MCKESSON CORP

3. Restructuring, Impairment, and Related Charges, Net

The Company recorded restructuring, impairment, and related charges, net of $344 million, $115 million, and $209 million in fiscal 2025, fiscal 2024, and fiscal 2023, respectively. Of these charges $286 million were included in “Restructuring, impairment, and related charges, net” and $58 million was included in “Cost of sales” in the Consolidated Statement of Operations for the year ended March 31, 2025.

Restructuring Initiatives

During the second quarter of fiscal 2025, the Company approved enterprise-wide initiatives to modernize and accelerate the technology service operating model, which are intended to improve business continuity, compliance, operating efficiency and advance investments to streamline the organization. These initiatives included cost reduction efforts and support other rationalization efforts within Corporate, and the Medical-Surgical Solutions, and U.S. Pharmaceutical segments to help realize long-term sustainable growth. The Company anticipates total charges related to these initiatives of $650 million to $700 million, consisting primarily of employee severance and other employee-related costs as well as facility, exit, and other related costs, including long-lived asset impairments. These programs are anticipated to be substantially complete in fiscal 2028. For the year ended March 31, 2025, the Company recorded charges of $298 million related to the initiatives, which primarily includes severance and other employee-related costs as well as facility exit and other related costs, including long-lived asset impairments.

During the fourth quarter of fiscal 2023, the Company approved a broad set of initiatives to drive operational efficiencies and increase cost optimization efforts, with the intent of simplifying its infrastructure and realizing long-term sustainable growth. These initiatives included headcount reductions, primarily consisting of employee severance and other employee-related costs within the RxTS segment, and the exit or downsizing of certain facilities. The Company recorded charges of $45 million and $60 million for the years ended March 31, 2024 and 2023 related to this program, respectively, primarily consisting of employee severance and other employee-related costs within its RxTS segment, asset impairments and accelerated depreciation, including certain asset impairments primarily within its U.S. Pharmaceutical segment and real estate charges within Corporate, as well as facility and other exit-related costs. This restructuring program was substantially complete in fiscal 2024.

Restructuring, impairment, and related charges, net for the year ended March 31, 2025 consisted of the following:

(1)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s U.S. Pharmaceutical segment, including an inventory impairment of $58 million within "Cost of sales" in the Consolidated Statement of Operations.

(2)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s Medical-Surgical Solutions segment.

(3)Exit and other-related costs consist of accruals for costs to be incurred without future economic benefits, project consulting fees, and other exit costs expensed as incurred.

Restructuring, impairment, and related charges, net for the year ended March 31, 2024 consisted of the following:

(1)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s technology solutions.

(2)Exit and other-related costs consist of accruals for costs to be incurred without future economic benefits, project consulting fees, and other exit costs expensed as incurred.

Fiscal 2023

Restructuring, impairment, and related charges, net for the year ended March 31, 2023 consisted of the following:

(1)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s technology solutions.

(2)Exit and other-related costs consist of accruals for costs to be incurred without future economic benefits, project consulting fees, and other exit costs expensed as incurred. Corporate includes costs for business transformation and optimization efforts related to the Company’s technology organization. The International segment includes costs related to the Company’s European divestitures.

The following table summarizes the activity related to the liabilities associated with the Company’s restructuring initiatives for the years ended March 31, 2025 and 2024:

(1) As of March 31, 2023, the total reserve balance was $92 million, of which $66 million was recorded in “Other accrued liabilities” and $26 million was recorded in “Other non-current liabilities” in the Company’s Consolidated Balance Sheet.

(2) Other primarily includes cumulative translation adjustments as well as adjustments to Canadian retail disposal group reserves within International in fiscal 2025, and transfers to certain other liabilities for the remainder segments.

(3) As of March 31, 2024, the total reserve balance was $55 million, of which $24 million was recorded in “Other accrued liabilities” and $31 million was recorded in “Other non-current liabilities” in the Company’s Consolidated Balance Sheet.

(4) As of March 31, 2025, the total reserve balance was $126 million, of which $103 million was recorded in “Other accrued liabilities” and $23 million was recorded in “Other non-current liabilities” in the Company’s Consolidated Balance Sheet.

Long-Lived Asset Impairments

There wereno material long-lived asset impairments recorded in fiscal 2025.

There wereno material long-lived asset impairments recorded in fiscal 2024.

Fiscal 2023

There wereno material long-lived asset impairments recorded in fiscal 2023.

4. Share-Based Compensation

The Company provides share-based compensation to its employees, officers, and non-employee directors, including restricted stock units (“RSUs”), performance-based stock units (“PSUs”), and an employee stock purchase plan (“ESPP”) (collectively, “share-based awards”). Most of the share-based awards are granted in the first quarter of each fiscal year.

Share-based compensation expense for the share-based awards is recognized for the portion of awards ultimately expected to vest. The Company estimates the number of share-based awards that will ultimately vest primarily based on historical experience. The estimated forfeiture rate established upon grant is re-assessed throughout the requisite service period and is adjusted when actual forfeitures occur. The actual forfeitures in future reporting periods could be higher or lower than current estimates.

Share-based compensation expense is classified in the Consolidated Statements of Operations in the same manner as cash compensation paid to the Company’s employees and included in “Selling, distribution, general, and administrative expenses.”

Impact on Net Income

The components of share-based compensation expense and related tax benefits were as follows:

(1)Includes share-based compensation expense recognized for RSUs and PSUs.

Stock Plans

In April 2022, the Company’s stockholders approved the McKesson Corporation 2022 Stock Plan (the “2022 Stock Plan”), which permits the grant of awards in the form of restricted stock, RSUs, PSUs, stock options, and other share-based awards to selected employees, officers, and non-employee directors. As of March 31, 2025,4.2 million shares remain available for future grant under the 2022 Stock Plan.

Restricted Stock Unit Awards

RSUs entitle the holder to receive a specified number of shares of the Company’s common stock which vest over a period of generally three tofour years as determined by the Compensation Committee at the time of grant. The fair value of the award is determined based on the price of the Company’s common stock on the grant date and the related share-based compensation expense is recognized over the vesting period on a straight-line basis.

Non-employee directors receive an annual grant of RSUs, which vest immediately and are expensed upon grant. The director may elect to receive the underlying shares immediately or defer receipt of the shares if they meet director stock ownership guidelines. The shares will be automatically deferred for those directors who do not meet the director stock ownership guidelines. At March 31, 2025, approximately 33,000 RSUs for the Company’s directors were vested.

Performance Stock Unit Awards

PSUs are conditional upon the attainment of market and performance objectives over a specified period. The number of vested PSUs is assessed at the end of athree-year performance period upon attainment of meeting certain earnings per share targets, average return on invested capital, and for certain participants, total shareholder return relative to a peer group of companies. The Company uses the Monte Carlo simulation model to measure the fair value of the total shareholder return portion of the PSUs. The earnings per share portion of the PSUs is measured at the grant date market price. PSUs have a requisite service period of generally three years. Expense is attributed to the requisite service period on a straight-line basis based on the fair value of the PSUs, adjusted for the performance modifier at the end of each reporting period. For PSUs that are designated as equity awards, the fair value is measured at the grant date.

The weighted-average assumptions used in the Monte Carlo valuations were as follows:

The following table summarizes activity for RSUs and PSUs during fiscal 2025:

The following table provides data related to RSU and PSU award activity:

Employee Stock Purchase Plan

The Company has an ESPP under which 23.1 million shares have been authorized for issuance. The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions. The deductions occur over three-month purchase periods and the shares are then purchased at 85% of the market price at the end of each purchase period. Employees are allowed to terminate their participation in the ESPP at any time during the purchase period prior to the purchase of the shares, subject to the Company’s insider trading policies and procedures. The 15% discount provided to employees on these shares is included in share-based compensation expense. The shares related to funds outstanding at the end of a quarter are included in the calculation of diluted weighted-average shares outstanding. These amounts have not been significant for all the years presented. The Company recognizes costs for employer matching contributions as ESPP expense over the relevant purchase period. Shares issued under the ESPP were not material in fiscal 2025, fiscal 2024, and fiscal 2023. At March 31, 2025,3.3 million shares remain available for issuance.

5. Other Income, Net

Other income, net consists of the following:

(1)The increase in interest income for fiscal 2025 compared to fiscal 2024 is primarily due to higher investable cash in fiscal 2025. The increase in fiscal 2024 compared to fiscal 2023 is primarily due to higher interest rates on certain cash balances.

(2)Represents net realized and unrealized gains and losses as well as impairment charges on the Company’s investments in equity securities of certain U.S. growth stage companies in the healthcare industry. These net gains and losses primarily relate to mark-to-market adjustments for investments which are measured at fair value based on changes in the observable price of the securities and realized gains on the disposal of certain of these investments. Includes net gains of $101 million related to investments in equity securities of certain U.S. growth stage companies in the healthcare industry, partially offset by a loss of $43 million related to an equity method investment for the year ended March 31, 2025. Included a gain of $142 million for the year ended March 31, 2023 related to the exit of one of the Company’s investments in equity securities in July 2022 for proceeds of $179 million. Refer to Financial Note 15, “Fair Value Measurements,” for more information on these types of investments.

(3)Other, net for all periods presented includes income recognized from finance charges to customers primarily for late fees.

Other, net for the year ended March 31, 2025 includes charges of $87 million related to the termination of the U.K. pension plan. Refer to Financial Note 13, “Pension Benefits,” for more detail.

Other, net for year ended March 31, 2023 includes the following:

•a gain of $126 million related to a cash payment received for the early termination of a tax receivable agreement (“TRA”) exercised by Change Healthcare Inc. (“Change”) in October 2022. The Company was a party to a TRA entered into as part of the formation of the joint venture with Change, from which McKesson has since exited and in October 2022, Change exercised its right pursuant to the TRA to terminate the agreement; and

•a gain of $97 million recognized from the termination of certain forward-starting fixed interest rate swaps, as discussed in more detail in Financial Note 14, “Hedging Activities."