McKesson 2005 Annual Report Download - page 49

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Due to the length of our sales and implementation cycles for our Provider Technologies segment, our future operating results may be
impacted.
Our Provider Technologies segment has long sales and implementation cycles, which could range from several months to over 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. The solutions we provide typically require
significant capital expenditures and time commitments by the customer. Any decision by our customers to delay implementation may adversely
affect our revenues. 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.
Reduced capacity in the commercial property insurance market exposes us to potential loss.
In order to provide prompt and complete service to our major Pharmaceutical Solutions 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 materially harm our business, results of operations or
financial condition.
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. Integration of
acquisitions involves a number of 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 and the realization of potential operating synergies; the assimilation
and retention of the personnel of the acquired companies; challenges in retaining the customers of the combined businesses; and potential
adverse effects on operating results. In addition, we may potentially require additional financing in order to fund future acquisitions, which
may or may not be attainable. 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.
In addition to the above, the following factors could affect future results: changes in generally accepted accounting principles, including the
requirement by accounting setting standards boards to expense stock options; tax legislation initiatives, foreign currency fluctuations and
general economic and market conditions.
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