McKesson 2005 Annual Report Download - page 44

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
NEW ACCOUNTING PRONOUNCEMENTS
There are a number of new accounting pronouncements that may impact our financial results. These new pronouncements are described in
Financial Note 1, “Significant Accounting Policies,” to the accompanying consolidated financial statements.
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
In addition to historical information, management’s discussion and analysis includes certain forward-looking statements within the meaning
of section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Some of the forward-looking statements can be identified by use of forward-looking words such as “believes,”
“expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” or “estimates,” or the negative of these words,
or other comparable terminology. The discussion of financial trends, strategy, plans or intentions may also include forward-looking statements.
Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. Although it
is not possible to predict or identify all such risks and uncertainties, they may include, but are not limited to, the factors discussed under
“Additional Factors That May Affect Future Results.” The reader should not consider this list to be a complete statement of all potential risks
and uncertainties.
These and other risks and uncertainties are described herein or in our other public documents. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release the result
of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of
unanticipated events.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The following additional factors may affect our future results:
Adverse resolution of pending Securities Litigation regarding the restatement of our historical financial statements may cause us to
incur material losses.
As discussed in Financial Note 19, “Other Commitments and Contingent Liabilities,” to the accompanying consolidated financial
statements, in the third quarter of 2005, we announced that we had reached an agreement to settle the action captioned In re McKesson HBOC,
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nc. Securities Litigation (N.D. Cal. Case No. C-99-20743-RMW) (the “Consolidated Action”). In general, under the agreement to settle the
Consolidated Action, we will pay the settlement class a total of $960.0 million in cash. The settlement agreement is subject to various
conditions, including, but not limited to, preliminary approval by the Court, notice to the Class, and final approval by the Court after a hearing.
Other than the Consolidated Action, none of the previously reported Securities Litigation has been resolved by the settlement described above.
As a result, during the third quarter of 2005, we recorded a pre-tax charge totaling $1.2 billion ($810.0 million after-tax) for the Securities
Litigation charge, which consists of $960.0 million settlement payment and $240.0 million reserve. In addition, for the litigation costs not
covered under our directors and officers’ liability insurance policies, we accrue costs when it is probable that a liability has been incurred and
the amount can be reasonably estimated. We recorded $42.8 million, $17.7 million and $3.9 million of such expenses in 2005, 2004 and 2003.
We believe theses recorded amounts will be adequate to address our remaining potential exposures in relation with the Securities Litigation.
However, in view of the number of remaining cases, the uncertainties of the timing and outcome of this type of litigation, and the substantial
amounts involved, it is possible that the ultimate costs of these matters may exceed or be below the reserve.
Changes in the United States healthcare environment could have a material negative impact on our revenues and net income.
Our products and services are primarily intended to function within the structure of the healthcare financing and reimbursement system
currently being used in the United States. In recent years, the healthcare industry has changed significantly in an effort to reduce costs. These
changes include increased use of managed care, cuts in
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