McKesson 2012 Annual Report Download - page 25

McKESSON CORPORATION
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We also may experience difficulties and delays inherent in sourcing products and contract manufacturing from
foreign countries, including but not limited to: (1) difficulties in complying with the requirements of applicable
federal, state and local governmental authorities in the United States and of foreign regulatory authorities; (2)
inability to increase production capacity commensurate with demand or the failure to predict market demand; (3)
other manufacturing or distribution problems including changes in types of products produced, limits to
manufacturing capacity due to regulatory requirements, physical limitations, or scarce or inadequate resources that
could impact continuous supply; and (4) damage to our reputation due to real or perceived quality issues.
Manufacturing difficulties could result in production shutdowns, product shortages and other similar delays in
product manufacturing that could have a material adverse impact on our financial condition and results of
operations.
Tax legislation initiatives or challenges to our tax positions could have a material adverse impact on our results
of operations.
We are a large multinational corporation with operations in the United States and international jurisdictions. As
such, we are subject to the tax laws and regulations of the United States federal, state and local governments and of
many international jurisdictions. From time-to-time, legislation may be enacted that could adversely affect our tax
positions. There can be no assurance that our effective tax rate and the resulting cash flow will not be adversely
affected by these changes in legislation. For example, if legislation is passed to repeal the LIFO (last-in, first-out)
method of inventory accounting for income tax purposes, it would adversely impact our cash flow, and if legislation
is passed to change the current U.S. taxation treatment of income from foreign operations, it may adversely impact
our income tax expense. The tax laws and regulations of the various countries where we have major operations are
extremely complex and subject to varying interpretations. Although we believe that our historical tax positions are
sound and consistent with applicable laws, regulations and existing precedent, there can be no assurance that these
tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge.
Our business could be hindered if we are unable to complete and integrate acquisitions successfully.
An element of our strategy is to identify, pursue and consummate acquisitions that either expand or complement
our business. Since 2010, we have completed approximately $3.4 billion of business acquisitions. Integration of
acquisitions involves a number of significant risks, including the diversion of management’s attention to the
assimilation of the operations of businesses we have acquired; difficulties in the integration of operations and
systems; the realization of potential operating synergies; the assimilation and retention of the personnel of the
acquired companies; accounting, regulatory or compliance issues that could arise, including internal control over
financial reporting; challenges in retaining the customers, including physician affiliates, of the combined businesses.
Further, acquisitions may have a material adverse impact on our operating results if unanticipated expenses or
charges to earnings were to occur, including unanticipated depreciation and amortization expenses over the useful
lives of certain assets acquired, as well as costs related to potential impairment charges, assumed litigation and
unknown liabilities. In addition, we may potentially require additional financing in order to fund future acquisitions,
which may or may not be attainable and is subject to potential volatility in the credit markets. If we are unable to
successfully complete and integrate strategic acquisitions in a timely manner, our business and our growth strategies
could be negatively affected.
Volatility and disruption to the global capital and credit markets may adversely affect our ability to access credit,
our cost of credit and the financial soundness of our customers and suppliers.
Volatility and disruption in the global capital and credit markets, including the bankruptcy or restructuring of
certain financial institutions, reduced lending activity by other financial institutions, decreased liquidity and
increased costs in the commercial paper market and the reduced market for securitizations, may adversely affect the
availability and cost of credit already arranged and the availability, terms and cost of credit in the future, including
any arrangements to renew or replace our current credit or financing arrangements. Although we believe that our
operating cash flow, financial assets, current access to capital and credit markets, including our existing credit and
sales facilities, will give us the ability to meet our financing needs for the foreseeable future, there can be no
assurance that continued or increased volatility and disruption in the global capital and credit markets will not impair
our liquidity or increase our costs of borrowing.