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Restructuring and Asset Impairment Charges | 9 Months Ended
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Dec. 31, 2018
Restructuring and Related Activities [Abstract] |
Restructuring and Asset Impairment Charges | Restructuring and Asset Impairment Charges We recorded pre-tax restructuring and asset impairment charges of $110 million ($92 million after-tax) and $288 million ($244 million after-tax) during the third quarter and first nine months of 2019, and $6 million ($5 million after-tax) and $242 million ($202 million after-tax) during the third quarter and first nine months of 2018. These charges are included under the caption, “Restructuring and Asset Impairment Charges” within operating expenses in the accompanying condensed consolidated statements of operations. Fiscal 2019 Strategic Growth Initiative On April 25, 2018, the Company announced a strategic growth initiative (the “Growth Initiative”) intended to drive long-term incremental profit growth and increase operational efficiency. The initiative consists of multiple growth priorities and plans to optimize the Company’s operating models and cost structures primarily through centralization and outsourcing of certain administrative functions and cost management. As part of the preliminary phase of the Growth Initiative, we committed to implement certain actions including a reduction in workforce, facility consolidation and store closures, which will be substantially completed by 2020. In connection with this preliminary phase, we expect to record total after-tax charges of approximately $150 million to $210 million. We recorded pre-tax charges of $19 million ($14 million after-tax) during the third quarter of 2019, and $130 million ($114 million after-tax) during the first nine months of 2019. The charges primarily represent employee severance, exit-related costs and asset impairment charges. Estimated remaining charges primarily consist of exit-related costs. On November 30, 2018, the Company announced that its corporate headquarters will be relocated from San Francisco, California to Las Colinas, Texas to improve efficiency, collaboration and cost competitiveness, effective April 1, 2019. We anticipate that the relocation will be completed by the fourth quarter of 2021. As a result, during the third quarter of 2019, we recorded a pre-tax charge of $31 million ($23 million after-tax) primarily representing employee severance. We expect to record total pre-tax charges of approximately $60 million to $120 million. The estimated remaining charges primarily consists of lease exit costs and employee retention and relocation expenses. As part of the Growth Initiative, we expanded the existing outsourcing arrangement with a third-party vendor in December 2018. We continue to commit to achieve operational efficiency through further centralization of certain functions and outsourcing. Restructuring charges for the Growth Initiative consisted of the following for the third quarter and first nine months of 2019:
| Quarter Ended December 31, 2018
(In millions) | U.S. Pharmaceutical and Specialty Solutions |  | Medical-Surgical Solutions |  | Other |  | Corporate |  | Total
Severance and employee-related costs, net | $ | 1 |  |  | $ | — |  |  | $ | 9 |  |  | $ | 31 |  |  | $ | 41 |
Exit-related costs | 1 |  |  | 5 |  |  | — |  |  | — |  |  | 6 |
Asset impairments and accelerated depreciation | 2 |  |  | 1 |  |  | — |  |  | — |  |  | 3 |
Total | $ | 4 |  |  | $ | 6 |  |  | $ | 9 |  |  | $ | 31 |  |  | $ | 50 |
| Nine Months Ended December 31, 2018
(In millions) | U.S. Pharmaceutical and Specialty Solutions |  | Medical-Surgical Solutions |  | Other |  | Corporate |  | Total
Severance and employee-related costs, net | $ | 4 |  |  | $ | 10 |  |  | $ | 16 |  |  | $ | 31 |  |  | $ | 61 |
Exit-related costs (1) | 7 |  |  | 12 |  |  | 56 |  |  | — |  |  | 75 |
Asset impairments and accelerated depreciation | 6 |  |  | 2 |  |  | 17 |  |  | — |  |  | 25 |
Total | $ | 17 |  |  | $ | 24 |  |  | $ | 89 |  |  | $ | 31 |  |  | $ | 161 |
(1) Exit-related costs primarily include lease exit costs associated with closures of retail pharmacy stores within our Canadian business. The following table summarizes the activity related to the restructuring liabilities associated with the Growth Initiative during the first nine months of 2019:
(In millions) | U.S. Pharmaceutical and Specialty Solutions |  | Medical-Surgical Solutions |  | Other |  | Corporate |  | Total
Balance, March 31, 2018 | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Net restructuring charges recognized | 17 |  |  | 24 |  |  | 89 |  |  | 31 |  |  | 161 |
Non-cash charges | (6 | ) |  | (2 | ) |  | (17 | ) |  | — |  |  | (25 | )
Cash payments | (7 | ) |  | (13 | ) |  | (36 | ) |  | — |  |  | (56 | )
Balance, December 31, 2018 (1) | $ | 4 |  |  | $ | 9 |  |  | $ | 36 |  |  | $ | 31 |  |  | $ | 80 |
(1) | As of December 31, 2018, the total reserve balance was $80 million of which $49 million was recorded in other accrued liabilities and $31 million was recorded in other noncurrent liabilities.
Asset Impairment Charges During the third quarter of 2019, we performed an interim impairment test of long-lived assets for our Rexall Health retail business due to the decline in the estimated future cash flows primarily driven by a lower projected overall growth rate resulting from the ongoing impact of government regulations. As a result, we recognized a non-cash charge of $35 million (pre-tax and after-tax) to impair certain long-lived assets at retail stores and certain intangible assets (primarily customer relationships). We utilized an income approach (a discounted cash flow (“DCF”) method) for estimating the fair value of the long-lived and intangible assets. The fair value of these assets is considered a Level 3 fair value measurement due to the significance of unobservable inputs developed using company specific information. During the first quarter of 2019, we performed an interim impairment test of long-lived assets primarily for our United Kingdom (“U.K.”) retail business due to the decline in the estimated future cash flows driven by additional U.K. government reimbursement reductions announced on June 29, 2018. As a result, we recognized a non-cash pre-tax charge of $20 million ($16 million after-tax) to impair the carrying value of certain intangible assets (primarily pharmacy licenses). We utilized a market approach for estimating the fair value of intangible assets. The fair value of the intangible assets is considered a Level 3 fair value measurement due to the significance of unobservable inputs developed using company specific information. Other Additionally, during the third quarter and first nine months of 2019, we recorded pre-tax charges of $21 million ($16 million after-tax) and $54 million ($40 million after-tax) related to other smaller programs primarily representing other restructuring-related costs in corporate expenses. Fiscal 2018 McKesson Europe Plan During the second quarter of 2018, we performed an interim impairment test of long-lived assets primarily for our U.K. retail business due to the decline in the estimated future cash flows driven by government reimbursement reductions in the U.K. As a result, we recognized a non-cash pre-tax charge of $189 million ($157 million after-tax) to impair the carrying value of certain intangible assets (notably pharmacy licenses) and store assets (primarily fixtures). We utilized a combination of the income approach (primarily DCF model) and the market approach for estimating the fair value of intangible assets. The fair value of the intangible assets is considered a Level 3 fair value measurement due to the significance of unobservable inputs developed using company specific information. On September 29, 2017, we committed to a restructuring plan which primarily consists of the closures of under-performing retail stores in the U.K. and a reduction in workforce. The plan is expected to be substantially implemented by the end of 2019. As part of this plan, we recorded restructuring charges of $4 million (pre-tax and after-tax) and $15 million ($13 million after-tax) in operating expenses in the third quarter and first nine months of 2019 within the European Pharmaceutical Solutions segment primarily representing employee severance and lease exit costs. We recorded pre-tax charges of $6 million ($5 million after-tax) and $53 million ($45 million after-tax) primarily representing severance during the third quarter and first nine months of 2018. We made cash payments of $10 million and $26 million, primarily related to employee severance in the third quarter and first nine months of 2019. The reserve balances as of December 31, 2018 and March 31, 2018 were $24 million and $42 million, and are recorded in other accrued liabilities in our condensed consolidated balance sheets. We expect to record total pre-tax restructuring charges of approximately $90 million to $130 million for our European Pharmaceutical Solutions segment, of which $89 million of pre-tax charges were recorded to date. Fiscal 2016 Cost Alignment Plan On March 14, 2016, we committed to a restructuring plan to lower our operating costs (the “Cost Alignment Plan”). The Cost Alignment Plan primarily consists of a reduction in workforce, and business process initiatives. There were no material restructuring charges recorded during the third quarters and first nine months of 2019 and 2018. We made cash payments of $3 million and $14 million during the third quarter and first nine months of 2019, and $9 million and $32 million during the third quarter and first nine months of 2018, primarily related to severance. The reserve balances as of December 31, 2018 and March 31, 2018 were $22 million and $39 million, recorded in other accrued liabilities, and $27 million and $30 million recorded in other noncurrent liabilities in our condensed consolidated balance sheets. The remaining programs under the Cost Alignment Plan primarily consist of exit-related activities for our European Pharmaceutical Solutions segment.

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -URI http://asc.fasb.org/topic&trid=2175745 + Details
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