Segments of Business

Commencing in the first quarter of 2019, a new segment reporting structure was implemented which resulted in three reportable segments on a retrospective basis: U.S. Pharmaceutical and Specialty Solutions, European Pharmaceutical Solutions and Medical-Surgical Solutions. All remaining operating segments and business activities that are not significant enough to require separate reportable segment disclosure are included in Other. The factors for determining the reportable segments included the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities. We evaluate the performance of our operating segments on a number of measures, including operating profit before interest expense, income taxes and results from discontinued operations. Assets by operating segment are not reviewed by management for the purpose of assessing performance or allocating resources.

Our U.S. Pharmaceutical and Specialty Solutions segment distributes pharmaceutical and other healthcare-related products and also provides pharmaceutical solutions to pharmaceutical manufacturers in the United States.

Our European Pharmaceutical Solutions segment provides distribution and services to wholesale, institutional and retail customers and serves patients and consumers in 13 European countries through our own pharmacies and participating pharmacies that operate under brand partnership and franchise arrangements.

Our Medical-Surgical Solutions segment distributes medical-surgical supplies and provides logistics and other services to healthcare providers in the United States.

Other primarily consists of the following:


•	McKesson Canada which distributes pharmaceutical and medical products and operates Rexall Health retail pharmacies;


•	McKesson Prescription Technology Solutions which provides innovative technologies that support retail pharmacies; and


•	Our 70% equity ownership interest in a joint venture, Change Healthcare, which is accounted for by us using the equity investment method of accounting.

Financial information relating to our reportable operating segments and reconciliations to the condensed consolidated totals is as follows:



	Quarter Ended June 30,
(In millions)	2018			2017
Revenues
U.S. Pharmaceutical and Specialty Solutions ⁽¹⁾	$	40,977		$	40,282
European Pharmaceutical Solutions ⁽²⁾	6,935			6,382
Medical-Surgical Solutions ⁽³⁾	1,703			1,533
Other	2,992			2,854
Total Revenues	$	52,607		$	51,051

Operating profit
U.S. Pharmaceutical and Specialty Solutions ⁽⁴⁾	$	543		$	475
European Pharmaceutical Solutions ⁽⁵⁾	(560		)	35
Medical-Surgical Solutions	93			108
Other ⁽⁶⁾	114			17
Total	190			635
Corporate Expenses, Net	(123		)	(109		)
Interest Expense	(61		)	(68		)
Income from Continuing Operations Before Income Taxes	$	6		$	458

Revenues, net by geographic area
United States	$	42,890		$	42,093
Foreign	9,717			8,958
Total Revenues	$	52,607		$	51,051


(1)	Revenues derived from services represent less than 1% of this segment’s total revenues.


(2)	Revenues derived from services represent less than 10% of this segment’s total revenues.


(3)	Revenues derived from services represent less than 1% of this segment’s total revenues.

(4)

Our U.S. Pharmaceutical and Specialty Solutions segment operating profit for the first quarters of 2019 and 2018 includes $21 million in pre-tax credits and $26 million in pre-tax charges related to our last-in, first-out (“LIFO”) method of accounting for inventories. The LIFO inventory credit in the first quarter of 2019 was primarily due to lower full year expectations for net price increases compared to the same period a year ago. Operating profit for the first quarter of 2019 also includes $35 million of cash receipts for our share of antitrust legal settlements.


(5)	European Pharmaceutical Solutions segment’s operating profit for the first quarter of 2019 includes non-cash goodwill impairment charges (pre-tax and after-tax) of $570 million.

(6)

The first quarter of 2019 operating profit for Other includes pre-tax restructuring charges of $38 million (pre-tax and after-tax) primarily associated with the closure of retail pharmacy stores within our Canadian business. Operating profit for the first quarter of 2019 also includes a pre-tax gain from escrow settlement of $97 million representing certain indemnity and other claims related to our 2017 third quarter acquisition of Rexall Health. Operating profit for the first quarter of 2018 includes a pre-tax gain of $37 million (after-tax gain of $22 million) upon the finalization of net working capital and other adjustments related to the contribution of the majority of our Core MTS Business to Change Healthcare in the fourth quarter of 2017.