mck-20221231

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 December 31, 2022


☐			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. 136,939,227 shares of the issuer’s common stock were outstanding as of December 31, 2022.

Table of Contents

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 nine months ended December 31, 2022 and 2021	3

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended December 31, 2022 and 2021	4

	Condensed Consolidated Balance Sheets as of December 31, 2022 and March 31, 2022	5

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and nine months ended December 31, 2022 and 2021	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 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	16

	Note 4 - Income Taxes	18

	Note 5 - Redeemable Noncontrolling Interests and Noncontrolling Interests	19

	Note 6 - Earnings (Loss) per Common Share	21

	Note 7 - Goodwill and Intangible Assets, Net	22

	Note 8 - Debt and Financing Activities	24

	Note 9 - Pension Benefits	26

	Note 10 - Hedging Activities	26

	Note 11 - Fair Value Measurements	30

	Note 12 - Commitments and Contingent Liabilities	32

	Note 13 - Stockholders’ Equity (Deficit)	35

	Note 14 - Segments of Business	39

2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42

3	Quantitative and Qualitative Disclosures About Market Risk	63

4	Controls and Procedures	63

	PART II—OTHER INFORMATION

1	Legal Proceedings	64

1A	Risk Factors	64

2	Unregistered Sales of Equity Securities and Use of Proceeds	64

3	Defaults Upon Senior Securities	64

4	Mine Safety Disclosures	65

5	Other Information	65

6	Exhibits	66

	Signatures	67

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 December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Revenues	$	70,490	$	68,614	$	207,801	$	197,864
Cost of sales	(67,316)		(65,186)		(198,509)		(188,052)
Gross profit	3,174		3,428		9,292		9,812
Selling, distribution, general, and administrative expenses	(1,903)		(3,105)		(5,812)		(8,006)
Claims and litigation charges, net	1		(7)		5		(193)

Restructuring, impairment, and related charges, net	(31)		(18)		(84)		(208)
Total operating expenses	(1,933)		(3,130)		(5,891)		(8,407)
Operating income	1,241		298		3,401		1,405
Other income, net	276		20		466		202
Loss on debt extinguishment	—		—		—		(191)

Interest expense	(69)		(41)		(169)		(135)
Income from continuing operations before income taxes	1,448		277		3,698		1,281
Income tax expense	(329)		(238)		(799)		(396)
Income from continuing operations	1,119		39		2,899		885
Income (loss) from discontinued operations, net of tax	1		—		(3)		(3)
Net income	1,120		39		2,896		882
Net income attributable to noncontrolling interests	(41)		(46)		(123)		(136)
Net income (loss) attributable to McKesson Corporation	$	1,079	$	(7)	$	2,773	$	746

Earnings (loss) per common share attributable to McKesson Corporation
Diluted
Continuing operations	$	7.65	$	(0.04)	$	19.32	$	4.81
Discontinued operations	0.01		—		(0.02)		(0.02)
Total	$	7.66	$	(0.04)	$	19.30	$	4.79
Basic
Continuing operations	$	7.70	$	(0.04)	$	19.48	$	4.87
Discontinued operations	0.01		—		(0.02)		(0.02)
Total	$	7.71	$	(0.04)	$	19.46	$	4.85

Weighted-average common shares outstanding
Diluted	141.0		151.6		143.7		155.8
Basic	139.9		151.6		142.5		154.0

See Financial Notes

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McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Net income	$	1,120	$	39	$	2,896	$	882

Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	252		16		642		(8)
Unrealized gains (losses) on cash flow hedges	(65)		(6)		(29)		2
Changes in retirement-related benefit plans	28		(2)		66		2
Other comprehensive income (loss), net of tax	215		8		679		(4)

Comprehensive income	1,335		47		3,575		878
Comprehensive income attributable to noncontrolling interests	(41)		(44)		(167)		(137)
Comprehensive income attributable to McKesson Corporation	$	1,294	$	3	$	3,408	$	741

See Financial Notes

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McKESSON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

(Unaudited)


	December 31, 2022		March 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	2,774	$	3,532
Receivables, net	20,537		18,583
Inventories, net	20,657		18,702
Assets held for sale	14		4,516
Prepaid expenses and other	675		898
Total current assets	44,657		46,231
Property, plant, and equipment, net	2,140		2,092
Operating lease right-of-use assets	1,653		1,548
Goodwill	9,934		9,451
Intangible assets, net	2,273		2,059
Other non-current assets	2,033		1,917
Total assets	$	62,690	$	63,298

LIABILITIES AND DEFICIT
Current liabilities
Drafts and accounts payable	$	42,238	$	38,086
Short-term borrowings	617		—
Current portion of long-term debt	404		799
Current portion of operating lease liabilities	292		297
Liabilities held for sale	2		4,741
Other accrued liabilities	4,453		4,543
Total current liabilities	48,006		48,466
Long-term debt	5,452		5,080
Long-term deferred tax liabilities	1,465		1,418
Long-term operating lease liabilities	1,410		1,366
Long-term litigation liabilities	6,642		7,220
Other non-current liabilities	1,804		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 December 31, 2022 and March 31, 2022, respectively	3		2
Additional paid-in capital	7,536		7,275
Retained earnings	11,582		9,030
Accumulated other comprehensive loss	(899)		(1,534)

Treasury shares, at cost, 140 and 130 shares at December 31, 2022 and March 31, 2022, respectively	(20,677)		(17,045)
Total McKesson Corporation stockholders’ deficit	(2,455)		(2,272)
Noncontrolling interests	366		480
Total deficit	(2,089)		(1,792)
Total liabilities and deficit	$	62,690	$	63,298

See Financial Notes

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McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended December 31, 2022
	Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury			Noncontrolling Interests		Total Deficit
	Shares	Amount				Common Shares					Amount
Balance, September 30, 2022	277	$	3	$	7,609		$	10,579	$	(1,114)	(135)	$	(18,844)	$	518	$	(1,249)
Issuance of shares under employee plans, net of forfeitures	—	—		16			—		—		—	(3)		—		13
Share-based compensation	—	—		36			—		—		—	—		—		36
Repurchase of common stock	—	—		(146)			—		—		(5)	(1,830)		—		(1,976)
Net income	—	—		—			1,079		—		—	—		41		1,120
Other comprehensive income	—	—		—			—		215		—	—		—		215
Cash dividends declared, $0.54 per common share	—	—		—			(77)		—		—	—		—		(77)
Payments to noncontrolling interests	—	—		—			—		—		—	—		(36)		(36)
Reclassification of recurring compensation to other accrued liabilities	—	—		—			—		—		—	—		(1)		(1)
Formation of an oncology research business	—	—		22			—		—		—	—		225		247
Derecognition of noncontrolling interests in McKesson Europe AG	—	—		—			—		—		—	—		(382)		(382)
Other	—	—		(1)			1		—		—	—		1		1
Balance, December 31, 2022	277	$	3	$	7,536		$	11,582	$	(899)	(140)	$	(20,677)	$	366	$	(2,089)


	Three Months Ended December 31, 2021
	Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss		Treasury			Noncontrolling Interests		Total Deficit
	Shares	Amount				Common Shares					Amount
Balance, September 30, 2021	275	$	2	$	7,311		$	8,812	$	(1,665)	(122)	$	(15,031)	$	484	$	(87)
Issuance of shares under employee plans, net of forfeitures	—	—		63			—		—		—	(7)		—		56
Share-based compensation	—	—		36			—		—		—	—		—		36
Repurchase of common stock	—	—		—			—		—		(3)	(728)		—		(728)
Net income (loss)	—	—		—			(7)		—		—	—		46		39
Other comprehensive income (loss)	—	—		—			—		10		—	—		(2)		8
Cash dividends declared, $0.47 per common share	—	—		—			(72)		—		—	—		—		(72)
Payments to noncontrolling interests	—	—		—			—		—		—	—		(38)		(38)
Reclassification of recurring compensation to other accrued liabilities	—	—		—			—		—		—	—		(3)		(3)
Other	—	—		1			1		—		—	—		—		2
Balance, December 31, 2021	275	$	2	$	7,411		$	8,734	$	(1,655)	(125)	$	(15,766)	$	487	$	(787)

See Financial Notes

Table of Contents

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In millions, except per share amounts)

(Unaudited)


	Nine Months Ended December 31, 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		143		—		—			—		(157)		—		(13)
Share-based compensation	—	—		122		—		—			—		—		—		122
Repurchase of common stock	—	—		(25)		—		—			(10)		(3,475)		—		(3,500)
Net income	—	—		—		2,773		—			—		—		123		2,896
Other comprehensive income	—	—		—		—		635			—		—		44		679
Cash dividends declared, $1.55 per common share	—	—		—		(222)		—			—		—		—		(222)
Payments to noncontrolling interests	—	—		—		—		—			—		—		(113)		(113)

Reclassification of recurring compensation to other accrued liabilities	—	—		—		—		—			—		—		(5)		(5)
Formation of an oncology research business	—	—		22		—		—			—		—		225		247
Derecognition of noncontrolling interests in McKesson Europe AG	—	—		—		—		—			—		—		(382)		(382)
Other	—	—		(1)		1		—			—		—		(6)		(6)
Balance, December 31, 2022	277	$	3	$	7,536	$	11,582	$	(899)		(140)		$	(20,677)	$	366	$	(2,089)


	Nine Months Ended December 31, 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	—		174			—		—		—	(67)		—		107
Share-based compensation	—	—		112			—		—		—	—		—		112
Repurchase of common stock	—	—		21			—		—		(10)	(2,029)		—		(2,008)
Net income	—	—		—			746		—		—	—		128		874
Other comprehensive loss	—	—		—			—		(5)		—	—		(2)		(7)
Cash dividends declared, $1.36 per common share	—	—		—			(211)		—		—	—		—		(211)
Payments to noncontrolling interests	—	—		—			—		—		—	—		(117)		(117)
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	—	—		—			—		—		—	—		(5)		(5)
Other	—	—		1			(3)		—		—	—		—		(2)
Balance, December 31, 2021	275	$	2	$	7,411		$	8,734	$	(1,655)	(125)	$	(15,766)	$	487	$	(787)

See Financial Notes

Table of Contents

McKESSON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended December 31,
	2022		2021
OPERATING ACTIVITIES
Net income	$	2,896	$	882
Adjustments to reconcile to net cash provided by operating activities:
Depreciation	185		215
Amortization	262		383
Long-lived asset impairment charges	13		128
Deferred taxes	55		12
Credits associated with last-in, first-out inventory method	(31)		(79)
Non-cash operating lease expense	183		198
Gain from sales of businesses and investments	(215)		(117)
European businesses held for sale	—		1,271
Other non-cash items	221		452
Changes in assets and liabilities, net of acquisitions:
Receivables	(2,193)		(1,925)
Inventories	(2,190)		(1,659)
Drafts and accounts payable	3,531		1,612
Operating lease liabilities	(256)		(276)
Taxes	381		176
Litigation liabilities	(1,021)		146
Other	13		128
Net cash provided by operating activities	1,834		1,547

INVESTING ACTIVITIES
Payments for property, plant, and equipment	(265)		(253)
Capitalized software expenditures	(111)		(127)
Acquisitions, net of cash, cash equivalents, and restricted cash acquired	(856)		(6)
Proceeds from sales of businesses and investments, net	1,074		197
Other	(140)		(83)
Net cash used in investing activities	(298)		(272)

FINANCING ACTIVITIES
Proceeds from short-term borrowings	1,100		3,642
Repayments of short-term borrowings	(483)		(3,270)
Proceeds from issuances of long-term debt	499		498
Repayments of long-term debt	(412)		(1,646)
Payments for debt extinguishments	—		(184)
Common stock transactions:
Issuances	143		174
Share repurchases	(3,500)		(1,986)
Dividends paid	(216)		(206)
Exercise of put right by noncontrolling shareholders of McKesson Europe AG	—		(1,031)
Other	(309)		(323)
Net cash used in financing activities	(3,178)		(4,332)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	15		35
Change in cash, cash equivalents, and restricted cash classified within Assets held for sale	470		(215)
Net decrease in cash, cash equivalents, and restricted cash	(1,157)		(3,237)
Cash, cash equivalents, and restricted cash at beginning of period	3,935		6,396
Cash, cash equivalents, and restricted cash at end of period	2,778