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 30, 2022

OR

☐ 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 shares of the issuer’s common stock were outstanding as of September 30, 2022.

McKESSON CORPORATION

TABLE OF CONTENTS

Item		Page
	PART I—FINANCIAL INFORMATION
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 Stockholders’ Equity (Deficit) for the three and six months ended September 30, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2022 and 2021	8
	Financial Notes	9
	Note 1 - Significant Accounting Policies	9
	Note 2 - Business Acquisitions and Divestitures	10
	Note 3 - Restructuring, Impairment, and Related Charges, Net	13
	Note 4 - Income Taxes	16
	Note 5 - Redeemable Noncontrolling Interests and Noncontrolling Interests	17
	Note 6 - Earnings (Loss) per Common Share	19
	Note 7 - Goodwill and Intangible Assets, Net	20
	Note 8 - Debt and Financing Activities	22
	Note 9 - Pension Benefits	23
	Note 10 - Hedging Activities	23
	Note 11 - Fair Value Measurements	27
	Note 12 - Commitments and Contingent Liabilities	29
	Note 13 - Stockholders’ Equity (Deficit)	32
	Note 14 - Segments of Business	36
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
3	Quantitative and Qualitative Disclosures About Market Risk	58
4	Controls and Procedures	59
	PART II—OTHER INFORMATION
1	Legal Proceedings	60
1A	Risk Factors	60
2	Unregistered Sales of Equity Securities and Use of Proceeds	60
3	Defaults Upon Senior Securities	60
4	Mine Safety Disclosures	61
5	Other Information	61
6	Exhibits	62
	Signatures	63

2

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,
	2022		2021		2022		2021
Revenues	$	70,157	$	66,576	$	137,311	$	129,250
Cost of sales	(67,062)		(63,224)		(131,193)		(122,866)
Gross profit	3,095		3,352		6,118		6,384
Selling, distribution, general, and administrative expenses	(1,950)		(2,669)		(3,909)		(4,901)
Claims and litigation charges, net	9		(112)		4		(186)
Restructuring, impairment, and related charges, net	(30)		(32)		(53)		(190)
Total operating expenses	(1,971)		(2,813)		(3,958)		(5,277)
Operating income	1,124		539		2,160		1,107
Other income, net	175		139		190		182
Loss on debt extinguishment	—		(191)		—		(191)
Interest expense	(55)		(45)		(100)		(94)
Income from continuing operations before income taxes	1,244		442		2,250		1,004
Income tax expense	(271)		(132)		(470)		(158)
Income from continuing operations	973		310		1,780		846
Loss from discontinued operations, net of tax	(6)		—		(4)		(3)
Net income	967		310		1,776		843
Net income attributable to noncontrolling interests	(41)		(43)		(82)		(90)
Net income attributable to McKesson Corporation	$	926	$	267	$	1,694	$	753
Earnings (loss) per common share attributable to McKesson Corporation
Diluted
Continuing operations	$	6.46	$	1.71	$	11.71	$	4.82
Discontinued operations	(0.04)		—		(0.03)		(0.02)
Total	$	6.42	$	1.71	$	11.68	$	4.80
Basic
Continuing operations	$	6.51	$	1.73	$	11.81	$	4.87
Discontinued operations	(0.04)		—		(0.02)		(0.02)
Total	$	6.47	$	1.73	$	11.79	$	4.85
Weighted-average common shares outstanding
Diluted	144.1		155.8		145.0		156.9
Basic	143.1		154.1		143.7		155.1

See Financial Notes

3

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended September 30,				Six Months Ended September 30,
	2022		2021		2022		2021
Net income	$	967	$	310	$	1,776	$	843
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	(192)		(48)		390		(24)
Unrealized gains on cash flow hedges	18		8		36		8
Changes in retirement-related benefit plans	2		2		38		4
Other comprehensive income (loss), net of tax	(172)		(38)		464		(12)
Comprehensive income	795		272		2,240		831
Comprehensive income attributable to noncontrolling interests	(35)		(43)		(126)		(93)
Comprehensive income attributable to McKesson Corporation	$	760	$	229	$	2,114	$	738

See Financial Notes

4

McKESSON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

(Unaudited)

	September 30, 2022		March 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	2,916	$	3,532
Receivables, net	20,109		18,583
Inventories, net	19,876		18,702
Assets held for sale	2,825		4,516
Prepaid expenses and other	722		898
Total current assets	46,448		46,231
Property, plant, and equipment, net	2,071		2,092
Operating lease right-of-use assets	1,548		1,548
Goodwill	9,239		9,451
Intangible assets, net	1,872		2,059
Other non-current assets	1,903		1,917
Total assets	$	63,081	$	63,298
LIABILITIES AND DEFICIT
Current liabilities
Drafts and accounts payable	$	41,003	$	38,086
Current portion of long-term debt	800		799
Current portion of operating lease liabilities	284		297
Liabilities held for sale	1,991		4,741
Other accrued liabilities	4,279		4,543
Total current liabilities	48,357		48,466
Long-term debt	4,813		5,080
Long-term deferred tax liabilities	1,660		1,418
Long-term operating lease liabilities	1,315		1,366
Long-term litigation liabilities	6,644		7,220
Other non-current liabilities	1,541		1,540
McKesson Corporation stockholders’ deficit
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
Additional paid-in capital	7,609		7,275
Retained earnings	10,579		9,030
Accumulated other comprehensive loss	(1,114)		(1,534)
Treasury shares, at cost, 135 and 130 shares at September 30, 2022 and March 31, 2022, respectively	(18,844)		(17,045)
Total McKesson Corporation stockholders’ deficit	(1,767)		(2,272)
Noncontrolling interests	518		480
Total deficit	(1,249)		(1,792)
Total liabilities and deficit	$	63,081	$	63,298

See Financial Notes

5

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In millions, except per share amounts)

(Unaudited)

	Three 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, June 30, 2022	277	$	3	$	7,350	$	9,732	$	(948)	(133)	$	(18,141)	$	532	$	(1,472)
Issuance of shares under employee plans, net of forfeitures	—	—		36		—		—		—	(2)		—		34
Share-based compensation	—	—		46		—		—		—	—		—		46
Repurchase of common stock	—	—		177		—		—		(2)	(701)		—		(524)
Net income	—	—		—		926		—		—	—		41		967
Other comprehensive loss	—	—		—		—		(166)		—	—		(6)		(172)
Cash dividends declared, $0.54 per common share	—	—		—		(78)		—		—	—		—		(78)
Payments to noncontrolling interests	—	—		—		—		—		—	—		(41)		(41)
Reclassification of recurring compensation to other accrued liabilities	—	—		—		—		—		—	—		(2)		(2)
Other	—	—		—		(1)		—		—	—		(6)		(7)
Balance, September 30, 2022	277	$	3	$	7,609	$	10,579	$	(1,114)	(135)	$	(18,844)	$	518	$	(1,249)

	Three Months Ended September 30, 2021
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury			Noncontrolling Interests		Total  Deficit
	Shares	Amount								Common Shares	Amount
Balance, June 30, 2021	274	$	2	$	7,057	$	8,618	$	(1,627)	(119)	$	(14,579)	$	484	$	(45)
Issuance of shares under employee plans, net of forfeitures	1	—		40		—		—		—	(1)		—		39
Share-based compensation	—	—		43		—		—		—	—		—		43
Repurchase of common stock	—	—		171		—		—		(3)	(451)		—		(280)
Net income	—	—		—		267		—		—	—		43		310
Other comprehensive loss	—	—		—		—		(38)		—	—		—		(38)
Cash dividends declared, $0.47 per common share	—	—		—		(74)		—		—	—		—		(74)
Payments to noncontrolling interests	—	—		—		—		—		—	—		(40)		(40)
Reclassification of recurring compensation to other accrued liabilities	—	—		—		—		—		—	—		(2)		(2)
Other	—	—		—		1		—		—	—		(1)		—
Balance, September 30, 2021	275	$	2	$	7,311	$	8,812	$	(1,665)	(122)	$	(15,031)	$	484	$	(87)

See Financial Notes

6

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

7

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended September 30,
	2022		2021
OPERATING ACTIVITIES
Net income	$	1,776	$	843
Adjustments to reconcile to net cash provided by operating activities:
Depreciation	124		148
Amortization	175		265
Long-lived asset impairment charges	11		127
Deferred taxes	170		(18)
Credits associated with last-in, first-out inventory method	(36)		(46)
Non-cash operating lease expense	126		152
Gain from sales of businesses and investments	(148)		(101)
European businesses held for sale	(35)		470
Other non-cash items	157		381
Changes in assets and liabilities, net of acquisitions:
Receivables	(1,883)		(2,311)
Inventories	(1,453)		(1,164)
Drafts and accounts payable	2,292		1,431
Operating lease liabilities	(174)		(186)
Taxes	82		40
Litigation liabilities	(915)		151
Other	(103)		(12)
Net cash provided by operating activities	166		170
INVESTING ACTIVITIES
Payments for property, plant, and equipment	(157)		(186)
Capitalized software expenditures	(65)		(93)
Acquisitions, net of cash, cash equivalents, and restricted cash acquired	(23)		(4)
Proceeds from sales of businesses and investments, net	496		179
Other	(135)		(53)
Net cash provided by (used in) investing activities	116		(157)
FINANCING ACTIVITIES
Proceeds from short-term borrowings	100		3,020
Repayments of short-term borrowings	(100)		(3,020)
Proceeds from issuances of long-term debt	—		498
Repayments of long-term debt	(4)		(1,636)
Payments for debt extinguishments	—		(184)
Common stock transactions:
Issuances	127		111
Share repurchases	(1,484)		(1,272)
Dividends paid	(139)		(134)
Exercise of put right by noncontrolling shareholders of McKesson Europe AG	—		(1,031)
Other	(253)		(246)
Net cash used in financing activities	(1,753)		(3,894)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	24		18
Change in cash, cash equivalents, and restricted cash classified within Assets held for sale	470		—
Net decrease in cash, cash equivalents, and restricted cash	(977)		(3,863)
Cash, cash equivalents, and restricted cash at beginning of period	3,935		6,396
Cash, cash equivalents, and restricted cash at end of period	2,958		2,533
Less: Restricted cash at end of period included in Prepaid expenses and other	(42)		(382)
Cash and cash equivalents at end of period	$	2,916	$	2,151

See Financial Notes

8

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, “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.

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 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 30, 2022 are not necessarily indicative of the results that may be expected for the entire year. These interim financial statements should be read in conjunction with the annual audited financial statements, accounting policies, and financial notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022, previously filed with the SEC on May 9, 2022 (“2022 Annual Report”).

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IR Act”). Among other provisions, the IR Act 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 Company does not currently expect the IR Act to have a material impact on its results of operations, financial position, or cash flows in the foreseeable future; however, the Company will continue to evaluate the full impact of these legislative changes.

9

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Recently Adopted Accounting Pronouncements

There were no adopted accounting standards 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.

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 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 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 Rx Savings Solutions, LLC (“RxSS”), a privately-owned company headquartered in Overland Park, Kansas, 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. The purchase 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 included in the Company’s RxTS segment as of the acquisition date in the third quarter of fiscal 2023. The transaction will be accounted for as a business combination and the analysis to assign fair values to the assets acquired and liabilities assumed is currently underway.

Oncology Research Business

On October 31, 2022, the Company 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. McKesson owns a 51% controlling interest in the combined business, and the financial results will be consolidated by the Company and reported within its U.S. Pharmaceutical segment as of the acquisition date in the third quarter of fiscal 2023. Transaction consideration included the transfer of full ownership interest in USOR to the combined business and $173 million of cash paid to HCA. The transaction will be accounted for as a business combination and the analysis to assign fair values 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 the U.S. Pharmaceutical segment as of the acquisition date in the third quarter of 2023. The analysis to assign 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 divestiture of the Company’s U.K. disposal group in April 2022, as discussed in more detail below.

10

McKESSON CORPORATION

FINANCIAL NOTES (CONTINUED)

(UNAUDITED)

Assets and liabilities to be disposed of by sale (“disposal groups”) are classified as “held 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. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. When the net realizable value of a disposa