AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 4/6 · 19/10/2026
Moat—
Insufficient evidence for every rubric criterion; no category score is inferred.
structural advantage · — · Joint sourcing and 27 distribution centers establish substantial capabilities, but comparative costs, replication barriers and defensible market structure are missing. Management's scale claim cannot resolve the structural position.
durability · — · The CVS extension demonstrates a continuing relationship through June 2027, but does not establish persistent competitive protection beyond that contract.
customer dependency · — · Integrated workflows suggest potential switching friction, while non-renewals and declining franchise participation show that relationships can end. Material customer dependence cannot be established.
erosion resilience · — · Actual pharmaceutical growth demonstrates business effectiveness, but does not resolve whether any structural advantage withstands counterparty bargaining or internal alternatives.
Pricing power38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Supplier price changes are passed to customers, and branded price decreases offset recent volume growth. These observed outcomes indicate limited autonomous product pricing; service-fee outcomes are not separately disclosed.
retention · 2/4 · The CVS extension and higher institutional and retail national-account volumes support continuing demand, partly through indirect operating evidence. Actual unfavorable renewals and Health Mart contraction balance that support. No retention rate is inferred.
margin resilience · 2/4 · Manufacturer price protection and adjusted pharmaceutical and oncology profit growth support resilience during branded price decreases. Prescription Technology Solutions shows adjusted growth despite lower GAAP profit, while Medical-Surgical adjusted profit declined 20%. Volume, acquisitions, mix and accounting effects limit attribution to pricing.
contractual freedom · 1/4 · Supplier-linked price pass-through, constrained supplier negotiations, stronger customer bargaining and experienced renewals on less favorable terms demonstrate limited discretion. Exact fee-setting and termination rights remain missing.
Predictability100
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 4.10
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 0.15
Financial strength75
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 97.98
- netDebtEbitGrade
- 91.79
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 8.29
- Debt / FCF (x)
- 1.14
- Net debt / operating income (x)
- 0.41
- Interest coverage (x)
- 25.15
- Current ratio (x)
- 0.85
Capital allocation—
Missing required inputs: operatingReturn. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year average dilution (%)
- -4.31
- 3-year average SBC / revenue (%)
- 0.06
- cashConversionGrade
- 100.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Three-year operating cash generation after reinvestment and the applied 26.43% adjusted ROIC support productive capital use. Acquisition spending and recent substantial repurchases alongside operating cash use and subsidiary borrowing make the record mixed; the MMS debt lacks a parent guarantee. The proposed $1.4 billion investment has unproven returns and remains conditional. Buyback value creation is not established.
incentive alignment · 3/4 · Actual grants, an applied multiyear ROIC payout result and established PSU metrics linking adjusted EPS, ROIC and relative returns demonstrate meaningful alignment mechanisms. Adjusted metrics and change-in-control conversion at the greater of target or actual performance weaken the link. FY 2026–FY 2028 payout decisions remain future events; ownership amounts are missing.
execution · 3/4 · Multiyear cash generation, increased customer volumes and adjusted pharmaceutical, oncology and access-solutions profit growth demonstrate strong execution from operating evidence. Medical-Surgical weakness, franchise contraction and the realized Rite Aid provision qualify the record. These results do not prove a moat.
governance · 2/4 · Annual elections, majority voting, proxy access, special-meeting rights and an appointed Lead Independent Director support accountability. Combined CEO and chair roles concentrate authority, and the $5.7 billion opioid settlement liability provides material adverse compliance context without establishing current oversight failure. The independence ratio describes nominees, not verified post-election composition.
Evidence
We also source generic pharmaceutical drugs through our ClarusONE Sourcing Services LLP joint venture with Walmart Inc.
Business / North American Pharmaceutical / joint generic sourcing · Filed 08/05/2026
Pharmaceutical business operates and serves customers through a network of 27 distribution centers in the U.S., including two strategic redistribution centers.
Business / U.S. Pharmaceutical / distribution centers · Filed 08/05/2026
We believe that our scale and diversity of product and service offerings are our primary competitive advantages.
Competition / management assertion about scale and breadth · Filed 09/05/2025
This concentration reduces our ability to negotiate favorable terms with suppliers and causes us to depend on a smaller number of suppliers.
Risk factors / supplier concentration and negotiating terms · Filed 08/05/2026
Many of our customers, including healthcare organizations, have consolidated or joined group purchasing organizations and have greater power to negotiate favorable prices.
Risk factors / customer bargaining power · Filed 08/05/2026
In addition, our businesses face competition from various other service providers and from pharmaceutical and other healthcare manufacturers as well as other potential customers, which may from time to time decide to develop, for their own internal needs, supply management capabilities that might otherwise be provided by our businesses.
Risk factors / competing service providers and internal supply capabilities · Filed 08/05/2026
For example, we offer McKesson ConnectSM, an internet-based ordering system that provides item look-up and real-time inventory availability as well as ordering, purchasing, third-party reconciliation, and account management functionality.
Business / McKesson Connect ordering and account functionality · Filed 08/05/2026
•Inventory Management – An integrated solution comprised of forecasting software and automated replenishment technologies that reduce inventory-carrying costs.
Business / integrated inventory management · Filed 08/05/2026
In fiscal 2023, we extended our pharmaceutical distribution partnership with CVS to June 2027.
Other Information about the Business / CVS partnership extension · Filed 08/05/2026
Some of our customers from time to time reduce the amounts they purchase from us, do not renew their purchase contracts with us, renew their purchase contracts at less favorable terms, delay or default on their payments to us, or avoid payments to us through bankruptcy proceedings.
Risk factors / experienced customer reductions and unfavorable renewals · Filed 08/05/2026
•Health Mart® – A national network of approximately 4,500 independently-owned pharmacies and one of the industry’s most comprehensive pharmacy franchise programs.
Business / fiscal 2024 Health Mart pharmacy participation · Filed 08/05/2024
•Health Mart® – A national network of approximately 3,900 independently-owned pharmacies and one of the industry’s most comprehensive pharmacy franchise programs.
Business / fiscal 2026 Health Mart pharmacy participation · Filed 08/05/2026
Other Information about the Business Customers: During fiscal 2026, sales to our ten largest customers, including group purchasing organizations (“GPOs”) accounted for approximately 73% of our total consolidated revenues.
Other Information about the Business / customer concentration · Filed 08/05/2026
The business’ practice is to pass on to customers published price changes from suppliers.
Financial Review / supplier price changes passed to customers · Filed 04/02/2026
Manufacturers generally provide us with price protection, which limits price related inventory losses.
Financial Review / manufacturer inventory price protection · Filed 04/02/2026
increased $3.7 billion primarily due to higher volumes from institutional and retail national account customers partially offset by branded pharmaceutical price decreases and branded to generic drug conversions.
Financial Review / U.S. customer volume growth and branded price decreases · Filed 05/08/2026
31 Table of Contents McKESSON CORPORATION FINANCIAL NOTES (CONTINUED) (UNAUDITED) Financial information relating to the Company’s reportable segments and reconciliations to the consolidated totals was as follows: Three Months Ended June 30, (In millions) 2026 2025 Segment revenues (1) North American Pharmaceutical $ 86,773 $ 82,729 Oncology & Multispecialty 14,222 10,658 Prescription Technology Solutions 1,566 1,434 Medical-Surgical Solutions 2,819 2,701 Other — 305 Total revenues $ 105,380 $ 97,827 Other segment expense, net (2) North American Pharmaceutical (3) $ 85,870 $ 82,135 Oncology & Multispecialty 13,897 10,446 Prescription Technology Solutions (4) 1,340 1,181 Medical-Surgical Solutions (5) 2,697 2,480 Other — 292 Total other segment expense, net $ 103,804 $ 96,534 Segment operating profit North American Pharmaceutical $ 903 $ 594 Oncology & Multispecialty 325 212 Prescription Technology Solutions 226 253 Medical-Surgical Solutions 122 221 Other — 13 Subtotal 1,576 1,293 Corporate expenses, net (6) (191) (193) Interest expense (77) (49) Income before income taxes $ 1,308 $ 1,051 Segment depreciation and amortization (7) North American Pharmaceutical $ 39 $ 32 Oncology & Multispecialty 66 42 Prescription Technology Solutions 19 21 Medical-Surgical Solutions 26 22 Other — 3 Corporate 45 37 Total segment depreciation and amortization $ 195 $ 157 Segment expenditures for long-lived assets (8) North American Pharmaceutical $ 64 $ 61 Oncology & Multispecialty 18 24 Prescription Technology Solutions — 1 Medical-Surgical Solutions 27 25 Other — 1 Corporate 43 77 Total segment expenditures for long-lived assets $ 152 $ 189 32 Table of Contents McKESSON CORPORATION FINANCIAL NOTES (CONCLUDED) (UNAUDITED) (1)Revenues from services on a disaggregated basis represent less than 1% of the North American Pharmaceutical segment’s total revenues, approximately 7% of the Oncology & Multispecialty segment’s total revenues, approximately 39% of the Prescription Technology Solutions segment’s total revenues, and less than 1% of the Medical-Surgical Solutions segment’s total revenues.
Financial Note 13 / comparative segment revenues and operating profits · Filed 05/08/2026
Adjusted Segment Operating Profit was $303 million, an increase of 13%, driven by higher demand for access solutions.
First-quarter results / adjusted Prescription Technology Solutions profit and demand · Filed 05/08/2026
Adjusted Segment Operating Profit was $195 million, a decrease of 20%, driven by product mix and one-time administrative expenses, partially offset by contributions from the extended care channel.
First-quarter results / adjusted Medical-Surgical profit decline · Filed 05/08/2026
A-2
Reconciliation of Operating Cash Flow (GAAP) to Free Cash Flow (Non-GAAP)
Year Ended March 31,
(In millions)
Operating Cash Flow (GAAP)
6,155
6,085
4,314
Investing Cash Flow (GAAP)
(3,432)
(733)
(1,072)
Financing Cash Flow (GAAP)
(4,631)
(3,965)
(3,342)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(16)
Net increase (decrease) in cash, cash equivalents, and restricted cash
(1,888)
1,371
(94)
Year Ended March 31,
(In millions)
Operating Cash Flow (GAAP)
6,155
6,085
4,314
Payments for property, plant, and equipment
(436)
(537)
(431)
Capitalized software expenditures
(309)
(322)
(256)
Free Cash Flow (Non-GAAP)
5,410
5,226
3,627
Supplemental Non-GAAP Financial Information
Appendix A / three-year operating cash flow and capital expenditures · Filed 12/06/2026
For FY 2024 — FY 2026, the Compensation and Talent Committee applied a three-year average ROIC result of 26.43% for purposes of calculating PSU payouts.
Executive Compensation / applied three-year adjusted ROIC result · Filed 12/06/2026
Investing activities for the three months ended June 30, 2026 and 2025 includes $23 million and $3.4 billion of net cash payments for acquisitions, including $2.5 billion and $874 million for the acquisitions of the interests in Core Ventures and PRISM Vision, respectively, during the three months ended June 30, 2025 as discussed in further detail in Financial Note 2, “Business Acquisitions and Divestitures,” to the accompanying condensed consolidated financial statements in this Quarterly Report.
Financial Review / actual acquisition spending · Filed 05/08/2026
Contacts:
Investors
[email protected]
Media Relations
Receivables
(2,374)
(2,089)
Inventories
(2,074)
(1,971)
Drafts and accounts payable
3,773
1,947
Operating lease liabilities
(65)
(89)
Taxes
(538)
134
Litigation liabilities
(34)
—
Other
(380)
(165)
Net cash used in operating activities
(220)
(918)
INVESTING ACTIVITIES
Payments for property, plant, and equipment
(112)
(111)
Capitalized software expenditures
(40)
(78)
Acquisitions, net of cash, cash equivalents, and restricted cash acquired
(23)
(3,359)
Proceeds from sales of businesses and investments, net
9
4
Other
(48)
(20)
Net cash used in investing activities
(214)
(3,564)
FINANCING ACTIVITIES
Proceeds from issuances of long-term debt
3,215
1,990
Repayments of long-term debt
(1)
—
Common stock transactions:
Issuances
23
22
Share repurchases
(2,530)
(581)
Dividends paid
(102)
(90)
Sale of noncontrolling interest in Medical-Surgical Solutions, net
1,238
—
Other
(211)
(165)
Net cash provided by financing activities
1,632
1,176
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(10)
33
Net increase (decrease) in cash, cash equivalents, and restricted cash
1,188
(3,273)
Cash, cash equivalents, and restricted cash at beginning of period
4,068
5,956
Cash, cash equivalents, and restricted cash at end of period
5,256
2,683
Less: Restricted cash at end of period included in Prepaid expenses and other
(92)
(265)
Cash and cash equivalents at end of period
$
5,164
$
2,418
Schedule 6
McKESSON CORPORATION
RECONCILIATION OF GAAP CASH FLOW TO FREE CASH FLOW (NON-GAAP)
Cash flow statement / operating cash use, debt proceeds and shareholder distributions · Filed 05/08/2026
Neither McKesson Corporation nor any of its subsidiaries outside of the MMS Borrower group guarantees or otherwise has any obligation with respect to the Amended MMS Credit Agreement.
Debt and Financing Activities / limits on parent guarantees for MMS borrowing · Filed 05/08/2026
Under the definitive agreement, CD&R will hold a majority interest of approximately 51% in Option Care Health and McKesson will invest approximately $1.4 billion for a minority interest of approximately 49%.
Transaction Details / proposed minority investment commitment · Filed 06/10/2026
The transaction is expected to close in the first half of calendar year 2027, subject to customary closing conditions, including approval by Option Care Health’s stockholders and the receipt of required regulatory approvals.
Transaction Details / expected closing and approval conditions · Filed 06/10/2026
PSUs for the FY 2026 — FY 2028 cycle will be earned based on Cumulative Adjusted EPS (67%) and three-year average Return on Invested Capital (“ROIC”) (33%), with the resulting payout subject to a potential upward or downward adjustment of up to 20% based on McKesson’s three-year Total Shareholder Return (“TSR”) relative to a comparator group of companies.
Executive Compensation / FY 2026–FY 2028 PSU metrics · Filed 12/06/2026
Smith 1,391 1,000,393 Thomas L. Rodgers 974 700,491 (1)The RSUs awarded in May 2025 were granted at a fair market value of $719.19 per unit.
Executive Compensation / actual May 2025 RSU grants · Filed 12/06/2026
Award agreements under the Stock Plans provide that upon a Change in Control, PSUs convert into time-based vesting awards based on the greater of target or actual performance under the terms of the awards through the date of the Change in Control.
Change in Control / PSU conversion at greater of target or actual performance · Filed 12/06/2026
Payout decisions for these PSU awards will be made in May 2028.
Grants of Plan-Based Awards / future PSU payout decisions · Filed 12/06/2026
Shareholder Rights Board of Directors Corporate Governance •Annual election of directors with majority voting standard for uncontested elections •Proxy access •Meaningful right to call special meeting of shareholders (15% ownership threshold) •No supermajority vote provisions •Lead Independent Director with robust roles and responsibilities •10 of 11 director nominees are independent •Regular executive sessions of independent directors •Annual Board and committee evaluation process •Policy requiring directors with over 12 years of tenure to offer to resign •Policies on other public company board service and retirement age of 75 •Pay for performance alignment •No poison pill •Regular Board refreshment •Comprehensive senior management succession planning process •Robust shareholder engagement program •Stock ownership guidelines for executives and directors 10 2026 Proxy Statement Proxy Summary Item Your Board’s Recommendation 2 RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2027 Deloitte & Touche LLP (D&T) is an independent accounting firm with the breadth of expertise and knowledge necessary to audit the Company.
Governance highlights / shareholder rights and director nominees · Filed 12/06/2026
Brian S. Tyler, who has served as McKesson’s Chief Executive Officer since 2019 and has led the Company’s transformation into a diversified healthcare services leader, assumed the additional role of Chair of the Board, effective May 1, 2026.
Board letter / combined CEO and chair roles effective May 2026 · Filed 12/06/2026
Caruso as Lead Independent Director, effective May 1, 2026.
Board Leadership Structure / Lead Independent Director appointment · Filed 12/06/2026
Funds necessary for future debt maturities and our other cash requirements, including any future payments that may be made related to our total estimated litigation liability of $5.7 billion as of June 30, 2026 payable under the terms of various settlement agreements for opioid-related claims, are expected to be met by existing cash balances, cash flow from operations, existing credit sources, and future borrowings.
Financial Review / opioid settlement liability at June 2026 · Filed 05/08/2026
5.Other adjustments, net for the three months ended June 30, 2025 includes a pre-tax provision for bad debts of $189 million ($140 million after-tax), within North American Pharmaceutical related to the bankruptcy of our customer, Rite Aid Corporation (including certain of its subsidiaries, "Rite Aid").
Financial Statement Notes / realized Rite Aid bad-debt provision · Filed 05/08/2026
Adjusted Segment Operating Profit was $894 million, an increase of 19%, driven by growth in the distribution of specialty products to health systems and strategic accounts, and the timing of new product launches.
First-quarter results / adjusted North American Pharmaceutical profit growth · Filed 05/08/2026
Adjusted Segment Operating Profit was $405 million, an increase of 41%, driven by growth in provider solutions and specialty distribution, including contributions from acquisitions.
First-quarter results / adjusted Oncology & Multispecialty profit growth · Filed 05/08/2026
