McKesson 2009 Annual Report Download - page 62

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
56
We generally sell product to our customers on credit that is short-term in nature and unsecured. Any adverse
change in general economic conditions can adversely reduce sales to our customers, affect consumer buying
practices or cause our customers to delay or be unable to pay accounts receivable owed to us, which would reduce
our revenue growth and cause a decrease in our profitability and cash flow. Further, interest rate fluctuations and
changes in capital market conditions may affect our customers’ ability to obtain credit to finance their business
under acceptable terms, which would reduce our revenue growth and cause a decrease in our profitability.
Our Distribution Solutions segment is dependent upon sophisticated information systems. The
implementation delay, malfunction or failure of these systems for any extended period of time could adversely
affect our business.
We rely on sophisticated information systems in our business to obtain, rapidly process, analyze and manage
data to, (1) facilitate the purchase and distribution of thousands of inventory items from numerous distribution
centers, (2) receive, process and ship orders on a timely basis, (3) manage the accurate billing and collections for
thousands of customers and (4) process payments to suppliers. If these systems are interrupted, damaged by
unforeseen events or fail for any extended period of time, we could have an adverse impact on our results of
operations.
Reduced capacity in the commercial property insurance market exposes us to potential loss.
In order to provide prompt and complete service to our major Distribution Solutions segment’s customers, we
maintain significant product inventory at certain of our distribution centers. While we seek to maintain property
insurance coverage in amounts sufficient for our business, there can be no assurance that our property insurance will
be adequate or available on acceptable terms. One or more large casualty losses caused by fire, earthquake or other
natural disaster in excess of our coverage limits could have an adverse impact on our results of operations.
We could become subject to liability claims that are not adequately covered by our insurance and may have
to pay damages and other expenses which could have an adverse impact on our results of operations.
Our business exposes us to risks that are inherent in the distribution, manufacturing, dispensing of
pharmaceuticals and medical-surgical supplies, the provision of ancillary services, the conduct of our payor
businesses (which include disease management programs and our nurse triage services) and the provision of
products that assist clinical decision-making and relate to patient medical histories and treatment plans. If customers
assert liability claims against our products and/or services, any ensuing litigation, regardless of outcome, could
result in a substantial cost to us, divert management’s attention from operations and decrease market acceptance of
our products. We attempt to limit by contract our liability to customers; however, the limitations of liability set forth
in the contracts may not be enforceable or may not otherwise protect us from liability for damages. We also
maintain general liability coverage; however, this coverage may not continue to be available on acceptable terms or
may not be available in sufficient amounts to cover one or more large claims against us. In addition, the insurer
might disclaim coverage as to any future claim. A successful product or professional liability claim not fully
covered by our insurance could have an adverse impact on our results of operations.
The failure of our healthcare technology businesses to attract and retain customers due to challenges in
software product integration or to keep pace with technological advances may significantly reduce our
revenues or increase our expenses.
Our healthcare technology businesses, the bulk of which resides in our Technology Solutions segment, deliver
enterprise-wide clinical, patient care, financial, supply chain, strategic management software solutions and
pharmacy automation to hospitals, physicians, homecare providers, retail and mail order pharmacies and payors.
Challenges in integrating software products could impair our ability to attract and retain customers and could have
an adverse impact on our consolidated results of operations and a disproportionate impact on the results of
operations of our Technology Solutions segment.