MCKESSON CORP
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
MCK$1,060.84-1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000927653-24-000098
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsGeneralOverview of our BusinessExecutive SummaryTrends and UncertaintiesOverview of Consolidated ResultsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000927653-24-000125
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsGeneralOverview of our BusinessExecutive SummaryTrends and UncertaintiesOverview of Consolidated ResultsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 30 previous paragraphs and 41 current paragraphs.
14 unchanged; 13 reworded; 13 added; 2 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 4 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
On September 5, 2024, we announced an agreement to sell our Canadian retail disposal group. The adjusted purchase price is approximately $148 million. We recorded a charge of $643 million for the three and six months ended September 30, 2024 in total operating expenses to remeasure the Canadian retail disposal group to fair value less costs to sell. The remeasurement adjustment includes a $15 million loss related to the accumulated other comprehensive loss balances associated with the disposal group. The transaction is anticipated to close in the second half of fiscal 2025, pursuant to the satisfaction of customary closing conditions, including receipt of regulatory approvals, as applicable.
Current report
As of September 30, 2024, we had $631 million of assets and $371 million of liabilities classified as “Assets held for sale” and “Liabilities held for sale,” respectively, in the Condensed Consolidated Balance Sheet related to the Canadian retail disposal group. Refer to Financial Note 2, “Held for Sale,” to the accompanying condensed consolidated financial statements included in this Quarterly Report for more information.
Current report
•In the second quarter of fiscal 2025, we onboarded a new strategic partner within our U.S. Pharmaceutical segment;
Current report
•Total operating expenses for the three and six months ended September 30, 2024 includes fair value remeasurement charges of $643 million related to our Canadian retail disposal group;
Current report
•For the three and six months ended September 30, 2024, we recorded a restructuring charge of $227 million related to an enterprise-wide initiative to drive operational efficiencies as further described in the “Restructuring Initiatives” section of “Overview of Consolidated Results” below;
Current report
•On September 10, 2024, we completed a public offering of 4.25% Notes due September 15, 2029 (the “2029 Notes”) in a principal amount of $500 million. Proceeds received from this note issuance, net of discounts and offering expenses were approximately $496 million;
Current report
•During the three months ended September 30, 2024, we utilized the net proceeds from the issuance of the 2029 Notes, along with cash on hand, to redeem our $500 million outstanding principal amount of 5.25% Notes due February 15, 2026 (the “2026 Notes”) prior to maturity;
Current report
•On August 26, 2024, we announced a definitive agreement to acquire a 70% controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (“Core Ventures”), an internal business and administrative services organization established by Florida Cancer Specialists & Research Institute, LLC, for approximately $2.49 billion cash, subject to certain customary adjustments. Following the completion of the transaction, Core Ventures will be part of the Oncology platform, and financial results will be reported within our U.S. Pharmaceutical segment. The transaction is subject to customary closing conditions, including required regulatory clearance. On November 6, 2024, we received a request for additional information and documentary materials from the Federal Trade Commission (the “FTC”) in connection with the FTC’s review of our proposed acquisition of Core Ventures. We will respond promptly and continue to work cooperatively with the FTC staff in connection with its review of the transaction.
Current report
In October 2023, our customer Rite Aid Corporation (including certain of its subsidiaries, “Rite Aid”) filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. Consequently, we recorded a provision for bad debts totaling $725 million during the year ended March 31, 2024, of which $210 million was recorded in the second quarter of fiscal 2024 representing the uncollected trade accounts receivable balance from Rite Aid as of September 30, 2023.
Current report
Rite Aid's restructuring plan was approved by the court and the company successfully emerged from bankruptcy in August 2024. During the three and six months ended September 30, 2024, we reassessed our initial estimates made in conjunction with the previously reserved prepetition balances, including cash received during the period, resulting in a reversal of $203 million recorded within “Selling, distribution, general, and administrative expenses” in our Condensed Consolidated Statements of Operations and included in our U.S. Pharmaceutical segment. During the three and six months ended September 30, 2024, we released $237 million of allowance for doubtful accounts against trade accounts receivables, representing the write-off of uncollectible receivables related to the Rite Aid provision in the Condensed Consolidated Balance Sheet.
Current report
We believe the reserves maintained and expenses and credits recorded in fiscal 2025 and fiscal 2024 for Rite Aid trade accounts receivable are appropriate and consistent with our accounting policy and assessment of the information currently available. We evaluate our reserves periodically and as circumstances warrant which may result in changes to our reserves. For additional disclosure of our policy regarding allowances for credit losses, refer to the “Critical Accounting Estimates” section within Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of our 2024 Annual Report.
Removed paragraphs (2)
Previous report
With respect to acute care hospitals, for the year ended March 31, 2024, the Company recorded a charge of $149 million within “Claims and litigation charges, net” in the Consolidated Statement of Operations to reflect its portion of a proposed settlement with a nationwide class of acute care hospitals, of which $75 million was recorded within Corporate expenses, net, and $74 million was recorded within U.S. Pharmaceutical. The corresponding liability was included within “Other accrued liabilities” in the Consolidated Balance Sheet. The proposed settlement is subject to, among other things, court approval and sufficient participation by hospitals.
Previous report
With respect to the third party payors, the Company has reached an agreement in principle with representatives of a nationwide group of certain third-party payors. For the three months ended June 30, 2024, we recorded a charge of $114 million within “Claims and litigation charges, net” in the Condensed Consolidated Statement of Operations to reflect our portion of the proposed settlement with representatives of a nationwide group of certain third-party payors, of which $57 million was recorded within Corporate expenses, net, and $57 million was recorded within U.S. Pharmaceutical. The corresponding liability was included within “Other accrued liabilities” in the Condensed Consolidated Balance Sheet. The proposed settlement is subject to, among other things, court approval and sufficient participation by third-party payors. The claims of remaining U.S. non-governmental plaintiffs and those plaintiffs in Canada are not included in the charges recorded by the Company.
Reworded paragraphs (13)
Previous wording
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, 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 before interest expense and income taxes.
Current wording
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, as well as the results of certain investments and operations. 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.
Previous wording
•Prescription Technology Solutionsis a reportable segment that combines automation and our ability to navigate the healthcare ecosystems to connect patients, pharmacies, providers, pharmacy benefit managers, health plans, and biopharma companies to address patients’ medication access, affordability, and adherence 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 biopharma customers throughout the product lifecycle.
Current wording
•Prescription Technology Solutionsis a reportable segment that combines automation and our ability to navigate the healthcare ecosystem to connect patients, pharmacies, providers, pharmacy benefit managers, health plans, and biopharma companies to address patients’ medication access, affordability, and adherence challenges. RxTS also offers prescription price transparency, benefit insight, and dispensing support services, as well as third-party logistics and wholesale distribution support across various therapeutic categories and temperature ranges to biopharma customers throughout the product lifecycle.
Previous wording
•International is a reportable segment that includes our operations in Canada and Norway, bringing together non-U.S.-based drug distribution services, specialty pharmacy, retail, and infusion care services. Our Canadian operations deliver medicines, supplies, and information technology solutions throughout Canada and include Rexall Health retail pharmacies. Our Norwegian operations provide distribution and services to wholesale and retail customers in Norway where we own, partner, or franchise with retail pharmacies.
Current wording
•International is a reportable segment that includes our operations in Canada and Norway, bringing together non-U.S.-based drug distribution services, specialty pharmacy, retail, and infusion care services. Our Canadian operations deliver medicines, supplies, and information technology solutions throughout Canada and include Rexall Health retail pharmacies. Our Norwegian operations provide distribution and services to wholesale and retail customers in Norway where we own, partner, or franchise with retail pharmacies. In the second quarter of fiscal 2025, we entered into an agreement to sell our Rexall and Well.ca businesses in Canada (“Canadian retail disposal group”). These divestitures are further described in the “Canadian Divestiture Activities” section below.
Previous wording
The following summary provides highlights and key factors that impacted our business, operating results, financial condition, and liquidity for the three months ended June 30, 2024:
Current wording
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 30, 2024:
Previous wording
•For the three months ended June 30, 2024 compared to the prior year, revenues increased by 6%, gross profit increased by 4%, total operating expenses increased by 10%, and other income, net increased by $92 million. Refer to the “Overview of Consolidated Results” section below for an analysis of these changes;
Current wording
•For the six months ended September 30, 2024 compared to the prior year period, revenues increased by 14%, gross profit increased by 5%, total operating expenses increased by 19%, and other income, net increased by $100 million. Refer to the “Overview of Consolidated Results” section below for an analysis of these changes;
Previous wording
•Diluted earnings per common share attributable to McKesson Corporation decreased to $7.00 from $7.02 for the three months ended June 30, 2024 compared to the prior year period;
Current wording
•Diluted earnings per common share attributable to McKesson Corporation decreased to $1.87 from $4.92 for the three months ended September 30, 2024 and decreased to $8.89 from $11.95 for the six months ended September 30, 2024 compared to the respective prior year periods;
Previous wording
•For the three months ended June 30, 2024, we recognized a net discrete tax benefit of $125 million including $58 million related to an election to change the tax status of a foreign affiliate;
Current wording
•For the six months ended September 30, 2024, we recognized a net discrete tax benefit of $150 million, including $58 million related to an election to change the tax status of a foreign affiliate;
Previous wording
•We recorded a charge of$114 million for the three months ended June 30, 2024 related to our estimated liability for opioid-related claims as further described in the Opioid-Related Litigation and Claims section of “Trends and Uncertainties” below;
Current wording
•For thesix months ended September 30, 2024, we recorded a net charge of$108 million related to our estimated liability for opioid-related claims, as further described in the Opioid-Related Litigation and Claims section of “Trends and Uncertainties” below;
Previous wording
•For the three months ended June 30, 2024, we recognized a net gain of $97 million related to a recapitalization event of one of our investments in equity securities which resulted in an increase to the carrying value of this investment;
Current wording
•For thesix months ended September 30, 2024, we recognized a net gain of $100 million related to a recapitalization event of one of our investments in equity securities which resulted in an increase to the carrying value of this investment;
Previous wording
•For the three months ended June 30, 2024, we received $90 million related to our share of antitrust legal settlements. This amount was recorded as a gain within “Cost of sales” in the Condensed Consolidated Statements of Operations within our U.S. Pharmaceutical segment;
Current wording
•For the three and six months ended September 30, 2024, we received $63 million and $153 million, respectively, related to our share of antitrust legal settlements. These amounts were recorded as a gain within “Cost of sales” in the Condensed Consolidated Statements of Operations within our U.S. Pharmaceutical segment;
Previous wording
•In July 2024, our Board of Directors (the “Board”) approved an increase of $4.0 billion in the authorization for repurchase of the Company’s common stock and raised our quarterly dividend to $0.71 from $0.62 per share of common stock.
Current wording
•During the six months ended September 30, 2024, we returned $2.2 billion of cash to shareholders through $2.0 billion of common stock repurchases in open market transactions and $162 million of dividend payments. In July 2024, our Board of Directors (the “Board”) approved an increase of $4.0 billion in the authorization for repurchase of the Company’s common stock and raised our quarterly dividend to $0.71 from $0.62 per share of common stock. The total remaining authorization outstanding for repurchases of the Company’s common stock at September 30, 2024 was $8.6 billion; and
Previous wording
The Company and two other national distributors have reached agreements in principle with representatives of nationwide groups of acute care hospitals and certain third-party payors.
Current wording
The Company and two other national distributors have reached proposed settlements with representatives of nationwide groups of acute care hospitals and certain third-party payors.
Previous wording
During the three months ended June 30, 2024, we made no payments associated with various settlement agreements for opioid-related claims. Our total estimated liability for opioid-related claims was $6.9 billion as of June 30, 2024, of which $778 million was included within “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. In July 2024, we made payments totaling $500 million associated with the Settlement and the separate settlement agreements.
Current wording
During the three months ended September 30, 2024, we made payments totaling $500 million associated with various settlement agreements for opioid-related claims of states, subdivisions, and Native American tribes. Our total estimated liability for opioid-related claims was $6.4 billion as of September 30, 2024, of which $775 million was included within “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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
•For the three months ended September 30, 2024 compared to the prior year period, revenues increased by 21%, gross profit increased by 6%, total operating expenses increased by 26%, and other income, net increased by $8 million;
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
•We returned $609 million of cash to shareholders during the three months ended June 30, 2024 through $527 million of common stock repurchases through open market transactions and $82 million of dividend payments. The total remaining authorization outstanding for repurchases of the Company’s common stock at June 30, 2024 was $6.1 billion; and