filings.toolsItem 8. Financial Statements and Supplementary Data.
278K characters. Original on sec.gov · Markdown
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL INFORMATION
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of McKesson Corporation is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). With the participation of the Chief Executive Officer and the Chief Financial Officer, our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of March 31, 2026.
Deloitte & Touche LLP, an independent registered public accounting firm, audited the financial statements included in this Annual Report on Form 10-K and has also audited the effectiveness of the Company’s internal control over financial reporting as of March 31, 2026. This audit report appears on the following page of this Annual Report on Form 10-K.
May 7, 2026
| /s/ Brian S. Tyler | ||
| Brian S. Tyler | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
| /s/ Britt J. Vitalone | ||
| Britt J. Vitalone | ||
| Executive Vice President and Chief Financial Officer | ||
| (Principal Financial Officer) |
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of McKesson Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of McKesson Corporation and subsidiaries (the "Company") as of March 31, 2026 and March 31, 2025, the related consolidated statements of operations, comprehensive income, stockholders’ deficit, and cash flows, for each of the three years in the period ended March 31, 2026, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2026 and March 31, 2025, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2026, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Uncertain Tax Position, Opioid-Related Claims - refer to Note 1 and Note 6 to the financial statements
Critical Audit Matter Description
The Company has recorded charges and related tax benefit for opioid-related claims. In order to account for the uncertainty associated with the ultimate realization of the income tax benefit related to opioid-related claims, the Company recorded an uncertain tax position reserve. Tax benefits from uncertain tax positions are recognized when, based upon the technical tax merits, it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes. The net amount of income tax benefit recognized by management is measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized. The Company uses significant judgment in evaluating the technical tax merits of income tax benefits that qualify for recognition, including the determination of the amount that is more likely than not of being realized for U.S. federal and state income tax purposes.
We identified the Company’s uncertain tax position related to liabilities arising from opioid-related claims as a critical audit matter because of the challenges in auditing management’s estimate of the amount of income tax benefit that qualifies for recognition. Specifically, there is significant judgment associated with the assessment of the technical tax merits, including the related interpretation of applicable tax laws and regulations. Auditing the uncertain tax position related to liabilities arising from opioid-related claims required a high degree of auditor judgment and an increased extent of effort, including the need to involve our tax specialists.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s uncertain tax position associated with liabilities arising from opioid-related claims included the following, among others:
-
We tested the effectiveness of the Company’s internal control related to management’s assessment of the technical merits of its tax position and the amount of benefit more likely than not to be realized related to liabilities arising from opioid-related claims.
-
With the assistance of our income tax specialists, we evaluated the facts, evidence and the Company’s related income tax analysis for the uncertain tax position reserve associated with liabilities arising from opioid-related claims.
-
We held inquiries with the Company’s internal and external income tax specialists related to the uncertain tax position for liabilities arising from opioid-related claims.
-
We evaluated any events after March 31, 2026, that might affect management’s accounting treatment and related applicable disclosures.
-
We obtained written representations from executives and internal legal counsel of the Company.
-
We obtained and reviewed terms related to the Company’s settlements of opioid-related claims and evaluated them against the deductibility criteria set forth by relevant tax laws and regulations.
-
We evaluated the Company’s related disclosures for consistency with our testing and also searched for contradictory evidence by reading disclosures from peer companies, who are also party to opioid-related litigation.
| /s/ Deloitte & Touche LLP | ||
| Dallas, Texas | ||
| May 7, 2026 |
We have served as the Company's auditor since 1968.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
| Years Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Revenues | $ | 403,430 | $ | 359,051 | $ | 308,951 | |||||||||||
| Cost of sales | (388,880) | (345,728) | (296,123) | ||||||||||||||
| Gross profit | 14,550 | 13,323 | 12,828 | ||||||||||||||
| Selling, distribution, general, and administrative expenses | (8,096) | (8,507) | (8,657) | ||||||||||||||
| Claims and litigation charges, net | 3 | (108) | (147) | ||||||||||||||
| Restructuring, impairment, and related charges, net | (245) | (286) | (115) | ||||||||||||||
| Total operating expenses | (8,338) | (8,901) | (8,919) | ||||||||||||||
| Operating income | 6,212 | 4,422 | 3,909 | ||||||||||||||
| Other income, net | 236 | 202 | 132 | ||||||||||||||
| Interest expense | (247) | (265) | (252) | ||||||||||||||
| Income before income taxes | 6,201 | 4,359 | 3,789 | ||||||||||||||
| Income tax expense | (1,102) | (878) | (629) | ||||||||||||||
| Net income | 5,099 | 3,481 | 3,160 | ||||||||||||||
| Net income attributable to noncontrolling interests | (337) | (186) | (158) | ||||||||||||||
| Net income attributable to McKesson Corporation | $ | 4,762 | $ | 3,295 | $ | 3,002 | |||||||||||
| Earnings (loss) per common share attributable to McKesson Corporation | |||||||||||||||||
| Diluted | $ | 38.38 | $ | 25.72 | $ | 22.39 | |||||||||||
| Basic | $ | 38.55 | $ | 25.86 | $ | 22.54 | |||||||||||
| Weighted-average common shares outstanding | |||||||||||||||||
| Diluted | 124.1 | 128.1 | 134.1 | ||||||||||||||
| Basic | 123.6 | 127.4 | 133.2 |
See Financial Notes
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
| Years Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Net income | $ | 5,099 | $ | 3,481 | $ | 3,160 | |||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||
| Foreign currency translation adjustments | 176 | (74) | (7) | ||||||||||||||
| Unrealized gains (losses) on cash flow and other hedges | 9 | (7) | 39 | ||||||||||||||
| Changes in retirement-related benefit plans | 2 | 30 | (8) | ||||||||||||||
| Other comprehensive income (loss), net of tax | 187 | (51) | 24 | ||||||||||||||
| Comprehensive income | 5,286 | 3,430 | 3,184 | ||||||||||||||
| Comprehensive income attributable to noncontrolling interests | (337) | (186) | (158) | ||||||||||||||
| Comprehensive income attributable to McKesson Corporation | $ | 4,949 | $ | 3,244 | $ | 3,026 |
See Financial Notes
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
| March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 3,975 | $ | 5,691 | |||||||
| Receivables, net | 27,985 | 25,643 | |||||||||
| Inventories, net | 24,207 | 23,001 | |||||||||
| Prepaid expenses and other | 1,043 | 1,063 | |||||||||
| Total current assets | 57,210 | 55,398 | |||||||||
| Property, plant, and equipment, net | 2,668 | 2,502 | |||||||||
| Operating lease right-of-use assets | 2,058 | 1,782 | |||||||||
| Goodwill | 11,316 | 10,022 | |||||||||
| Intangible assets, net | 4,079 | 1,464 | |||||||||
| Other non-current assets | 4,992 | 3,972 | |||||||||
| Total assets | $ | 82,323 | $ | 75,140 | |||||||
| LIABILITIES AND DEFICIT | |||||||||||
| Current liabilities | |||||||||||
| Drafts and accounts payable | $ | 59,973 | $ | 55,330 | |||||||
| Current portion of long-term debt | 1,267 | 1,191 | |||||||||
| Current portion of operating lease liabilities | 287 | 258 | |||||||||
| Other accrued liabilities | 5,490 | 4,825 | |||||||||
| Total current liabilities | 67,017 | 61,604 | |||||||||
| Long-term debt | 5,259 | 4,463 | |||||||||
| Long-term deferred tax liabilities | 1,330 | 1,029 | |||||||||
| Long-term operating lease liabilities | 1,801 | 1,478 | |||||||||
| Long-term litigation liabilities | 5,091 | 5,601 | |||||||||
| Other non-current liabilities | 2,659 | 2,659 | |||||||||
| Commitments and contingent liabilities (Note 17) | |||||||||||
| Redeemable noncontrolling interests | 943 | — | |||||||||
| 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, 280 and 279 shares issued at March 31, 2026 and 2025, respectively | 3 | 3 | |||||||||
| Additional paid-in capital | 8,284 | 8,373 | |||||||||
| Retained earnings | 22,291 | 17,921 | |||||||||
| Accumulated other comprehensive loss | (745) | (932) | |||||||||
| Treasury shares, at cost, 160 and 154 shares at March 31, 2026 and 2025, respectively | (32,005) | (27,439) | |||||||||
| Total McKesson Corporation stockholders’ deficit | (2,172) | (2,074) | |||||||||
| Noncontrolling interests | 395 | 380 | |||||||||
| Total deficit | (1,777) | (1,694) | |||||||||
| Total liabilities, redeemable noncontrolling interests, and deficit | $ | 82,323 | $ | 75,140 |
See Financial Notes
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(In millions, except per share amounts)
| McKesson Corporation Stockholders’ Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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, 2023 | 277 | $ | 3 | $ | 7,747 | $ | 12,295 | $ | (905) | (141) | $ | (20,997) | $ | 367 | $ | (1,490) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares under employee plans, net of forfeitures | 1 | — | 116 | — | — | — | (99) | — | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 182 | — | — | — | — | — | 182 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | — | (7) | (3,023) | — | (3,023) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 3,002 | — | — | — | 158 | 3,160 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | 24 | — | — | — | 24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared, $2.40 per common share | — | — | — | (320) | — | — | — | — | (320) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payments to noncontrolling interests | — | — | — | — | — | — | — | (152) | (152) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | 3 | 1 | — | — | — | (1) | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | 278 | 3 | 8,048 | 14,978 | (881) | (148) | (24,119) | 372 | (1,599) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares under employee plans, net of forfeitures | 1 | — | 101 | — | — | — | (148) | — | (47) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 226 | — | — | — | — | — | 226 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | — | (6) | (3,172) | — | (3,172) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 3,295 | — | — | — | 186 | 3,481 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (51) | — | — | — | (51) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared, $2.75 per common share | — | — | — | (352) | — | — | — | — | (352) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payments to noncontrolling interests | — | — | — | — | — | — | — | (178) | (178) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | (2) | — | — | — | — | — | (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | 279 | 3 | 8,373 | 17,921 | (932) | (154) | (27,439) | 380 | (1,694) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares under employee plans, net of forfeitures | 1 | — | 89 | — | — | — | (114) | — | (25) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 247 | — | — | — | — | — | 247 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | (338) | — | — | (6) | (4,452) | — | (4,790) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 4,762 | — | — | — | 197 | 4,959 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | 187 | — | — | — | 187 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared, $3.17 per common share | — | — | — | (393) | — | — | — | — | (393) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payments to noncontrolling interests | — | — | — | — | — | — | — | (182) | (182) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment to fair value of redeemable noncontrolling interests | — | — | (87) | — | — | — | — | — | (87) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | 1 | — | — | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2026 | 280 | $ | 3 | $ | 8,284 | $ | 22,291 | $ | (745) | (160) | $ | (32,005) | $ | 395 | $ | (1,777) |
See Financial Notes
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
| Years Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| OPERATING ACTIVITIES | |||||||||||||||||
| Net income | $ | 5,099 | $ | 3,481 | $ | 3,160 | |||||||||||
| Adjustments to reconcile to net cash provided by operating activities: | |||||||||||||||||
| Depreciation | 256 | 242 | 253 | ||||||||||||||
| Amortization | 473 | 394 | 382 | ||||||||||||||
| Long-lived asset impairment charges | 55 | 98 | 43 | ||||||||||||||
| Deferred taxes | 230 | (110) | (603) | ||||||||||||||
| Charges (credits) associated with last-in, first-out inventory method | (210) | 82 | (157) | ||||||||||||||
| Non-cash operating lease expense | 261 | 245 | 228 | ||||||||||||||
| Loss (gain) from sales of businesses and investments | (573) | 485 | (17) | ||||||||||||||
| Provision for bad debts | 100 | (130) | 819 | ||||||||||||||
| Other non-cash items | 302 | 424 | 233 | ||||||||||||||
| Changes in assets and liabilities, net of acquisitions: | |||||||||||||||||
| Receivables | (1,999) | (3,935) | (2,954) | ||||||||||||||
| Inventories | (1,082) | (2,270) | (1,294) | ||||||||||||||
| Drafts and accounts payable | 4,317 | 8,301 | 4,587 | ||||||||||||||
| Operating lease liabilities | (270) | (404) | (339) | ||||||||||||||
| Taxes | (339) | (136) | 331 | ||||||||||||||
| Litigation liabilities | (684) | (401) | (395) | ||||||||||||||
| Other | 219 | (281) | 37 | ||||||||||||||
| Net cash provided by operating activities | 6,155 | 6,085 | 4,314 | ||||||||||||||
| INVESTING ACTIVITIES | |||||||||||||||||
| Payments for property, plant, and equipment | (436) | (537) | (431) | ||||||||||||||
| Capitalized software expenditures | (309) | (322) | (256) | ||||||||||||||
| Acquisitions, net of cash, cash equivalents, and restricted cash acquired | (3,416) | (24) | (272) | ||||||||||||||
| Proceeds from sales of businesses and investments, net | 830 | 179 | 47 | ||||||||||||||
| Other | (101) | (29) | (160) | ||||||||||||||
| Net cash used in investing activities | (3,432) | (733) | (1,072) | ||||||||||||||
| FINANCING ACTIVITIES | |||||||||||||||||
| Proceeds from short-term borrowings | 9,247 | 15,086 | 19,964 | ||||||||||||||
| Repayments of short-term borrowings | (9,247) | (15,086) | (19,964) | ||||||||||||||
| Proceeds from issuances of long-term debt | 1,990 | 498 | 991 | ||||||||||||||
| Repayments of long-term debt | (1,207) | (519) | (288) | ||||||||||||||
| Purchase of U.S. government obligations for the satisfaction and discharge of long-term debt | — | — | (647) | ||||||||||||||
| Common stock transactions: | |||||||||||||||||
| Issuances | 89 | 101 | 116 | ||||||||||||||
| Share repurchases | (4,750) | (3,146) | (3,025) | ||||||||||||||
| Dividends paid | (381) | (345) | (314) | ||||||||||||||
| Other | (372) | (554) | (175) | ||||||||||||||
| Net cash used in financing activities | (4,631) | (3,965) | (3,342) | ||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 20 | (16) | 6 | ||||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | (1,888) | 1,371 | (94) | ||||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of year | 5,956 | 4,585 | 4,679 | ||||||||||||||
| Cash, cash equivalents, and restricted cash at end of year | 4,068 | 5,956 | 4,585 | ||||||||||||||
| Less: Restricted cash at end of year included in Prepaid expenses and other | (93) | (265) | (2) | ||||||||||||||
| Cash and cash equivalents at end of year | $ | 3,975 | $ | 5,691 | $ | 4,583 | |||||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||||||||
| Cash paid for: | |||||||||||||||||
| Interest, net | $ | 212 | $ | 273 | $ | 234 | |||||||||||
| Income taxes, net of refunds | 1,211 | 1,124 | 901 |
See Financial Notes
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES
1. Significant Accounting Policies
Nature of Operations: McKesson Corporation together with its subsidiaries (collectively, the “Company” or “McKesson”) 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. Commencing with the second quarter of fiscal 2026, the Company reports its financial results in four reportable segments: North American Pharmaceutical, Oncology & Multispecialty, Prescription Technology Solutions, and Medical-Surgical Solutions. The Company’s former Norwegian operations were included in Other. All prior segment information has been recast to reflect the Company’s current segment structure and presentation. Refer to Financial Note 20, “Segments of Business,” for additional information.
Basis of Presentation: The consolidated financial statements and accompanying notes are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). The consolidated financial statements of McKesson include the financial statements of all 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 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 instead has the ability to 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 in the consolidated financial statements and accompanying notes. Actual amounts could differ from those estimated amounts.
Cash and Cash Equivalents: All highly liquid debt and money market instruments purchased with an original maturity of three months or less at the date of acquisition are included in cash and cash equivalents. Cash equivalents are carried at fair value. Cash equivalents are primarily invested in AAA-rated U.S. government money market funds, short-term deposits with financial institutions, and short-term commercial papers issued by non-financial institutions. Deposits with financial institutions are primarily denominated in U.S. dollars and the functional currencies of the Company’s foreign subsidiaries, including Canadian dollars, Euro, and British pounds sterling. Deposits could exceed the amounts insured by the Federal Deposit Insurance Corporation in the U.S. and similar deposit insurance programs in other jurisdictions. The Company mitigates the risk of its short-term investment portfolio by depositing funds with reputable financial institutions and monitoring risk profiles and investment strategies of money market funds.
Restricted Cash: Cash that is subject to legal restrictions or is unavailable for general operating purposes is classified as restricted cash and is included in “Prepaid expenses and other” and “Other non-current assets” in the Consolidated Balance Sheets.
Equity Method Investments: Investments in business entities in which the Company does not have control, but instead has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method. The Company evaluates its equity method investments for impairment whenever an event or change in circumstances occurs that could have a significant adverse impact on the carrying value of the investment. If a loss in value has occurred that is deemed to be other-than-temporary, an impairment loss is recorded.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Receivables, Net and Allowances for Credit Losses: The Company’s receivables are presented net of an allowance for credit losses and primarily consist of trade accounts receivable from customers that result from the sale of goods and services. Receivables, net also includes other receivables, which primarily represent amounts due from suppliers.
The Company is exposed to credit losses on accounts receivable balances. The Company estimates credit losses by considering historical credit losses, the current economic environment, customer credit ratings, collections on past due amounts, legal disputes, and bankruptcies, as well as reasonable and supportable forecasts to develop its allowance for credit losses. Management reviews these factors quarterly to determine if any adjustments are needed to the allowance.
Trade accounts receivable represent the majority of the Company's financial assets, for which an allowance for credit losses of $194 million and $450 million were included in “Receivables, net” in the Consolidated Balance Sheets as of March 31, 2026 and 2025, respectively. During the year ended March 31, 2025, the Company reassessed its estimates related to prepetition balances associated with the Rite Aid Corporation bankruptcy which resulted in a reversal of $206 million recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statements of Operations and included within the North American Pharmaceutical segment. During the years ended March 31, 2026 and 2025, the Company released $483 million and $237 million, respectively, of uncollectible receivables related to the Rite Aid Corporation provision in the Consolidated Balance Sheets.
The following table presents the components of the Company’s receivables as of March 31, 2026 and 2025:
| March 31, | |||||||||||
| (In millions) | 2026 | 2025 | |||||||||
| Customer accounts | $ | 24,247 | $ | 22,281 | |||||||
| Other | 3,997 | 3,862 | |||||||||
| Total receivables | 28,244 | 26,143 | |||||||||
| Allowances | (259) | (500) | |||||||||
| Receivables, net | $ | 27,985 | $ | 25,643 |
Concentrations of Credit Risk and Receivables: The Company’s trade accounts receivable are subject to concentrations of credit risk with customers, primarily in its North American Pharmaceutical segment. During fiscal 2026, sales to the Company’s ten largest customers, including group purchasing organizations (“GPOs”), accounted for approximately 73% of its total consolidated revenues and approximately 43% of total trade accounts receivable at March 31, 2026. Sales to the Company’s largest customer, CVS Health Corporation (“CVS”), accounted for approximately 24% of its total consolidated revenues in fiscal 2026 and comprised approximately 21% of total trade accounts receivable at March 31, 2026. Sales to the Company’s next two largest customers accounted for 11% and 10% of total consolidated revenues in fiscal 2026. As a result, the Company’s sales and credit concentration is significant. The Company has agreements with GPOs, each of which functions as a purchasing agent on behalf of member hospitals, pharmacies, and other healthcare providers, as well as with government entities and agencies. The accounts receivable balances are with individual members of the GPOs, and therefore no significant concentration of credit risk exists. A material default in payment, a material reduction in purchases from GPOs or any other large customers, or the loss of a large customer or customer groups could have a material adverse impact on the Company’s financial condition, results of operations, and liquidity. In addition, trade accounts receivables are subject to concentrations of credit risk with customers in the institutional, retail, and healthcare provider sectors, which can be affected by a downturn in the economy, changes in reimbursement policies, and other factors. This credit risk is mitigated by the size and diversity of the Company’s customer base as well as its geographic dispersion.
Inventories: Inventories consist of merchandise held for resale. The Company reports inventories at the lower of cost or net realizable value, except for inventories determined using the last-in, first-out (“LIFO”) method which are valued at the lower of LIFO cost or market. The LIFO method presumes that the most recent inventory purchases are the first items sold and the inventory cost under LIFO approximates market. The majority of the cost of domestic inventories is determined using the LIFO method. The majority of the cost of inventories held in foreign and certain domestic locations is based on the first-in, first-out (“FIFO”) method or weighted-average purchase prices. Rebates, cash discounts, and other incentives received from vendors are recognized in cost of sales upon the sale of the related inventory.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The Company believes the moving‑average inventory costing method reasonably approximates current replacement cost (“Market”). Accordingly, LIFO inventories are carried at the lower of LIFO cost or Market. At March 31, 2026 and 2025, inventories, net, totaled $24.2 billion and $23.0 billion, respectively, with approximately 59% and 63% valued using LIFO. At March 31, 2026 and 2025, LIFO reserves were $99 million and $309 million. LIFO reserves include both pharmaceutical and non-pharmaceutical products.
A LIFO charge is recognized when the net effect of price increases on pharmaceutical and non-pharmaceutical products held in inventory exceeds the impact of price declines, including the effect of branded pharmaceutical products that have lost market exclusivity. A LIFO credit is recognized when the net effect of price declines exceeds the impact of price increases on pharmaceutical and non-pharmaceutical products held in inventory. The Company recognized a LIFO credit of $210 million in fiscal 2026, a LIFO charge of $82 million in fiscal 2025, and a LIFO credit of $157 million in fiscal 2024, all within “Cost of sales” in its Consolidated Statements of Operations. The LIFO credit in fiscal 2026 compared to a LIFO charge in fiscal 2025 was primarily due to significant brand deflation in the current fiscal year, compared to the prior fiscal year brand inflation. The LIFO charge in fiscal 2025 compared to a LIFO credit in fiscal 2024 was primarily due to higher brand inflation in fiscal 2025.
Shipping and Handling Costs: The Company includes costs to pack and deliver inventory to its customers in “Selling, distribution, general, and administrative expenses” in its Consolidated Statements of Operations. Shipping and handling costs of $1.2 billion, $1.1 billion, and $1.1 billion were recognized in fiscal 2026, fiscal 2025, and fiscal 2024, respectively.
Held for Sale: 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 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 during 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 disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale.
Property, Plant, and Equipment, Net: Property, plant, and equipment, net is stated at historical cost and depreciated under the straight-line method over the estimated useful life of each asset, which ranges from 15 to 30 years for building and improvements and three to 15 years for machinery, equipment, and other. Depreciation and amortization begins when an asset is placed in service and ready for its intended use. Repairs and maintenance costs are expensed as incurred. When certain events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable, an impairment assessment may be performed on the recoverability of the carrying amounts.
The following table presents the components of the Company’s property, plant, and equipment, net as of March 31, 2026 and 2025:
| March 31, | |||||||||||
| (In millions) | 2026 | 2025 | |||||||||
| Land | $ | 102 | $ | 104 | |||||||
| Building and improvements | 1,451 | 1,433 | |||||||||
| Machinery, equipment, and other | 3,151 | 2,772 | |||||||||
| Construction in progress | 578 | 722 | |||||||||
| Total property, plant, and equipment | 5,282 | 5,031 | |||||||||
| Accumulated depreciation and amortization | (2,614) | (2,529) | |||||||||
| Property, plant, and equipment, net | $ | 2,668 | $ | 2,502 |
Total depreciation expense for property, plant, and equipment, net and amortization of the ROU assets of finance leases was $287 million, $272 million, and $279 million for the years ended March 31, 2026, 2025, and 2024, respectively.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Leases: The Company leases facilities and equipment primarily under operating leases. The Company recognizes lease expense on a straight-line basis over the term of the lease, taking into account, when applicable, lessor incentives for tenant improvements, periods where no rent payment is required, and escalations in rent payments over the term of the lease. As a practical expedient, the Company does not separate lease components from non-lease components, such as common area maintenance, utilities, and repairs and maintenance. Remaining terms for facility leases generally range from one to 15 years, while remaining terms for equipment leases generally range from one to 5 years. Most real property leases contain renewal options (typically for five-year increments). Generally, the renewal option periods are not included within the lease term as the Company is not reasonably certain to exercise that right at lease commencement. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Finance leases are amortized over the respective useful lives of the right-of-use (“ROU”) asset or over the term of the lease, whichever is shorter. Operating ROU assets and operating lease liabilities are recognized at the lease commencement date. ROU assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease liabilities are recognized based on the present value of the future lease payments over the lease term, discounted at the Company’s incremental borrowing rate as the implicit rate in the lease is not readily determinable for most of the Company’s leases. The Company estimates the discount rate as its incremental borrowing rate based on qualitative factors including Company specific credit rating, lease term, general economics, and the interest rate environment. Operating lease liabilities are recorded in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” and the corresponding lease assets are recorded in “Operating lease right-of-use assets” in the Company’s Consolidated Balance Sheets. Finance lease assets are included in “Property, plant, and equipment, net” and finance lease liabilities are included in “Current portion of long-term debt” and “Long-term debt” in the Company’s Consolidated Balance Sheets. As a practical expedient, short-term leases with an initial term of 12 months or less are excluded from the Consolidated Balance Sheets and charges from these leases are expensed as incurred.
As a lessor, the Company primarily leases certain owned equipment, classified as direct financing or sales-type leases, to physician practices.
Refer to Financial Note 9, “Leases,” for additional information on the Company’s leases.
Goodwill: Goodwill is tested for impairment on an annual basis in the first fiscal quarter and more frequently if indicators of potential impairment exist. Impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or one level below an operating segment (also known as a component), for which discrete financial information is available and segment management regularly reviews the operating results.
The Company applies the goodwill impairment test by comparing the estimated fair value of a reporting unit to its carrying value and recording an impairment charge equal to the amount of excess carrying value above the estimated fair value, if any, but not to exceed the amount of goodwill allocated to the reporting unit.
To estimate the fair value of its reporting units, the Company generally uses a combination of the market approach and the income approach. Under the market approach, it estimates fair value by comparing the business to similar businesses, or guideline companies whose securities are actively traded in public markets. Under the income approach, it uses a discounted cash flow (“DCF”) model in which cash flows anticipated over future periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate that is commensurate with the risk inherent within the reporting unit. Other estimates inherent in both the market and income approaches include long-term growth rates, projected revenues, and earnings and cash flow forecasts for the reporting units. In addition, the Company compares the aggregate of the reporting units’ fair values to the Company’s market capitalization as further corroboration of the fair values. Goodwill testing requires a complex series of assumptions and judgments by management in projecting future operating results, selecting guideline public companies for comparisons, and assessing risks. The use of alternative assumptions and estimates could affect the fair values and change the impairment determinations.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Intangible Assets: Currently all of the Company’s identifiable intangible assets are subject to amortization and are amortized based on the pattern of their economic consumption or on a straight-line basis over their estimated useful lives, ranging from three to 26 years. The Company reviews intangible assets for impairment at an asset group level whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated future undiscounted cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset group over its estimated fair value. The Company also performs a periodic review of its intangible assets and removes from the balance sheet fully amortized intangible assets that no longer provide an economic benefit, are no longer in use, or for which the related contract has expired.
Capitalized Software Held for Internal Use: The Company capitalizes costs of software held for internal use during the application development stage of a project and amortizes those costs using the straight-line method over their estimated useful lives, not to exceed 10 years. As of March 31, 2026 and 2025, capitalized software held for internal use was $764 million and $681 million, respectively, net of accumulated amortization of $750 million and $657 million, respectively, and is included in “Other non-current assets” in the Consolidated Balance Sheets. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Amortization expense for capitalized software held for internal use was $164 million, $135 million, and $102 million for the years ended March 31, 2026, 2025, and 2024, respectively.
Insurance Programs: The Company maintains insurance programs through its wholly-owned captive insurance subsidiaries (“Captives”) from which it obtains coverage for various exposures, including certain exposures arising from the opioid-related claims of governmental entities against the Company as discussed in more detail in Financial Note 17, “Commitments and Contingent Liabilities,” as well as those risks required to be insured by law or contract. It is the Company’s policy to retain a significant portion of certain losses, including those related to workers’ compensation and comprehensive general, product, and vehicle liability. Provisions for losses expected under insurance programs are recorded based on the Company’s estimate of the aggregate liability for claims incurred as well as for claims incurred but not yet reported. Such estimates utilize certain actuarial assumptions followed in the insurance industry. The Captives receive direct premiums, which are eliminated on consolidation against the Company’s premium costs within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations.
Revenue Recognition: Revenue is recognized when an entity satisfies a performance obligation by transferring control of a promised good or service to a customer in an amount that reflects the consideration to which the entity expects to be entitled for that good or service.
Revenues generated from the distribution of pharmaceutical and medical products represent the majority of the Company’s revenues. The Company orders product from the manufacturer, receives and carries the product at its central distribution facilities, and delivers the product directly to its customers’ warehouses, hospitals, or retail pharmacies. The distribution business primarily generates revenue from a contract related to a confirmed purchase order with a customer in a distribution arrangement. Revenue is recognized when control of goods is transferred to the customer which occurs upon the Company’s delivery to the customer or upon customer pick-up. The Company also earns revenues from a variety of other sources including its retail, services, and technology businesses. Retail revenues are recognized at the point of sale. Service revenues, including technology service revenues, are recognized when services are rendered. Revenues derived from distribution and retail business at the point of sale represent approximately 98%, 99%, and 98% of total revenues for the years ended March 31, 2026, 2025, and 2024, respectively. Revenues derived from services represent approximately 2%, 1%, and 2% of total revenues for the years ended March 31, 2026, 2025, and 2024, respectively.
Revenues are recorded gross when the Company is the principal in the transaction, has the ability to direct the use of the goods or services prior to transfer to a customer, is responsible for fulfilling the promise to its customer, has latitude in establishing prices, and controls the relationship with the customer. The Company records its revenues net of sales taxes. Revenues are measured based on the amount of consideration that the Company expects to receive, reduced by estimates for return allowances, discounts, and rebates using historical data. Sales returns from customers were approximately $2.5 billion, $2.9 billion, and $3.0 billion for the years ended March 31, 2026, 2025, and 2024, respectively. Assets for the right to recover products from customers and the associated refund liabilities for return allowances were not material as of March 31, 2026 and 2025. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs. The Company records deferred revenues when payments are received or due in advance of its performance. Deferred revenues are primarily from the Company’s services arrangements and are recognized as revenues over the periods when services are performed.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The Company had $366 million and $354 million of contract liabilities recorded in its Consolidated Balance Sheets as of March 31, 2026 and 2025. The Company generally expenses costs to obtain a contract as incurred when the amortization period is less than one year.
Supplier Incentives: Fees for services and other incentives received from suppliers, relating to the purchase or distribution of inventory, are considered product discounts and are generally reported as a reduction to cost of sales.
Supplier Reserves: The Company establishes reserves against amounts due from suppliers relating to various fees for services and price and rebate incentives, including deductions taken against payments otherwise due to it. These reserve estimates are established based on judgment after considering the status of current outstanding claims, historical experience with the suppliers, the specific incentive programs, and any other pertinent information available. The Company evaluates the amounts due from suppliers on a continual basis and adjusts the reserve estimates when appropriate based on changes in facts and circumstances. Adjustments to supplier reserves are generally included in cost of sales unless consideration from the vendor is in exchange for distinct goods or services or for pass-through rebate purchases. The ultimate outcome of any outstanding claims could be different than the Company’s estimate. The supplier reserves primarily pertain to the Company’s North American Pharmaceutical segment.
Income Taxes: The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or the tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Tax benefits from uncertain tax positions are recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The amount recognized is measured as the largest amount of tax benefit that is greater than 50% likely of being realized.
Interest Expense: Interest expense primarily includes interest for the Company’s long-term debt obligations, commercial paper, net interest settlements of interest rate swaps, and the amortization of deferred issuance costs and original issue discounts on debt.
Foreign Currency Translation: The reporting currency of the Company and its subsidiaries is the U.S. dollar. Its foreign subsidiaries generally consider their local currency to be their functional currency. Foreign currency-denominated assets and liabilities of these foreign subsidiaries are translated into U.S. dollars at period-end exchange rates, while revenues and expenses are translated at average exchange rates during the corresponding period and stockholders’ equity or deficit accounts are primarily translated at historical exchange rates. Foreign currency translation adjustments are included in “Other comprehensive income (loss), net of tax” in the Consolidated Statements of Comprehensive Income, and the cumulative effect is included in the stockholders’ deficit section of the Consolidated Balance Sheets. Gains and losses from currency exchange transactions are recorded in “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations and were not material for the years ended March 31, 2026, 2025, and 2024. The Company releases cumulative translation adjustments from stockholders’ equity or deficit into earnings as a gain or loss only upon a complete or substantially complete liquidation of a controlling interest in a subsidiary or a group of assets within a foreign entity. It also releases all or a pro-rata portion of the cumulative translation adjustments into earnings upon the sale of an equity method investment that is a foreign entity or has a foreign component.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Derivative Financial Instruments: Derivative financial instruments are used principally in the management of foreign currency exchange and interest rate exposures and are recorded in the Consolidated Balance Sheets at fair value. The Company uses cross-currency swaps to hedge the changes in the fair value of its foreign currency notes resulting from changes in benchmark interest rates and foreign currency exchange rates. The Company also uses floating interest rate swaps to hedge the changes in the fair value of its U.S. dollar notes resulting from changes in benchmark interest rates. If a derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. The Company uses cross-currency swaps to hedge a portion of its net investment in its foreign subsidiaries and foreign currency-denominated notes. The Company uses cash flow hedges primarily to reduce the effects of foreign currency exchange rate risk related to intercompany loans denominated in non-functional currencies. The Company uses forward contracts to hedge the variability of future benchmark interest rates on any planned bond issuances and to offset the potential income statement effects from obligations denominated in non-functional currencies. If the financial instrument is designated as a cash flow hedge or net investment hedge, the effective portions of changes in the fair value of the derivative are included in “Other comprehensive income (loss), net of tax” in the Consolidated Statements of Comprehensive Income, and the cumulative effect is included in the stockholders’ deficit section of the Consolidated Balance Sheets. The cumulative changes in fair value are reclassified to the same line as the hedged item in the Consolidated Statements of Operations when the hedged item affects earnings. The Company evaluates hedge effectiveness at inception and on an ongoing basis, and ineffective portions of changes in the fair value of cash flow hedges and net investment hedges are recognized in earnings following the date when ineffectiveness was identified. Any cash flows received or paid as part of the termination of derivative financial instruments are classified within the Consolidated Statements of Cash Flows in accordance with the nature of the hedged item. Derivative instruments not designated as hedges are marked-to-market at the end of each accounting period with the change included in earnings. Refer to Financial Note 14, “Hedging Activities,” for additional information.
Comprehensive Income: Comprehensive income consists of two components: net income and other comprehensive income or loss. Other comprehensive income or loss refers to revenue, expenses, as well as gains and losses that are recorded as an element of stockholders’ deficit but are excluded from earnings. The Company’s other comprehensive income or loss primarily consists of foreign currency translation adjustments from those subsidiaries where the local currency is the functional currency, including gains and losses on net investment hedges, as well as unrealized gains and losses on cash flow hedges and unrealized gains and losses on retirement-related benefit plans.
Noncontrolling Interests and Redeemable Noncontrolling Interests: Noncontrolling interests represent the portion of profit or loss, net assets, and comprehensive income or loss that is not allocable to McKesson Corporation. Net income attributable to noncontrolling interests includes third-party equity interests in the Company’s consolidated entities, including: ClarusONE Sourcing Services LLP (“ClarusONE”), a joint venture established between McKesson and Walmart Inc. in fiscal 2017; Vantage Oncology Holdings, LLC (“Vantage”), a provider of integrated oncology and radiation services acquired in fiscal 2017; and SCRI Oncology, LLC (“SCRI Oncology”), an oncology research business formed in fiscal 2023.
Redeemable noncontrolling interests are presented outside of McKesson Corporation stockholders’ deficit on the Company’s Consolidated Balance Sheet. An adjustment is then made to reflect the carrying value of non-controlling interests at the higher of the initial carrying amount, adjusted for cumulative earnings allocations, or redemption value at each reporting date. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for additional information on fiscal 2026 acquisition activity which included Redeemable noncontrolling interests.
Refer to Financial Note 7, “Redeemable Noncontrolling Interests and Noncontrolling Interests,” for additional information.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Share-Based Compensation: The Company accounts for all share-based compensation transactions at fair value. The share-based compensation expense, for the portion of the awards that is ultimately expected to vest, is recognized on a straight-line basis over the requisite service period. 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. The share-based compensation expense recognized 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.” Refer to Financial Note 4, “Share-Based Compensation,” for additional information.
Loss Contingencies: The Company is subject to various claims, including, but not limited to, claims with customers and vendors, pending and potential legal actions for damages, investigations relating to laws and regulations, and other matters arising out of the normal conduct of its business. When a loss from one of those matters is considered probable and reasonably estimable, the Company records a liability in the amount of its best estimate for the ultimate loss. However, the likelihood of a loss with respect to any particular matter is often difficult to predict, and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. Moreover, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must be reevaluated at least quarterly to determine both the likelihood of potential loss and whether it is possible to reasonably estimate the loss or a range of possible loss. When a material loss is reasonably possible, or is probable but a reasonable estimate cannot be made, disclosure of the proceeding is provided. The Company expenses legal fees when they are incurred.
The Company reviews all material contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or a range of the loss can be made. As discussed above, development of a meaningful estimate of loss or a range of potential loss is complex when the outcome is directly dependent on negotiations with or decisions by third parties, such as regulatory agencies, the court system, and other interested parties. Refer to Financial Note 17, “Commitments and Contingent Liabilities,” for additional information related to controlled substances claims to which the Company is a party.
Restructuring Charges: Restructuring charges are incurred for programs in which the Company changes its operations, the scope of a business undertaken by its business units, or the manner in which that business is conducted, as well as long-lived asset impairments. Such charges may include employee severance, retention bonuses, facility closure or consolidation costs, lease or contract termination costs, asset impairments, accelerated depreciation and amortization, and other related expenses. The restructuring programs may be implemented due to the sale or discontinuation of a product line, reorganization or management structure changes, headcount rationalization, realignment of operations or products, integration of acquired businesses, and/or company-wide cost saving initiatives. The amount and/or frequency of these restructuring charges are not part of the Company’s underlying business, which include normal levels of reinvestment in the business. Employee severance costs are generally recognized when payments are probable and amounts are reasonably estimable. Costs related to contracts without future benefit or contract termination are recognized at fair value at the earlier of the contract termination or the cease-use dates. Other exit-related costs are expensed as incurred. Restructuring charges may also include credit adjustments due to subsequent changes in estimates. Refer to Financial Note 3, “Restructuring Impairment and Related Charges, Net,” for additional information.
Business Combinations: The Company accounts for business combinations using the acquisition method of accounting whereby the identifiable assets and liabilities of the acquired business, including contingent consideration, as well as any noncontrolling interest in the acquired business, are recorded at their estimated fair values as of the date that the Company obtains control of the acquired business. Any purchase consideration in excess of the estimated fair values of the net assets acquired is recorded as goodwill. Acquisition-related expenses and related restructuring costs are expensed as incurred.
Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed. For intangible assets, the Company typically uses a variation of the income approach, whereby a forecast of future cash flows attributable to the asset is discounted to present value using a risk-adjusted discount rate. Some of the more significant estimates and assumptions inherent in the income approach include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, and the assessment of the asset’s expected useful life.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Contingent consideration liabilities are measured at their fair value as of the acquisition date using unobservable inputs. These inputs include the estimated amount and timing of projected operational and financial information, the probability of achievement of performance milestones or other agreed-upon events, and the risk-adjusted discount rate used to calculate the present value of the probability-weighted projected financial information. Contingent liabilities are remeasured to fair value at each reporting date until the liability is resolved. Changes in any of the inputs could result in a significant adjustment to the fair value.
Treasury Stock: The Company records purchases of treasury stock at cost, which is reflected as a reduction to stockholders’ equity in the Company’s Consolidated Balance Sheets. Incremental direct costs to purchase treasury stock, including any excise tax recognized as a result of the Inflation Reduction Act of 2022, are included in the cost of the shares acquired. Treasury stock also includes shares withheld to satisfy the tax obligations of recipients of share-based compensation. Refer to Financial Note 18, “Stockholders' Deficit,” for additional information.
Recently Adopted Accounting Pronouncements
In fiscal 2026, the Company adopted Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures using a prospective transition method. ASU 2023-09 improves the transparency of income tax disclosures by requiring, on an annual basis, consistent categories, and greater disaggregation of information in the rate reconciliation, as well as income taxes paid disaggregated by jurisdiction. As a result, the Company has provided enhanced disclosures required by ASU 2023‑09. The adoption of this standard did not have any impact on the Company’s Consolidated Financial Statements. Refer to Financial Note 6, “Income Taxes,” for additional information.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. ASU 2024-03 is effective for the Company for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, as clarified by ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on its disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 amends the accounting and the disclosure of software costs, including website development costs. ASU 2025-06 is effective for the Company for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on its disclosures.
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 818): Hedge Accounting Improvements. ASU 2025-09 clarifies areas of the current hedge accounting guidance and addresses new hedge accounting related to global reference-rate reform. ASU 2025-09 is effective for the Company for fiscal years beginning after December 15, 2026, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on its disclosures.
2. Business Acquisitions and Divestitures
Acquisitions
For all acquisitions, the Company allocates the purchase price to the assets acquired, and the liabilities assumed, based on their fair values as of the acquisition date. The fair values of the assets acquired and liabilities assumed are preliminary and may be subject to additional adjustments, which may be made up to one year after the respective acquisition dates.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
PRISM Vision Holdings, LLC
On April 1, 2025, the Company completed its acquisition of a controlling interest in PRISM Vision Holdings, LLC (“PRISM Vision”), a leading provider of general ophthalmology and retina administrative services. The Company acquired an 80% controlling interest in PRISM Vision for $875 million in net cash. The payment made upon closing was from cash on hand. Prior owners, including management and physicians in PRISM Vision practices, retained a 20% ownership interest, of which $25 million was classified as redeemable noncontrolling interest.
The financial results of PRISM Vision are included within the Company’s Oncology & Multispecialty segment as of the acquisition date. The transaction was accounted for as a business combination.
The purchase price allocation included acquired intangible finite-lived assets of $510 million and goodwill of $437 million. Goodwill attributable to the acquisition of PRISM Vision is mostly deductible for tax purposes.
The following table summarizes the preliminary purchase price allocation to the underlying assets acquired and liabilities assumed based upon their estimated fair values as of the acquisition date.
| (In millions) | Amounts Recognized as of Acquisition Date (As adjusted ) | ||||
| Purchase consideration | |||||
| Cash consideration | $ | 875 | |||
| Redeemable noncontrolling interests | 25 | ||||
| Contingent stock-based compensation liability | 16 | ||||
| Estimated fair value of total consideration | $ | 916 | |||
| Identifiable assets acquired and liabilities assumed: | |||||
| Current assets | $ | 126 | |||
| Intangible assets | 510 | ||||
| Other non-current assets | 106 | ||||
| Total assets | 742 | ||||
| Current liabilities | 176 | ||||
| Non-current liabilities | 87 | ||||
| Net identifiable assets | 479 | ||||
| Goodwill | 437 | ||||
| Net assets acquired | $ | 916 |
Community Oncology Revitalization Enterprise Ventures, LLC
On June 2, 2025, the Company completed the acquisition of a controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (“Core Ventures”), a business and administrative services organization established by Florida Cancer Specialists & Research Institute, LLC (“FCS”). The Company acquired a 70% controlling interest for $2.5 billion in cash. The payment made upon closing was from cash on hand and the net proceeds from the May 30, 2025 public debt offering. Refer to Financial Note 11, “Debt and Financing Activities,” for additional information on the public debt offering. FCS physicians retained a 30% interest. The 30% minority interest is classified as redeemable noncontrolling interest, with a put option exercisable every five years. Refer to Financial Note 7, “Redeemable Noncontrolling Interests and Noncontrolling Interests,” for additional information.
The transaction was accounted for as a business combination, and the financial results of Core Ventures are included within the Company’s Oncology & Multispecialty segment as of the acquisition date.
The purchase price allocation included acquired intangible finite-lived assets of $2.3 billion and goodwill of $775 million. Goodwill attributable to the acquisition of Core Ventures is deductible for tax purposes.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The following table summarizes the preliminary purchase price allocation to the underlying assets acquired and liabilities assumed based upon their estimated fair values as of the acquisition date.
| (In millions) | Amounts Recognized as of Acquisition Date (As adjusted) | ||||
| Purchase consideration | |||||
| Cash and other considerations | $ | 2,481 | |||
| Redeemable noncontrolling interests | 700 | ||||
| Estimated fair value of total consideration | $ | 3,181 | |||
| Identifiable assets acquired and liabilities assumed: | |||||
| Current assets | $ | 529 | |||
| Intangible assets | 2,310 | ||||
| Other non-current assets | 359 | ||||
| Total assets | 3,198 | ||||
| Current liabilities | 464 | ||||
| Non-current liabilities | 328 | ||||
| Net identifiable assets | 2,406 | ||||
| Goodwill | 775 | ||||
| Net assets acquired | $ | 3,181 |
Divestitures
Norway
On January 30, 2026, the Company completed the sale of its retail and distribution businesses in Norway (“Norway disposal group”) for an adjusted purchase price of $821 million. The Company’s former Norwegian operations were included in Other. As part of the transaction, the Company divested net assets of $140 million. The Company determined that the Norway disposal group did not meet the criteria for classification as discontinued operations.
During the year ended March 31, 2026, the Company recorded a net gain of $480 million within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations. The net gain for the year ended March 31, 2026 includes a loss of $164 million related to the accumulated other comprehensive loss balances associated with the Norway disposal group.
Canada
On December 30, 2024, the Company completed the sale of its Rexall and Well.ca businesses in Canada (“Canadian retail disposal group”) for an adjusted purchase price consisting of a cash payment of $9 million, received at closing, and a note of $120 million, measured at fair value and accruing interest upon satisfaction of certain conditions, and payable to the Company at the end of six years. Within the North American Pharmaceutical segment and as part of the transaction, the Company divested net assets of $741 million, including $125 million of intercompany trade accounts payable primarily related to purchases of inventories from McKesson Canada assumed by the buyer upon divestiture. The Company determined that the disposal group did not meet the criteria for classification as discontinued operations.
During the year ended March 31, 2025, the Company recorded net charges of $667 million to remeasure the Canadian retail disposal group to fair value less costs to sell within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations. The remeasurement adjustment for the year ended March 31, 2025 included a $48 million loss related to the accumulated other comprehensive loss balances associated with the Canadian retail disposal group. The Company’s measurement of the fair value of the Canadian retail disposal group was based on the total consideration expected to be received by the Company as outlined in the transaction agreements. Certain components of the total consideration included Level 3 fair value measurements.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Other
For the periods presented, the Company also completed immaterial acquisitions and divestitures within its operating segments. These transactions included acquisition of 100% of the shares of New Rite Aid LLC on December 30, 2025, related to the bankruptcy of the Company’s customer, Rite Aid Corporation. Assets owned by New Rite Aid LLC, including a central fill facility in New Jersey, will be integrated into the North American Pharmaceutical segment. Financial results for the Company’s business acquisitions have been included in its consolidated financial statements as of their respective acquisition dates. Purchase prices for business acquisitions have been allocated based on estimated fair values at the respective acquisition dates.
3. Restructuring, Impairment, and Related Charges, Net
The Company recorded restructuring, impairment, and related charges, net of $245 million, $344 million, and $115 million in fiscal 2026, fiscal 2025, and fiscal 2024, 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 fourth quarter of fiscal 2026, the Company approved an initiative within its Prescription Technology Solutions segment to increase operational efficiencies and cost optimization efforts, with the intent of aligning with the Company’s long-term strategy. These initiatives include headcount reductions, the exit or downsizing of certain facilities, and other costs. The Company anticipates total charges between $200 million and $250 million, consisting primarily of employee severance and other employee-related costs, and facility and other exit-related costs, including long-lived asset impairments. The Company recorded immaterial charges associated with this initiative in the fourth quarter of fiscal 2026, primarily related to asset impairments, as well as employee severance and other employee-related costs. This program is anticipated to be substantially complete by the end of fiscal 2029.
During the second quarter of fiscal 2025, the Company approved enterprise-wide initiatives to modernize and accelerate the technology service operating model which were intended to improve business continuity, compliance, operating efficiency and advance investments to streamline the organization. These initiatives include cost reduction efforts and support other rationalization efforts within Corporate, and the Medical-Surgical Solutions and North American 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, 2026, the Company recorded charges of $170 million related to the initiatives, which primarily includes facility, exit and other related costs as well as severance and other employee-related costs. For the year ended March 31, 2025, the Company recorded charges of $298 million related to the initiatives, which primarily included severance and other employee-related costs as well as facility, exit and other related costs, including long-lived asset impairments.
Fiscal 2026
Restructuring, impairment, and related charges, net for the year ended March 31, 2026 consisted of the following:
| Year Ended March 31, 2026 | |||||||||||||||||||||||||||||||||||
| (In millions) | North American Pharmaceutical (1) | Prescription Technology Solutions (2) | Medical-Surgical Solutions (3) | Corporate & Other (4) | Total | ||||||||||||||||||||||||||||||
| Severance and employee-related costs, net | $ | 9 | $ | 3 | $ | 14 | $ | (1) | $ | 25 | |||||||||||||||||||||||||
| Exit and other-related costs (5) | 3 | — | 37 | 151 | 191 | ||||||||||||||||||||||||||||||
| Asset impairments and accelerated depreciation | 12 | 17 | (8) | 8 | 29 | ||||||||||||||||||||||||||||||
| Total | $ | 24 | $ | 20 | $ | 43 | $ | 158 | $ | 245 |
(1)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s North American Pharmaceutical segment.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
(2)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s Prescription Technology Solutions segment.
(3)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s Medical-Surgical Solutions segment.
(4)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s Corporate and other activities.
(5)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 2025
Restructuring, impairment, and related charges, net for the year ended March 31, 2025 consisted of the following:
| Year Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||
| (In millions) | North American Pharmaceutical (1) | Oncology & Multispecialty | Prescription Technology Solutions | Medical-Surgical Solutions (2) | Corporate & Other (3) | Total | |||||||||||||||||||||||||||||
| Severance and employee-related costs, net | $ | (3) | $ | 1 | $ | — | $ | 137 | $ | 3 | $ | 138 | |||||||||||||||||||||||
| Exit and other-related costs (4) | 3 | — | 3 | 53 | 49 | 108 | |||||||||||||||||||||||||||||
| Asset impairments and accelerated depreciation | 59 | — | 9 | 14 | 16 | 98 | |||||||||||||||||||||||||||||
| Total | $ | 59 | $ | 1 | $ | 12 | $ | 204 | $ | 68 | $ | 344 |
(1)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s North American Pharmaceutical segment, including an inventory impairment charge 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)Includes costs related to operational efficiencies and cost optimization efforts described above to support the Company’s Corporate and other activities.
(4)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 2024
Restructuring, impairment, and related charges, net for the year ended March 31, 2024 consisted of the following:
| Year Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||
| (In millions) | North American Pharmaceutical (1) | Oncology & Multispecialty**(1)** | Prescription Technology Solutions | Medical-Surgical Solutions | Corporate & Other (1)(2) | Total | |||||||||||||||||||||||||||||
| Severance and employee-related costs, net | $ | 7 | $ | 5 | $ | — | $ | (1) | $ | (1) | $ | 10 | |||||||||||||||||||||||
| Exit and other-related costs (3) | 3 | 1 | 11 | 12 | 35 | 62 | |||||||||||||||||||||||||||||
| Asset impairments and accelerated depreciation | 10 | 3 | — | — | 30 | 43 | |||||||||||||||||||||||||||||
| Total | $ | 20 | $ | 9 | $ | 11 | $ | 11 | $ | 64 | $ | 115 |
(1)Includes costs related to operational efficiencies and cost optimization efforts to support the Company’s North American Pharmaceutical, Oncology & Multispecialty, Corporate and other activities.
(2)Corporate & other includes costs for business transformation and optimization efforts related to the Company’s technology organization and costs related to the Company’s divested European operations.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
(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.
The following table summarizes the activity related to the liabilities associated with the Company’s restructuring initiatives for the years ended March 31, 2026 and 2025:
| (In millions) | North American Pharmaceutical | Oncology & Multispecialty | Prescription Technology Solutions | Medical-Surgical Solutions | Corporate & Other | Total | |||||||||||||||||||||||||||||
| Balance, March 31, 2024 (1) | $ | 23 | $ | 3 | $ | 5 | $ | 1 | $ | 23 | $ | 55 | |||||||||||||||||||||||
| Restructuring, impairment, and related charges, net | 59 | 1 | 12 | 204 | 68 | 344 | |||||||||||||||||||||||||||||
| Non-cash charges | (58) | (1) | (9) | (14) | (16) | (98) | |||||||||||||||||||||||||||||
| Cash payments | (8) | (2) | (4) | (99) | (51) | (164) | |||||||||||||||||||||||||||||
| Other (2) | (5) | (1) | (3) | (2) | — | (11) | |||||||||||||||||||||||||||||
| Balance, March 31, 2025 (3) | 11 | — | 1 | 90 | 24 | 126 | |||||||||||||||||||||||||||||
| Restructuring, impairment, and related charges, net | 24 | — | 20 | 43 | 158 | 245 | |||||||||||||||||||||||||||||
| Non-cash charges | (12) | — | (17) | 8 | (8) | (29) | |||||||||||||||||||||||||||||
| Cash payments | (4) | — | (1) | (133) | (161) | (299) | |||||||||||||||||||||||||||||
| Other (2) | (1) | — | — | 2 | — | 1 | |||||||||||||||||||||||||||||
| Balance, March 31, 2026 (4) | $ | 18 | $ | — | $ | 3 | $ | 10 | $ | 13 | $ | 44 |
(1) 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.
(2) Other primarily includes cumulative translation adjustments as well as adjustments to Canadian retail disposal group reserves within North American Pharmaceutical segment in fiscal 2025, and transfers to certain other liabilities for the remaining segments.
(3) 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.
(4) As of March 31, 2026, the total reserve balance was $44 million, of which $30 million was recorded in “Other accrued liabilities” and $14 million was recorded in “Other non-current liabilities” in the Company’s Consolidated Balance Sheet.
Long-Lived Asset Impairments
There were no material long-lived asset impairments recorded for any of the years presented.
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.”
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Impact on Net Income
The components of share-based compensation expense and related tax benefits were as follows:
| Years Ended March 31, | |||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | ||||||||||||||
| Restricted stock unit awards (1) | $ | 231 | $ | 211 | $ | 168 | |||||||||||
| Employee stock purchase plan | 16 | 15 | 14 | ||||||||||||||
| Share-based compensation expense | 247 | 226 | 182 | ||||||||||||||
| Tax benefit for share-based compensation expense | (72) | (85) | (72) | ||||||||||||||
| Share-based compensation expense, net of tax | $ | 175 | $ | 141 | $ | 110 |
(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, 2026, 4.0 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 to four 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, 2026, 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 a three-year performance period upon attainment of meeting certain earnings per share targets, average return on invested capital, and for certain participants, total shareholder return (“TSR”) 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. Starting in fiscal 2026, PSU awards are based on cumulative three‑year earnings per share and average return on invested capital targets and, for certain participants, include a TSR modifier. For awards with a TSR modifier, the Company uses a Monte Carlo simulation model to measure grant‑date fair value. For awards without a TSR modifier, the PSUs are 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.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The weighted-average assumptions used in the Monte Carlo valuations were as follows:
| Years Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Expected stock price volatility | 23 | % | 21 | % | 24 | % | |||||||||||
| Expected dividend yield | 0.4 | % | 0.5 | % | 0.6 | % | |||||||||||
| Risk-free interest rate | 3.9 | % | 4.5 | % | 3.9 | % | |||||||||||
| Expected life (in years) | 3 | 3 | 3 |
The following table summarizes activity for RSUs and PSUs during fiscal 2026:
| (In millions, except per share data) | Shares | Weighted- Average Grant Date Fair Value Per Share | |||||||||
| Nonvested, March 31, 2025 | 0.9 | $ | 434.89 | ||||||||
| Granted | 0.3 | 728.77 | |||||||||
| Cancelled | 0.0 | 527.76 | |||||||||
| Vested | (0.4) | 394.72 | |||||||||
| Nonvested, March 31, 2026 | 0.8 | $ | 556.43 |
The following table provides data related to RSU and PSU award activity:
| Years Ended March 31, | |||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | ||||||||||||||
| Total fair value of shares vested | $ | 179 | $ | 192 | $ | 143 | |||||||||||
| Total compensation cost, net of estimated forfeitures, related to nonvested restricted stock unit awards not yet recognized, pre-tax | $ | 187 | $ | 191 | $ | 205 | |||||||||||
| Weighted-average period in years over which restricted stock unit award cost is expected to be recognized | 1 | 1 | 2 |
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 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 2026, fiscal 2025, and fiscal 2024. At March 31, 2026, 3.1 million shares remain available for issuance.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
5. Other Income, Net
Other income, net consists of the following:
| Years Ended March 31, | |||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | ||||||||||||||
| Interest income (1) | $ | 179 | $ | 173 | $ | 118 | |||||||||||
| Equity in earnings, net | 7 | 9 | 4 | ||||||||||||||
| Net gains (losses) on investments in equity securities (2) | 6 | 58 | (24) | ||||||||||||||
| Other, net (3) | 44 | (38) | 34 | ||||||||||||||
| Total | $ | 236 | $ | 202 | $ | 132 |
(1)The increase in interest income for fiscal 2026 compared to fiscal 2025 is primarily due to higher average intra‑period cash balances in fiscal 2026, driven by higher cash flows. The increase in fiscal 2025 compared to fiscal 2024 is primarily due to higher investable cash in fiscal 2025.
(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. For the year ended March 31, 2025, included 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. 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.
6. Income Taxes
| Years Ended March 31, | |||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | ||||||||||||||
| Income from continuing operations before income taxes | |||||||||||||||||
| U.S. | $ | 4,300 | $ | 3,735 | $ | 2,597 | |||||||||||
| Foreign | 1,901 | 624 | 1,192 | ||||||||||||||
| Income from continuing operations before income taxes | $ | 6,201 | $ | 4,359 | $ | 3,789 |
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Income tax expense related to continuing operations consists of the following:
| Years Ended March 31, | |||||||||||||||||
| (In millions, except percentages) | 2026 | 2025 | 2024 | ||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 437 | $ | 552 | $ | 867 | |||||||||||
| State | 217 | 182 | 231 | ||||||||||||||
| Foreign | 218 | 254 | 134 | ||||||||||||||
| Total current | 872 | 988 | 1,232 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 248 | 102 | (360) | ||||||||||||||
| State | 57 | 5 | (133) | ||||||||||||||
| Foreign | (75) | (217) | (110) | ||||||||||||||
| Total deferred | 230 | (110) | (603) | ||||||||||||||
| Income tax expense | $ | 1,102 | $ | 878 | $ | 629 | |||||||||||
| Reported income tax rate | 17.8 | % | 20.1 | % | 16.6 | % |
Fluctuations in the Company’s reported income tax rates are primarily due to changes in the business mix of earnings between various taxing jurisdictions, including the impact of non-cash pre-tax charges related to the remeasurement of the Canadian retail disposal group to fair value less costs to sell as described in Financial Note 2, “Business Acquisitions and Divestitures,” and recognized discrete tax items.
The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures using a prospective transition method in the current fiscal year. The following table presents a reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate for the year ended March 31, 2026, in accordance with ASU 2023-09.
| Year Ended March 31, 2026 | |||||||||||||||||
| (In millions, except percentages) | Amount | Percent | |||||||||||||||
| U.S. federal statutory tax rate | $ | 1,302 | 21.0 | % | |||||||||||||
| State and local income taxes, net of federal income tax effect (1) | 213 | 3.4 | |||||||||||||||
| Foreign tax effects | |||||||||||||||||
| Luxembourg | |||||||||||||||||
| Valuation allowance release | (119) | (1.9) | |||||||||||||||
| Other | 2 | 0.0 | |||||||||||||||
| Germany | |||||||||||||||||
| Divestiture of investment | (99) | (1.6) | |||||||||||||||
| Other foreign jurisdictions | (26) | (0.4) | |||||||||||||||
| Effect of cross-border tax laws (2) | (30) | (0.5) | |||||||||||||||
| Tax credits (2) | (27) | (0.4) | |||||||||||||||
| Nontaxable or nondeductible items | (21) | (0.3) | |||||||||||||||
| Changes in unrecognized tax benefits (2) | 65 | 1.0 | |||||||||||||||
| Other adjustments | |||||||||||||||||
| Liquidation of investment | (158) | (2.5) | |||||||||||||||
| Effective tax rate | $ | 1,102 | 17.8 | % |
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
(1)State income taxes in California, Illinois, New Jersey, Oregon and Pennsylvania represented the majority (greater than 50%) of the tax effect within this category.
(2)Reconciling items are presented on a gross basis, except for cross-border tax effects, tax credits and changes in unrecognized tax benefits (“UTBs”).
Income tax expense related to continuing operations for the years ended March 31, 2025 and 2024, prior to the adoption of ASU 2023-09, is reconciled from the U.S. federal statutory income tax rate to the Company’s effective income tax rate as follows:
| Years Ended March 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | |||||||||||||||
| Income tax expense at federal statutory rate | $ | 915 | $ | 796 | |||||||||||||
| State income taxes, net of federal tax benefit | 145 | 104 | |||||||||||||||
| Tax effect of foreign operations | (25) | (16) | |||||||||||||||
| Foreign-derived intangible income | (83) | (67) | |||||||||||||||
| Unrecognized tax benefits and settlements | 91 | 116 | |||||||||||||||
| Net tax benefit on intellectual property repatriation and sales | (258) | (104) | |||||||||||||||
| Canadian disposal transaction loss | 140 | — | |||||||||||||||
| Valuation allowance release | — | (157) | |||||||||||||||
| Share-based compensation | (42) | (37) | |||||||||||||||
| Other, net | (5) | (6) | |||||||||||||||
| Income tax expense | $ | 878 | $ | 629 |
On January 30, 2026, the Company completed the previously announced sale of its retail and distribution businesses in Norway as part of its exit from European activities, as described in Financial Note 2, “Business Acquisitions and Divestitures.” The transaction did not result in a material income tax liability for either the Norwegian subsidiary or its German parent entity. Consequently, the Company’s effective income tax rate for fiscal 2026 was favorably impacted by this transaction.
During the year ended March 31, 2026, the Company recognized a U.S. federal tax benefit of $158 million related to the impact of the liquidation of its investment in a wholly-owned affiliate.
During the year ended March 31, 2026, the Company also recognized a tax benefit of $119 million related to the release of a valuation allowance in a foreign jurisdiction based on management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. In evaluating the realizability of deferred tax assets, the Company considers all available evidence, both positive and negative, as of each reporting date. As of March 31, 2026, the Company concluded that sufficient positive evidence existed to support the realization of these deferred tax assets and reduced the valuation allowance accordingly.
During the year ended March 31, 2025, the Company recognized a tax benefit of $258 million related to the sale of certain intellectual property between McKesson wholly-owned legal entities based in foreign tax jurisdictions. The transferor entities of the intellectual property were not subject to income tax on their transaction. The recipient entities of the intellectual property are entitled to amortize the fair value of the assets for tax purposes. As a result of these transactions, and in accordance with ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, net discrete tax benefits of $44 million and $214 million were recognized in the second and fourth quarters of fiscal 2025, respectively.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
During the year ended March 31, 2024, the Company recognized a tax benefit of $157 million related to the release of a valuation allowance based on management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized.
During the year ended March 31, 2024, the Company also repatriated certain intellectual property between McKesson wholly-owned legal entities that are based in different tax jurisdictions. The transferor entity of the intellectual property was not subject to income tax on this transaction. The recipient entity of the intellectual property is entitled to amortize the fair value of the assets for tax purposes. As a result of this repatriation and in accordance with ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, a net discrete tax benefit of $147 million was recognized in the first quarter of fiscal 2024. In addition, the Company sold certain intellectual property between McKesson wholly-owned legal entities that are based in different tax jurisdictions, where the transferor entity was subject to income tax and the recipient entity is entitled to amortize the fair value of the assets for tax purposes. As a result of this sale, a net discrete tax expense of $43 million was recognized in the fourth quarter of fiscal 2024.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law, introducing modifications to various U.S. federal tax provisions. The Company has evaluated the implications of the legislation and concluded that the provisions of the OBBBA are not expected to have a material impact on its Consolidated Financial Statements.
Deferred tax balances consisted of the following:
| March 31, | |||||||||||
| (In millions) | 2026 | 2025 | |||||||||
| Assets | |||||||||||
| Receivable allowances | $ | 69 | $ | 136 | |||||||
| Opioid-related litigation and claims | 623 | 680 | |||||||||
| Compensation and benefit-related accruals | 333 | 287 | |||||||||
| Loss and credit carryforwards | 996 | 847 | |||||||||
| Lease obligations | 429 | 423 | |||||||||
| Other | 194 | 236 | |||||||||
| Subtotal | 2,644 | 2,609 | |||||||||
| Less: valuation allowance | (769) | (644) | |||||||||
| Total assets | 1,875 | 1,965 | |||||||||
| Liabilities | |||||||||||
| Inventory valuation and other assets | (2,008) | (2,139) | |||||||||
| Fixed assets | (303) | (4) | |||||||||
| Lease right-of-use assets | (432) | (434) | |||||||||
| Other | (30) | (50) | |||||||||
| Total liabilities | (2,773) | (2,627) | |||||||||
| Net deferred tax liability | $ | (898) | $ | (662) | |||||||
| Long-term deferred tax asset | $ | 432 | $ | 367 | |||||||
| Long-term deferred tax liability | (1,330) | (1,029) | |||||||||
| Net deferred tax liability | $ | (898) | $ | (662) |
The Company assesses the available positive and negative evidence to determine whether deferred tax assets are more likely than not to be realized. As a result of this assessment, valuation allowances have been recorded on certain deferred tax assets in various tax jurisdictions. The valuation allowances were approximately $769 million and $644 million in fiscal 2026 and fiscal 2025, respectively, and primarily relate to net operating and capital losses.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The Company has federal, state, and foreign net operating loss carryforwards of $53 million, $4.0 billion, and $1.2 billion at March 31, 2026, respectively. Federal and state net operating losses will expire at various dates from 2027 through 2046. Substantially all its foreign net operating losses have indefinite lives. In addition, the Company has federal, state and foreign capital loss carryforwards of $801 million, $1.4 billion and $1.2 billion at March 31, 2026, respectively, with various expiration dates beginning in 2031.
Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023‑09 for the year ended March 31, 2026 was as follows:
| Year Ended March 31, | |||||
| (In millions) | 2026 | ||||
| U.S. Federal | $ | 839 | |||
| U.S. States | 131 | ||||
| Foreign | |||||
| Canada | 114 | ||||
| United Kingdom | 103 | ||||
| Others | 24 | ||||
| Total cash taxes paid, net of refunds | $ | 1,211 |
The following table summarizes the activity related to the Company’s gross unrecognized tax benefits for the last three fiscal years:
| Years Ended March 31, | |||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | ||||||||||||||
| Unrecognized tax benefits at beginning of period | $ | 1,532 | $ | 1,463 | $ | 1,399 | |||||||||||
| Additions based on tax positions related to prior years | 30 | 33 | 10 | ||||||||||||||
| Reductions based on tax positions related to prior years | (5) | (43) | (2) | ||||||||||||||
| Additions based on tax positions related to current year | 36 | 97 | 64 | ||||||||||||||
| Reductions based on settlements | — | (13) | (8) | ||||||||||||||
| Reductions based on the lapse of the applicable statutes of limitations | (20) | (7) | (2) | ||||||||||||||
| Exchange rate fluctuations | 1 | 2 | 2 | ||||||||||||||
| Unrecognized tax benefits at end of period | $ | 1,574 | $ | 1,532 | $ | 1,463 |
As of March 31, 2026, the Company had $1.6 billion in unrecognized tax benefits, of which $1.5 billion would reduce income tax expense and the effective tax rate, if recognized. The increase in unrecognized tax benefits in both fiscal 2026 and fiscal 2025 primarily relate to additions associated with recurring items.
During the fourth quarter of fiscal 2023, the Internal Revenue Service (“IRS”) communicated proposed adjustments to taxable income reported in the Company’s fiscal 2018 and fiscal 2019 U.S. Federal Corporate Income Tax returns. The adjustments would increase the Company’s federal income tax liability, excluding any applicable interest, in the range of $600 million to $700 million. The Company disagrees with the proposed adjustments and intends to pursue resolution through the administrative process with the IRS Independent Office of Appeals and, if necessary, through judicial remedies. During the first quarter of fiscal 2024, the Company filed a formal protest with the IRS. Although the final resolution of these matters is uncertain, the Company believes in the merits of its tax positions and believes that it has adequately reserved for any adjustments to the provision of income taxes that may ultimately result. However, if the IRS prevails in these matters, the assessed tax and interest could have a material adverse effect on the Company’s financial position, results of operations, and cash flows in future periods.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The Company reports interest and penalties on income taxes as income tax expense. It recognized income tax expense of $74 million, $80 million, and $84 million in fiscal 2026, fiscal 2025, and fiscal 2024, respectively, representing interest and penalties, in its Consolidated Statements of Operations. As of March 31, 2026 and 2025, the Company accrued cumulatively $376 million and $302 million, respectively, in interest and penalties on unrecognized tax benefits in its Consolidated Balance Sheets.
The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, and various foreign jurisdictions. The Company is generally subject to audit by taxing authorities in various U.S. states and in foreign jurisdictions for fiscal 2016 through the current fiscal year.
Undistributed earnings of the Company’s foreign operations of approximately $3.7 billion were considered indefinitely reinvested on March 31, 2026. Following the enactment of the 2017 Tax Act, the repatriation of cash to the U.S. is generally no longer taxable for federal income tax purposes. However, the repatriation of cash held outside the U.S. could be subject to applicable foreign withholding taxes and state income taxes. The Company may remit foreign earnings to the U.S. to the extent it is tax efficient to do so. It does not expect the tax impact from remitting these earnings to be material.
7. Redeemable Noncontrolling Interests and Noncontrolling Interests
Redeemable Noncontrolling Interests
Noncontrolling interests with redemption features, such as put rights, that are not solely within the Company’s control are considered redeemable noncontrolling interests.
During the year ended March 31, 2026, the Company initially recognized redeemable noncontrolling interests of $25 million related to its acquisition of PRISM Vision and $700 million related to its acquisition of Core Ventures. The Company utilized a Monte Carlo simulation model for its periodic valuation of the redeemable noncontrolling interests for both acquisitions. As a result, the Company recorded a fair value adjustment of $87 million, which was recorded as a decrease in the Company’s additional paid-in capital, for the year ended March 31, 2026.
The Company also recognized a redemption value adjustment to the Core Ventures redeemable noncontrolling interest of $122 million, which was recorded to “Net income attributable to noncontrolling interests” in the Company’s Consolidated Statement of Operations for the year ended March 31, 2026.
Redeemable noncontrolling interests are presented outside of stockholders’ deficit in the Company’s Consolidated Balance Sheet. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for additional information on the acquisition activity discussed above.
Noncontrolling Interests
Noncontrolling interests represent third-party equity interests in the Company’s consolidated entities primarily related to ClarusONE, Vantage, and SCRI Oncology. Noncontrolling interests in the Company’s Consolidated Balance Sheets were $395 million and $380 million at March 31, 2026 and 2025, respectively. For the years ended March 31, 2026, 2025, and 2024, the Company allocated a total of $197 million, $186 million, and $158 million of net income to noncontrolling interests, respectively.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Changes in noncontrolling interests for the years ended March 31, 2026, 2025, and 2024 were as follows:
| Fiscal 2026 | Fiscal 2025 | Fiscal 2024 | |||||||||||||||||||||
| (In millions) | Noncontrolling Interests | Redeemable Noncontrolling Interests | Noncontrolling Interests | Noncontrolling Interests | |||||||||||||||||||
| Beginning balance | $ | 380 | $ | — | $ | 372 | $ | 367 | |||||||||||||||
| Net income attributable to noncontrolling interests | 197 | 18 | 186 | 158 | |||||||||||||||||||
| Adjustment to redemption value in net income attributable to noncontrolling interests | — | 122 | — | — | |||||||||||||||||||
| Payments to noncontrolling interests | (182) | (7) | (178) | (152) | |||||||||||||||||||
| Acquisition of PRISM Vision at fair value | — | 25 | — | — | |||||||||||||||||||
| Acquisition of Core Ventures at fair value | — | 700 | — | — | |||||||||||||||||||
| Adjustment to fair value | — | 87 | — | — | |||||||||||||||||||
| Other | — | (2) | — | (1) | |||||||||||||||||||
| Ending balance | $ | 395 | $ | 943 | $ | 380 | $ | 372 |
8. Earnings Per Common Share
Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. The computation of diluted earnings per common share is similar to that of basic earnings per common share, except that the former reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Potentially dilutive securities include outstanding stock options, restricted stock units, and performance-based and other restricted stock units.
The computations for basic and diluted earnings or loss per common share were as follows:
| Years Ended March 31, | |||||||||||||||||
| (In millions, except per share amounts) | 2026 | 2025 | 2024 | ||||||||||||||
| Numerator | |||||||||||||||||
| Income from continuing operations | $ | 5,099 | $ | 3,481 | $ | 3,160 | |||||||||||
| Net income attributable to noncontrolling interests | (215) | (186) | (158) | ||||||||||||||
| Adjustment to redemption value in net income attributable to noncontrolling interests | (122) | — | — | ||||||||||||||
| Net income attributable to McKesson Corporation | $ | 4,762 | $ | 3,295 | $ | 3,002 | |||||||||||
| Denominator | |||||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||
| Basic | 123.6 | 127.4 | 133.2 | ||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||
| Stock options | — | — | 0.2 | ||||||||||||||
| Restricted stock units (1) | 0.5 | 0.7 | 0.7 | ||||||||||||||
| Diluted | 124.1 | 128.1 | 134.1 | ||||||||||||||
| Earnings per common share attributable to McKesson Corporation: (2) | |||||||||||||||||
| Diluted | $ | 38.38 | $ | 25.72 | $ | 22.39 | |||||||||||
| Basic | $ | 38.55 | $ | 25.86 | $ | 22.54 |
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
(1)Includes dilutive effect from restricted stock units and performance-based restricted stock units.
(2)Certain computations may reflect rounding adjustments.
9. Leases
Lessee
Supplemental balance sheet information related to leases was as follows:
| March 31, | ||||||||||||||
| (In millions, except lease term and discount rate) | 2026 | 2025 | ||||||||||||
| Operating leases | ||||||||||||||
| Operating lease right-of-use assets | $ | 2,058 | $ | 1,782 | ||||||||||
| Current portion of operating lease liabilities | $ | 287 | $ | 258 | ||||||||||
| Long-term operating lease liabilities | 1,801 | 1,478 | ||||||||||||
| Total operating lease liabilities | $ | 2,088 | $ | 1,736 | ||||||||||
| Finance leases | ||||||||||||||
| Property, plant, and equipment, net | $ | 137 | $ | 177 | ||||||||||
| Current portion of long-term debt | $ | 37 | $ | 32 | ||||||||||
| Long-term debt | 152 | 163 | ||||||||||||
| Total finance lease liabilities | $ | 189 | $ | 195 | ||||||||||
| Weighted-average remaining lease term (years) | ||||||||||||||
| Operating leases | 8.0 | 8.0 | ||||||||||||
| Finance leases | 5.5 | 6.3 | ||||||||||||
| Weighted-average discount rate | ||||||||||||||
| Operating leases | 4.17 | % | 4.11 | % | ||||||||||
| Finance leases | 3.45 | % | 3.27 | % |
The components of lease cost were as follows:
| Years Ended March 31, | |||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | ||||||||||||||
| Short-term lease cost | $ | 8 | $ | 8 | $ | 14 | |||||||||||
| Operating lease cost | 433 | 418 | 418 | ||||||||||||||
| Finance lease cost: | |||||||||||||||||
| Amortization of right-of-use assets | 31 | 30 | 25 | ||||||||||||||
| Interest on lease liabilities | 7 | 7 | 5 | ||||||||||||||
| Total finance lease cost | 38 | 37 | 30 | ||||||||||||||
| Variable lease cost (1) | 147 | 139 | 131 | ||||||||||||||
| Sublease income | (44) | (36) | (35) | ||||||||||||||
| Total lease cost (2) | $ | 582 | $ | 566 | $ | 558 | |||||||||||
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
(1) These amounts include payments for maintenance, taxes, payments affected by the consumer price index, and other similar metrics and payments contingent on usage.
(2) These amounts were primarily recorded in “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations.
Supplemental cash flow information related to leases was as follows:
| Years Ended March 31, | ||||||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | |||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||
| Operating cash flows from operating leases | $ | (270) | $ | (404) | $ | (339) | ||||||||||||||
| Operating cash flows from finance leases | — | — | (1) | |||||||||||||||||
| Financing cash flows from finance leases | (36) | (39) | (47) | |||||||||||||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||||||||||||||
| Operating leases | $ | 699 | (1) | $ | 599 | $ | 391 | |||||||||||||
| Finance leases | 34 | 18 | 21 | |||||||||||||||||
(1)Increase in fiscal 2026 due to addition of leases from the Core Ventures and PRISM Vision acquisitions, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures.”
Maturities of lease liabilities as of March 31, 2026 were as follows:
| (In millions) | Operating Leases | Finance Leases | Total | ||||||||||||||
| Fiscal 2027 | $ | 364 | $ | 41 | $ | 405 | |||||||||||
| Fiscal 2028 | 352 | 42 | 394 | ||||||||||||||
| Fiscal 2029 | 315 | 39 | 354 | ||||||||||||||
| Fiscal 2030 | 286 | 30 | 316 | ||||||||||||||
| Fiscal 2031 | 244 | 24 | 268 | ||||||||||||||
| Thereafter | 916 | 32 | 948 | ||||||||||||||
| Total lease payments (1) | 2,477 | 208 | 2,685 | ||||||||||||||
| Less imputed interest | (389) | (19) | (408) | ||||||||||||||
| Present value of lease liabilities | $ | 2,088 | $ | 189 | $ | 2,277 |
(1)Total lease payments are not reduced by future minimum sublease income of $219 million, which is due under noncancellable subleases.
As of March 31, 2026, the Company entered into additional leases primarily for facilities that have not yet commenced with future lease payments of $46 million that are not reflected in the table above. These operating leases will commence in calendar year 2026 with noncancellable lease terms of three to 10 years.
Lessor
The Company leases certain owned equipment, classified as direct financing or sales-type leases, to physician practices. As of March 31, 2026 and 2025, the total lease receivable was $503 million and $419 million, respectively, with a weighted-average remaining lease term of approximately eight years. Interest income from these leases was not material for the years ended March 31, 2026, 2025, and 2024.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
10. Goodwill and Intangible Assets, Net
Goodwill
In the second quarter of fiscal 2026, the Company implemented a new segment reporting structure which resulted in four reportable segments: North American Pharmaceutical, Oncology & Multispecialty, Prescription Technology Solutions, and Medical-Surgical Solutions. These reportable segments encompass all operating segments of the Company. The Company’s former Norwegian operations are included in Other.
Changes in the carrying amount of goodwill were as follows:
| (In millions) | North American Pharmaceutical | Oncology & Multispecialty | Prescription Technology Solutions | Medical-Surgical Solutions | Other | Total | |||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | 2,857 | $ | 2,775 | $ | 2,024 | $ | 2,453 | $ | 23 | $ | 10,132 | |||||||||||||||||||||||
| Goodwill acquired | 1 | — | 11 | — | 4 | 16 | |||||||||||||||||||||||||||||
| Disposals (1) | (46) | — | — | — | — | (46) | |||||||||||||||||||||||||||||
| Foreign currency translation adjustments, net | (80) | — | — | — | — | (80) | |||||||||||||||||||||||||||||
| Other adjustments | 5 | (51) | (8) | 54 | — | — | |||||||||||||||||||||||||||||
| Balance, March 31, 2025 | 2,737 | 2,724 | 2,027 | 2,507 | 27 | 10,022 | |||||||||||||||||||||||||||||
| Goodwill acquired (2) | — | 1,266 | 39 | — | — | 1,305 | |||||||||||||||||||||||||||||
| Disposals (3) | — | (9) | — | — | (28) | (37) | |||||||||||||||||||||||||||||
| Foreign currency translation adjustments, net | 44 | — | — | — | 1 | 45 | |||||||||||||||||||||||||||||
| Other adjustments (4) | — | (18) | (1) | — | — | (19) | |||||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | 2,781 | $ | 3,963 | $ | 2,065 | $ | 2,507 | $ | — | $ | 11,316 |
(1)Goodwill related to the Canadian retail disposal group. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for more details.
(2)Primarily reflects goodwill of $432 million for the PRISM Vision acquisition and $806 million for the Core Ventures acquisition. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for more details.
(3)Other reflects $28 million of goodwill related to the Norway disposal group. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for more details.
(4)Primarily reflects acquisition-related goodwill adjustments. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for more details.
Goodwill Impairment Charges
The Company evaluates goodwill for impairment on an annual basis in the first fiscal quarter, and more frequently if indicators for potential impairment exist. Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or one level below an operating segment (also known as a component), for which discrete financial information is available and segment management regularly reviews the operating results of that reporting unit.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The fair value of the reporting units is determined using a combination of an income approach based on a DCF model and a market approach based on appropriate valuation multiples observed for the reporting unit’s guideline public companies. Fair value estimates result from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions that have been deemed reasonable by management as of the measurement date. Any material changes in key assumptions, including additional government reimbursement reductions, deterioration in the financial markets, an increase in interest rates, or an increase in the cost of equity financing by market participants within the industry, or other unanticipated events and circumstances, may affect such estimates. The discount rates are the weighted-average cost of capital measuring the reporting unit’s cost of debt and equity financing weighted by the percentage of debt and percentage of equity in a company’s target capital. The unsystematic risk premium is an input factor used in calculating the discount rate that specifically addresses uncertainty related to the reporting unit’s future cash flow projections. Fair value assessments of the reporting unit are considered a Level 3 measurement due to the significance of unobservable inputs developed using company-specific information.
The annual impairment testing performed for fiscal 2026, fiscal 2025, and fiscal 2024 did not indicate any impairment of goodwill.
Intangible Assets
Information regarding intangible assets were as follows:
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Weighted- Average Remaining Amortization Period (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||||||
| Customer relationships | 10 | $ | 1,477 | $ | (717) | $ | 760 | $ | 1,475 | $ | (650) | $ | 825 | ||||||||||||||||||||||||||||
| Service agreements | 23 | 3,249 | (833) | 2,416 | 1,116 | (728) | 388 | ||||||||||||||||||||||||||||||||||
| Trademarks and trade names | 20 | 576 | (293) | 283 | 378 | (278) | 100 | ||||||||||||||||||||||||||||||||||
| Provider networks | 21 | 383 | (15) | 368 | — | — | — | ||||||||||||||||||||||||||||||||||
| Technology | 9 | 317 | (160) | 157 | 288 | (141) | 147 | ||||||||||||||||||||||||||||||||||
| Other | 22 | 127 | (32) | 95 | 31 | (27) | 4 | ||||||||||||||||||||||||||||||||||
| Total | $ | 6,129 | $ | (2,050) | $ | 4,079 | $ | 3,288 | $ | (1,824) | $ | 1,464 |
All intangible assets were subject to amortization as of March 31, 2026 and 2025. Amortization of intangible assets of the Canadian retail disposal group previously classified as held for sale and disposed in December 2024 ceased in the second quarter of fiscal 2025. Amortization expense of intangible assets was $276 million, $226 million, and $249 million for fiscal 2026, fiscal 2025, and fiscal 2024, respectively.
Estimated amortization expense of the assets listed in the table above is as follows:
| (In millions) | Estimated Amortization Expense | |||||||
| Fiscal 2027 | $ | 282 | ||||||
| Fiscal 2028 | 278 | |||||||
| Fiscal 2029 | 276 | |||||||
| Fiscal 2030 | 272 | |||||||
| Fiscal 2031 | 264 | |||||||
| Thereafter | 2,707 |
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
11. Debt and Financing Activities
Long-term debt consisted of the following:
| March 31, | |||||||||||
| (In millions) | 2026 | 2025 | |||||||||
| U.S. Dollar notes (1) (2) | |||||||||||
| 0.90% Notes due December 3, 2025 | $ | — | $ | 500 | |||||||
| 1.30% Notes due August 15, 2026 | 500 | 499 | |||||||||
| 7.65% Debentures due March 1, 2027 | 150 | 150 | |||||||||
| 3.95% Notes due February 16, 2028 | 343 | 343 | |||||||||
| 4.90% Notes due July 15, 2028 | 400 | 399 | |||||||||
| 4.75% Notes due May 30, 2029 | 196 | 196 | |||||||||
| 4.25% Notes due September 15, 2029 | 500 | 500 | |||||||||
| 4.65% Notes due May 30, 2030 | 650 | — | |||||||||
| 4.95% Notes due May 30, 2032 | 650 | — | |||||||||
| 5.10% Notes due July 15, 2033 | 597 | 597 | |||||||||
| 5.25% Notes due May 30, 2035 | 699 | — | |||||||||
| 6.00% Notes due March 1, 2041 | 218 | 217 | |||||||||
| 4.88% Notes due March 15, 2044 | 255 | 255 | |||||||||
| Foreign currency notes (1) (3) | |||||||||||
| 1.50% Euro Notes due November 17, 2025 | — | 649 | |||||||||
| 1.63% Euro Notes due October 30, 2026 | 578 | 541 | |||||||||
| 3.13% Sterling Notes due February 17, 2029 | 595 | 581 | |||||||||
| Lease and other obligations | 195 | 227 | |||||||||
| Total debt | 6,526 | 5,654 | |||||||||
| Less: Current portion | 1,267 | 1,191 | |||||||||
| Total long-term debt | $ | 5,259 | $ | 4,463 |
(1)These notes are unsecured and unsubordinated obligations of the Company.
(2)Interest on these U.S. dollar notes is payable semi-annually.
(3)Interest on these foreign currency notes is payable annually.
Long-Term Debt
The Company’s long-term debt includes both U.S. dollar and foreign currency-denominated borrowings. At March 31, 2026 and 2025, $6.5 billion and $5.7 billion, respectively, of total debt was outstanding, of which $1.3 billion and $1.2 billion, respectively, was included under the caption “Current portion of long-term debt” in the Company’s Consolidated Balance Sheets.
Public Debt Offerings
On May 30, 2025, the Company completed a public debt offering of 4.65% Notes due May 30, 2030 in a principal amount of $650 million (the “2030 Notes”), a public debt offering of 4.95% Notes due May 30, 2032 in a principal amount of $650 million (the “2032 Notes”) and a public debt offering of 5.25% Notes due May 30, 2035 in a principal amount of $700 million (the “2035 Notes” and, together with the 2030 and 2032 Notes, the “Notes”). Interest on the Notes is payable semi-annually on May 30th and November 30th of each year, commencing on November 30, 2025. Total proceeds received from the issuance of the Notes, net of discounts and debt offering expenses, were $2.0 billion. The Company utilized the net proceeds from the Notes together with cash on hand to fund the acquisition of Core Ventures.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
On September 10, 2024, the Company completed a public debt offering of 4.25% Notes due September 15, 2029 in a principal amount of $500 million (the “2029 Notes”). Interest on the 2029 Notes is payable semi-annually on March 15th and September 15th of each year, commencing on March 15, 2025. Proceeds received from the issuance of the 2029 Notes, net of discounts and debt offering expenses, were $496 million. The Company utilized the net proceeds from the debt offering of the 2029 Notes together with cash on hand to redeem its $500 million outstanding principal amount of 5.25% Notes due February 15, 2026 (the “2026 Notes”), which became callable on or after February 15, 2024, prior to maturity at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest through the redemption date. The total loss recognized on the debt extinguishment of the 2026 Notes described above for the year ended March 31, 2025 was not material and was included within “Interest expense” in the Company’s Consolidated Statements of Operations.
Each of the 2029 Notes, the 2030 Notes, the 2032 Notes and the 2035 Notes, constitutes a “series,” is an unsecured and unsubordinated obligation of the Company and ranks equally with all of the Company’s existing and future unsecured and unsubordinated indebtedness that may be outstanding from time-to-time. Each series is governed by an indenture and officers’ certificate that are materially similar to those of other series of notes issued by the Company. Upon at least 10 days’ and not more than 60 days’ notice to holders of the applicable series of the notes, the Company may redeem such series of the notes for cash in whole, at any time, or in part, from time to time, at redemption prices that include accrued and unpaid interest and a make-whole premium before a specified date, and at par plus accrued and unpaid interest thereafter until maturity, each as specified in the indenture and the officers’ certificate. If there were to occur both (a) a change of control of the Company and (b) a downgrade of the applicable series of the notes below an investment grade rating by each of the Ratings Agencies (as defined in the applicable officers’ certificate) within a specified period, then the Company would be required to make an offer to purchase that series at a price equal to 101% of the then outstanding principal amount of that series, plus accrued and unpaid interest to, but not including, the date of repurchase. The indenture and the related officers’ certificate for each series, subject to the exceptions and in compliance with the conditions as applicable, specify that the Company may not consolidate, merge or sell all or substantially all of its assets, incur liens, or enter into sale-leaseback transactions exceeding specific terms, without the lenders’ consent. The indenture also contains customary events of default provisions.
Retirements and Redemption
The Company’s €600 million of 1.50% Notes and $500 million of 0.90% Notes matured on November 17, 2025 and December 3, 2025, respectively. These notes were repaid using cash on hand.
Other Information
Scheduled principal payments of long-term debt are:
| (In millions) | Payments | ||||
| Fiscal 2027 | $ | 1,267 | |||
| Fiscal 2028 | 390 | ||||
| Fiscal 2029 | 1,030 | ||||
| Fiscal 2030 | 723 | ||||
| Fiscal 2031 | 676 | ||||
| Thereafter | 2,440 | ||||
| Total | $ | 6,526 |
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Revolving Credit Facilities
5-Year Facility
On November 7, 2022, the Company entered into a Credit Agreement (the “2022 Credit Facility”) which was subsequently amended on November 7, 2024 and May 8, 2025, that provides a syndicated $4.0 billion senior unsecured credit facility with a $3.6 billion aggregate sublimit of availability in Canadian dollars, British pound sterling, and Euro. The 2022 Credit Facility was scheduled to mature in November 2029, but was terminated in April 2026 and replaced with the 2026 5-Year Facility described below. Borrowings under the 2022 Credit Facility bear interest based upon the Term Secured Overnight Financing Rate (“SOFR”) for credit extensions denominated in U.S. dollars, the Sterling Overnight Index Average Reference Rate for credit extensions denominated in British pound sterling, the Euro Interbank Offered Rate for credit extensions denominated in Euros, the Canadian Overnight Repo Rate Average for credit extensions denominated in Canadian dollars, a prime rate, or alternative overnight rates, as applicable, plus agreed upon margins. The 2022 Credit Facility contains various customary investment grade covenants, including a financial covenant which obligates the Company to maintain a maximum Total Debt to Consolidated EBITDA ratio, as defined in the 2022 Credit Facility. If the Company does not comply with these covenants, its ability to use the 2022 Credit Facility may be suspended and repayment of any outstanding balances under the 2022 Credit Facility may be required to be repaid. The remaining terms and conditions of the 2022 Credit Facility are substantially similar to those previously in place under the 2020 Credit Facility. The Company can use funds obtained under the 2022 Credit Facility for general corporate purposes. There were no borrowings under the 2022 Credit Facility during the year ended March 31, 2026 and 2025 and no amounts outstanding at March 31, 2026 or March 31, 2025.
364-Day Credit Facility
On May 8, 2025, the Company entered into a Credit Agreement (the “364-Day Credit Facility”), that provides a syndicated $1.0 billion senior unsecured credit facility. The 364-Day Credit Facility was scheduled to mature in May 2026, but was terminated in April 2026 and replaced with the 2026 5-Year Facility described below. On or prior to the maturity date, the Company may, at its election and subject to certain customary conditions, convert the outstanding loans into a term loan that is repayable in May 2027. Borrowings under the 364-Day Credit Facility bear interest based upon SOFR for credit extensions denominated in U.S. Dollars and other relevant underlying benchmarks, plus agreed margins.
The 364-Day Credit Facility contains various customary investment grade covenants, including a financial covenant which obligates the Company to maintain a maximum Total Debt to Consolidated EBITDA ratio, as defined in the 364-Day Credit Facility. If the Company does not comply with these covenants, its ability to use the 364-Day Credit Facility may be suspended and any outstanding balances under the 364-Day Credit Facility may be required to be repaid. The terms and conditions of the 364-Day Credit Facility are substantially similar to those under the 2022 Credit Facility. The Company can use funds obtained under the 364-Day Credit Facility for general corporate purposes. There were no borrowings under the 364-Day Credit Facility during the year ended March 31, 2026 and no amounts outstanding at March 31, 2026.
At March 31, 2026, the Company was in compliance with all covenants under the 2022 Credit Facility and the 364-Day Credit Facility
2026 Credit Facility
On April 24, 2026, the Company terminated the 2022 Credit Facility and 364-Day Credit Facility and entered into a new Credit Agreement (the “2026 Credit Facility”) that provides a syndicated $5.0 billion senior unsecured credit facility with a $4.5 billion aggregate sublimit of availability in Canadian dollars, British pound sterling, and Euro. The 2026 Credit Facility is scheduled to mature in April 2031. Borrowings under the 2026 Credit Facility will bear interest, at the Company’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the greatest of (1) the “prime rate” as quoted by the Wall Street Journal, (2) the federal funds effective rate plus 0.50% and (3) the Term SOFR rate plus 1.00%, (b) a SOFR rate determined by reference to the secured overnight financing rate published by the CME Group Benchmark Administration Limited for the interest period relevant to such borrowing or (c) a rate determined by the relevant rate administrator for loans denominated in Euro, Sterling or Canadian dollars. The margin for the 2026 Credit Facility will be based on a ratings-based pricing grid ranging from 0% to 0.25%, in the case of base rate loans, 0.625% to 1.25%, in the case of SOFR rate loans and 0.625% to 1.25%, in the case of loans denominated in Euro, Sterling or Canadian dollars. The 2026 Credit Facility contains various customary investment grade covenants, including a financial covenant which obligates the Company to maintain a maximum Total Debt to Consolidated EBITDA ratio, each as defined in the 2026 Credit Facility, excluding any indebtedness of the Medical-Surgical Solutions segment and the portion of Consolidated EBITDA attributable to that segment. If the Company
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
does not comply with these covenants, its ability to use the 2026 Credit Facility may be suspended and repayment of any outstanding balances under the 2026 Credit Facility may be required to be repaid. The remaining terms and conditions of the 2026 Credit Facility are substantially similar to those previously in place under the 2022 Credit Facility. The Company can use funds obtained under the 2026 Credit Facility for general corporate purposes.
Medical-Surgical Solutions Term Loan and Revolving Facility
On April 1, 2026, a subsidiary of the Company, McKesson Medical-Surgical Top Holdings, Inc. (“MMS Borrower”) and certain of its subsidiaries, entered into a credit agreement (the “MMS Credit Agreement”) for (i) a $750 million senior secured term “A” loan facility due 2031 (the “Term Loan A-1 Facility”), (ii) a $250 million senior secured term “A” loan facility due 2028 (the “Term Loan A-2 Facility” and, together with the Term Loan A-1 Facility, the “Term Loan A Facilities”) and (iii) a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan A Facilities, the “Senior Secured Credit Facilities”). The Revolving Credit Facility matures on April 1, 2031. MMS Borrower and certain other subsidiaries of MMS Borrower also entered into security, guaranty and other related agreements in connection with the MMS Credit Agreement.
Borrowings under the Term Loan A Facilities bear interest at a rate selected by MMS Borrower equal to either (i) the Adjusted Term SOFR Rate (as defined in the MMS Credit Agreement), plus an applicable margin equal to 1.250% per annum or (ii) the Base Rate (as defined in the MMS Credit Agreement), plus an applicable margin equal to 0.250% per annum. MMS Borrower selected an initial interest rate equal to the Adjusted Term SOFR Rate plus the applicable margin of 1.250% per annum. Borrowings under the Revolving Credit Facility will bear interest at a rate selected by MMS Borrower at a rate initially equal to either (x) the Term Benchmark Rate (as defined in the MMS Credit Agreement), plus an applicable margin equal to 1.250% per annum or (y) the Base Rate, plus an applicable margin equal to 0.250% per annum, in each case until financial statements for the fiscal quarter ending June 30, 2026 have been delivered, and thereafter at rates varying from 1.625% to 1.250% plus the Term Benchmark Rate or 0.625% to 0.250% plus the Base Rate, based on achievement of certain Total Net Leverage Ratios (as defined in the MMS Credit Agreement) and certain public corporate credit ratings. In addition, MMS Borrower is required to pay a commitment fee at rates varying from 0.225% to 0.175%.
All of MMS Borrower’s obligations under the MMS Credit Agreement are secured, subject to certain exceptions and Excluded Assets (as defined in the Credit Agreement), by a security interest in substantially all tangible and intangible assets of MMS Borrower and certain material U.S. subsidiaries of MMS Borrower (such entities, collectively, the “Guarantors”).
The MMS Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to MMS Borrower and the Guarantors, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, and dividends and other distributions. The MMS Credit Agreement also includes financial maintenance covenants requiring MMS Borrower to maintain a maximum Total Net Leverage Ratio and a minimum Interest Coverage Ratio, in each case, tested on a quarterly basis, and customary events of default. MMS Borrower can use funds obtained under the MMS Credit Agreement to, among other things, pay indebtedness due from MMS Borrower or its subsidiaries to the Company, and other general corporate purposes. Total proceeds received from the issuance of the Term Loan A Facilities, net of discounts and debt offering expenses, were $993 million. The net proceeds from the Term Loan A Facilities were used by MMS Borrower for a payment of principal on an intercompany loan with the Company.
Commercial Paper
The Company maintains a commercial paper program to support its working capital requirements and for other general corporate purposes. Under the program, the Company can issue up to $5.0 billion in outstanding commercial paper notes. During the years ended March 31, 2026, 2025, and 2024, the Company borrowed and repaid $9.2 billion, $15.1 billion, and $20.0 billion, respectively, under the program. At March 31, 2026 and 2025, there were no commercial paper notes outstanding.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
12. Variable Interest Entities
The Company evaluates its ownership, contractual, and other interests in entities to determine if they are VIEs if it has a variable interest in those entities, and the nature and extent of those interests. These evaluations are highly complex and involve management judgment and the use of estimates and assumptions based on available historical information, among other factors. Based on its evaluations, if the Company determines it is the primary beneficiary of such VIEs, it consolidates such entities into its financial statements.
Consolidated Variable Interest Entities
The Company consolidates a VIE when it has the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE and, as a result, is considered the primary beneficiary of the VIE. The Company consolidates certain single-lessee leasing entities where it, as the lessee, has the majority risk of the leased assets due to its minimum lease payment obligations to these leasing entities. As a result of absorbing this risk, the leases provide the Company with the power to direct the operations of the leased properties and the obligation to absorb losses or the right to receive benefits of the entity. The Company also consolidates certain VIEs resulting from the acquisition of PRISM Vision in fiscal 2026. Consolidated VIEs do not have a material impact on the Company’s Consolidated Statements of Operations or Consolidated Statements of Cash Flows. Total assets and liabilities included in its Consolidated Balance Sheets for these VIEs were $818 million and $287 million, respectively, at March 31, 2026, and $610 million and $47 million, respectively, at March 31, 2025.
Investments in Unconsolidated Variable Interest Entities
The Company is involved with VIEs which it does not consolidate because it does not have the power to direct the activities that most significantly impact their economic performance and thus is not considered the primary beneficiary of the entities. Its relationships include equity method investments and lending, leasing, contractual, or other relationships with the VIEs. The Company’s most significant VIE relationships are with oncology and other specialty practices. Under these practice arrangements, the Company generally owns or leases all of the real estate and equipment used by the practices and manages the practices’ administrative functions. The Company’s maximum exposure to loss (regardless of probability) as a result of all unconsolidated VIEs was $4.0 billion and $1.6 billion at March 31, 2026 and 2025, respectively, which primarily represents the value of intangible assets related to service agreements, lease and loan receivables, operating ROU assets, and equity investments. The fiscal 2026 increase is primarily due to the inclusion of assets related to unconsolidated VIEs of Core Ventures. This amount excludes the customer loan guarantees discussed in Financial Note 16, “Financial Guarantees and Warranties.” The Company believes there is no material loss exposure on these assets or from these relationships.
13. Pension Benefits
The Company maintains a number of qualified and nonqualified defined benefit pension plans and defined contribution plans for eligible employees.
Non-U.S. Defined Benefit Pension Plans
As of March 31, 2026 and 2025, the Company’s non-U.S. defined benefit pension plans cover eligible employees located predominantly in Norway and Canada. Benefits for these plans are based primarily on each employee’s final salary, with annual adjustments for inflation.
The Company divested certain pension assets and liabilities as part of the Norway disposal group and the Canadian retail disposal group activities in fiscal 2026 and 2025. Refer to Financial Note 2, “Business Acquisitions and Divestitures.” for additional details on these divestitures. During fiscal 2026 and 2025, changes in the Company pension assets and accumulated other comprehensive loss related to the Norwegian and Canadian divestiture activities were not material.
During the fourth quarter of fiscal 2025, the Company settled the frozen U.K. pension plan (“U.K. Plan”) by irrevocably transferring future financial responsibilities for the plan to a third-party insurance provider (the “buy-out”). In connection with the buy-out and settlement of the U.K. Plan, a non-cash pre-tax settlement charge of $87 million was recorded in “Other income (expense), net” in the Company’s Consolidated Statement of Operations for the year ended March 31, 2025, which consisted of $53 million of pension losses and $34 million of Foreign currency translation adjustments associated with the plan.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The net periodic expense for the Company’s pension plans were $3 million, $60 million and $5 million for the years ended March 31, 2026, 2025, and 2024, respectively. The benefit obligation as of March 31, 2026 and 2025 was $40 million and $77 million, respectively. The fair value of plan assets was $25 million and $66 million and the funded status was $(15) million and $(11) million as of March 31, 2026 and 2025, respectively. As of March 31, 2026 and 2025, the Company’s accumulated benefit obligations were $39 million and $74 million, respectively.
Defined Contribution Plans
The Company has a contributory retirement savings plan (“RSP”) for U.S. eligible employees. Eligible employees may contribute to the RSP up to 75% of their eligible compensation on a pre-tax or post-tax basis not to exceed IRS limits. The Company makes matching contributions in an amount equal to 100% of the employee’s first 3% of pay contributed and 50% for the next 2% of pay contributed. The Company, at the discretion of its Board of Directors (the “Board”), may also make an additional annual matching contribution for each plan year to enable participants to receive a full match based on their annual contribution. The Company also contributed to non-U.S. plans that are available in certain countries. Contribution expenses for the RSP and non-U.S. plans were $141 million, $128 million, and $138 million for the years ended March 31, 2026, 2025, and 2024, respectively.
Postretirement Benefits
The Company maintains a number of postretirement benefit plans, primarily consisting of healthcare and life insurance (“welfare”) benefits, for certain eligible U.S. employees. Eligible employees consist of those who retired before March 31, 1999 and those who retired after March 31, 1999, but were an active employee as of that date, after meeting other age-related criteria. It also provides postretirement benefits for certain U.S. executives. Defined benefit plan obligations are measured as of the Company’s fiscal year-end. The net periodic credit or expense for the Company’s postretirement welfare benefits was not material for the years ended March 31, 2026, 2025, and 2024. The benefit obligation at March 31, 2026 and 2025 was $42 million and $40 million, respectively.
14. Hedging Activities
In the normal course of business, the Company is exposed to interest rate and foreign currency exchange rate fluctuations. At times, the Company limits these risks through the use of derivatives as described below. In accordance with the Company’s policy, derivatives are only used for hedging purposes. The Company does not use derivatives for trading or speculative purposes. The Company uses various counterparties for its derivative contracts to minimize the exposure to credit risk, but does not anticipate non-performance by these parties.
Foreign Currency Exchange Risk
The Company conducts its business worldwide in U.S. dollars and the functional currencies of its foreign subsidiaries, including Canadian dollars, Euro, and British pounds sterling. Changes in foreign currency exchange rates could have a material adverse impact on the Company’s financial results that are reported in U.S. dollars. The Company is also exposed to foreign currency exchange rate risk related to its foreign subsidiaries, including intercompany loans denominated in non-functional currencies. The Company has certain foreign currency exchange rate risk programs that use foreign currency forward contracts and cross-currency swaps. These forward contracts and cross-currency swaps are generally used to offset the potential income statement effects from intercompany loans and other obligations denominated in non-functional currencies. These programs reduce but do not entirely eliminate foreign currency exchange rate risk.
Interest Rate Risk
The Company has exposure to changes in interest rates, and it utilizes risk programs which use interest rate swaps to hedge the changes in debt fair values caused by fluctuations in benchmark interest rates. The Company also enters into forward contracts to hedge the variability of future benchmark interest rates on any planned bond issuances. These programs reduce but do not entirely eliminate interest rate risk.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Derivative Instruments
At March 31, 2026 and 2025, the notional amounts of the Company’s outstanding derivatives were as follows:
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||
| (In millions) | Currency | Maturity Date (1) | Notional | ||||||||||||||||||||
| Derivatives designated as net investment hedges: (2) | |||||||||||||||||||||||
| Cross-currency swaps (3) | CAD | Dec-26 to Mar-27 | C$ | 6,500 | C$ | 6,500 | |||||||||||||||||
| Derivatives designated as fair value hedges: (2) | |||||||||||||||||||||||
| Cross-currency swaps (4) | GBP | Nov-28 | £ | 450 | £ | 450 | |||||||||||||||||
| Cross-currency swaps (4) | EUR | Jul-26 | € | 500 | € | 1,100 | |||||||||||||||||
| Floating interest rate swaps (5) | USD | Aug-27 to Sep-29 | $ | 750 | $ | 750 | |||||||||||||||||
| Derivatives designated as cash flow hedges: (2) | |||||||||||||||||||||||
| Foreign currency forwards | GBP | — | £ | — | £ | 11 | |||||||||||||||||
| Interest rate swap locks | USD | — | $ | — | $ | 850 | |||||||||||||||||
(1)The maturity date reflected is for outstanding derivatives as of March 31, 2026.
(2)There was no ineffectiveness in these hedges for the years ended March 31, 2026, 2025, and 2024.
(3)The Company agreed with third parties to exchange fixed interest payments in one currency for fixed interest payments in another currency at specified intervals and to exchange principal in one currency for principal in another currency, calculated by reference to agreed-upon notional amounts.
(4)Represents cross-currency fixed-to-fixed interest rate swaps to mitigate the foreign currency exchange fluctuations on its foreign currency-denominated notes.
(5)Represents fixed-to-floating interest rate swaps to hedge the changes in fair value caused by fluctuations in the benchmark interest rates.
Net Investment Hedges
The Company uses cross-currency swaps to hedge portions of the Company’s net investments denominated in Canadian dollars against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. The changes in the fair value of these derivatives attributable to the changes in spot currency exchange rates and differences between spot and forward interest rates are recorded in accumulated other comprehensive loss and offset foreign currency translation gains and losses recorded on the Company’s net investments denominated in Canadian dollars. To the extent cross-currency swaps designated as hedges are ineffective, changes in carrying value attributable to the change in spot rates are recorded in earnings.
In fiscal 2025, the Company expanded the net investment hedging program by entering into cross-currency swaps and restructuring existing cross-currency swaps. As of March 31, 2026 and 2025, the outstanding notional amount of cross- currency swaps was C$6.5 billion.
Fair Value Hedges
The Company uses cross-currency swaps to hedge the changes in the fair value of its foreign currency notes resulting from changes in benchmark interest rates and foreign currency exchange rates. The Company also uses floating interest rate swaps to hedge the changes in the fair value of its U.S. dollar notes resulting from changes in benchmark interest rates. The changes in the fair value of these derivatives and the offsetting changes in the fair value of the hedged notes are recorded in earnings. Gains and losses from the changes in the Company’s fair value hedges recorded in earnings were largely offset by the gains and losses recorded in earnings on the hedged item. For components excluded from the assessment of hedge effectiveness, the initial value of the excluded component is recognized in accumulated other comprehensive loss and then released into earnings over the life of the hedging instrument. The difference between the change in the fair value of the excluded component and the amount amortized into earnings during the period is recorded in other comprehensive loss.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
During fiscal 2023, the Company entered into floating interest rate swaps designated as fair value hedges to hedge the changes in fair value caused by fluctuations in the benchmark interest rate. In fiscal 2025, $500 million of the $1.3 billion floating interest rate swaps with original maturity dates in February 2026 and callable at any time after February 2024 were terminated. Refer to Financial Note 11, “Debt and Financing Activities,” for additional information on the Company’s debt obligations. The changes in the fair value of these derivatives are recorded in “Interest expense” in the Consolidated Statements of Operations.
During the second quarter of fiscal 2026, the Company settled €600 million of fair value cross-currency swaps with original maturity in August 2025, and subsequently entered into €600 million of fair value cross-currency swaps with maturity dates in November 2025. During the third quarter of fiscal 2026, the Company settled the €600 million fair value cross-currency swaps upon repayment of its 1.50% Euro Notes due November 17, 2025. Refer to Financial Note 11, “Debt and Financing Activities,” for additional information on the 1.50% Euro Notes repayment.
Cash Flow Hedges
The Company uses cross-currency swaps to hedge intercompany loans denominated in non-functional currencies to reduce the income statement effects arising from fluctuations in foreign currency exchange rates. The Company also uses forward contracts to hedge the variability of future benchmark interest rates on any planned bond issuances and to offset the potential income statement effects from obligations denominated in non-functional currencies. The effective portion of changes in the fair value of these hedges is recorded in accumulated other comprehensive loss and reclassified into earnings in the same period in which the hedged transaction affects earnings. Changes in fair values representing hedge ineffectiveness are recognized in current earnings.
In January 2026, the Company entered into foreign currency forward contracts designated as cash flow hedges with a total notional amount of $791 million to hedge the variability of foreign currency exchange fluctuations related to the sale of the Norway disposal group. These foreign currency forwards were settled in January 2026, and a loss of $30 million was reclassified from accumulated other comprehensive loss and included as a component of the gain recognized on the Norway divestiture as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures.” The net gain was reflected within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations for the year ended March 31, 2026. There were no gains or losses reclassified from accumulated other comprehensive loss and recorded within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations for the years ended March 31, 2025, and 2024.
The Company executed a series of forward-starting interest rate swap locks designated as cash flow hedges in fiscal 2025 with a notional amount of $850 million, and in the first quarter of fiscal 2026 with a notional amount of $550 million, for a total of $1.4 billion, to hedge the cash flows associated with certain financing activities. During the first quarter of fiscal 2026, the Company completed a public debt offering of notes, at which point the interest rate swap locks were terminated, and the gains are being amortized to interest expense over the life of the Notes. Refer to Financial Note 11, “Debt and Financing Activities,” for information on the Company’s debt obligations.
In fiscal 2024, the Company entered into foreign currency forward contracts designated as cash flow hedges with a total notional amount of £45 million to hedge the variability of foreign currency exchange fluctuations in future cash payments due to a third party for capital expenditures. Certain of these foreign currency forwards matured in fiscal 2024 and fiscal 2025, and the remainder were settled in full in fiscal 2026.
Derivatives Not Designated as Hedges
Derivative instruments not designated as hedges are marked-to-market at the end of each accounting period with the change in fair value included in earnings. Changes in the fair values for contracts not designated as hedges are recorded directly into earnings within “Selling, distribution, general, and administrative expenses” in the Consolidated Statements of Operations. The Company did not enter into or have any outstanding derivative instruments not designated as hedges during fiscal 2026 and fiscal 2025.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Other Information on Derivative Instruments
Gains (losses) from derivatives included in other comprehensive income in the Consolidated Statements of Comprehensive Income were as follows:
| Years Ended March 31, | |||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | ||||||||||||||
| Derivatives designated as net investment hedges: | |||||||||||||||||
| Cross-currency swaps | $ | (142) | $ | 80 | $ | 3 | |||||||||||
| Derivatives designated as cash flow and other hedges: | |||||||||||||||||
| Cross-currency swaps (1) | $ | — | $ | (4) | $ | 39 | |||||||||||
| Interest rate swap locks, Foreign currency forwards and Other | 12 | (6) | — | ||||||||||||||
| Fixed interest rate swaps | — | — | 14 |
(1)Includes other comprehensive income related to the excluded component of certain fair value hedges.
Information regarding the fair value of derivatives on a gross basis were as follows:
| Balance Sheet Caption | March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||||||||||||||||
| Fair Value of Derivative | U.S. Dollar Notional | Fair Value of Derivative | U.S. Dollar Notional | |||||||||||||||||||||||||||||||||||
| (In millions) | Asset | Liability | Asset | Liability | ||||||||||||||||||||||||||||||||||
| Derivatives designated for hedge accounting: | ||||||||||||||||||||||||||||||||||||||
| Cross-currency swaps (current) | Prepaid expenses and other/Other accrued liabilities | $ | 76 | $ | 160 | $ | 5,008 | $ | 54 | $ | — | $ | 595 | |||||||||||||||||||||||||
| Cross-currency swaps (non-current) | Other non-current assets/liabilities | 40 | — | 542 | 66 | 18 | 5,550 | |||||||||||||||||||||||||||||||
| Interest rate swaps (non-current) | Other non-current liabilities | — | 12 | 750 | — | 18 | 750 | |||||||||||||||||||||||||||||||
| Interest Rate Swap Locks | Other non-current liabilities | — | — | — | — | 6 | 850 | |||||||||||||||||||||||||||||||
| Foreign currency forwards (current) | Prepaid expenses and other | — | — | — | 1 | — | 14 | |||||||||||||||||||||||||||||||
| Total | $ | 116 | $ | 172 | $ | 121 | $ | 42 | ||||||||||||||||||||||||||||||
Refer to Financial Note 15, “Fair Value Measurements,” for more information on these recurring fair value measurements.
15. Fair Value Measurements
The Company measures certain assets and liabilities at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. The fair value hierarchy consists of three levels of inputs that may be used to measure fair value as follows:
Level 1 - quoted prices in active markets for identical assets or liabilities.
Level 2 - significant other observable market-based inputs.
Level 3 - significant unobservable inputs for which little or no market data exists and requires considerable assumptions that are significant to the fair value measurement.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Cash and cash equivalents at March 31, 2026 and 2025 included investments in money market funds of $843 million and $1.0 billion, respectively, which are reported at fair value. The fair value of money market funds was determined using quoted prices for identical investments in active markets, which are considered to be Level 1 inputs under the fair value measurements and disclosure guidance. The carrying value of all other cash equivalents approximates their fair value due to their relatively short-term nature.
Fair values of the Company’s interest rate swaps, cross-currency swaps, and foreign currency forward contracts were determined using observable inputs from available market information, including quoted interest rates, foreign currency exchange rates, and other observable inputs from available market information. These inputs are considered Level 2 under the fair value measurements and disclosure guidance, and may not be representative of actual values that could have been realized or that will be realized in the future. Refer to Financial Note 14, “Hedging Activities,” for fair values and other information on the Company’s derivatives.
The Company holds investments in equity and debt securities of U.S. growth stage companies that address both current and emerging business challenges in the healthcare industry and which had a carrying value of $227 million and $103 million at March 31, 2026 and 2025, respectively. These investments primarily consist of equity securities without readily determinable fair values and are included in “Other non-current assets” in the Consolidated Balance Sheets. During fiscal 2026, 2025, 2024, the Company recognized impairment charges, unrealized gains, and realized gains on the exit of certain investments. The Company recognized an immaterial gain in fiscal 2026, a net gain of $101 million in fiscal 2025, and a net loss of $24 million in fiscal 2024. These amounts were recorded in “Other income, net” in the Consolidated Statements of Operations. Of the gain recognized in fiscal 2025, $100 million relates to a recapitalization event of one of the Company’s investments in equity securities which resulted in an increase to the carrying value of this investment. Proceeds from the sale of a portion of this investment were $92 million. Additionally, during the fourth quarter of fiscal 2025, the Company exited one of its publicly-traded investments, receiving cash of $97 million and recognizing a gain of $44 million for the year ended March 31, 2025. These were partially offset by $44 million asset impairments recorded in the fourth quarter of fiscal 2025. The carrying value of publicly traded investments was determined using quoted prices for identical investments in active markets and are considered to be Level 1 inputs.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company’s assets and liabilities are also subject to nonrecurring fair value measurements. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges, including long-lived assets associated with the Company’s restructuring initiatives as discussed in more detail in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net,” or as a result of charges to remeasure assets classified as held for sale to fair value less costs to sell.
The aforementioned investments in equity securities of U.S. growth stage companies include the carrying value of investments without readily determinable fair values, which were determined using a measurement alternative and are recorded at cost less impairment, plus or minus any changes in observable price from orderly transactions of the same or similar security of the same issuer. These inputs related to changes in observable price are considered Level 2 under the fair value measurements and disclosure guidance and may not be representative of actual values that could have been realized or that will be realized in the future. Inputs related to impairments of investments are generally considered Level 3 fair value measurements due to their inherently unobservable nature based on significant assumptions by management and use of company-specific information.
There were no other material assets or liabilities measured at fair value on a nonrecurring basis at March 31, 2026 and 2025.
Other Fair Value Disclosures
At March 31, 2026 and 2025, the carrying amounts of cash, certain cash equivalents, restricted cash, receivables, drafts and accounts payable, and other current liabilities approximated their estimated fair values because of the short-term maturity of these financial instruments.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The Company determines the fair value of commercial paper using quoted prices in active markets for identical instruments, which are considered Level 1 inputs under the fair value measurements and disclosure guidance.
The Company’s long-term debt is recorded at amortized cost. The carrying value and fair value of the Company’s long-term debt was as follows:
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||||||||
| (In millions) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||||
| Long-term debt, including current maturities | $ | 6,526 | $ | 6,549 | $ | 5,654 | $ | 5,598 |
The estimated fair value of the Company’s long-term debt was determined using quoted market prices in a less active market and other observable inputs from available market information, which are considered to be Level 2 inputs, and may not be representative of actual values that could have been realized or that will be realized in the future.
Goodwill
Fair value assessments of the reporting unit and the reporting unit's net assets, which are performed for goodwill impairment tests, are considered a Level 3 measurement due to the significance of unobservable inputs developed using company-specific information. The Company considered a market approach as well as an income approach using a DCF model to determine the fair value of each reporting unit.
Long-lived Assets
The Company utilizes multiple approaches including the DCF model and market approaches for estimating the fair value of intangible assets. The future cash flows used in the analysis are based on internal cash flow projections from its long-range plans and include significant assumptions by management. Accordingly, the fair value assessment of long-lived assets is considered a Level 3 fair value measurement.
The Company measures certain long-lived and intangible assets at fair value on a nonrecurring basis when events occur that indicate an asset group may not be recoverable. If the carrying amount of an asset group is not recoverable, an impairment charge is recorded to reduce the carrying amount by the excess over its fair value. Refer to Financial Note 3, “Restructuring, Impairment, and Related Charges, Net” under the heading “Long-Lived Asset Impairments” for more information*.*
16. Financial Guarantees and Warranties
Financial Guarantees
The Company has agreements with certain of its customers’ financial institutions, primarily in its North American Pharmaceutical segment, under which it has guaranteed the repurchase of its customers’ inventory or its customers’ debt in the event these customers are unable to meet their obligations to those financial institutions. For the Company’s inventory repurchase agreements, among other requirements, inventories must be in a resalable condition and any repurchase would be at a discount. The inventory repurchase agreements mostly relate to certain Canadian customers and generally range from one to two years. Customers’ debt guarantees generally range from three to five years and are primarily provided to facilitate financing for certain customers. The majority of the Company’s customers’ debt guarantees are secured by certain assets of the customer. At March 31, 2026, the maximum amounts of inventory repurchase guarantees and customers’ debt guarantees were $451 million and $7 million, respectively, of which the Company has not accrued any amounts.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The expirations of these financial guarantees were as follows:
| (In millions) | Financial Guarantees Subject to Expiration | ||||
| Fiscal 2027 | $ | 136 | |||
| Fiscal 2028 | 269 | ||||
| Fiscal 2029 | 3 | ||||
| Fiscal 2030 | 5 | ||||
| Fiscal 2031 | 4 | ||||
| Thereafter | 41 |
At March 31, 2026, the Company’s banks and insurance companies have issued $288 million of standby letters of credit and surety bonds, which were issued on the Company’s behalf primarily related to its customer contracts and in order to meet the security requirements for statutory licenses and permits, court and fiduciary obligations, and its workers’ compensation and automotive liability programs.
The Company’s software license agreements generally include certain provisions for indemnifying customers against liabilities if its software products infringe a third party’s intellectual property rights. To date, the Company has not incurred any material costs as a result of such indemnification agreements and has not accrued any liabilities related to such obligations.
In conjunction with certain transactions, primarily divestitures, the Company may provide routine indemnification agreements (such as retention of previously existing environmental, tax, and employee liabilities) whose terms vary in duration and often are not explicitly defined. Where appropriate, obligations for such indemnifications are recorded as liabilities. Because the amounts of these indemnification obligations often are not explicitly stated, the overall maximum amount of these commitments cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, the Company has historically not made material payments as a result of these indemnification provisions.
Warranties
In the normal course of business, the Company provides certain warranties and indemnification protection for its products and services. For example, the Company provides warranties that the pharmaceutical and medical-surgical products it distributes are in compliance with the U.S. Food, Drug, and Cosmetic Act and other applicable laws and regulations. It has received the same warranties from its suppliers, which customarily are the manufacturers of the products. In addition, the Company has indemnity obligations to its customers for these products, which have also been provided from its suppliers, either through express agreement or by operation of law. Accrued warranty costs were not material to the Consolidated Balance Sheets as of March 31, 2026 and 2025.
17. Commitments and Contingent Liabilities
In addition to commitments and obligations incurred in the ordinary course of business, the Company is subject to a variety of claims and legal proceedings, including claims from customers and vendors, pending and potential legal actions for damages, governmental investigations, and other matters. The Company and its affiliates are parties to the legal claims and proceedings described below. The Company is vigorously defending itself against those claims and in those proceedings. Those matters, including commitments related to them and significant developments are described below. If the Company is unsuccessful in defending, or if it determines to settle, any of these matters, it may be required to pay substantial sums, be subject to injunction and/or be forced to change how it operates its business, which could have a material adverse impact on its financial position or results of operations.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Unless otherwise stated, the Company is unable to reasonably estimate the loss or a range of possible loss for the matters described below. Often, the Company is unable to determine that a loss is probable, or to reasonably estimate the amount of loss or a range of loss, for a matter because of the limited information available and the potential effects of future events and decisions by third parties, such as courts and regulators, that will determine the ultimate resolution of the matter. Many of the matters described are at preliminary stages, raise novel theories of liability, or seek an indeterminate amount of damages. It is not uncommon for claims to remain unresolved over many years. The Company reviews loss contingencies at least quarterly to determine whether the likelihood of loss has changed and whether it can make a reasonable estimate of the loss or range of loss. When the Company determines that a loss from a matter is probable and reasonably estimable, it records a liability for an estimated amount. The Company also provides disclosure when it is reasonably possible that a loss may be incurred or when it is reasonably possible that the amount of a loss will exceed its recorded liability. Amounts included within “Claims and litigation charges, net” in the Consolidated Statements of Operations consist of estimated loss contingencies related to opioid-related litigation matters, as well as any applicable income items or credit adjustments due to subsequent changes in estimates.
Litigation and Claims Involving Distribution of Controlled Substances
The Company and its affiliates have been sued as defendants in many cases asserting claims related to distribution of controlled substances, such as opioids. They have been named as defendants along with other pharmaceutical wholesale distributors, pharmaceutical manufacturers, and retail pharmacies. The plaintiffs in these actions have included state attorneys general, county and municipal governments, school districts, tribal nations, hospitals, health and welfare funds, third-party payors, and individuals. The Company is not able to conclude that a liability is probable or provide a reasonable estimate for the range of ultimate possible loss for opioid-related litigation matters other than those for which an accrual is described below.
State and Local Government Claims
The Company and two other national pharmaceutical distributors (collectively “Distributors”) entered into a settlement agreement (the “Settlement”) and consent judgment with 48 states and their participating subdivisions, as well as the District of Columbia and all eligible territories (the “Settling Governmental Entities”). Approximately 2,300 cases have been dismissed. The Distributors did not admit liability or wrongdoing and do not waive any defenses pursuant to the Settlement. A minimum of 85% of the $7.9 billion Settlement payments, to be paid by 2038, must be used by the Settling Governmental Entities to remediate the opioid epidemic, while the remainder relates to plaintiffs’ attorneys’ fees and costs and will be paid out through 2030. Pursuant to the Settlement, the Distributors are in the process of establishing a clearinghouse to consolidate their controlled-substance distribution data, which will be available to the settling U.S. states to use as part of their anti-diversion efforts.
The Company has also entered into separate settlement agreements with: (i) Alabama and its subdivisions for approximately $174 million through 2031, and (ii) certain West Virginia subdivisions for approximately $152 million through 2033. The Company previously settled with the state of West Virginia and has satisfied that settlement. The agreement with West Virginia subdivisions does not include school districts or the claims of Cabell County and the City of Huntington. After a trial, the claims of Cabell County and the City of Huntington, were initially decided in the Company’s favor on July 4, 2022. Those subdivisions appealed that decision and on October 28, 2025, a panel of the U.S. Court of Appeals for the Fourth Circuit issued a decision reversing the trial court’s judgment and remanding the case to the trial court for additional proceedings.
Some state and local governmental subdivisions did not participate in the Settlement, including certain municipal governments, government hospitals, school districts, and government-affiliated third-party payors. The Company contends that those subdivisions’ claims are foreclosed by the Settlement or other dispositive defenses, but the subdivisions contend that their claims are not foreclosed. An accrual for the remaining governmental subdivision claims is reflected in the total estimated liability for opioid-related claims in a manner consistent with how Settlement amounts were allocated to Settling Governmental Entities.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The City of Baltimore, Maryland, is one such subdivision. A trial of its claims against the Company and another national pharmaceutical distributor began on September 16, 2024 in the Circuit Court of Maryland for Baltimore City, Mayor and City Council of Baltimore v. Purdue Pharma LP, No. 24-C-18-000515. On September 4, 2025, the trial court entered judgment against McKesson, awarding $37 million in compensatory damages and an additional $72 million in “monetary abatement” to fund programs related to drug abuse in Baltimore. On April 24, 2026, the Supreme Court of Maryland issued an order vacating the judgment against the Company and remanding the case to the Circuit Court of Maryland for Baltimore City for further proceedings. The Company has not adjusted its existing accrual as a result of the trial court’s entry of judgment or its subsequent vacatur by the Supreme Court of Maryland.
The district attorneys of the City of Philadelphia, Pennsylvania, and Allegheny County, Pennsylvania did not participate in the Settlement and sought to bring separate claims against the Company, notwithstanding the settlement with the state of Pennsylvania and its attorney general. On January 26, 2024, the Commonwealth Court of Pennsylvania ruled that the Pennsylvania attorney general had settled and fully released the claims brought by those district attorneys under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law. The district attorneys have appealed that decision to the Supreme Court of Pennsylvania.
Native American Tribe Claims
The Company also entered into settlement agreements for opioid-related claims of federally recognized Native American tribes. A minimum of 85% of the $196 million total settlement payments through 2027 must be used by the settling Native American tribes to remediate the opioid epidemic.
Non-Governmental Plaintiff Claims
The Company has also been a defendant in hundreds of opioid-related cases brought in the U.S. by private plaintiffs, such as hospitals, health and welfare funds, third-party payors, and individuals. These claims, and those of private entities generally, are not included in the settlement agreements described above. The Company and two other national distributors reached class-action settlements with representatives of nationwide groups of acute care hospitals and certain third-party payors. The claims of remaining U.S. non-governmental plaintiffs are not included in the charges recorded by the Company (described below).
With respect to the acute care hospitals, the Company reached a settlement of $149 million with a nationwide class, which the Company paid into escrow on November 27, 2024.
With respect to the third-party payors, the Company reached a settlement of $114 million with a nationwide class, which the Company paid into escrow on February 12, 2025. The remaining escrow payments were presented as restricted cash within “Prepaid expenses and other” in the Company’s Consolidated Balance Sheet as of March 31, 2026.
Estimated Liabilities of Opioid-related Settlements
The Company’s estimated accrued liability for the above-described opioid-related claims of U.S. governmental entities, including Native American tribes, and certain non-governmental plaintiffs, including a settlement with certain third-party payors and a nationwide class of acute care hospitals, was as follows:
| (In millions) | March 31, 2026 | March 31, 2025 | |||||||||||||||||||||
| Current litigation liabilities (1) | $ | 601 | $ | 776 | |||||||||||||||||||
| Long-term litigation liabilities | 5,091 | 5,601 | |||||||||||||||||||||
| Total litigation liabilities | $ | 5,692 | $ | 6,377 |
(1)These amounts, recorded in “Other accrued liabilities” in the Consolidated Balance Sheets, are the amounts estimated to be paid within the next twelve months following each respective period end date.
During the years ended March 31, 2026, 2025, and 2024, the Company made payments totaling $512 million, $515 million, and $544 million, respectively, associated with the Settlement and the separate settlement agreements for opioid-related claims of participating states, subdivisions, and Native American tribes discussed above.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Canadian Plaintiff Claims
The Company and its Canadian affiliate are also defendants in four opioid-related cases pending in Canada. These cases involve the claims of the provincial governments, municipal governments, a group representing indigenous people, as well as one case brought by an individual. The claims of a class of provincial governments are pending in the Supreme Court of British Columbia, Docket No. S-189395, and a common-issues trial is scheduled to begin February 22, 2028.
Defense of Opioids Claims
The Company believes it has valid legal defenses in all opioid-related matters, including claims not covered by settlement agreements, and it intends to mount a vigorous defense in such matters. Other than the accruals described above, the Company has not determined that a loss is probable in any of the matters; nor is any possible loss or range of loss reasonably estimable. An adverse judgment or negotiated resolution in any of these matters could have a material adverse impact on the Company’s financial position, cash flows or liquidity, or results of operations.
Other Litigation and Claims
On or about April 25, 2018, a second amended qui tam complaint filed in the U.S. District Court for the Eastern District of New York was served on McKesson Corporation, McKesson Specialty Care Distribution Corporation, McKesson Specialty Distribution LLC, McKesson Specialty Care Distribution Joint Venture, L.P., Oncology Therapeutics Network Corporation, Oncology Therapeutics Network Joint Venture, L.P., US Oncology, Inc., and US Oncology Specialty, L.P. by Omni Healthcare, Inc. as relator, purportedly on behalf of the United States and 33 cities and states alleging that from 2001 through 2010 the defendants repackaged and sold single-dose syringes of oncology medications in a manner that violated the federal False Claims Act and various state and local false claims statutes, and seeking damages, treble damages, civil penalties, attorneys’ fees and costs of suit, all in unspecified amounts. United States of America ex rel. Omni Healthcare, Inc. v. McKesson Corp., et al., 1:12-cv-06440 (E.D.N.Y.). The United States and the other governmental plaintiffs declined to intervene in the suit. In February 2019, the court dismissed all of the defendants except McKesson Corporation and Oncology Therapeutics Network Corp.
In July 2015, The Great Atlantic & Pacific Tea Company (“A&P”), a former customer of the Company, filed for reorganization in bankruptcy under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the Southern District of New York. In re The Great Atlantic & Pacific Tea Company, Inc., et al., Case No. 15-23007. A suit filed in 2017 against the Company in this bankruptcy case seeks to recover alleged preferential transfers. The Official Committee of Unsecured Creditors on behalf of the bankruptcy estate of The Great Atlantic & Pacific Tea Company, Inc., et al. v. McKesson Corporation d/b/a McKesson Drug Co., Adv. Proc. No. 17-08264. Trial concluded on July 18, 2024. The outcome of that trial is pending.
On October 17, 2024, the Company was served with a qui tam complaint filed in the United States District Court for the Eastern District of New York by a relator alleging that, from 2010 through at least 2012, the Company submitted false certifications to the government in support of Horizon Clinicals, an electronic health record product. United States ex rel. James Thompson v. McKesson Corporation, No. 16-CV-2891. The United States has declined to intervene in the case. The complaint seeks relief under the False Claims Act including damages, treble damages, civil penalties, attorney fees, and costs of suit.
Government Subpoenas and Investigations
From time to time, the Company receives subpoenas or requests for information from various governmental agencies. The Company generally responds to such subpoenas and requests in a cooperative, thorough, and timely manner. These responses sometimes require time and effort and can result in considerable costs being incurred by the Company. Such subpoenas and requests can lead to the assertion of claims or the commencement of civil or criminal legal proceedings against the Company and other members of the healthcare industry, as well as to settlements of claims against the Company. The Company responds to these requests in the ordinary course of business. The following are examples of the type of subpoenas or requests the Company receives from time to time.
In July 2024, the United States Department of Justice served a Civil Investigative Demand issued pursuant to the False Claims Act on the Company seeking documents and information related to administration of copay coupon programs associated with certain Sun Pharmaceutical Industries Inc. drugs.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
In March 2025, the United States Department of Justice served a Civil Investigative Demand issued pursuant to the False Claims Act on NDCHealth Corporation, a subsidiary of the Company, seeking documents and information related to cybersecurity requirements in contracts or sub-contracts with the federal government.
Environmental Matters
Primarily as a result of the operation of the Company’s former chemical businesses, which were fully divested by 1987, the Company is involved in various matters pursuant to environmental laws and regulations. The Company has received claims and demands from governmental agencies relating to investigative and remedial actions purportedly required to address environmental conditions alleged to exist at four sites where it, or entities acquired by it, formerly conducted operations and the Company, by administrative order or otherwise, has agreed to take certain actions at those sites, including soil and groundwater remediation.
Based on a determination by the Company’s environmental staff, in consultation with outside environmental specialists and counsel, the current estimate of the Company’s probable loss associated with the remediation costs for these four sites is $28 million, net of amounts anticipated from third parties. This amount is expected to be paid out between April 2026 and March 2056. The Company has accrued $28 million for the estimated probable loss for these environmental matters in its Consolidated Balance Sheet as of March 31, 2026.
The Company has been designated as a Potentially Responsible Party (“PRP”) under the Superfund law for environmental assessment and cleanup costs as the result of its alleged disposal of hazardous substances at 12 sites. With respect to these sites, numerous other PRPs have similarly been designated and while the current state of the law potentially imposes joint and several liabilities upon PRPs, as a practical matter, costs of these sites are typically shared with other PRPs.
For one such site, the Company was one of multiple recipients of a New Jersey Department of Environmental Protection directive and a separate U.S. Environmental Protection Agency (“EPA”) directive concerning natural resources damages to the Passaic River associated with the Company’s Newark, New Jersey facility. In March 2016, the EPA selected a preferred remedy for this Lower Passaic River site with an estimated cost of approximately $1.4 billion. In December 2022, the Company entered into a Consent Decree with the EPA that is currently pending approval by the U.S. District Court for the District of New Jersey and would require the Company to pay $3 million, for which the Company maintained an escrow deposit as of March 31, 2026. Accordingly, the Company’s estimated probable loss at the remaining 11 sites is approximately $27 million, which has been accrued for in the Consolidated Balance Sheet as of March 31, 2026.
Value Added Tax Assessments
The Company operates in various countries outside the U.S. which collect value added taxes (“VAT”). The determination of the manner in which a VAT applies to the Company’s foreign operations is subject to varying interpretations arising from the complex nature of the tax laws. The Company has received assessments for VAT which are in various stages of appeal. The Company disagrees with these assessments and believes that it has a strong legal argument to defend its tax positions. Certain VAT assessments relate to years covered by an indemnification agreement. Due to the complex nature of the tax laws, it is not possible to estimate the outcome of these matters. However, based on currently available information, the Company believes the ultimate outcome of these matters will not have a material adverse effect on its financial position, cash flows, or results of operations.
Other Matters
The Company is involved in various other litigation, governmental proceedings, and claims, not described above, that arise in the normal course of business. While it is not possible to determine the ultimate outcome or the duration of such litigation, governmental proceedings, or claims, the Company believes, based on current knowledge and the advice of counsel, that such litigation, proceedings, and claims will not have a material impact on the Company’s financial position or results of operations.
18. Stockholders' Deficit
Each share of the Company’s outstanding common stock is permitted one vote on proposals presented to stockholders and is entitled to participate equally in any dividends declared by the Board.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
In July 2025, the Company’s quarterly dividend was raised from $0.71 to $0.82 per share of common stock. The Company declared regular cash dividends of $3.17, $2.75, and $2.40 per share for the years ended March 31, 2026, 2025, and 2024, respectively. The Company anticipates that it will continue to pay quarterly cash dividends in the future. However, the declaration and amount of future dividends remain within the discretion of the Board and will depend upon the Company’s future earnings, financial condition, capital requirements, legal requirements, and other factors.
Share Repurchase Plans
The Board has authorized the repurchase of common stock. The Company may repurchase common stock from time-to-time through open market transactions, privately negotiated transactions, accelerated share repurchase (“ASR”) programs, or by combinations of such methods, any of which may use pre-arranged trading plans that are designed to meet the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. The timing of any repurchases and the actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price, corporate and regulatory requirements, tax implications, restrictions under the Company’s debt obligations, other uses for capital, impacts on the value of remaining shares, cash generated from operations, and market and economic conditions.
Excise taxes incurred on share repurchases of an entity’s own common stock are direct and incremental costs to purchase treasury stock, and accordingly are included in the total cost basis of the common stock acquired and reflected as a reduction of stockholders’ equity within “Treasury shares” in the Company’s Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Deficit. Excise taxes do not reduce the Company’s remaining authorization for the repurchase of common stock. Excise taxes of $40 million and $26 million were accrued for shares repurchased during the years ended March 31, 2026 and 2025, respectively. On October 30, 2024, the Company made a payment of $25 million for fiscal 2024 excise taxes previously accrued. On July 30, 2025, the Company made a payment of $26 million for fiscal 2025 excise taxes previously accrued. As of March 31, 2026 and March 31, 2025, the amount accrued for excise taxes was $40 million and $26 million, respectively, within “Other accrued liabilities” in the Company’s Consolidated Balance Sheets.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Information regarding share repurchase activity over the last three fiscal years were as follows:
| Share Repurchases (1) | ||||||||||||||||||||
| (In millions, except price per share) | Total Number of Shares Purchased (2) | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (3) (5) | |||||||||||||||||
| Balance, March 31, 2023 | $ | 3,613 | ||||||||||||||||||
| Share repurchase authorization increase in fiscal 2024 | 6,000 | |||||||||||||||||||
| Shares repurchased - Open market | 6.9 | $ | 436.46 | (2,998) | ||||||||||||||||
| Balance, March 31, 2024 | 6,615 | |||||||||||||||||||
| Share repurchase authorization increase in fiscal 2025 | 4,000 | |||||||||||||||||||
| Shares repurchased - Open market | 5.8 | $ | 543.05 | (3,146) | ||||||||||||||||
| Balance, March 31, 2025 | 7,469 | |||||||||||||||||||
| Shares repurchased - Open market | 3.3 | $ | 753.61 | (2,500) | ||||||||||||||||
| Shares repurchased - March 2026 ASR (4) | 2.0 | $ | 940.91 | (2,250) | ||||||||||||||||
| Balance, March 31, 2026 | $ | 2,719 |
(1)This table does not include the value of equity awards surrendered to satisfy tax withholding obligations or forfeitures of equity awards.
(2)The number of shares purchased reflects rounding adjustments.
(3)The remaining authorization outstanding for repurchases of common stock excludes $40 million, $26 million and $25 million of excise taxes incurred on share repurchases for the years ended March 31, 2026, 2025, and 2024 respectively.
(4)In March 2026, the Company entered into an ASR program with a third-party financial institution to repurchase $2.3 billion of the Company’s common stock. The average price paid per share and total number of shares purchased under this program are estimates based on the initial share purchase price and initial delivery of shares under an ASR agreement and may differ from the average price paid per share and total number of shares purchased under the ASR program upon its final settlement in the first quarter of fiscal 2027.
(5)On April 29, 2026, the Board of Directors approved the Company to repurchase up to an additional $5.0 billion shares of common stock to a total authorization of $7.7 billion as of April 2026.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Accumulated Other Comprehensive Loss
Information regarding changes in the Company’s accumulated other comprehensive loss by component were as follows:
| Foreign Currency Translation Adjustments | |||||||||||||||||||||||||||||
| (In millions) | Foreign Currency Translation Adjustments, Net of Tax (1) | Unrealized Gains (Losses) on Net Investment Hedges, Net of Tax (2) | Unrealized Gains (Losses) on Cash Flow and Other Hedges, Net of Tax (3) | Unrealized Gains (Losses) and Other Components of Benefit Plans, Net of Tax | Total Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | (847) | $ | (14) | $ | (36) | $ | (8) | $ | (905) | |||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | (9) | 2 | 39 | (6) | 26 | ||||||||||||||||||||||||
| Amounts reclassified to earnings and other | — | — | — | (2) | (2) | ||||||||||||||||||||||||
| Other comprehensive income (loss) | (9) | 2 | 39 | (8) | 24 | ||||||||||||||||||||||||
| Balance, March 31, 2024 | (856) | (12) | 3 | (16) | (881) | ||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | (214) | 59 | (5) | (16) | (176) | ||||||||||||||||||||||||
| Amounts reclassified to earnings and other (4) (5) | 81 | — | (2) | 46 | 125 | ||||||||||||||||||||||||
| Other comprehensive income (loss) | (133) | 59 | (7) | 30 | (51) | ||||||||||||||||||||||||
| Balance, March 31, 2025 | (989) | 47 | (4) | 14 | (932) | ||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | 122 | (105) | (21) | (3) | (7) | ||||||||||||||||||||||||
| Amounts reclassified to earnings and other (6) | 159 | — | 30 | 5 | 194 | ||||||||||||||||||||||||
| Other comprehensive income (loss) | 281 | (105) | 9 | 2 | 187 | ||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | (708) | $ | (58) | $ | 5 | $ | 16 | $ | (745) |
(1)Primarily results from the conversion of non-U.S. dollar financial statements of the Company’s operations in Canada and Europe into the Company’s reporting currency, U.S. dollars.
(2)Amounts before reclassifications recorded in fiscal 2026, fiscal 2025, and fiscal 2024 include gains (losses) of $(142) million, $80 million, and $3 million, respectively, related to net investment hedges from cross-currency swaps. These amounts are net of income tax benefit (expense) of $37 million, $(21) million, and $(1) million in fiscal 2026, fiscal 2025, and fiscal 2024, respectively.
(3)Amounts before reclassifications recorded in fiscal 2026, fiscal 2025, and fiscal 2024 include gains (losses) of $(21) million for cash flow and other hedges related to foreign currency forwards, and $(4) million, and $39 million, respectively, related to cash flow and other hedges from cross-currency swaps. Amounts before reclassifications recorded in fiscal 2025 include (losses) of $(6) million related to cash flow hedges from interest rate swap locks and foreign currency forwards. Amounts before reclassifications recorded in fiscal 2024 include gains of $14 million, respectively, related to cash flow hedges from fixed interest rate swaps. These amounts are net of income tax benefit (expense) of $(3) million, $3 million, and $(14) million in fiscal 2026, fiscal 2025, and fiscal 2024, respectively.
(4)Includes adjustments to Foreign Currency Translation Adjustments, Net of Tax for the year ended March 31, 2025 related to the Canadian retail disposal group, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures,” These amounts were included in the current and prior periods calculation of charges to remeasure the assets and liabilities held for sale to fair value less costs to sell recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statements of Operation.
(5)Adjustments to Unrealized Gains (Losses) and Other Components of Benefit Plans, Net of Tax for the year ended March 31, 2025 include reclassification of losses related to the termination of the U.K. pension plan as discussed in Financial Note 13, “Pension Benefits.” Amounts reclassified to earnings and other includes a net income tax impact of $11 million.
(6)Includes adjustments related to the Norway disposal group, net of tax for the year ended March 31, 2026, as discussed in more detail in Financial Note 2, “Business Acquisitions and Divestitures,” These amounts were included in the current and prior periods calculation of net gain on sale recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statements of Operations.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
19. Related Party Balances and Transactions
In fiscal 2026 and 2025, the North American Pharmaceutical segment’s sales to one of the Company’s equity method investees totaled $1.6 billion and $1.1 billion, respectively. Trade receivables related to transactions from this investee were $443 million and $313 million as of March 31, 2026 and March 31, 2025, respectively.
20. Segments of Business
Commencing in the second quarter of fiscal 2026, the Company implemented a new segment reporting structure which resulted in four reportable segments: North American Pharmaceutical, Oncology & Multispecialty, Prescription Technology Solutions, and Medical-Surgical Solutions. The Company’s former Norwegian operations are included in Other. All prior segment information has been recast to reflect the Company’s new segment structure and current period presentation. The organizational structure also includes Corporate, which consists of income and expenses associated with administrative functions and projects, and the results of certain investments. These segment changes reflect how the Company’s Chief Executive Officer, who is the chief operating decision maker (“CODM”), allocates resources and assesses performance beginning in the second quarter of fiscal 2026. The factors for determining the reportable segments include the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities. The Company evaluates the performance of its operating segments on a number of measures, including revenues and operating profit before interest expense and income taxes.
The CODM uses operating profit before interest expense and income taxes to assess performance and allocate resources for each reportable segment during the Company’s annual long-term planning process and through quarterly operating reviews focused on each segment’s results compared to the budget and rolling forecast. The CODM is regularly provided with budgeted or forecasted expense information for the segment and also uses consolidated expense information. Assets by segment are not a measure used to assess the performance of the Company by the CODM and thus are not reported in the Company’s disclosures.
The North American Pharmaceutical segment provides distribution and logistics services for branded, generic, specialty, biosimilar and over-the-counter pharmaceutical drugs along with other healthcare-related products to customers in the U.S. and Canada. In addition, the segment sells financial, operational, and clinical solutions to pharmacies (retail, hospital, alternate sites) and provides consulting, outsourcing, technological, and other services. The U.S. distribution operations were previously included in the former U.S. Pharmaceutical reportable segment, and the Canadian operations were previously included in the former International reportable segment.
The Oncology & Multispecialty segment includes provider solutions that encompass specialty drug distribution, group purchasing organizations, infusion services, direct to patient pharmacy capabilities, cell and gene therapy services with InspiroGene, technology solutions, practice consulting services, and vaccine distribution. In addition, the segment supports the U.S Oncology Network, one of the largest networks of physician-led, integrated, community-based oncology practices dedicated to advancing high-quality, evidence-based cancer care in the U.S. The segment also includes PRISM Vision, which drives patient outcomes in a retina and ophthalmology setting. Combined with Sarah Cannon Research Institute and the technology business, Ontada, this segment provides research, insights, technologies, and services that address and improve cancer and specialty care. This segment was previously reflected in the former U.S. Pharmaceutical reportable segment.
The Prescription Technology Solutions segment helps solve medication access, affordability, and adherence challenges for patients by working across healthcare to connect patients, pharmacies, providers, pharmacy benefit managers, health plans, and biopharma companies. Prescription Technology Solutions serves the Company’s biopharma and life sciences partners, delivering innovative solutions that help people get the medicine they need to live healthier lives. This segment offers technology services, which includes electronic prior authorization, prescription price transparency, benefit insight, dispensing support services, and patient enrollment, in addition to third-party logistics and wholesale distribution support designed to benefit stakeholders.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The Medical-Surgical Solutions segment is a leading provider of medical-surgical supplies, laboratory equipment and pharmaceutical distribution, logistics, and other services to non-acute settings in the U.S. These include healthcare providers operating in ambulatory care environments, such as physician offices, surgery centers, and hospital reference labs, as well as extended care settings, including nursing homes, hospice and home health care agencies, government facilities and online marketplaces and retailers. This segment offers national brand medical-surgical products as well as its own line of more than 4,000 high-quality products through a network of distribution centers in the U.S. During fiscal 2026, the Company announced its intention to separate this segment into an independent company. As a part of the separation strategy, on April 20, 2026, the Company announced it had entered into a definitive agreement under which funds managed by affiliates of Apollo Global Management, Inc. (“Apollo Funds”) will acquire approximately 13% minority ownership interest in the Medical‑Surgical Solutions segment through an investment of approximately $1.25 billion in the segment’s convertible preferred equity. This transaction is subject to regulatory approvals and customary closing conditions.
The Company’s former Norwegian operations, which provided distribution and services to wholesale and retail customers in Norway where it owned, partnered, or franchised with retail pharmacies, were included in Other. During fiscal 2026, the Company completed the previously announced transaction to sell its Norway disposal group. Refer to Financial Note 2, “Business Acquisitions and Divestitures,” for more information.
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Financial information relating to the Company’s reportable operating segments and reconciliations to the consolidated totals was as follows:
| Years Ended March 31, | |||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | ||||||||||||||
| Segment revenues (1) | |||||||||||||||||
| North American Pharmaceutical | $ | 336,652 | $ | 304,507 | $ | 261,368 | |||||||||||
| Oncology & Multispecialty | 48,423 | 36,862 | 30,490 | ||||||||||||||
| Prescription Technology Solutions | 5,805 | 5,216 | 4,769 | ||||||||||||||
| Medical-Surgical Solutions | 11,507 | 11,380 | 11,309 | ||||||||||||||
| Other | 1,043 | 1,086 | 1,015 | ||||||||||||||
| Total revenues | $ | 403,430 | $ | 359,051 | $ | 308,951 | |||||||||||
| Other segment expense, net (2) | |||||||||||||||||
| North American Pharmaceutical (3) | $ | 332,994 | $ | 301,562 | $ | 259,030 | |||||||||||
| Oncology & Multispecialty (4) | 47,274 | 36,095 | 29,783 | ||||||||||||||
| Prescription Technology Solutions (5) | 4,761 | 4,341 | 3,934 | ||||||||||||||
| Medical-Surgical Solutions (6) | 10,569 | 10,601 | 10,354 | ||||||||||||||
| Other (7) | 453 | 1,032 | 958 | ||||||||||||||
| Total other expense, net | $ | 396,051 | $ | 353,631 | $ | 304,059 | |||||||||||
| Segment operating profit | |||||||||||||||||
| North American Pharmaceutical | $ | 3,658 | $ | 2,945 | $ | 2,338 | |||||||||||
| Oncology & Multispecialty | 1,149 | 767 | 707 | ||||||||||||||
| Prescription Technology Solutions | 1,044 | 875 | 835 | ||||||||||||||
| Medical-Surgical Solutions | 938 | 779 | 955 | ||||||||||||||
| Other | 590 | 54 | 57 | ||||||||||||||
| Subtotal | 7,379 | 5,420 | 4,892 | ||||||||||||||
| Corporate expenses, net (8) | (931) | (796) | (851) | ||||||||||||||
| Interest expense | (247) | (265) | (252) | ||||||||||||||
| Income before income taxes | $ | 6,201 | $ | 4,359 | $ | 3,789 | |||||||||||
| Segment depreciation and amortization (9) | |||||||||||||||||
| North American Pharmaceutical | $ | 134 | $ | 155 | $ | 197 | |||||||||||
| Oncology & Multispecialty | 240 | 148 | 137 | ||||||||||||||
| Prescription Technology Solutions | 82 | 86 | 84 | ||||||||||||||
| Medical-Surgical Solutions | 96 | 91 | 82 | ||||||||||||||
| Other | 4 | 18 | 14 | ||||||||||||||
| Corporate | 173 | 138 | 121 | ||||||||||||||
| Total segment depreciation and amortization | $ | 729 | $ | 636 | $ | 635 | |||||||||||
| Segment expenditures for long-lived assets (10) | |||||||||||||||||
| North American Pharmaceutical | $ | 334 | $ | 243 | $ | 159 | |||||||||||
| Oncology & Multispecialty | 78 | 88 | 96 | ||||||||||||||
| Prescription Technology Solutions | 4 | 11 | 31 | ||||||||||||||
| Medical-Surgical Solutions | 94 | 163 | 159 | ||||||||||||||
| Other | 10 | 17 | 13 | ||||||||||||||
| Corporate | 225 | 337 | 229 | ||||||||||||||
| Total segment expenditures for long-lived assets | $ | 745 | $ | 859 | $ | 687 |
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Continued)
(1)Revenues from services on a disaggregated basis represent less than 1% of the North American Pharmaceutical segment’s total revenues, approximately 7% of the Oncology & Multispecialty segment’s total revenues, approximately 43% of the Prescription Technology Solutions segment’s total revenues, and less than 1% of the Medical-Surgical Solutions segment’s total revenues. The Company’s former Norwegian operations are included in Other. Revenues for the four reportable segments are derived in the U.S and Canada.
(2)Other segment expense, net include cost of sales, total operating expenses, and other income, net, for the Company’s reportable segments.
(3)The Company’s North American Pharmaceutical other segment expense, net includes the following:
-
a credit of $210 million, a charge of $82 million, and a credit of $157 million for the years ended March 31, 2026, 2025, and 2024, respectively, related to the LIFO method of accounting for inventories. These amounts were recorded within “Cost of sales” in the Company’s Consolidated Statements of Operations;
-
cash receipts for the Company’s share of antitrust legal settlements were $23 million, $444 million, and $244 million for the years ended March 31, 2026, 2025, and 2024, respectively. These gains were recorded within “Cost of sales” in the Company’s Consolidated Statements of Operations;
-
a charge of $605 million for the year ended March 31, 2025 to remeasure the assets and liabilities of the Canadian retail disposal group to fair value less costs to sell, as discussed in Financial Note 2, “Business Acquisitions and Divestitures;”
-
related to the bankruptcy of the Company’s customer Rite Aid Corporation (including certain of its subsidiaries, “Rite Aid”), the Company recognized a credit of $206 million for the year ended March 31, 2025 to reassess the previously reserved prepetition balance and a charge of $725 million for the year ended March 31, 2024 which primarily reflects the initial provision for bad debts. These were recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statements of Operations;
-
restructuring charges of $59 million for the year ended March 31, 2025 for restructuring initiatives, as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net;” and
-
charges of $57 million and $74 million for the years ended March 31, 2025 and 2024, respectively, related to the estimated liability for opioid-related claims, as discussed in Financial Note 17, “Commitments and Contingent Liabilities."
(4)The Company’s Oncology & Multispecialty other segment expense, net includes the following:
-
charges of $96 million for the year ended March 31, 2026 related to the acquisition and integration of PRISM Vision and Core Ventures, which were recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statement of Operations;
-
a net gain of $51 million for the year ended March 31, 2026 related to the sale of an investment and market decisions, which was recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statement of Operations; and
-
a loss of $43 million for the year ended March 31, 2025 related to one of the Company’s equity method investments, which was recorded within “Other income, net” in the Company’s Consolidated Statement of Operations.
(5)The Company’s Prescription Technology Solutions other segment expense, net includes gains of $78 million in fiscal 2024 resulting from fair value adjustments of the Company’s contingent consideration liability related to the RxSS acquisition, which were recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statement of Operations.
(6)The Company’s Medical-Surgical Solutions other segment expense, net includes the following:
-
charges of $25 million for the year ended March 31, 2026 related to the Company’s planned separation of its Medical‑Surgical Solutions segment, which were recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statement of Operations; and
-
restructuring charges of $43 million and $204 million for the years ended March 31, 2026 and 2025, respectively, for restructuring initiatives, as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net.”
(7)The Company’s other segment expense, net for Other for the year ended March 31, 2026 includes a net gain of $503 million related to the sale of the Norway disposal group, as discussed in Financial Note 2, “Business Acquisitions and Divestitures.”
(8)Corporate expenses, net, includes the following:
-
charges of $52 million for the year ended March 31, 2026 related to the Company’s planned separation of its Medical‑Surgical Solutions business, which were recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statement of Operations;
-
a net charge of $23 million for the year ended March 31, 2026 related to the sale of our Norway disposal group as discussed in Financial Note 2, “Business Acquisitions and Divestitures;”
-
a charge of $87 million for the year ended March 31, 2025 related to the termination of the U.K. pension plan as discussed in Financial Note 13, “Pension Benefits;”
-
a charge of $62 million for the year ended March 31, 2025 related to the effect of accumulated other comprehensive loss components from the Canadian retail disposal group, as discussed in Financial Note 2, “Business Acquisitions and Divestitures;”
| Table of Contents | Item 8 Index |
McKESSON CORPORATION
FINANCIAL NOTES (Concluded)
-
a net gain of $101 million and a net loss of $24 million for the years ended March 31, 2025 and 2024, respectively, related to the Company’s investments in equity securities of certain U.S. growth stage companies in the healthcare industry, as discussed in Financial Note 15, “Fair Value Measurements;”
-
net charges of $51 million and $73 million for the years ended March 31, 2025 and 2024, respectively, related to the estimated liability for opioid-related claims, as discussed in Financial Note 17, “Commitments and Contingent Liabilities;”
-
restructuring charges of $158 million, $68 million, and $64 million for the years ended March 31, 2026, 2025, and 2024, respectively, for restructuring initiatives, as discussed in Financial Note 3, “Restructuring, Impairment, and Related Charges, Net;” and
-
charges of $11 million, $14 million, and $35 million for the years ended March 31, 2026, 2025, and 2024, respectively, for opioid-related costs, primarily litigation expenses, which were recorded within “Selling, distribution, general, and administrative expenses” in the Company’s Consolidated Statements of Operations.
(9)Amounts primarily consist of amortization of acquired intangible assets purchased in connection with business acquisitions and capitalized software for internal use as well as depreciation and amortization of property, plant, and equipment, net.
(10)Long-lived assets consist of property, plant, and equipment, net and capitalized software.
Long-lived assets by geographic areas were as follows:
| March 31, | |||||||||||
| (In millions) | 2026 | 2025 | |||||||||
| Long-lived assets | |||||||||||
| United States | $ | 3,177 | $ | 2,877 | |||||||
| Foreign | 255 | 306 | |||||||||
| Total long-lived assets | $ | 3,432 | $ | 3,183 |
McKESSON CORPORATION
Previous: Item 7A. Quantitative and Qualitative Disclosures about Market Risk. · Next: Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.