0.83 per McKesson Europe share that McKesson was obligated~~three months ended June 30, 2023, net income attributable to pay to the noncontrolling shareholders of McKesson Europe under the December 2014 domination and profit and loss transfer agreement (the “Domination Agreement”). Noncontrolling interests with redemption features, such as put rights, that are not solely within our control are considered redeemable noncontrolling interests. Refer to the ~~“Selected Measures of Liquidity and Capital Resources”~~ section of this Financial Review and Financial Note 5, “Redeemable Noncontrolling Interests and Noncontrolling Interests,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information on changes to our redeemable and noncontrolling interests ~~that occurred during~~also includes the ~~first quarter~~proportionate results of ~~fiscal 2022.~~third-party equity interest in SCRI Oncology, LLC.

Net Income Attributable to McKesson Corporation

Net income attributable to McKesson Corporation was ~~$926~~$958 million and ~~$267~~$768 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively, and $1.7 billion and $753 million for the six months ended September 30,~~ 2022, ~~and 2021,~~ respectively. Diluted earnings per common share attributable to McKesson Corporation was ~~$6.42~~$7.02 and ~~$1.71~~$5.26 for the three months ended ~~September~~June 30, 2023 and 2022, ~~and 2021, respectively, and $11.68 and $4.80 for~~respectively. Our diluted earnings per share reflects the ~~six months ended September 30, 2022 and 2021, respectively.~~cumulative effects of share repurchases during each period.

Weighted-Average Diluted Common Shares Outstanding

Diluted earnings per common share ~~were~~was calculated based on a weighted-average number of shares outstanding of ~~144.1~~136.6 million and ~~155.8~~145.9 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively, and 145.0 million and 156.9 million for the six months ended September 30,~~ 2022, ~~and 2021,~~ respectively. Weighted-average diluted shares outstanding for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 decreased from the same prior year ~~periods~~period primarily due to the cumulative effect of share repurchases.

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(UNAUDITED)

Overview of Segment Results:

Segment Revenues:


		Three Months Ended September 30,						Six Months Ended September 30,							Three Months Ended June 30,
(Dollars in millions)	(Dollars in millions)	2022		2021		Change		2022		2021		Change		(Dollars in millions)		2023			2022			Change
Segment revenues	Segment revenues													Segment revenues
U.S. Pharmaceutical	U.S. Pharmaceutical	$	60,059	$	53,411	12	%	$	117,006	$	103,430	13	%	U.S. Pharmaceutical			$	67,160		$	56,947		18	%
Prescription Technology Solutions	Prescription Technology Solutions	1,018		932		9		2,084		1,813		15		Prescription Technology Solutions			1,244			1,066			17
Medical-Surgical Solutions	Medical-Surgical Solutions	2,843		3,124		(9)		5,435		5,652		(4)		Medical-Surgical Solutions			2,611			2,592			1
International	International	6,237		9,109		(32)		12,786		18,355		(30)		International			3,468			6,549			(47)
Total revenues	Total revenues	$	70,157	$	66,576	5	%	$	137,311	$	129,250	6	%	Total revenues			$	74,483		$	67,154		11	%

U.S. Pharmaceutical

Three Months Ended ~~September~~June 30, ~~2022~~2023 vs. ~~2021~~2022

U.S. Pharmaceutical revenues for the three months ended ~~September~~June 30, ~~2022~~2023 increased ~~$6.6~~$10.2 billion or ~~12%~~18% compared to the same prior year period. Within the segment, sales to pharmacies and institutional healthcare providers increased ~~$6.4~~$9.6 billion and sales to specialty practices and other ~~which reflects the results for the distribution of COVID-19 vaccines,~~ increased ~~$235~~$613 million. Overall, these increases were primarily due to market growth, including ~~growth in specialty pharmaceuticals driven by~~ higher volumes from retail national account customers, ~~and branded pharmaceutical price increases, partially offset by branded to generic drug conversions.~~

~~Six Months Ended September 30, 2022 vs. 2021~~

~~U.S. Pharmaceutical revenues for the six months ended September 30, 2022 increased $13.6 billion or~~13% compared to the same prior year period. Within the segment, sales to pharmacies and institutional healthcare providers increased $13.0 billion and sales to specialty practices and other, which reflects the results for the distribution of COVID-19 vaccines, increased $550 million. Overall, these increases were primarily due to market growth, including growth in specialty pharmaceuticals, ~~driven by higher volumes from retail national account customers,~~ and branded pharmaceutical price increases, partially offset by branded to generic drug conversions.

Prescription Technology Solutions

Three Months Ended ~~September~~June 30, ~~2022~~2023 vs. ~~2021~~2022

RxTS revenues for the three months ended ~~September~~June 30, ~~2022~~2023 increased ~~$86~~$178 million or 9%17% compared to the same prior year period due to increased ~~volumes with new and existing customers primarily in our third-party logistics and wholesale distribution services as well as higher technology service revenues.~~

~~Six Months Ended September 30, 2022 vs. 2021~~

~~RxTS revenues for the six months ended September 30, 2022 increased $271 million or 15% compared to the same prior year period due to increased volumes~~volume with new and existing customers primarily in our third-party logistics and wholesale distribution services, as well as higher technology service revenues.

Medical-Surgical Solutions

Three Months Ended ~~September~~June 30, ~~2022~~2023 vs. ~~2021~~2022

Medical-Surgical Solutions revenues for the three months ended ~~September~~June 30, ~~2022 decreased $281~~2023 increased $19 million or 9%1% compared to the same prior year period. Within the segment, sales to ~~primary care and~~ extended care customers ~~decreased $227~~increased $76 million, and ~~$8 million, respectively.~~sales to primary care customers decreased $4 million. The decrease in our primary care business was driven by lower sales of COVID-19 tests, ~~partially~~largely offset by underlying core business growth. Other sales declined ~~$46~~$53 million driven by lower contribution from the kitting and distribution of ancillary ~~supply kits~~supplies used to administer COVID-19 vaccines.

International

Three Months Ended June 30, 2023 vs. 2022

International revenues for the three months ended June 30, 2023 decreased $3.1 billion or 47% compared to the same prior year period which included unfavorable effects of foreign currency exchange fluctuations of $199 million. Within the segment, sales in Europe declined by $3.1 billion largely due to the completed divestiture of our E.U. disposal group in the third quarter of fiscal 2023, partially offset by increased sales in Canada of $238 million primarily driven by higher pharmaceutical distribution volumes.

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~~Six Months Ended September 30, 2022 vs. 2021~~

Medical-Surgical Solutions revenues for the six months ended September 30, 2022 decreased $217 million or 4% compared to the same prior year period. Within the segment, sales to primary care customers decreased $140 million and sales to extended care customers increased $2 million. The decrease in our primary care business was driven by lower sales of COVID-19 tests, partially offset by underlying core business growth. Other sales declined $79 million driven by lower contribution from the kitting and distribution of ancillary supply kits used to administer COVID-19 vaccines.

~~International~~

~~Three Months Ended September 30, 2022 vs. 2021~~

International revenues for the three months ended September 30, 2022 decreased $2.9 billion or 32% compared to the same prior year period. Within the segment, foreign currency exchange fluctuations were unfavorable by $633 million and sales in Europe declined by $2.5 billion, partially offset by increased sales in Canada of $231 million. Excluding the unfavorable effects of foreign currency exchange fluctuations, revenues for this segment decreased 25% largely due to the completed divestitures of our U.K. disposal group in April 2022 and Austrian business in January 2022.

~~Six Months Ended September 30, 2022 vs. 2021~~

International revenues for the six months ended September 30, 2022 decreased $5.6 billion or 30% compared to the same prior year period. Within the segment, foreign currency exchange fluctuations were unfavorable by $1.2 billion and sales in Europe declined by $4.8 billion, partially offset by increased sales in Canada of $400 million. Excluding the unfavorable effects of foreign currency exchange fluctuations, revenues for this segment decreased 24% largely due to the completed divestitures of our U.K. disposal group in April 2022 and Austrian business in January 2022.

Segment Operating Profit (Loss) and Corporate Expenses, Net:


		Three Months Ended September 30,								Six Months Ended September 30,									Three Months Ended June 30,
(Dollars in millions)	(Dollars in millions)	2022			2021			Change		2022			2021			Change		(Dollars in millions)	2023			2022			Change
Segment operating profit (loss) (1)	Segment operating profit (loss) (1)																	Segment operating profit (loss) (1)
U.S. Pharmaceutical (2)	U.S. Pharmaceutical (2)	$	896		$	760		18	%	$	1,592		$	1,442		10	%	U.S. Pharmaceutical (2)	$	827		$	696		19	%
Prescription Technology Solutions(3)	Prescription Technology Solutions(3)	120			128			(6)		264			232			14		Prescription Technology Solutions(3)	231			144			60
Medical-Surgical Solutions ~~(3)~~	Medical-Surgical Solutions ~~(3)~~	299			296			1		555			371			50		Medical-Surgical Solutions ~~(3)~~	227			256			(11)
International (4)	International (4)	(37)			(146)			(75)		(43)			(93)			(54)		International (4)	57			(6)			—

Subtotal	Subtotal	1,278			1,038			23		2,368			1,952			21		Subtotal	1,342			1,090			23
Corporate expenses, net (5)	Corporate expenses, net (5)	21			(360)			106		(18)			(663)			(97)		Corporate expenses, net (5)	(204)			(39)			423
Loss on debt extinguishment (6)		—			(191)			(100)		—			(191)			(100)
Interest expense	Interest expense	(55)			(45)			22		(100)			(94)			6		Interest expense	(47)			(45)			4
Income from continuing operations before income taxes	Income from continuing operations before income taxes	$	1,244		$	442		181	%	$	2,250		$	1,004		124	%	Income from continuing operations before income taxes	$	1,091		$	1,006		8	%

Segment operating profit (loss) margin	Segment operating profit (loss) margin																	Segment operating profit (loss) margin
U.S. Pharmaceutical	U.S. Pharmaceutical	1.49		%	1.42		%	7	bp	1.36		%	1.39		%	(3)	bp	U.S. Pharmaceutical	1.23		%	1.22		%	1	bp
Prescription Technology Solutions	Prescription Technology Solutions	11.79			13.73			(194)		12.67			12.80			(13)		Prescription Technology Solutions	18.57			13.51			506
Medical-Surgical Solutions	Medical-Surgical Solutions	10.52			9.48			104		10.21			6.56			365		Medical-Surgical Solutions	8.69			9.88			(119)
International	International	(0.59)			(1.60)			101		(0.34)			(0.51)			17		International	1.64			(0.09)			173

All percentage changes displayed above which are not meaningful are displayed as zero percent.

bp - basis points

(1)Segment operating profit (loss) includes gross profit, net of total operating expenses, as well as other income, net, for our reportable segments.

(2)Operating profit for our U.S. Pharmaceutical segment includes the following:


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~~FINANCIAL REVIEW (CONTINUED)~~

~~(UNAUDITED)~~

•~~a gain of $142 million related to the exit of one of our investments in equity securities in July 2022 for the three and six months ended September 30, 2022; and~~

•cash receipts for our share of antitrust legal settlements of ~~$34 million and $46~~$118 million for the three ~~and six~~ months ended ~~September~~June 30, ~~2021,~~2023; and

•a charge of $32 million and a credit of $13 million related to the LIFO method of accounting for inventories for the three months ended June 30, 2023 and 2022, respectively.

(3)Operating profit for our ~~Medical-Surgical Solutions~~RxTS segment for the ~~six~~three months ended ~~September~~June 30, ~~2021~~2023 includes ~~$164~~a fair value adjustment gain of $28 million ~~of inventory charges on certain PPE~~which reduced our contingent consideration liability related to the RxSS acquisition, as discussed in more detail in Financial Note 2, “Business Acquisitions and ~~other related products.~~Divestitures,” to the accompanying condensed consolidated financial statements included in this Quarterly Report.

(4)Operating loss for our International segment includes ~~the following:~~

•charges of ~~$143 million and $237~~$94 million for the three ~~and six~~ months ended ~~September~~June 30, 2022 ~~respectively, and charges of $342 million for the three and six months ended September 30, 2021,~~ to remeasure the assets and liabilities of our E.U. disposal group to fair value less costs to sell, as discussed in more detail in Financial Note 2, “Business Acquisitions and ~~in fiscal 2022, to impair certain assets, including internal-use software that will not be utilized in the future; and~~

•~~a gain of $59 million for the three and six months ended September 30, 2021 related~~Divestitures,” to the ~~sale of our Canadian health benefit claims management and plan administrative services business.~~accompanying condensed consolidated financial statements included in this Quarterly Report.

(5)Corporate expenses, net includes the following:

•~~charges of $112 million and $186 million for the three and six months ended September 30, 2021, respectively, related to our estimated liability for opioid-related claims;~~

~~(6)Loss on debt extinguishment for the three and six months ended September 30, 2021 consists of a charge of $191 million related to our July 2021 tender offer to redeem a portion of our existing debt.~~

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(UNAUDITED)

U.S. Pharmaceutical

Three Months Ended ~~September~~June 30, ~~2022~~2023 vs. ~~2021~~2022

Operating profit for this segment increased for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the same prior year period primarily due to ~~a gain recognized~~an increase from ~~the exit~~net cash proceeds received of ~~one~~$118 million representing our share of ~~our investments in equity securities in July 2022~~antitrust legal settlements and growth in specialty pharmaceuticals, partially offset by ~~net cash proceeds received~~a LIFO charge in the first quarter of fiscal 2024 compared to a credit in the same prior year ~~representing our share of antitrust legal settlements.~~period.

~~Six~~Prescription Technology Solutions

Three Months Ended ~~September~~June 30, ~~2022~~2023 vs. ~~2021~~2022

Operating profit for this segment increased for the ~~six~~three months ended ~~September~~June 30, ~~2022~~2023 compared to the same prior year period primarily due to a gain recognized from the exit of one of our investments in equity securities in July 2022 and growth in specialty pharmaceuticals. This was partially offset by net cash proceeds received in the prior year representing our share of antitrust legal settlements and a decrease in the contribution from our COVID-19 vaccine distribution program.

~~Prescription Technology Solutions~~

~~Three Months Ended September 30, 2022 vs. 2021~~

Operating profit for this segment decreased for the three months ended September 30, 2022 compared to the same prior year period primarily due to higher operating expenses related to annual support of customer programs.

~~Six Months Ended September 30, 2022 vs. 2021~~

~~Operating profit for this segment increased for the six months ended September 30, 2022 compared to the same prior year period primarily~~ driven by increased volumes with new and existing customers due to growth in our access ~~affordability, and adherence solutions.~~solutions, primarily related to electronic prior authorization services.

Medical-Surgical Solutions

Three Months Ended ~~September~~June 30, ~~2022~~2023 vs. ~~2021~~2022

Operating profit for this segment ~~was flat~~decreased for the three months ended ~~September~~June 30, ~~2022 compared to the same prior year period. Operating profit increased due to favorability in our core primary care business, which was offset by lower sales of COVID-19 tests.~~

~~Six Months Ended September 30, 2022 vs. 2021~~

Operating profit for this segment increased for the six months ended September 30, 2022 compared to the same prior year period largely due to prior year inventory charges on certain PPE and other related products.

~~International~~

~~Three Months Ended September 30, 2022 vs. 2021~~

Operating loss for this segment improved for the three months ended September 30, 2022 compared to the same prior year period largely due to a decrease in fair value remeasurement charges related to our E.U. disposal group, partially offset by a gain recognized in the prior year from the sale of our Canadian health benefit claims management and plan administrative services business.

~~Six Months Ended September 30, 2022 vs. 2021~~

~~Operating loss for this segment improved for the six months ended September 30, 2022~~2023 compared to the same prior year period due to a ~~decrease in fair value remeasurement charges related~~lower contribution from kitting and distribution of ancillary supplies for COVID-19 vaccines and higher employee-related expenses to our E.U. disposal group and the cessation of depreciation and amortization expenses from its assets classified as held for sale, as well as lower restructuring expenses due to optimization programs in Canada. This wassupport core business growth, partially offset by ~~unfavorable impacts from~~growth in extended care and our core primary care businesses.

International

Three Months Ended June 30, 2023 vs. 2022

Operating profit for this segment for the ~~completed divestitures of our Austrian business and U.K. disposal group as well~~three months ended June 30, 2023 compared to an operating loss in the same prior year period was primarily as a ~~gain recognized~~result of remeasurement charges recorded in the prior year related to the E.U. disposal group, partially offset by lower contributions from the ~~sale of our Canadian health benefit claims management and plan administrative services business.~~


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~~FINANCIAL REVIEW (CONTINUED)~~

~~(UNAUDITED)~~

European operations divested in fiscal 2023.

Corporate Expenses, Net

Three Months Ended ~~September~~June 30, ~~2022~~2023 vs. ~~2021~~2022

Corporate expenses, net ~~decreased~~increased for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the same prior year period primarily ~~due~~as a result of remeasurement gains recorded in the prior year related to ~~year over year favorability from~~ the ~~fair value remeasurement of our~~ E.U. disposal group, ~~which includes the effect of accumulated other comprehensive loss components,~~ and ~~lower charges related to our estimated liability for opioid-related claims, partially offset by prior year net gains recognized from our equity investments.~~

~~Six Months Ended September 30, 2022 vs. 2021~~

Corporate expenses, net decreased for the six months ended September 30, 2022 compared to the same prior year period primarily due to year over year favorability from the fair value remeasurement of our E.U. disposal group, which includes the effect of accumulated other comprehensive loss components, lower charges related to our estimated liability for opioid-related claims, and prior yearhigher restructuring charges ~~for the transition to a partial remote work model for certain employees.~~recorded in fiscal 2024. This was partially offset by ~~lower net gains recognized~~a favorable impact to interest income from higher interest rates on certain of our ~~equity investments.~~cash balances compared to the prior year period.

Business Combinations

Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for our disclosures on business combinations.

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 included in this Quarterly Report.

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McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

We expect our available cash generated from operations and our short-term investment portfolio, together with our existing sources of liquidity from our credit facilities, ~~and~~ commercial paper program, and other borrowings will be sufficient to fund our short-term and long-term capital expenditures, working capital, and other cash requirements. We remain adequately capitalized, ~~with~~including access to liquidity from our $4.0 billion revolving credit facility. At ~~September~~June 30, ~~2022,~~2023, we were in compliance with all debt covenants, and believe we have the ability to continue to meet our debt covenants in the future.

The following table summarizes the net change in cash, cash equivalents, and restricted cash for the periods shown:


		Six Months Ended September 30,							Three Months Ended June 30,
(Dollars in millions)	(Dollars in millions)	2022		2021		Change		(Dollars in millions)	2023		2022		Change
Net cash provided by (used in):	Net cash provided by (used in):							Net cash provided by (used in):
Operating activities	Operating activities	$	166	$	170	$	(4)	Operating activities	$	(1,052)	$	(941)	$	(111)
Investing activities	Investing activities	116		(157)		273		Investing activities	(149)		39		(188)
Financing activities	Financing activities	(1,753)		(3,894)		2,141		Financing activities	(843)		(1,181)		338
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	24		18		6		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	2		18		(16)
Change in cash, cash equivalents, and restricted cash classified within Assets held for sale (1)		470		—		470
Change in cash, cash equivalents, and restricted cash classified as Assets held for sale (1)								Change in cash, cash equivalents, and restricted cash classified as Assets held for sale (1)	—		470		(470)
Net change in cash, cash equivalents, and restricted cash	Net change in cash, cash equivalents, and restricted cash	$	(977)	$	(3,863)	$	2,886	Net change in cash, cash equivalents, and restricted cash	$	(2,042)	$	(1,595)	$	(447)

(1)~~This~~The fiscal 2023 change reflects a reversal of cash, cash equivalents, and restricted cash previously classified ~~within~~as assets held for sale at March 31, 2022 as part of the U.K. disposal group and is offset by cash outflows primarily related to the settlement of liabilities which is reflected in operating activities. ~~Refer to Financial Note 2, “Business Acquisitions and Divestitures,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for further information.~~

Operating Activities

Operating activities ~~provided~~used cash of ~~$166 million~~$1.1 billion and ~~$170~~$941 million during the ~~six~~three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Cash flows from operations can be significantly impacted by factors such as the timing of receipts from customers, inventory ~~purchases,~~receipts, and payments to vendors. Additionally, working capital is primarily a function of sales and purchase volumes, inventory requirements, and vendor payment terms.

Operating activities for the ~~six~~three months ended ~~September~~June 30, 2023 were affected by net income of $1.0 billion, adjusted for non-cash items, as well as increases in receivables of $2.4 billion, drafts and accounts payable of $1.5 billion, and inventories of $826 million, all primarily driven by higher revenues and timing.

Operating activities for the three months ended June 30, 2022 were affected by net income of $809 million, adjusted for non-cash items, ~~and changes~~as well as increases in receivables drafts and accounts payables, and inventories classified as held for sale. Refer Financial Note 2, “Business Acquisitions and Divestitures,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for further information on our European divestiture activities. Operating activities for the six months ended September 30, 2022 were affected by increases inof $1.6 billion, drafts and accounts payable of ~~$2.3 billion, receivables of $1.9~~$1.0 billion, and ~~inventories~~inventory of ~~$1.5 billion,~~$955 million, all primarily driven by higher revenues and timing. Our litigation liabilities also decreased by ~~$915~~$370 million ~~due to~~primarily driven by payments made during the first ~~half~~quarter of fiscal 2023 associated with ~~the Settlement and separate~~various settlement agreements offor opioid-related claims of ~~participating~~ states, subdivisions, and Native American ~~tribes.~~

~~Operating activities for~~tribes, as discussed in more detail in Financial Note 10, “Commitments and Contingent Liabilities,” to the ~~six months ended September 30, 2021 were affected by increases~~accompanying condensed consolidated financial statements included in drafts and accounts payable of $1.4 billion, receivables of $2.3 billion, and inventories of $1.2 billion, all primarily due to timing and higher revenues. Other non-cash items for the six months ended September 30, 2021 includes non-cash inventory charges totaling $164 million on certain PPE and other related products in our Medical-Surgical Solutions segment.this Quarterly Report .

Investing Activities

Investing activities used cash of $149 million and provided cash of ~~$116 million and used cash of $157~~$39 million during the ~~six~~three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Investing activities for the ~~six~~three months ended ~~September~~June 30, 2023 and 2022 reflects proceeds from sales of businesses and investments of $496 million, including $202 million of cash from the completed divestiture of our U.K. disposal group in April 2022 and $179 million of cash from the exit of one our investments in equity securities in July 2022. Investing activities for the six months ended September 30, 2022 and 2021 includes ~~$222~~$124 million and ~~$279~~$100 million, respectively, in capital expenditures for property, plant, and equipment and capitalized software. Investing activities for the three months ended June 30, 2022 also includes proceeds from sales of businesses and investments of $240 million, primarily due to the completed divestiture of our U.K. disposal group in April 2022.

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McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

Financing Activities

Financing activities used cash of ~~$1.8 billion~~$843 million and ~~$3.9~~$1.2 billion during the ~~six~~three months ended ~~September~~June 30, 2023 and 2022, respectively. On June 15, 2023, we completed a public offering of 4.90% Notes due June 15, 2028 in a principal amount of $400 million and ~~2021,~~5.10% Notes due July 15, 2033 in a principal amount of $600 million, for proceeds received, net of discounts and offering expenses, of $397 million and $592 million, respectively. A portion of the net proceeds from these notes was utilized to fund the repurchase of our 2024 Notes discussed below, while the remaining net proceeds is available for general corporate purposes.

On June 16, 2023, we completed a cash tender offer for any and all of our 2024 Notes with a principal amount of $918 million. Using a portion of the proceeds from the June 15, 2023 notes offering described above, we paid an aggregate consideration of $268 million to repurchase $271 million principal amount of the 2024 Notes. Following the consummation of this tender offer, on June 16, 2023, we irrevocably deposited U.S. government obligations with the trustee under the indenture governing the 2024 Notes sufficient to fund the payment of accrued and unpaid interest of the remaining $647 million principal amount of the 2024 Notes as it becomes due, and of the principal amount of those 2024 Notes on their March 15, 2024 maturity date.

Financing activities for the ~~six~~three months ended ~~September~~June 30, 2023 and 2022 includes $696 million and ~~2021 includes $1.5 billion and $1.3~~$1.0 billion of cash paid for share repurchases, respectively, as well as ~~$139~~$74 million and ~~$134~~$71 million of cash paid for dividends, respectively. Financing activities also includes cash receipts and repayments of $100 million and $3.0 billion for the six months ended September 30, 2022 and 2021, respectively, for short-term borrowings, primarily commercial paper.

Cash used for other financing activities generally includes the cash value of shares surrendered for tax withholding and payments to noncontrolling interests.

Financing activities for the six months ended September 30, 2021 includes a payment of $1.0 billion to purchase shares of McKesson Europe through exercises of a put right option by noncontrolling shareholders. The put right option expired on June 15, 2021 as further described below. In July 2021, we completed a cash tender offer and paid an aggregate consideration of $1.1 billion to redeem certain notes with a principal amount of $922 million and also redeemed our 0.63% Euro-denominated notes with a principal amount of €600 million (or, approximately $709 million) prior to the maturity date of August 17, 2021 using cash on hand. This resulted in total repayments of long-term debt during the six months ended September 30, 2021 of $1.8 billion, including $184 million of cash paid for premiums and transaction fees. This was partially offset by the issuance of long-term debt in August 2021 from a public offering of 1.30% notes due August 15, 2026 for proceeds received of $498 million, which was utilized for general corporate purposes.

Share Repurchase Plans

The Board has authorized the repurchase of McKesson’s common stock. We may effect stock repurchases from time-to-time inthrough open market transactions, privately negotiated transactions, ~~through ASR~~accelerated share repurchase (“ASR”) programs, or by combinations of such methods, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1(c) of the Securities Exchange Act of ~~1934.~~1934, as amended (“Exchange Act”). The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including ~~the Company’s~~our stock price, corporate and regulatory requirements, tax implications, restrictions under ~~the Company’s~~our debt obligations, other uses for capital, impacts on the value of remaining shares, and ~~other~~ market and economic conditions. The ASR programs discussed below were designed to comply with Rule 10b5-1(c).

In May 2022, we entered into an ASR program with a third-party financial institution to repurchase $1.0 billion of the Company’s common stock. The total number of shares repurchased under this ASR program was 3.1 million shares at an average price per share of $321.05. We received 2.6 million shares as the initial share settlement, and in August 2022, we received an additional 0.5 million shares upon the completion of this ASR program.

In February 2022, we entered into an ASR program with a third-party financial institution to repurchase $1.5 billion of the Company’s common stock. The total number of shares repurchased under this ASR program was 5.1 million shares at an average price per share of $295.16. We received 4.8 million shares as the initial share settlement in the fourth quarter of fiscal 2022, and in May 2022, we received an additional 0.3 million shares upon the completion of this ASR program.

In May 2021, we entered into an ASR program with a third-party financial institution to repurchase $1.0 billion of the Company’s common stock. The total number of shares repurchased under this ASR program was 5.2 million shares at an average price per share of $193.22. We received 4.3 million shares as the initial share settlement, and in August 2021, we received an additional 0.9 million shares upon the completion of this ASR program.

During the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, we repurchased ~~1.5~~1.8 million of the Company’s shares of common stock for ~~$524~~$673 million through open market transactions at an average price per share of ~~$355.75, of which $40~~$379.14. Of the total dollar value, $4 million was accrued within “Other ~~accrued~~non-current liabilities” in ~~the Company’s~~our Condensed Consolidated Balance ~~Sheets~~Sheet for excise taxes incurred during the three months ended June 30, 2023. As of March 31, 2023, we had $27 million accrued within “Other accrued liabilities” for share repurchases that were executed in late ~~September 2022 and~~March 2023, which settled in early ~~October 2022. During~~April 2023. There were no open market share repurchases during the three ~~and six~~ months ended ~~September~~June 30, 2021, we repurchased 1.4 million of the Company’s shares of common stock for $280 million through open market transactions at an average price per share of $203.20, of which $16 million was accrued within “Other accrued liabilities” in the Company’s Condensed Consolidated Balance Sheets for the period ended September 30, 2021 for share repurchases that were executed in late September 2021 and settled in early October 2021.

In July 2022, the Board approved an increase of $4.0 billion in the authorization for repurchase of McKesson’s common stock. The total remaining authorization outstanding for repurchases of the Company’s common stock at September 30, 2022 was $5.8 billion.2022.

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McKESSON CORPORATION

FINANCIAL REVIEW (CONTINUED)

(UNAUDITED)

The total remaining authorization outstanding for repurchases of the Company’s common stock at June 30, 2023 was $2.9 billion. In July 2023, the Board approved an increase of $6.0 billion in the authorization for repurchase of McKesson��s common stock.

Selected Measures of Liquidity and Capital Resources


(Dollars in millions)	(Dollars in millions)	September 30, 2022			March 31, 2022			(Dollars in millions)	June 30, 2023			March 31, 2023
Cash, cash equivalents, and restricted cash	Cash, cash equivalents, and restricted cash	$	2,958		$	3,935		Cash, cash equivalents, and restricted cash	$	2,637		$	4,679
Working capital	Working capital	(1,909)			(2,235)			Working capital	(2,883)			(3,665)
Debt to capital ratio (1)	Debt to capital ratio (1)	113.2		%	114.5		%	Debt to capital ratio (1)	115.4		%	120.5		%

(1)This ratio describes the relationship and changes within our capital resources, and is computed as total debt divided by the sum of total debt and McKesson stockholders’ ~~equity (deficit),~~deficit, which excludes noncontrolling interests and accumulated other comprehensive loss.

Cash equivalents, which are readily convertible to known amounts of cash, are carried at fair value. Cash equivalents are primarily invested in AAA-rated U.S. government money market funds, ~~and overnight~~short-term deposits with financial institutions, and short-term commercial papers issued by non-financial institutions. Deposits with financial institutions are primarily denominated in U.S. dollars and the functional currencies of our foreign subsidiaries, including ~~Euro,~~ Canadian dollars, Euro, and British ~~pound~~pounds sterling. Deposits could exceed the amounts insured by the Federal Deposit Insurance Corporation in the U.S. and similar deposit insurance programs in other jurisdictions. 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~~June 30, ~~2022~~2023 and March 31, ~~2022~~2023 included approximately $~~921~~616 million and ~~$1.5~~$1.3 billion of cash held by our subsidiaries outside of the U.S., respectively. Our primary intent is to utilize this cash for foreign operations for an indefinite period of time. Although the vast majority of cash held outside the U.S. is available for repatriation, doing so could subject us to foreign withholding taxes and state income taxes. We may remit foreign earnings to the U.S. to the extent it is tax efficient to do so. We do not anticipate the tax impact from remitting these earnings to be material. Following enactment of the 2017 Tax Cuts and Jobs Act, the repatriation of cash to the U.S. is generally no longer taxable for federal income tax purposes.

Working capital primarily includes cash and cash equivalents, receivables, inventories, and ~~net assets or liabilities classified as held for sale,~~prepaid expenses, net of drafts and accounts payable, current portion of long-term debt, current portion of operating lease liabilities, and other accrued liabilities. Our businesses require substantial investments in working capital that are 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.

Consolidated working capital ~~improved~~increased at ~~September~~June 30, ~~2022~~2023 compared to March 31, ~~2022~~2023 primarily due to ~~increases~~an increase in receivables, ~~inventory,~~net and ~~net assets classified as held for sale related to our European divestiture activities,~~inventories, driven by higher revenues and timing, and a decrease in the current portion of long-term debt largely funded by an issuance of long-term debt in the first quarter of 2024. These were partially offset by ana decrease in cash and cash equivalents and increase in drafts and accounts payable driven by the aforementioned increased revenues and ~~a decrease in cash and cash equivalents.~~timing.

Our debt to capital ratio decreased for the ~~six~~three months ended ~~September~~June 30, ~~2022~~2023 due to ~~a decrease in our foreign currency denominated notes driven by foreign currency remeasurement and an improvement in our stockholder’s deficit driven by~~ net income attributable to McKesson for the ~~year-to-date period,~~quarter and issuance of new long-term debt, partially offset by share ~~repurchases.~~repurchases and dividend payments as well as repayments of long-term debt.

In July ~~2022,~~2023, we raised our quarterly dividend from ~~$0.47~~$0.54 to ~~$0.54~~$0.62 per share of common ~~share~~stock for dividends declared on or after such date by the Board. We anticipate that we will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon our future earnings, financial condition, capital requirements, legal requirements, and other factors.

~~Redeemable Noncontrolling Interests~~

Our previously recognized redeemable noncontrolling interests primarily related to our consolidated subsidiary, McKesson Europe. Under the Domination Agreement, the noncontrolling shareholders of McKesson Europe had a right to put (“Put Right”) their shares at €22.99 per share, increased annually for interest in the amount of five percentage points above a base rate published semi-annually by the German Bundesbank, less any compensation amount or guaranteed dividend already paid by McKesson (“Put Amount”). During the six months ended September 30, 2021, we paid $1.0 billion to purchase 34.5 million shares of McKesson Europe through exercises of the Put Right by the noncontrolling shareholders, which reduced the balance of our redeemable noncontrolling interests.

The Put Right expired on June 15, 2021, at which point the remaining shares owned by the minority shareholders, valued at $287 million, were transferred from redeemable noncontrolling interests to noncontrolling interests and as a result, we no longer have redeemable noncontrolling interests presented in our condensed consolidated balance sheets at September 30, 2022 or March 31, 2022. Our noncontrolling interest in McKesson Europe was included in the sale of our E.U. disposal group.

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McKESSON CORPORATION

FINANCIAL REVIEW (CONCLUDED)

(UNAUDITED)

Additionally, we were obligated to pay an annual recurring compensation of €0.83 per McKesson Europe share (the “Compensation Amount”) to the noncontrolling shareholders of McKesson Europe under the Domination Agreement. The Compensation Amount was recognized ratably during the applicable annual period. The Domination Agreement does not expire, but it may be terminated at the end of any fiscal year by giving at least six months’ advance notice.

Refer to Financial Note 5, “Redeemable Noncontrolling Interests and Noncontrolling Interests,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for additional information on redeemable noncontrolling interests.

~~Credit~~Capital Resources

We fund our working capital requirements primarily with cash and cash equivalents, ~~as well as~~proceeds from short-term borrowings from our ~~credit facilities and~~ commercial paper ~~issuances.~~issuances, and longer-term credit agreements and debt offerings. Funds necessary for future debt maturities and our other cash requirements, including any ~~completed and anticipated acquisitions, or~~ future payments that may be made related to our total estimated litigation liability of ~~$7.3~~$7.2 billion as of ~~September~~June 30, ~~2022~~2023 payable under the terms of various settlement agreements for opioid-related claims, are expected to be met by existing cash balances, cash flow from operations, existing credit sources, and ~~other capital market transactions.~~future borrowings. Long-term debt markets and commercial paper markets, our ~~principal~~primary sources of capital after cash flow from operations, are open and accessible to us should we decide to access those markets. Detailed information regarding our debt and financing activities is included in Financial Note 8,7, “Debt and Financing Activities,” to the accompanying condensed consolidated financial statements included in this Quarterly Report.

We believe that our future 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 an increase in volatility or disruption in the global capital and credit markets will not impair our liquidity or increase our costs of borrowing.

CAUTIONARY NOTICE ABOUT 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 and Section 21E of the ~~Securities~~ Exchange ~~Act of 1934. Some of these~~Act. Forward-looking statements ~~can~~may be identified by ~~the~~their use of terminology such as “believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “projects,” “plans,” “estimates,” “targets,” or the negative of these words ~~and~~or other comparable terminology. The discussion of financial trends, strategy, plans, assumptions, or intentions may also include forward-looking statements. Readers should not 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 update or revise our 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 include, but are not limited to, the factors ~~described~~discussed in the ~~Risk Factors discussion~~“Risk Factors” section in Item 1A of Part I of the 2023 Annual Report and in our ~~most recently filed Annual Report.~~publicly available SEC 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 federal securities laws, we undertake no obligation to publicly release the result of any revisions to any forward-looking statements to reflect events or circumstances after the date the statements are made, or to reflect the occurrence of unanticipated events.

AVAILABLE INFORMATION

We routinely post on our company website, and via our social media channels, information that may be material to investors, including details and updates to information disclosed elsewhere, which may include business developments, earnings and financial performance, sustainability matters, and materials for presentations to investors and financial analysts. Investors are encouraged to monitor our website www.mckesson.com. Interested parties can sign up on our website, including our Investor Relations site, to receive automated e-mail alerts, such as via RSS newsfeed, when we post certain information. Interested parties can also follow our social media feed @McKesson on Twitter. The content on any website or social media channel is not incorporated by reference into this report, unless expressly noted otherwise.

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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 ~~2022~~ Annual ~~Report.~~

Report on Form 10-K for the fiscal year ended March 31, 2023.

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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 Exchange Act 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 the three months ended ~~September~~June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.Legal Proceedings.

The information set forth in Financial Note ~~12,~~10, “Commitments and Contingent Liabilities,” to the accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and in Financial Note ~~18,~~17, “Commitments and Contingent Liabilities,” to the consolidated financial statements included in ~~the Company’s~~our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022,~~2023, is incorporated herein by reference. Disclosure of an environmental proceeding with a governmental agency generally is included only if we expect monetary sanctions in the proceeding to exceed $1 million, unless otherwise material.

Item 1A.Risk Factors.

Other than factual updates discussed in this Quarterly Report on Form 10-Q, there have been no material changes for the period covered by this Quarterly Report on Form 10-Q to the risk factors disclosed in Part I of Item 1A of our ~~2022~~ Annual Report on Form ~~10-K.~~10-K for the fiscal year ended March 31, 2023.

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

~~Stock~~Our Board of Directors has authorized the repurchase of McKesson’s common stock. We may effect stock repurchases ~~may be made~~ from time-to-time inthrough open market transactions, privately negotiated transactions, ~~through~~ accelerated share repurchase ~~(“ASR”)~~ programs, or by combinations of such methods, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1(c) of the Securities Exchange Act of ~~1934.~~1934, as amended. The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including ~~the Company’s~~our stock price, corporate and regulatory requirements, tax implications, restrictions under ~~the Company’s~~our debt obligations, other uses for capital, impacts on the value of remaining shares, and ~~other~~ market and economic conditions. ~~The ASR program discussed below was designed to comply with Rule 10b5-1(c).~~

Refer to Financial Note ~~13,~~11, “Stockholders' ~~Equity (Deficit),~~Deficit,” to the accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a full discussion of the Company’s share repurchases for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

The following table provides information on the Company’s share repurchases during the three months ended ~~September~~June 30, ~~2022:~~2023:

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, 2022 – July 31, 2022 — $ — — $ 6,278
August 1, 2022 – August 31, 2022 (2)
1.1 342.93 1.1 6,076
September 1, 2022 – September 30, 2022 0.9 351.32 0.9 5,754
Total 2.0 2.0


	Share Repurchases (1)
(In millions, except price per share)	Total Number of Shares Purchased	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Program (3)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (2)
April 1, 2023 – April 30, 2023	0.7	$	363.11	0.7	$	3,361
May 1, 2023 – May 31, 2023	0.5	378.52		0.5	3,158
June 1, 2023 – June 30, 2023	0.6	393.22		0.6	2,944
Total	1.8			1.8

(1)This table does not include the value of equity awards surrendered to satisfy tax withholding obligations or forfeitures of equity awards.

(2)~~In May 2022,~~The average price paid per share and the ~~Company entered into an ASR program with a third-party financial institution to repurchase $1.0 billion~~remaining authorization outstanding for repurchases of the Company’s common stock excludes $4 million of excise taxes incurred on share repurchases for the three months ended June 30, 2023.

(3)In July 2022, the Board authorized the Company to repurchase up to an additional $4.0 billion of its shares of common stock. The ~~total number~~authorization has no expiration date.

In July 2023, the Board approved an increase of ~~shares repurchased under this ASR program was 3.1 million shares at an average price per share~~$6.0 billion in the authorization for repurchase of ~~$321.05. The Company received 2.6 million shares as the initial share settlement, and in August 2022, the Company received an additional 0.5 million shares upon the completion of this ASR program.~~

McKesson’s common stock.

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Item 3.Defaults Upon Senior Securities.

None.

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Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other Information.

~~Not applicable.~~

None.

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McKESSON CORPORATION

Item 6.Exhibits.

Exhibits identified in parentheses below are on file with the SEC and are incorporated by reference as exhibits hereto.


Exhibit Number			Description

10.1*4.1			~~McKesson Corporation 2022 Stock Plan, effective July 22, 2022 (incorporated by reference~~Officer’s Certificate, dated as of June 15, 2023, and related Form of 2028 Note and Form of 2033 Note (Exhibit 4.1, 4.2 , and 4.3 to ~~Exhibit 10.1 of~~ the Company’s ~~Registration Statement~~Current Report on Form ~~S-8~~8-K, filed with the SEC on ~~July 27, 2022)~~June 16, 2023, File No. 1-13252).

10.1†*			Forms of Statement of Terms and Conditions and Grant Notices Applicable to Awards Pursuant to the McKesson Corporation 2022 Stock Plan.

10.2†*			Form of Statement of Terms and Conditions Applicable to Awards Pursuant to the McKesson Corporation Management Incentive Plan, effective May 23, 202 3 .

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~~June 30, ~~2022,~~2023, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Stockholders’ Equity (Deficit), (v) Condensed Consolidated Statements of Cash Flows, and (vi) related Financial Notes.

104			Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).

* Management contract or compensation plan or arrangement in which directors and/or executive officers are eligible to participate.

† Filed herewith.

†† Furnished herewith.

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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:	~~November 1, 2022~~August 2, 2023	/s/ Britt J. Vitalone
		Britt J. Vitalone
		Executive Vice President and Chief Financial Officer


		MCKESSON CORPORATION

Date:	~~November 1, 2022~~August 2, 2023	/s/ Napoleon B. Rutledge Jr.
		Napoleon B. Rutledge Jr.
		Senior Vice President and Controller

6349


	Six Months Ended September 30, 2021
	Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury			Noncontrolling Interests		Total Equity (Deficit)
	Shares	Amount				Common Shares					Amount
Balance, March 31, 2021	273	$	2	$	6,925		$	8,202	$	(1,480)	(115)	$	(13,670)	$	196	$	175
Issuance of shares under employee plans, net of forfeitures	2	—		111			—		—		—	(60)		—		51
Share-based compensation	—	—		76			—		—		—	—		—		76
Repurchase of common stock	—	—		21			—		—		(7)	(1,301)		—		(1,280)
Net income	—	—		—			753		—		—	—		82		835
Other comprehensive loss	—	—		—			—		(15)		—	—		—		(15)
Cash dividends declared, $0.89 per common share	—	—		—			(139)		—		—	—		—		(139)
Payments to noncontrolling interests	—	—		—			—		—		—	—		(79)		(79)
Exercise of put right by noncontrolling shareholders of McKesson Europe AG	—	—		178			—		(170)		—	—		—		8
Reclassification of McKesson Europe AG redeemable noncontrolling interests	—	—		—			—		—		—	—		287		287
Reclassification of recurring compensation to other accrued liabilities	—	—		—			—		—		—	—		(2)		(2)
Other	—	—		—			(4)		—		—	—		—		(4)
Balance, September 30, 2021	275	$	2	$	7,311		$	8,812	$	(1,665)	(122)	$	(15,031)	$	484	$	(87)


(In millions)	Noncontrolling Interests		Redeemable Noncontrolling Interests
Balance, June 30, 2021	$	484	$	7
Net income attributable to noncontrolling interests	43		—

Payments to noncontrolling interests	(40)		—
Reclassification of recurring compensation to other accrued liabilities	(2)		—
Other	(1)		(7)
Balance, September 30, 2021	$	484	$	—


Section			Page

General			3931

Overview of our Business			3931

Executive Summary			4132

Trends and Uncertainties			4133

Overview of Consolidated Results			4534

Overview of Segment Results			5038

B ~~usiness~~Business Combinations			5440

New Accounting Pronouncements			5440

Financial Condition, Liquidity, and Capital Resources			5541

Cautionary Notice About Forward-Looking Statements			5844

Available Information			44