McKesson 2006 Annual Report Download - page 55

McKESSON CORPORATION
FINANCIAL REVIEW (Concluded)
We may be required to record a significant charge to earnings if our goodwill or amortizable intangible assets become impaired.
We are required under generally accepted accounting principles to test our goodwill for impairment at least annually as well as review our
amortizable 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 amortizable intangible assets is determined.
This may adversely impact our results of operations.
Our operating results and our financial condition may be adversely affected by foreign operations.
We have significant operations based in Canada and other foreign countries, and we have a large investment in Mexico. 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; and difficulties in staffing and managing foreign operations.
Additionally, foreign operations expose us to foreign currency fluctuations that could impact our results of operations and financial condition
based on the movements of the applicable foreign currency exchange rates in relation to the U.S. Dollar.
Tax legislation initiatives could adversely affect our net earnings.
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,
various legislative initiatives may be proposed that could adversely affect our tax positions. There can be no assurance that our effective tax
rate will not be adversely affected by these initiatives. In addition, United States federal, state and local, as well as international, tax laws and
regulations 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. 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, changes in generally accepted accounting principles and general economic and market conditions could affect
future results.
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