McKesson 2015 Annual Report Download - page 56

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
If our assumptions and estimates described above were to change, an increase/decrease of 1% in our
effective tax rate as applied to income from continuing operations would have increased/decreased tax expense
by approximately $27 million, or $0.11 per diluted share, for 2015.
Loss Contingencies: We are subject to various claims, pending and potential legal actions for damages,
investigations relating to governmental laws and regulations and other matters arising out of the normal conduct
of our business. When a loss is considered probable and reasonably estimable, we record a liability in the amount
of our best estimate for the ultimate loss. However, the likelihood of a loss with respect to a particular
contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may
not be practicable based on the information available and the potential effect of future events and decisions by
third parties that will determine the ultimate resolution of the contingency. Moreover, it is not uncommon for
such matters to be resolved over many years, during which time relevant developments and new information
must be reevaluated at least quarterly to determine both the likelihood of potential loss and whether it is possible
to reasonably estimate a range of possible loss. When a loss is probable but a reasonable estimate cannot be
made, disclosure of the proceeding is provided.
Disclosure is also provided when it is reasonably possible that a loss will be incurred or when it is
reasonably possible that the amount of a loss will exceed the recorded provision. We review all contingencies at
least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable
estimate of the loss or range of the loss can be made. As discussed above, development of a meaningful estimate
of loss or a range of potential loss is complex when the outcome is directly dependent on negotiations with or
decisions by third parties, such as regulatory agencies, the court system and other interested parties. Such factors
bear directly on whether it is possible to reasonably estimate a range of potential loss and boundaries of high and
low estimate.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
We expect our available cash generated from operations and our short-term investment portfolio, together
with our existing sources of liquidity from our accounts receivable sales facilities, revolving credit facilities and
commercial paper issuance, will be sufficient to fund our long-term and short-term capital expenditures, working
capital and other cash requirements. In addition, we may access the long-term debt capital markets from time-to-
time.
Net cash flow from operating activities was $3,112 million in 2015 compared to $3,136 million in 2014 and
$2,483 million in 2013. Operating activities for 2015 were affected by an increase in drafts and accounts payable
reflecting longer payment terms for certain purchases and increases in receivables and inventories primarily
associated with our revenue growth. Cash flows from operations can be significantly impacted by factors such as
the timing of receipts from customers and payments to vendors. Additionally, working capital is primarily a
function of sales and purchase volumes, inventory requirements and vendor payment terms.
Operating activities for 2014 were primarily affected by an increase in drafts and accounts payable
reflecting longer payment terms for certain purchases and increases in receivables and inventories primarily
associated with our revenue growth. Operating activities for 2013 were primarily affected by $483 million of
payments for litigation settlements.
Net cash used in investing activities was $677 million in 2015 compared to $5,046 million in 2014 and
$2,209 million in 2013. Investing activities for 2015 include $170 million of net cash payments for acquisitions,
$376 million and $169 million in capital expenditures for property acquisitions and capitalized software, and
$15 million of net cash proceeds from sales of businesses.
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