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Restructuring, Impairment and Related Charges | 9 Months Ended
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Dec. 31, 2019
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 $136 million ($115 million after-tax) and $204 million ($167 million after-tax) during the three and nine months ended December 31, 2019, and $110 million ($92 million after-tax) and $288 million ($244 million after-tax) during the three and nine months ended December 31, 2018. These charges are included under the caption, “Restructuring, Impairment and Related Charges” within operating expenses in the condensed consolidated statements of operations. 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 the initiatives will be substantially completed by the end of 2020. The Company recorded restructuring, impairment and related charges of $3 million ($2 million after-tax) and $10 million ($8 million after-tax) during the three and nine months ended December 31, 2019. The Company expects to record total pre-tax charges of approximately $140 million to $180 million, of which $145 million of pre-tax charges were recorded to date. The charges primarily represent employee severance, exit-related costs and asset impairment charges. The estimated 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 completed by January 2021. As a result, the Company recorded pre-tax charges of $14 million ($10 million after-tax) and $34 million ($25 million after-tax) during the three and nine months ended December 31, 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 $67 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 the 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 closure of other facilities. The Company anticipates these additional programs will be substantially completed by the end of 2021. The Company recorded pre-tax charges of $20 million ($15 million after-tax) and $59 million ($45 million after-tax) during the three and nine months ended December 31, 2019, primarily representing project consulting fees. McKesson expects to incur total pre-tax charges of approximately $300 million to $350 million for these programs, of which $222 million of pre-tax charges were recorded to date. 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 during the three and nine months ended December 31, 2019 consisted of the following:
| Three Months Ended December 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 | $ | 3 |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 7 |  |  | $ | 12 |
Exit and other-related costs (1) | — |  |  | 2 |  |  | 5 |  |  | — |  |  | 13 |  |  | 20 |
Asset impairments and accelerated depreciation | — |  |  | 2 |  |  | — |  |  | — |  |  | 3 |  |  | 5 |
Total | $ | 3 |  |  | $ | 5 |  |  | $ | 6 |  |  | $ | — |  |  | $ | 23 |  |  | $ | 37 |
| Nine Months Ended December 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 | $ | 4 |  |  | $ | 3 |  |  | $ | 2 |  |  | $ | 1 |  |  | $ | 23 |  |  | $ | 33 |
Exit and other-related costs (1) | — |  |  | 7 |  |  | 9 |  |  | 1 |  |  | 36 |  |  | 53 |
Asset impairments and accelerated depreciation | — |  |  | 8 |  |  | 1 |  |  | — |  |  | 8 |  |  | 17 |
Total | $ | 4 |  |  | $ | 18 |  |  | $ | 12 |  |  | $ | 2 |  |  | $ | 67 |  |  | $ | 103 |
(1) | Exit and other-related costs primarily include project consulting fees.
Restructuring, impairment and related charges for the Company’s fiscal 2019 initiatives during the three and nine months ended December 31, 2018 consisted of the following:
| Three Months Ended December 31, 2018
(In millions) | U.S. Pharmaceutical and Specialty Solutions |  | European Pharmaceutical Solutions |  | Medical-Surgical Solutions |  | Other |  | Corporate |  | Total
Severance and employee-related costs, net | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | 9 |  |  | $ | 32 |  |  | $ | 42 |
Exit and other-related costs (1) | 1 |  |  | 4 |  |  | 5 |  |  | — |  |  | 16 |  |  | 26 |
Asset impairments and accelerated depreciation | 2 |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | 3 |
Total | $ | 4 |  |  | $ | 4 |  |  | $ | 6 |  |  | $ | 9 |  |  | $ | 48 |  |  | $ | 71 |
| Nine Months Ended December 31, 2018
(In millions) | U.S. Pharmaceutical and Specialty Solutions |  | European Pharmaceutical Solutions |  | Medical-Surgical Solutions |  | Other |  | Corporate |  | Total
Severance and employee-related costs, net | $ | 4 |  |  | $ | — |  |  | $ | 10 |  |  | $ | 16 |  |  | $ | 36 |  |  | $ | 66 |
Exit and other-related costs (1) | 7 |  |  | 4 |  |  | 12 |  |  | 56 |  |  | 45 |  |  | 124 |
Asset impairments and accelerated depreciation | 6 |  |  | — |  |  | 2 |  |  | 17 |  |  | — |  |  | 25 |
Total | $ | 17 |  |  | $ | 4 |  |  | $ | 24 |  |  | $ | 89 |  |  | $ | 81 |  |  | $ | 215 |
(1) | Exit and other-related costs primarily include lease exit costs associated with closures of retail pharmacy stores within the Company’s Canadian business as well as project consulting fees.
The following table summarizes the activity related to the restructuring liabilities associated with the Company’s fiscal 2019 initiatives for the nine months ended December 31, 2019:
(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, impairment and related charges | 4 |  |  | 18 |  |  | 12 |  |  | 2 |  |  | 67 |  |  | 103 |
Non-cash charges | — |  |  | (8 | ) |  | (1 | ) |  | — |  |  | (8 | ) |  | (17 | )
Cash payments | (6 | ) |  | (13 | ) |  | (8 | ) |  | (16 | ) |  | (43 | ) |  | (86 | )
Other | (1 | ) |  | (4 | ) |  | (2 | ) |  | (5 | ) |  | (6 | ) |  | (18 | )
Balance, December 31, 2019 (2) | $ | 28 |  |  | $ | 31 |  |  | $ | 16 |  |  | $ | 10 |  |  | $ | 47 |  |  | $ | 132 |
(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 December 31, 2019, the total reserve balance was $132 million of which $110 million was recorded in other accrued liabilities and $22 million was recorded in other noncurrent liabilities.
Other Plans There were no material restructuring, impairment and related charges for other plans recorded during the three and nine months ended December 31, 2019 and 2018. The restructuring liabilities for other plans as of December 31, 2019 and March 31, 2019 were $48 million and $87 million. Long-Lived Asset Impairments During the third quarter of 2020, the Company recognized a non-cash pre-tax charge of $64 million ($53 million after-tax) to impair certain long-lived and intangible assets within the Company’s European Pharmaceutical Solutions segment. This charge 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 three months ended December 31, 2019. The Company used a combination of an income approach (a discounted cash flow (“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. Additionally, during the third quarter of 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 non-cash 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. During the third quarter of 2019, the Company performed an interim impairment test of long-lived assets for its 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, the Company 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). 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. During the first quarter of 2019, the Company performed an interim impairment test of long-lived assets primarily for its 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, the Company 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). The Company 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. Refer to Financial Note 15, “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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