McKesson 2012 Annual Report Download - page 24

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McKESSON CORPORATION
20
The length of our sales and implementation cycles for our Technology Solutions segment could have a material
adverse impact on our future results of operations.
Many of the solutions offered by our Technology Solutions segment have long sales and implementation cycles,
which could range from a few months to two years or more from initial contact with the customer to completion of
implementation. How and when to implement, replace, or expand an information system, or modify or add business
processes, are major decisions for healthcare organizations. Many of the solutions we provide typically require
significant capital expenditures and time commitments by the customer. Any decision by our customers to delay or
cancel implementation could have a material adverse impact on our results of operations. Furthermore, delays or
failures to meet milestones established in our agreements may result in a breach of contract, termination of the
agreement, damages and/or penalties as well as a reduction in our margins or a delay in our ability to recognize
revenue.
We may be required to record a significant charge to earnings if our goodwill or intangible assets become
impaired.
We are required under U.S. generally accepted accounting principles (“GAAP”) to test our goodwill for
impairment, annually or more frequently if indicators for potential impairment exist. Indicators that are considered
include significant changes in performance relative to expected operating results, significant changes in the use of
the assets, significant negative industry, or economic trends or a significant decline in the Company’s stock price
and/or market capitalization for a sustained period of time. In addition, we periodically review our intangible assets
for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
Factors that may be considered a change in circumstances indicating that the carrying value of our intangible assets
may not be recoverable include slower growth rates and the loss of a significant customer. We may be required to
record a significant charge to earnings in our consolidated financial statements during the period in which any
impairment of our goodwill or intangible assets is determined. This could have a material adverse impact on our
results of operations. There are inherent uncertainties in management’s estimates, judgments and assumptions used
in assessing recoverability of goodwill and intangible assets. Any changes in key assumptions, including failure to
meet business plans, a further deterioration in the market or other unanticipated events and circumstances, may
affect the accuracy or validity of such estimates and could potentially result in an impairment charge.
Our foreign operations may subject us to a number of operating, economic, political and regulatory risks that
may have a material adverse impact on our financial condition and results of operations.
We have operations based in, and we source and contract manufacture pharmaceutical and medical-surgical
products in, a number of foreign countries. In the future, we look to continue to grow our foreign operations both
organically and through acquisitions and investments; however, increasing our foreign operations carries additional
risks. Operations outside of the United States may be affected by changes in trade protection laws, policies and
measures and other regulatory requirements affecting trade and investment; unexpected changes in regulatory
requirements for software, social, political, labor or economic conditions in a specific country or region;
import/export regulations in both the United States and foreign countries and difficulties in staffing and managing
foreign operations. Political changes and natural disasters, some of which may be disruptive, can interfere with our
supply chain, our customers and all of our activities in a particular location. We may also be affected by potentially
adverse tax consequences and difficulties associated with repatriating cash generated or held abroad. Additionally,
foreign operations expose us to foreign currency fluctuations that could adversely impact our results of operations
based on the movements of the applicable foreign currency exchange rates in relation to the U.S. dollar.
Foreign operations are also subject to risks of violations of laws prohibiting improper payments and bribery,
including the U.S. Foreign Corrupt Practices Act and similar regulations in foreign jurisdictions. Failure to comply
with these laws could subject us to civil and criminal penalties that could have a material adverse impact on our
financial condition and results of operations.