McKesson 2014 Annual Report Download - page 25

McKESSON CORPORATION
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The length of our sales and implementation cycles for our Technology Solutions segment could have a material adverse impact
on our future results of operations.
Many of the solutions offered by our Technology Solutions segment have long sales and implementation cycles, which could
range from a few months to 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. Many of the solutions we provide typically require significant capital expenditures and time commitments
by the customer. Any decision by our customers to delay or cancel implementation could have a material adverse impact on our
results of operations. 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.
We may be required to record a significant charge to earnings if our goodwill or intangible assets become impaired.
We are required under U.S. generally accepted accounting principles (“GAAP”) to test our goodwill for impairment, annually
or more frequently if indicators for potential impairment exist. Indicators that are considered include significant changes in
performance relative to expected operating results, significant changes in the use of the assets, significant negative industry, or
economic trends or a significant decline in the Company’s stock price and/or market capitalization for a sustained period of time.
In addition, we periodically review our intangible assets for impairment when events or changes in circumstances, such as a
divestiture 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 the loss of a significant customer,
or divestiture of a business or asset for below its carrying value. 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 intangible assets is determined.
This could have a material adverse impact on our results of operations. There are inherent uncertainties in management’s estimates,
judgments and assumptions used in assessing recoverability of goodwill and intangible assets. Any changes in key assumptions,
including failure to meet business plans, a further deterioration in the market or other unanticipated events and circumstances,
may affect the accuracy or validity of such estimates and could potentially result in an impairment charge.
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. Additionally, if legislation is passed to change the current U.S. taxation treatment of income from
foreign operations, or if legislation is passed at the state level to establish or increase taxation on the basis of our gross revenues,
it may adversely impact our 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. Even if we are successful in maintaining
our positions, we may incur significant expense in defending challenges to our tax positions by tax authorities that could have a
material impact on our financial position and results of operations.