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Restructuring, Impairment and Related Charges | 12 Months Ended
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Mar. 31, 2020
Restructuring and Related Activities [Abstract] |
Restructuring, Impairment and Related Charges | Restructuring, Impairment and Related Charges The Company recorded pre-tax restructuring, impairment and related charges of $268 million, $597 million and $567 million in 2020, 2019 and 2018. These charges are included under the caption “Restructuring, impairment and related charges” within operating expenses in the consolidated statements of operations. There were no material restructuring initiatives announced during 2020. Fiscal 2019 Initiatives On April 25, 2018, the Company announced a strategic growth initiative intended to drive long-term incremental profit growth and to 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, cost management and outsourcing of certain administrative functions. As part of the growth initiative, the Company committed to implement certain actions including a reduction in workforce, facility consolidation and store closures. This set of initiatives was substantially complete by the end of 2020. The Company recorded pre-tax charges of $15 million ($12 million after-tax) and $135 million ($122 million after-tax) in 2020 and 2019. Any remaining charges primarily consist of exit-related costs. As previously announced on November 30, 2018, the Company relocated its corporate headquarters, effective April 1, 2019, from San Francisco, California to Irving, Texas to improve efficiency, collaboration and cost competitiveness. The Company anticipates that the relocation will be complete by January 2021. As a result, the Company recorded pre-tax charges of $44 million ($32 million after-tax) and $33 million ($24 million after-tax) in 2020 and 2019, primarily representing employee retention expenses, asset impairments and accelerated depreciation. The Company expects to record total pre-tax charges of approximately $80 million to $130 million, of which $77 million of pre-tax charges were recorded to date. The estimated remaining charges primarily consist of lease and other exit-related costs and employee-related expenses including retention. During the fourth quarter of 2019, the Company committed to additional programs to continue its operating model and cost optimization efforts. The Company continues to implement centralization of certain functions and outsourcing through an expanded arrangement with a third-party vendor to achieve operational efficiency. The programs also include reorganization and consolidation of business operations, related headcount reductions, the further closures of retail pharmacy stores in Europe and closures of other facilities. The Company expects to incur total charges of approximately $300 million to $350 million for these programs, of which pre-tax charges of $72 million ($55 million after-tax) and $163 million ($127 million after-tax) were recorded in 2020 and 2019, primarily representing employee severance, accelerated depreciation expense and project consulting fees. We anticipate these additional programs will be substantially completed by the end of 2021. The estimated remaining charges primarily consist of facility and other exit costs and employee-related costs. Restructuring, impairment and related charges for the Company’s fiscal 2019 initiatives for the year ended March 31, 2020 consisted of the following:
| Year Ended March 31, 2020
(In millions) | U.S. Pharmaceutical and Specialty Solutions |  | European Pharmaceutical Solutions |  | Medical-Surgical Solutions |  | Other |  | Corporate |  | Total
Severance and employee-related costs, net | $ | 3 |  |  | $ | 1 |  |  | $ | 2 |  |  | $ | 1 |  |  | $ | 33 |  |  | $ | 40 |
Exit and other-related costs (1) | — |  |  | 11 |  |  | 19 |  |  | 1 |  |  | 44 |  |  | 75 |
Asset impairments and accelerated depreciation | — |  |  | 5 |  |  | 1 |  |  | — |  |  | 10 |  |  | 16 |
Total | $ | 3 |  |  | $ | 17 |  |  | $ | 22 |  |  | $ | 2 |  |  | $ | 87 |  |  | $ | 131 |
(1) | Exit and other-related costs primarily include project consulting fees.
Restructuring, impairment and related charges for the Company’s fiscal 2019 initiatives for the year ended March 31, 2019 consisted of the following:
| Year Ended March 31, 2019
(In millions) | U.S. Pharmaceutical and Specialty Solutions |  | European Pharmaceutical Solutions |  | Medical-Surgical Solutions |  | Other |  | Corporate |  | Total
Severance and employee-related costs, net | $ | 50 |  |  | $ | 33 |  |  | $ | 19 |  |  | $ | 16 |  |  | $ | 36 |  |  | $ | 154 |
Exit and other-related costs (1) | 7 |  |  | 3 |  |  | 20 |  |  | 57 |  |  | 57 |  |  | 144 |
Asset impairments and accelerated depreciation | 6 |  |  | 5 |  |  | 3 |  |  | 18 |  |  | 1 |  |  | 33 |
Total | $ | 63 |  |  | $ | 41 |  |  | $ | 42 |  |  | $ | 91 |  |  | $ | 94 |  |  | $ | 331 |
(1) | Exit and other-related costs primarily include lease and other contract exit costs associated with closures of facilities and retail pharmacy stores as well as project consulting fees.
The following table summarizes the activity related to the restructuring liabilities associated with the fiscal 2019 initiatives for the year ended March 31, 2020:
(In millions) | U.S. Pharmaceutical and Specialty Solutions |  | European Pharmaceutical Solutions |  | Medical-Surgical Solutions |  | Other |  | Corporate |  | Total
Balance, March 31, 2019 (1) | $ | 31 |  |  | $ | 38 |  |  | $ | 15 |  |  | $ | 29 |  |  | $ | 37 |  |  | $ | 150 |
Restructuring charges recognized | 3 |  |  | 17 |  |  | 22 |  |  | 2 |  |  | 87 |  |  | 131 |
Non-cash charges | — |  |  | (5 | ) |  | (1 | ) |  | — |  |  | (10 | ) |  | (16 | )
Cash payments | (13 | ) |  | (26 | ) |  | (16 | ) |  | (20 | ) |  | (61 | ) |  | (136 | )
Other | 1 |  |  | — |  |  | (2 | ) |  | (4 | ) |  | (14 | ) |  | (19 | )
Balance, March 31, 2020 (2) | $ | 22 |  |  | $ | 24 |  |  | $ | 18 |  |  | $ | 7 |  |  | $ | 39 |  |  | $ | 110 |
(1) | As of March 31, 2019, the total reserve balance was $150 million of which $117 million was recorded in other accrued liabilities and $33 million was recorded in other noncurrent liabilities.
(2) | As of March 31, 2020, the total reserve balance was $110 million of which $99 million was recorded in other accrued liabilities and $11 million was recorded in other noncurrent liabilities.
Fiscal 2018 McKesson Europe Plan In the second quarter of 2018, the Company committed to a restructuring plan, which primarily consisted of the closures of underperforming retail pharmacy stores in the U.K. and a reduction in workforce. Under this plan, the Company expected to record total pre-tax charges of approximately $90 million to $130 million for its European Pharmaceutical Solutions segment, of which $92 million of pre-tax charges were recorded through the end of 2019. The plan was substantially completed in 2020 and additional charges and payments in 2020 were not material. In 2019 and 2018, the Company recorded pre-tax charges of $18 million ($16 million after-tax) and $74 million ($67 million after-tax) in operating expenses primarily representing employee severance and lease exit costs. It made cash payments of $32 million and $10 million during 2019 and 2018, primarily related to severance. The reserve balances as of March 31, 2020 and 2019 were $4 million and $19 million, recorded in other accrued liabilities in the Company’s consolidated balance sheets. Other Plans There were no material restructuring, impairment and related charges for other plans recorded during 2020, 2019 and 2018. The restructuring liabilities for other plans as of March 31, 2020 and 2019 were $43 million and $68 million. Long-Lived Asset Impairments McKesson Europe In 2020, the Company recorded pre-tax charges of $82 million ($66 million after-tax) to impair certain long-lived and intangible assets within the Company’s European Pharmaceutical Solutions segment. These charges related primarily to intangible assets associated with pharmacy licenses within the U.K retail business due to a decline in estimated future cash flows driven by additional U.K. government reimbursement reductions communicated in the third quarter of 2020. The Company used a combination of an income approach (a DCF method) and a market approach to estimate the fair value of the long-lived and 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. In 2019, the Company recorded pre-tax charges of $210 million ($172 million after-tax) to impair certain long-lived assets (primarily pharmacy licenses) for its U.K. retail business primarily driven by government reimbursement reductions and competitive pressures in the U.K. In 2018, the Company recorded pre-tax charges of $446 million ($410 million after-tax) to impair the carrying value of certain intangible assets (primarily customer relationships and pharmacy licenses), store assets and capitalized software assets due to continuing declines in estimated future cash flows in its European businesses including consideration of significant government reimbursement reductions in its U.K. retail business. In 2019 and 2018, the Company used an income approach (a DCF method) or a combination of an income approach and a market approach to estimate the fair value of the long-lived 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. Rexall Health In 2020, the Company performed an interim impairment test of long-lived and intangible assets for its Rexall Health retail business due to the decline in the estimated future cash flows primarily driven by lower than expected growth in both prescription volume and sales of non-prescription goods. As a result, the Company recognized a charge of $30 million (pre-tax and after-tax) to impair certain long-lived and intangible assets, primarily customer relationships. The Company utilized an income approach (a 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. In 2019 and 2018, the Company recorded charges of $35 million and $33 million (pre-tax and after-tax) to impair certain intangible assets (primarily customer relationships) for its Rexall Health retail business. The impairments were primarily the result of the decline in estimated future cash flows for this business. The estimated cash flow projections were negatively affected by lower projected overall growth rate from the ongoing impact of government regulations in 2019 and significant generics reimbursement reductions across Canada and minimum wage increases in multiple provinces in 2018. The Company utilized an income approach (a DCF method) for estimating the fair value of long-lived 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. Refer to Financial Note 19, “Fair Value Measurements,” for more information on nonrecurring fair value measurements.

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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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