McKesson 2014 Annual Report Download - page 20

McKESSON CORPORATION
17
The process to obtain operational control of Celesio, including Celesio shareholder approval of the domination and profit and
loss agreement and registration of the domination and profit and loss agreement in the Celesio corporate register is complex and
we do not expect to complete the steps required to exercise operating control of Celesio until late in the first half of our fiscal 2015.
Until the domination and profit and loss agreement is registered and effective, Celesio will not be subject to direct management
control by us and Celesio’s profits can only be distributed by the declaration of dividends. In the event that a minority shareholder
of Celesio files an action to challenge the registration, or the registration is delayed by German courts, it may prevent us from
exercising operational control of Celesio on the anticipated timeline, or at all. Our pursuit of the Celesio acquisition and the
preparation for the integration of Celesio’s business over an extended period of time may place a significant burden on our
management and internal resources, as well as the management and internal resources of Celesio. In the event that our acquisition
of Celesio’s remaining then outstanding common shares is significantly delayed, it may prevent the Celesio acquisition from being
consummated on the anticipated timeline, which could have a material adverse impact on the market price of our common stock,
and could result in our incurring significant expenses related to the Celesio acquisition without realizing the expected benefits.
We are subject to legal proceedings that could have a material adverse impact on our financial position and results of operations.
From time- to-time and in the ordinary course of our business, we and certain of our subsidiaries may become involved in
various legal proceedings involving false claims, healthcare fraud and abuse, antitrust, commercial, employment, environmental,
intellectual property, regulatory, tort and other various claims. All such legal proceedings are inherently unpredictable, and the
outcome can result in excessive verdicts and/or injunctive relief that may affect how we operate our business or we may enter into
settlements of claims for monetary damages. In some cases, substantial non-economic remedies or punitive damages may be
sought. For some complaints filed against the Company, we are currently unable to estimate the amount of possible losses that
might be incurred should these legal proceedings be resolved against the Company.
The outcome of litigation and other legal matters is always uncertain and outcomes that are not justified by the evidence or
existing law can occur. The Company believes that it has valid defenses to the legal matters pending against it and is defending
itself vigorously. Nevertheless, it is possible that resolution of one or any combination of more than one legal matter could result
in a material adverse impact on our financial position or results of operations.
Litigation is costly, time-consuming and disruptive to normal business operations. The defense of these matters could also
result in continued diversion of our management’s time and attention away from business operations, which could also harm our
business. Even if these matters are not resolved against us, the uncertainty and expense associated with unresolved legal proceedings
could harm our business and reputation.
European economic conditions together with austerity measures being taken by certain European governments could have
a material adverse impact on our results of operations.
The Company’s acquisition of Celesio significantly increases our assets and operations within Europe and, accordingly, our
exposure to economic conditions in Europe. A further slowdown within the European economy could affect our business in Europe
by reducing the prices our customers may be able or willing to pay for our products and services or by reducing the demand for
our products, either of which could result in a material adverse impact on our results of operations.
In addition, in many European countries, the government provides or subsidizes healthcare to consumers and regulates
pharmaceutical prices, patient eligibility, and reimbursement levels to control costs for the government-sponsored healthcare
system. In recent years, in response to the recessionary environment and financial crisis in Europe, a number of European
governments have announced or implemented austerity measures to reduce healthcare spending and constrain overall government
expenditures. For example, in 2011, the French government introduced a new wholesale mark-up system that constrained
distribution margins on pharmaceuticals. These measures, which include efforts aimed at reforming healthcare coverage and
reducing healthcare costs, continue to exert pressure on the pricing of and reimbursement timelines for pharmaceuticals and may
cause our customers to purchase fewer of our products and services and reduce the prices they are willing to pay.
Countries with existing healthcare-related austerity measures may impose additional laws, regulations, or requirements on
the healthcare industry. In addition, European governments that have not yet imposed healthcare-related austerity measures may
impose them in the future. New austerity measures may be similar to or vary from existing austerity measures and could have a
material adverse impact on our results of operations.