Segments of Business

Commencing in the first quarter of 2019, a new segment reporting structure was implemented, and we report our financial results in three reportable segments on a retrospective basis: U.S. Pharmaceutical and Specialty Solutions, European Pharmaceutical Solutions and Medical-Surgical Solutions. All remaining operating segments and business activities that are not significant enough to require separate reportable segment disclosure are included in Other also on a retrospective basis. The factors for determining the reportable segments included the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities. We evaluate the performance of our operating segments on a number of measures, including operating profit before interest expense, income taxes and results from operations. Assets by operating segment are not reviewed by management for the purpose of assessing performance or allocating resources.

Our U.S. Pharmaceutical and Specialty Solutions segment distributes pharmaceutical and other healthcare-related products and also provides pharmaceutical solutions to pharmaceutical manufacturers in the United States.

Our European Pharmaceutical Solutions segment provides distribution and services to wholesale, institutional and retail customers and serves patients and consumers in 13 European countries through our own pharmacies and participating pharmacies that operate under brand partnership and franchise arrangements.

Our Medical-Surgical Solutions segment distributes medical-surgical supplies and provides logistics and other services to healthcare providers in the United States.

Other primarily consists of the following:


•	McKesson Canada which distributes pharmaceutical and medical products and operates Rexall Health retail pharmacies;


•	McKesson Prescription Technology Solutions which provides innovative technologies that support retail pharmacies; and


•	Our 70% equity ownership interest in a joint venture, Change Healthcare, which is accounted for by us using the equity investment method of accounting.

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



	Quarter Ended September 30,						Six Months Ended September 30,
(In millions)	2018			2017			2018			2017
Revenues
U.S. Pharmaceutical and Specialty Solutions ⁽¹⁾	$	41,610		$	40,603		$	82,587		$	80,885
European Pharmaceutical Solutions ⁽¹⁾	6,639			6,773			13,574			13,155
Medical-Surgical Solutions ⁽¹⁾	1,948			1,660			3,651			3,193
Other	2,878			3,025			5,870			5,879
Total Revenues	$	53,075		$	52,061		$	105,682		$	103,112

Operating profit
U.S. Pharmaceutical and Specialty Solutions ⁽²⁾	$	610		$	710		$	1,153		$	1,185
European Pharmaceutical Solutions ⁽³⁾	10			(547		)	(550		)	(512		)
Medical-Surgical Solutions	105			118			198			226
Other ^{(4) (5)}	95			74			209			91
Total	820			355			1,010			990
Corporate Expenses, Net ⁽⁶⁾	(167		)	(108		)	(290		)	(217		)
Interest Expense	(66		)	(69		)	(127		)	(137		)
Income from Continuing Operations Before Income Taxes	$	587		$	178		$	593		$	636

Revenues, net by geographic area
United States	$	43,774		$	42,558		$	86,664		$	84,669
Foreign	9,301			9,503			$	19,018		$	18,443
Total Revenues	$	53,075		$	52,061		$	105,682		$	103,112


(1)	Revenues derived from services represent less than 1% of our U.S. Pharmaceutical and Specialty Solutions segment’s total revenues, less than 10% of our European Pharmaceutical Solutions segment’s total revenues and less than 1% of our Medical-Surgical Solutions segment’s total revenues.

(2)

Our U.S. Pharmaceutical and Specialty Solutions segment’s operating profit for the second quarter and first six months of 2019 includes $22 million and $43 million, and for the second quarter and first six months of 2018 includes $29 million and $3 million pre-tax credits related to our last-in, first-out (“LIFO”) method of accounting for inventories. The LIFO inventory credit in the first six months of 2019 was higher primarily due to lower full year expectations for net price increases compared to the same period a year ago. Operating profit for the first six months of 2019 also includes $35 million of cash receipts for our share of antitrust legal settlements.

(3)

European Pharmaceutical Solutions segment’s operating profit for the first six months of 2019 includes non-cash goodwill impairment charges (pre-tax and after-tax) of $570 million. European Pharmaceutical Solutions segment’s operating profit for the second quarter and first six months of 2018 includes pre-tax charges of $236 million ($197 million after-tax) primarily related to the impairment of certain long-lived assets and employee severance for our U.K. retail businesses. The second quarter and first six months of 2018 include a non-cash goodwill impairment charge (pre-tax and after-tax) of $350 million within our former (prior to the 2019 first quarter realignment in our operating segment structure) Distribution Solutions segment.

(4)

The second quarter and first six months of 2019 operating profit for Other include pre-tax restructuring and asset impairment charges of $42 million ($37 million after-tax) and $80 million ($76 million after-tax) primarily associated with the closure of retail pharmacy stores within our Canadian business. The first six months of 2019 includes a pre-tax gain from escrow settlement of $97 million representing certain indemnity and other claims related to our 2017 third quarter acquisition of Rexall Health.

(5)

Operating profit for Other for the second quarter and first six months of 2019 includes a pre-tax credit of $90 million ($66 million after-tax) representing the derecognition of the TRA liability payable to the shareholders of Change. Operating profit for Other also includes our proportionate share of loss from Change Healthcare of $56 million and $112 million for the second quarter and first six months of 2019, and $61 million and $181 million for the second quarter and first six months of 2018. Operating profit for the first six months of 2018 also includes a pre-tax gain of $37 million (after-tax gain of $22 million) upon the finalization of net working capital and other adjustments related to the contribution of the majority of our Core MTS Business to Change Healthcare in the fourth quarter of 2017.


(6)	Corporate expenses, net, for the second quarter and first six months of 2019 include a pre-tax charge of $43 million ($32 million after-tax) and $59 million ($48 million after-tax) representing opioid-related costs, primarily related to litigation expenses and other-related costs.