MCKESSON CORP

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

We expect our available cash generated from operations and our short-term investment portfolio, together with our existing sources of liquidity from our credit facilities, commercial paper program, and other borrowings will be sufficient to fund our short-term and long-term capital expenditures, working capital, and other cash requirements. We remain adequately capitalized, including access to liquidity from our $4.0 billion revolving credit facility. At December 31, 2024, we were in compliance with all debt covenants, and believe we have the ability to continue to meet our debt covenants in the future.

The following table summarizes the net change in cash, cash equivalents, and restricted cash for the periods shown:

Operating Activities

Operating activities used cash of $1.7 billion and provided cash of $167 million during the nine months ended December 31, 2024 and 2023, respectively. Cash flows from operations can be significantly impacted by factors such as the timing of receipts from customers, inventory receipts, and payments to vendors. Additionally, working capital is primarily a function of sales and purchase volumes, inventory requirements, and vendor payment terms.

Operating activities for the nine months ended December 31, 2024 were affected by net income of $2.2 billion, adjusted for non-cash items, including charges of $666 million to remeasure the assets and liabilities of our Canadian retail disposal group to fair value less cost to sell, as well as increases in receivables of $4.1 billion, inventories of $3.1 billion, and accounts payable of $2.7 billion, all primarily driven by higher revenues and timing. Our litigation liabilities decreased by $386 million due to payments made in fiscal 2025 associated with various settlement agreements for opioid-related claims of states, subdivisions, and Native American tribes, partially offset by an accrual in the first quarter of fiscal 2025 related to a settlement with third party payors as discussed in Financial Note 10, “Commitments and Contingent Liabilities,” to the accompanying condensed consolidated financial statements included in this Quarterly Report.

Operating activities for the nine months ended December 31, 2023 were affected by net income of $2.3 billion, adjusted for non-cash items, including a provision for bad debts of $725 million related to the bankruptcy of Rite Aid in October 2023, as well as increases in receivables of $4.3 billion, drafts and accounts payable of $4.2 billion, and inventories of $2.4 billion, all primarily driven by higher revenues and timing. Our litigation liabilities also decreased by $529 million due to payments made during the first nine months of fiscal 2024 associated with various settlement agreements for opioid-related claims of states, subdivisions, and Native American tribes.

Investing Activities

Investing activities used cash of $509 million and $495 million during the nine months ended December 31, 2024 and 2023, respectively. Investing activities for the nine months ended December 31, 2024 and 2023 includes $581 million and $418 million, respectively, in capital expenditures for property, plant, and equipment and capitalized software. Investing activities for the nine months ended December 31, 2024 was also impacted by the receipt of proceeds of $92 million related to the sale of equity securities, as discussed in Financial Note 9, “Fair Value Measurements,” to the accompanying condensed consolidated financial statements included in this Quarterly Report.

Financing Activities

Financing activities used cash of $1.1 billion and $2.4 billion during the nine months ended December 31, 2024 and 2023, respectively. Financing activities for the nine months ended December 31, 2024 and 2023 includes $2.8 billion and $2.3 billion of cash paid for share repurchases, as well as $254 million and $232 million of cash paid for dividends, respectively. Financing activities also includes cash receipts of $11.4 billion and $4.8 billion, and cash repayments of $9.0 billion and $4.6 billion for the nine months ended December 31, 2024 and 2023, respectively, related to short-term borrowings of commercial paper.

On September 10, 2024, we completed a public offering of 4.25% Notes due September 15, 2029 in a principal amount of $500 million. Proceeds received from this note issuance, net of discounts and offering expenses, were approximately $496 million. We utilized the net proceeds from this note issuance along with cash on hand to redeem our $500 million outstanding principal amount of 5.25% Notes due February 15, 2026 prior to maturity at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest through the settlement date.

On June 15, 2023, we completed a public offering of 4.90% Notes due July 15, 2028 in a principal amount of $400 million and 5.10% Notes due July 15, 2033 in a principal amount of $600 million, for proceeds received, net of discounts and offering expenses, of $397 million and $592 million, respectively. A portion of the net proceeds from these notes was utilized to fund the repurchase of our then outstanding 3.80% Notes due March 15, 2024 (the “2024 Notes”) discussed below, while the remaining net proceeds was available for general corporate purposes.

On June 16, 2023, we completed a cash tender offer for any and all of our then outstanding 2024 Notes with a principal amount of $918 million, which was made concurrently with the June 15, 2023 notes offering described above. Using a portion of the proceeds from the June 15, 2023 notes offering, we paid an aggregate consideration of $268 million to repurchase $271 million principal amount of the 2024 Notes. Following the consummation of this tender offer, on June 16, 2023, we irrevocably deposited U.S. government obligations with the trustee under the indenture governing the 2024 Notes sufficient to fund the payment of accrued and unpaid interest of the remaining $647 million principal amount of the 2024 Notes as it became due, and of the principal amount of those 2024 Notes on their March 15, 2024 maturity date.

Cash used for other financing activities generally includes the cash value of shares surrendered for tax withholding and payments to noncontrolling interests.