Redeemable Noncontrolling Interests and Noncontrolling Interests

12 Months Ended

Mar. 31, 2020

Redeemable Noncontrolling Interests and Noncontrolling Interests

Redeemable Noncontrolling Interests

The Company’s redeemable noncontrolling interests primarily relate 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, during 2020, 2019 and 2018, the Company recorded a total attribution of net income to the noncontrolling shareholders of McKesson Europe of $42 million, $45 million and $43 million. All amounts were recorded in net income attributable to noncontrolling interests in the Company’s consolidated statements of operations and the corresponding liability balance was recorded in other accrued liabilities in the Company’s consolidated balance sheets.

Under the Domination Agreement, the noncontrolling shareholders of McKesson Europe have 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”). The exercise of the Put Right will reduce the balance of redeemable noncontrolling interests. During 2020 and 2019, there were no material exercises of the Put Right. During 2018, the Company paid $50 million to purchase 1.9 million shares of McKesson Europe through the exercises of the Put Right by the noncontrolling shareholders, which decreased the carrying value of redeemable noncontrolling interests by $53 million. The balance of redeemable noncontrolling interests is reported as the greater of its carrying value or its maximum redemption value at each reporting date. The redemption value is the Put Amount adjusted for exchange rate fluctuations each period. At March 31, 2020 and 2019, the carrying value of redeemable noncontrolling interests of $1.40 billion and $1.39 billion exceeded the maximum redemption value of $1.22 billion and $1.23 billion. At March 31, 2020 and 2019, the Company owned approximately 77% of McKesson Europe’s outstanding common shares. In April 2020, the Company paid $46 million to purchase 1.8 million shares of McKesson Europe through the exercises of the Put Right by the noncontrolling shareholders, which increased the Company’s ownership of McKesson Europe’s outstanding common shares to 78%.

Appraisal Proceedings

Subsequent to the Domination Agreement’s registration, certain noncontrolling shareholders of McKesson Europe initiated appraisal proceedings (“Appraisal Proceedings”) with the Stuttgart Regional Court (the “Court”) to challenge the adequacy of the Put Amount, annual recurring compensation amount, and/or the guaranteed dividend. During the pendency of the Appraisal Proceedings, such amount will be paid as specified currently in the Domination Agreement. On September 19, 2018, the Court ruled that the Put Amount shall be increased by €0.51 resulting in an adjusted Put Amount of €23.50. The annual recurring compensation amount and/or the guaranteed dividend remain unadjusted. Noncontrolling shareholders of McKesson Europe appealed this decision. McKesson Europe Holdings GmbH & Co. KGaA also appealed the decision. If upon final resolution of the appeal an upwards adjustment is ordered, the Company would be required to make certain additional payments for any shortfall to all McKesson Europe noncontrolling shareholders who previously received amounts under the Domination Agreement.

Noncontrolling Interests

Noncontrolling interests represent third-party equity interests in the Company’s consolidated entities primarily related to ClarusONE and Vantage, which were $217 million and $193 million at March 31, 2020 and 2019 in the Company’s consolidated balance sheets. During 2020, 2019 and 2018, the Company allocated a total of $178 million, $176 million and $187 million of net income to noncontrolling interests.

Changes in redeemable noncontrolling interests and noncontrolling interests for the years ended March 31, 2020 and 2019 were as follows:



(In millions)	Noncontrolling Interests			Redeemable Noncontrolling Interests
Balance, March 31, 2018	$	253		$	1,459
Net income attributable to noncontrolling interests	176			45
Other comprehensive loss	—			(66		)
Reclassification of recurring compensation to other accrued liabilities	—			(45		)
Payments to noncontrolling interests	(184		)	—
Other	(52		)	—
Balance, March 31, 2019	193			1,393
Net income attributable to noncontrolling interests	178			42
Other comprehensive income	—			3
Reclassification of recurring compensation to other accrued liabilities	—			(42		)
Payments to noncontrolling interests	(154		)	—
Other	—			6
Balance, March 31, 2020	$	217		$	1,402

There were no material changes in the Company’s ownership interests related to redeemable noncontrolling interests during 2020 and 2019. The effect of changes in its ownership interests related to redeemable noncontrolling interests on its equity of $3 million resulting from exercises of Put Right was recorded as a net increase to McKesson’s stockholders’ paid-in capital during 2018. Net income attributable to McKesson was $900 million, $34 million and $70 million in 2020, 2019 and 2018.