Full Press Release Details
McKESSON CORPORATION REPORTS FISCAL 2023 THIRD-QUARTER RESULTS
AND RAISES FULL-YEAR GUIDANCE
Third-Quarter Highlights
Total revenues of $70.5 billion increased 3%.
Earnings per diluted share from continuing operations of $7.65 increased $7.69.
Adjusted Earnings per Diluted Share of $6.90 increased 12%.
Adjusted Earnings per Diluted Share Excluding Certain Items increased 6%.
Increased fiscal 2023 Adjusted Earnings per Diluted Share guidance range to $25.75 to $26.15, from the previous range of $24.45 to $24.95.
Fiscal 2023 Adjusted Earnings per Diluted Share guidance includes approximately $2.30 to $2.50, an increase from the previous range of $1.45 to $1.65, attributable to the following
$0.70 to $0.80 related to the U.S. government's COVID-19 vaccine distribution program
$1.10 to $1.20 related to the U.S. government's kitting, storage, and distribution of ancillary supplies program and COVID-19 tests
Approximately ($0.15) related to year-to-date net gains and losses associated with McKesson Ventures' equity investments
$0.65 related to the termination of the tax receivable agreement with Change Healthcare.
Fiscal 2023 Adjusted Earnings per Diluted Share Excluding Certain Items guidance indicates 13% to 16% forecasted growth compared to prior year.
IRVING, Texas, February 1, 2023 - McKesson Corporation (NYSE MCK) today reported results for the third-quarter ended December 31, 2022.
Fiscal 2023 Third-Quarter Result Summary
| Third-Quarter | Year-to-Date | |||||||||||||||||||||
| ($ in millions, except per share amounts) | FY23 | FY22 | Change | FY23 | FY22 | Change | ||||||||||||||||
| Revenues | $ | 70,490 | $ | 68,614 | 3 | % | $ | 207,801 | $ | 197,864 | 5 | % | ||||||||||
| Income from Continuing Operations 1 | 1,078 | (7) | - | 2,776 | 749 | 271 | ||||||||||||||||
| Adjusted Earnings 1,2 | 972 | 944 | 3 | 2,697 | 2,782 | (3) | ||||||||||||||||
| Earnings per Diluted Share 1 | 7.65 | (0.04) | - | 19.32 | 4.81 | 302 | ||||||||||||||||
| Adjusted Earnings per Diluted Share 1,2 | 6.90 | 6.15 | 12 | 18.78 | 17.86 | 5 | ||||||||||||||||
| 1 Reflects continuing operations attributable to McKesson, net of tax 2 Adjusted results in this earnings release are non-GAAP financial measures refer to the accompanying definitions and reconciliation schedules |
"McKesson delivered another solid quarter, driven by the dedication of our talented associates committed to advancing healthcare for all. Our performance was highlighted by execution across our scaled distribution businesses and differentiated capabilities in the oncology and biopharma services platforms, said Brian Tyler, chief executive officer. This consistently solid performance, combined with our outlook, reinforces our ability to deliver on our financial targets, resulting in compelling value creation for all stakeholders. As a result of our execution and operational strength, we are raising our fiscal 2023 Adjusted Earnings per Diluted Share guidance to $25.75 to $26.15.
Third-quarter revenues were $70.5 billion, an increase of 3% from a year ago, primarily driven by growth in the U.S. Pharmaceutical segment, resulting from increased specialty product volumes, including retail national account customers, market growth, and strength across the oncology platform including increased patient visits partially offset by lower revenues in the International segment as a result of the completed divestitures of McKesson's European businesses.
Third-quarter earnings per diluted share from continuing operations was $7.65 compared to loss per diluted share from continuing operations of ($0.04) a year ago, an increase of $7.69, due to an after-tax charge of $829 million for the fair value remeasurement related to McKesson's agreement to sell its UK business in the third-quarter of fiscal 2022.
Third-quarter Adjusted Earnings per Diluted Share was $6.90 compared to $6.15 a year ago, an increase of 12%, driven by lower corporate expenses, including a pre-tax benefit of $126 million associated with the termination of the tax receivable agreement with Change Healthcare, lower share count, and growth across the North American businesses.
For the first nine months of the fiscal year, McKesson returned $3.7 billion of cash to shareholders, which included $3.5 billion of common stock repurchases and $216 million of dividend payments. During the first nine months of the fiscal year, McKesson generated cash from operations of $1.8 billion, and invested more than $300 million in capital expenditures, resulting in Free Cash Flow of $1.5 billion.
McKesson was recognized by Newsweek as one of America's Greatest Workplaces for Diversity in 2023.
The Science Based Targets initiative (SBTi) has approved McKesson's near-term science-based greenhouse gas (GHG) emissions reduction targets. The targets validated by SBTi are to
Reduce direct GHG emissions 50% by fiscal 2032 from a fiscal 2020 base year
Ensure 70% of McKesson suppliers, by spend covering purchased goods and services, will have their own SBTi-approved GHG reduction targets by fiscal 2027
McKesson continued to expand its differentiated oncology and biopharma businesses, further demonstrating meaningful progress against its company priorities.
On October 31, 2022, McKesson and HCA Healthcare completed the formation of a joint venture combining McKesson's US Oncology Research and HCA Healthcare's Sarah Cannon Research Institute and on November 1, 2022, McKesson completed the acquisition of Rx Savings Solutions.
The US Oncology Network expanded its footprint into local communities with the addition of two large multidisciplinary practices, Epic Care and Nexus Health.
U.S. Pharmaceutical Segment
Third-quarter revenues were $61.9 billion, an increase of 13%, driven by increased volume of specialty products, including higher volumes from retail national account customers, and market growth, partially offset by branded to generic conversions.
Third-quarter Segment Operating Profit was $850 million. Adjusted Segment Operating Profit was $778 million, an increase of 6%, driven by growth in distribution of specialty products to providers and health systems. Excluding the impact of COVID-19 vaccine distribution, the U.S. Pharmaceutical segment delivered Adjusted Segment Operating Profit growth of 7%, driven by growth in distribution of specialty products to providers and health systems and improvements in pharmaceutical prescription volumes and oncology visits.
Prescription Technology Solutions Segment
Third-quarter revenues were $1.1 billion, an increase of 9%, driven by growth in prescription volumes in our third-party logistics business and higher technology service revenues.
Third-quarter Segment Operating Profit was $136 million. Adjusted Segment Operating Profit was $155 million, an increase of 7%, driven by growth in access, affordability, and adherence solutions. During the quarter, we continued to organically invest in this segment as we position our products and services for sustainable long-term growth.
Medical-Surgical Solutions Segment
Third-quarter revenues were $3.0 billion, a decrease of 3%, driven by lower sales of COVID-19 tests and lower contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government's COVID-19 vaccine program, partially offset by growth in the primary care business.
Third-quarter Segment Operating Profit was $328 million. Adjusted Segment Operating Profit was $336 million, an increase of 2%, driven by growth in the primary care business and organic business performance, partially offset by lower sales of COVID-19 tests and lower contribution from kitting, storage, and distribution of ancillary supplies for the U.S. government's COVID-19 vaccine program. Excluding the impact of COVID-19 related items, the Medical-Surgical Solutions segment delivered Adjusted Segment Operating Profit growth of 25%, driven by growth in the primary care business, including illness season testing, and favorable sourcing activities.
International Segment
Third-quarter revenues were $4.4 billion. On an FX-Adjusted basis, revenues were $4.9 billion, a decrease of 48%, driven by the divestitures of McKesson's European businesses.
Third-quarter Segment Operating Profit was $136 million. On an FX-Adjusted basis, Adjusted Segment Operating Profit was $158 million, a decrease of 29%, driven by the divestitures of McKesson's European businesses.
McKesson raised fiscal 2023 Adjusted Earnings per Diluted Share guidance to $25.75 to $26.15 from the previous range of $24.45 to $24.95 to reflect solid operating business performance.
Fiscal 2023 Adjusted Earnings per Diluted Share guidance includes approximately $2.30 to $2.50 of impacts attributable to the following
| February 2023 Outlook | November 2022 Outlook | |
| U.S. government's COVID-19 vaccine distribution program | $0.70 to $0.80 | $0.60 to $0.70 |
| U.S. government's kitting, storage, and distribution of ancillary supplies program and COVID-19 tests | $1.10 to $1.20 | $1.00 to $1.10 |
| Net gains and losses associated with McKesson Ventures' equity investments | Approximately ($0.15) | Approximately ($0.15) |
| Termination of the tax receivable agreement with Change Healthcare | $0.65 | -- |
| Total Impact of Certain Items | $2.30 to $2.50 | $1.45 to $1.65 |
Fiscal 2023 Adjusted Earnings per Diluted Share Excluding Certain Items guidance indicates 13% to 16% forecasted growth compared to prior year.
Additional modeling considerations will be provided in the earnings call presentation.
Conference Call Details
McKesson has scheduled a conference call for today, Wednesday, February 1st at 4 30 PM ET to discuss the company's financial results. The audio webcast of the conference call will be available live and archived on McKesson's Investor Relations website at investor.mckesson.com.
Upcoming Investor Events
McKesson management will be participating in the following investor conference
BofA Securities 2023 Healthcare Conference, May 9-11, 2023
Audio webcast, and a complete listing of upcoming events for the investment community, including details and updates, will be available on McKesson's Investor Relations website.
Non-GAAP Financial Measures
GAAP refers to the U.S. generally accepted accounting principles. This press release includes GAAP financial measures as well as Non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Operating Expenses, Adjusted Other Income, Adjusted Loss on Debt Extinguishment, Adjusted Income Tax Expense, Adjusted Earnings, Adjusted Earnings per Diluted Share, Adjusted Earnings per Diluted Share Excluding Certain Items, Adjusted Segment Operating Profit, Adjusted Segment Operating Profit Margin, Adjusted Corporate Expenses, Adjusted Operating Profit, FX-Adjusted results and Free Cash Flow which are financial measures not calculated in accordance with GAAP. Refer to the "Supplemental Non-GAAP Financial Information" section of the accompanying financial statement tables for the definitions and usefulness of the Company's Non-GAAP financial measures and the attached schedules for reconciliations of the differences between the Non-GAAP financial measures and their most directly comparable GAAP financial measures.
The Company does not provide forward-looking guidance on a GAAP basis as McKesson is unable to provide a quantitative reconciliation of this forward-looking Non-GAAP measure to the most directly comparable forward-looking GAAP measure, without unreasonable effort, because McKesson cannot reliably forecast LIFO inventory-related adjustments, certain litigation loss and gain contingencies, restructuring, impairment and related charges, and other adjustments, which are difficult to predict and estimate. These items are inherently uncertain and depend on various factors, many of which are beyond the company's control, and as such, any associated estimate and its impact on GAAP performance could vary materially.
Cautionary Statements
This earnings release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by their use of terminology such as "believes," "expects," "anticipates," "may," "will," "should," "seeks," "approximately," "intends," "projects," "plans," "estimates," "targets" or the negative of these words or other comparable terminology. The discussion of financial outlook, guidance, trends, strategy, plans, assumptions, or intentions, and our greenhouse gas emission targets may also include forward-looking statements. Readers should not place undue reliance on forward-looking statements, such as financial performance forecasts, which speak only as of the date they are first made. Except to the extent required by law, we undertake no obligation to update or revise our forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or implied. Although it is not possible to predict or identify all such risks and uncertainties, we encourage investors to read the risk factors described in our most recent annual and periodic report filed with the Securities and Exchange Commission.
These risk factors include, but are not limited to we experience costly and disruptive legal disputes and settlements, including regarding our role in distributing controlled substances such as opioids we might experience losses not covered by insurance we might be adversely impacted by changes in tax legislation or challenges to our tax positions we from time to time record significant charges from impairment to goodwill, intangibles, inventory and other assets or investments we experience cybersecurity incidents and might experience significant computer system compromises or data breaches we might experience significant problems with information systems or networks we may be unsuccessful in retail pharmacy profitability we might be harmed by large customer purchase reductions, payment defaults or contract non-renewal our contracts with government entities involve future funding and compliance risks we might be harmed by changes in our relationships or contracts with suppliers we might be adversely impacted by delays or other difficulties with divestitures we might be adversely impacted by healthcare reform such as changes in pricing and reimbursement models we might be adversely impacted by changes or disruptions in product supply and we have experienced and may experience difficulties in sourcing products and changes in pricing due to the effects of the COVID-19 pandemic and Russo-Ukrainian War on supply chains we might be adversely impacted as a result of our distribution of generic pharmaceuticals we might be adversely impacted by an economic slowdown or recession and by disruption in capital and credit markets that might impede our access to credit, increase our borrowing costs and impair the financial soundness of our customers and suppliers we might be adversely impacted by monetary inflation or fluctuations in foreign currency exchange rates we might be adversely impacted by events outside of our control, such as widespread public health issues (including the effects we have experienced from the COVID-19 pandemic), natural disasters, political events (such as the Russo-Ukrainian War) and other catastrophic events we may not achieve our GHG emissions reduction targets SBTi may not validate a sufficient number of our suppliers' GHG reduction targets we may incur additional costs or operational impacts related to our GHG reduction initiatives we may be adversely affected by global climate change or by legal, regulatory or market responses to such change and we face uncertainties and risks related to COVID-19 vaccination distribution and related ancillary supply kit programs.
About McKesson Corporation
McKesson Corporation is a diversified healthcare services leader dedicated to advancing health outcomes for patients everywhere. Our teams partner 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. Learn more about how McKesson is impacting virtually every aspect of healthcare at McKesson.com and read Our Stories.
Rachel Rodriguez, 469-260-0556 (Investors)
Rachel.Rodriguez McKesson.com
David Matthews, 214-952-0833 (Media)
David.Matthews McKesson.com
McKESSON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP)
(in millions, except per share amounts)
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||
| Revenues | $ | 70,490 | $ | 68,614 | 3 | % | $ | 207,801 | $ | 197,864 | 5 | % | |||||||||
| Cost of sales | (67,316) | (65,186) | 3 | (198,509) | (188,052) | 6 | |||||||||||||||
| Gross profit | 3,174 | 3,428 | (7) | 9,292 | 9,812 | (5) | |||||||||||||||
| Selling, distribution, general, and administrative expenses | (1,903) | (3,105) | (39) | (5,812) | (8,006) | (27) | |||||||||||||||
| Claims and litigation charges, net | 1 | (7) | 114 | 5 | (193) | 103 | |||||||||||||||
| Restructuring, impairment, and related charges, net | (31) | (18) | 72 | (84) | (208) | (60) | |||||||||||||||
| Total operating expenses | (1,933) | (3,130) | (38) | (5,891) | (8,407) | (30) | |||||||||||||||
| Operating income | 1,241 | 298 | 316 | 3,401 | 1,405 | 142 | |||||||||||||||
| Other income, net | 276 | 20 | - | 466 | 202 | 131 | |||||||||||||||
| Loss on debt extinguishment | - | - | - | - | (191) | (100) | |||||||||||||||
| Interest expense | (69) | (41) | 68 | (169) | (135) | 25 | |||||||||||||||
| Income from continuing operations before income taxes | 1,448 | 277 | 423 | 3,698 | 1,281 | 189 | |||||||||||||||
| Income tax expense | (329) | (238) | 38 | (799) | (396) | 102 | |||||||||||||||
| Income from continuing operations | 1,119 | 39 | - | 2,899 | 885 | 228 | |||||||||||||||
| Income (loss) from discontinued operations, net of tax | 1 | - | - | (3) | (3) | - | |||||||||||||||
| Net income | 1,120 | 39 | - | 2,896 | 882 | 228 | |||||||||||||||
| Net income attributable to noncontrolling interests | (41) | (46) | (11) | (123) | (136) | (10) | |||||||||||||||
| Net income (loss) attributable to McKesson Corporation | $ | 1,079 | $ | (7) | - | % | $ | 2,773 | $ | 746 | 272 | % | |||||||||
| Earnings (loss) per common share attributable to McKesson Corporation (a) | |||||||||||||||||||||
| Diluted (b) | |||||||||||||||||||||
| Continuing operations | $ | 7.65 | $ | (0.04) | - | % | $ | 19.32 | $ | 4.81 | 302 | % | |||||||||
| Discontinued operations | 0.01 | - | - | (0.02) | (0.02) | - | |||||||||||||||
| Total | $ | 7.66 | $ | (0.04) | - | % | $ | 19.30 | $ | 4.79 | 303 | % | |||||||||
| Basic | |||||||||||||||||||||
| Continuing operations | $ | 7.70 | $ | (0.04) | - | % | $ | 19.48 | $ | 4.87 | 300 | % | |||||||||
| Discontinued operations | 0.01 | - | - | (0.02) | (0.02) | - | |||||||||||||||
| Total | $ | 7.71 | $ | (0.04) | - | % | $ | 19.46 | $ | 4.85 | 301 | % | |||||||||
| Dividends declared per common share | $ | 0.54 | $ | 0.47 | $ | 1.55 | $ | 1.36 | |||||||||||||
| Weighted-average common shares outstanding | |||||||||||||||||||||
| Diluted | 141.0 | 151.6 | (7) | % | 143.7 | 155.8 | (8) | % | |||||||||||||
| Basic | 139.9 | 151.6 | (8) | 142.5 | 154.0 | (7) |
(a)Certain computations may reflect rounding adjustments.
(b)Net loss per diluted share for the three months ended December 31, 2021 is calculated by excluding dilutive securities from the denominator due to their antidilutive effects.
All percentage changes displayed above which are not meaningful are displayed as zero percent.
Refer to our applicable filings with the SEC for additional disclosures including our Quarterly Reports on Form 10-Q for fiscal 2023 and 2022 as well as our
Annual Report on Form 10-K for fiscal 2022.
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED RESULTS (NON-GAAP)
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||
| Income from continuing operations (GAAP) | $ | 1,119 | $ | 39 | - | % | $ | 2,899 | $ | 885 | 228 | % | |||||||||
| Net income attributable to noncontrolling interests (GAAP) | (41) | (46) | (11) | (123) | (136) | (10) | |||||||||||||||
| Income (loss) from continuing operations attributable to McKesson Corporation (GAAP) | 1,078 | (7) | - | 2,776 | 749 | 271 | |||||||||||||||
| Pre-tax adjustments | |||||||||||||||||||||
| Amortization of acquisition-related intangibles | 57 | 81 | (30) | 170 | 263 | (35) | |||||||||||||||
| Transaction-related expenses and adjustments (1) (2) (3) (4) (5) | (9) | 882 | (101) | (158) | 1,343 | (112) | |||||||||||||||
| LIFO inventory-related adjustments | 5 | (33) | 115 | (31) | (79) | (61) | |||||||||||||||
| Gains from antitrust legal settlements | (129) | - | - | (129) | (46) | 180 | |||||||||||||||
| Restructuring, impairment, and related charges, net (6) | 31 | 18 | 72 | 84 | 208 | (60) | |||||||||||||||
| Claims and litigation charges, net (7) | (1) | 7 | (114) | (5) | 193 | (103) | |||||||||||||||
| Other adjustments, net (8) (9) (10) | (78) | - | - | (71) | 347 | (120) | |||||||||||||||
| Income tax effect on pre-tax adjustments | 18 | (4) | 550 | 61 | (196) | 131 | |||||||||||||||
| Adjusted Earnings (Non-GAAP) | $ | 972 | $ | 944 | 3 | % | $ | 2,697 | $ | 2,782 | (3) | % |
All percentage changes displayed above which are not meaningful are displayed as zero percent.
Refer to the section entitled Financial Statement Notes of this release.
For more information relating to the Adjusted Earnings (Non-GAAP) definition, refer to the section entitled "Supplemental Non-GAAP Financial Information" of this release.
Schedule 2 (continued)
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED RESULTS (NON-GAAP)
(in millions, except per share amounts)
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||
| Earnings (loss) per diluted common share from continuing operations attributable to McKesson Corporation (GAAP) (a) (b) | $ | 7.65 | $ | (0.04) | - | % | $ | 19.32 | $ | 4.81 | 302 | % | |||||||||
| After-tax adjustments | |||||||||||||||||||||
| Amortization of acquisition-related intangibles | 0.32 | 0.42 | (24) | 0.93 | 1.33 | (30) | |||||||||||||||
| Transaction-related expenses and adjustments | (0.17) | 5.80 | (103) | (0.70) | 8.55 | (108) | |||||||||||||||
| LIFO inventory-related adjustments | 0.03 | (0.16) | 119 | (0.16) | (0.38) | (58) | |||||||||||||||
| Gains from antitrust legal settlements | (0.67) | - | - | (0.66) | (0.22) | 200 | |||||||||||||||
| Restructuring, impairment, and related charges, net | 0.17 | 0.09 | 89 | 0.45 | 1.07 | (58) | |||||||||||||||
| Claims and litigation charges, net | (0.01) | 0.04 | (125) | (0.03) | 1.03 | (103) | |||||||||||||||
| Other adjustments, net | (0.42) | - | - | (0.37) | 1.67 | (122) | |||||||||||||||
| Adjusted Earnings per Diluted Share (Non-GAAP) (b) (c) | $ | 6.90 | $ | 6.15 | 12 | $ | 18.78 | $ | 17.86 | 5 | |||||||||||
| After-tax adjustments (d) | |||||||||||||||||||||
| U.S. government's COVID-19 vaccine distribution program | (0.25) | (0.26) | (4) | (0.66) | (0.82) | (20) | |||||||||||||||
| U.S. government's kitting, storage, and distribution of ancillary supplies program and COVID-19 tests | (0.38) | (0.57) | (33) | (0.96) | (1.36) | (29) | |||||||||||||||
| Net losses (gains) associated with McKesson Ventures' equity investments (11) | - | - | - | 0.13 | (0.49) | 127 | |||||||||||||||
| Termination of Tax Receivable Agreement with Change Healthcare (12) | (0.65) | - | - | (0.65) | - | - | |||||||||||||||
| Adjusted Earnings per Diluted Share Excluding Certain Items (Non-GAAP) (b) | $ | 5.62 | $ | 5.32 | 6 | % | $ | 16.64 | $ | 15.19 | 10 | % | |||||||||
| Diluted weighted-average common shares outstanding | 141.0 | 153.5 | (8) | % | 143.7 | 155.8 | (8) | % |
(a)Certain computations may reflect rounding adjustments.
(b)We calculate loss per diluted common share from continuing operations attributable to McKesson Corporation (GAAP) for the three months ended December 31, 2021 using a weighted average of 151.6 million common shares, which excludes dilutive securities from the denominator due to their antidilutive effect when calculating a net loss per diluted share. We calculate adjusted earnings per diluted share (Non-GAAP) for the three months ended December 31, 2021 on a fully diluted basis, using a weighted average of 153.5 million common shares.
(c)Adjusted earnings per diluted share on an FX-adjusted basis for the three and nine months ended December 31, 2022 was $6.97 and $18.98, respectively, which excludes the foreign currency exchange effect of $0.07 and $0.20, respectively.
(d)After-tax adjustments include the following tax impacts per diluted share
U.S. government's COVID-19 vaccine distribution program includes income tax expense of $0.09 per diluted share for each of the three months ended December 31, 2022 and 2021, and $0.23 and $0.29 per diluted share for the nine months ended December 31, 2022 and 2021, respectively.
U.S. government's kitting, storage, and distribution of ancillary supplies program and COVID-19 tests includes income tax expense of $0.13 and $0.20 per diluted share for the three months ended December 31, 2022 and 2021, respectively, and $0.34 and $0.48 per diluted share for the nine months ended December 31, 2022 and 2021, respectively.
Net losses (gains) associated with McKesson Ventures' equity investments includes income tax benefit of $0.04 per diluted share and income tax expense of $0.17 per diluted share for the nine months ended December 31, 2022 and 2021, respectively.
Termination of Tax Receivable Agreement with Change Healthcare early termination fee includes income tax expense of $0.23 per diluted share for the three and nine months ended December 31, 2022 and 2021.
All percentage changes displayed above which are not meaningful are displayed as zero percent.
Refer to the section entitled Financial Statement Notes of this release.
For more information relating to the Adjusted Earnings per Diluted Share (Non-GAAP) and Adjusted Earnings per Diluted Share Excluding Certain Items (Non-GAAP) definitions, refer to the section entitled "Supplemental Non-GAAP Financial Information" of this release.
Schedule 2 (continued)
McKESSON CORPORATION
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED RESULTS (NON-GAAP)
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||
| Gross profit (GAAP) | $ | 3,174 | $ | 3,428 | (7) | % | $ | 9,292 | $ | 9,812 | (5) | % | |||||||||
| Pre-tax adjustments | |||||||||||||||||||||
| LIFO inventory-related adjustments | 5 | (33) | 115 | (31) | (79) | (61) | |||||||||||||||
| Gains from antitrust legal settlements | (129) | - | - | (129) | (46) | 180 | |||||||||||||||
| Other adjustments, net (10) | - | - | - | - | 147 | (100) | |||||||||||||||
| Adjusted Gross Profit (Non-GAAP) | $ | 3,050 | $ | 3,395 | (10) | % | $ | 9,132 | $ | 9,834 | (7) | % | |||||||||
| Total operating expenses (GAAP) | $ | (1,933) | $ | (3,130) | (38) | % | $ | (5,891) | $ | (8,407) | (30) | % | |||||||||
| Pre-tax adjustments | |||||||||||||||||||||
| Amortization of acquisition-related intangibles | 57 | 81 | (30) | 170 | 262 | (35) | |||||||||||||||
| Transaction-related expenses and adjustments (1) (2) (3) (4) | (9) | 882 | (101) | (16) | 1,343 | (101) | |||||||||||||||
| Restructuring, impairment, and related charges, net (6) | 31 | 18 | 72 | 84 | 208 | (60) | |||||||||||||||
| Claims and litigation charges, net (7) | (1) | 7 | (114) | (5) | 193 | (103) | |||||||||||||||
| Other adjustments, net (10) | 20 | - | - | 26 | 9 | 189 | |||||||||||||||
| Adjusted Operating Expenses (Non-GAAP) | $ | (1,835) | $ | (2,142) | (14) | % | $ | (5,632) | $ | (6,392) | (12) | % | |||||||||
| Other income, net (GAAP) | $ | 276 | $ | 20 | - | % | $ | 466 | $ | 202 | 131 | % | |||||||||
| Pre-tax adjustments | |||||||||||||||||||||
| Amortization of acquisition-related intangibles | - | - | - | - | 1 | (100) | |||||||||||||||
| Transaction-related expenses and adjustments (5) | - | - | - | (142) | - | - | |||||||||||||||
| Other adjustments, net (8) | (98) | - | - | (97) | - | - | |||||||||||||||
| Adjusted Other Income (Non-GAAP) | $ | 178 | $ | 20 | 790 | % | $ | 227 | $ | 203 | 12 | % | |||||||||
| Loss on debt extinguishment (GAAP) | $ | - | $ | - | - | % | $ | - | $ | (191) | (100) | % | |||||||||
| Pre-tax adjustments | |||||||||||||||||||||
| Other adjustments, net (9) | - | - | - | - | 191 | (100) | |||||||||||||||
| Adjusted Loss on Debt Extinguishment (Non-GAAP) | $ | - | $ | - | - | % | $ | - | $ | - | - | % | |||||||||
| Income tax expense (GAAP) | $ | (329) | $ | (238) | 38 | % | $ | (799) | $ | (396) | 102 | % | |||||||||
| Tax adjustments | |||||||||||||||||||||
| Amortization of acquisition-related intangibles | (13) | (16) | (19) | (37) | (56) | (34) | |||||||||||||||
| Transaction-related expenses and adjustments | (15) | 9 | (267) | 57 | (11) | 618 | |||||||||||||||
| LIFO inventory-related adjustments | (1) | 8 | (113) | 8 | 20 | (60) | |||||||||||||||
| Gains from antitrust legal settlements | 34 | - | - | 34 | 12 | 183 | |||||||||||||||
| Restructuring, impairment, and related charges, net | (7) | (4) | 75 | (19) | (41) | (54) | |||||||||||||||
| Claims and litigation charges, net | - | (1) | (100) | 1 | (33) | 103 | |||||||||||||||
| Other adjustments, net | 20 | - | - | 17 | (87) | 120 | |||||||||||||||
| Adjusted Income Tax Expense (Non-GAAP) | $ | (311) | $ | (242) | 29 | % | $ | (738) | $ | (592) | 25 | % |
All percentage changes displayed above which are not meaningful are displayed as zero percent.