McKesson 2016 Annual Report Download - page 26

McKESSON CORPORATION
use of personal data that, in some respects, are more stringent, and impose more significant burdens on subject
businesses, than current privacy standards in the United States. We may also face audits or investigations by one
or more foreign government agencies relating to our compliance with these regulations that could result in the
imposition of penalties or fines. The EU member state regulations establish several obligations that organizations
must follow with respect to use of personal data, including a prohibition on the transfer of personal information
from the EU to other countries whose laws do not protect personal data to an adequate level of privacy or
security. In addition, certain member states have adopted more stringent data protection standards. The Company
had addressed these requirements by certification to the U.S.-EU Safe Harbor Frameworks prior to such
Frameworks being invalidated in October 2015 by the European Court of Justice. Although recent negotiations
between the U.S. and the EU have yielded the likely successor to the Safe Harbor Framework, the EU-U.S.
Privacy Shield, this new framework has not yet been approved by all of the necessary EU regulatory bodies. In
the interim, we are pursuing alternative methods of compliance, but those methods may be subject to scrutiny by
data protection authorities in EU member states. On December 15, 2015, the European Parliament and the
Council of the European Union (Council) reached a political agreement on the future EU data protection legal
framework. Subject to formal adoption by the European Parliament in the first half of 2016, the General Data
Protection Regulation (“GDPR”) will replace the 1995 Data Protection Directive. Although the GDPR has not
yet been finalized and minor modifications remain possible, the GDPR will have significant impacts on how
businesses can collect and process the personal data of EU individuals. The GDPR is expected to become
effective sometime in 2018, two years after its final adoption in 2016. The costs of compliance with, and other
burdens imposed by, such laws, regulations and policies that are applicable to us may limit the use and adoption
of our products and solutions and could have a material adverse impact on our results of operations.
Our results of operations, which are stated in U.S. dollars, could be adversely impacted by fluctuations in
foreign currency exchange rates.
We conduct our business worldwide in U.S. dollars and the functional currencies of our foreign subsidiaries,
including Euro, British pound sterling and Canadian dollar. Changes in foreign currency exchange rates could
have a significant adverse impact on our financial results that are reported in the U.S. dollar. We are also exposed
to foreign currency exchange rate risk related to our foreign subsidiaries, including intercompany loans
denominated in non-functional currencies.
We may from time to time enter into foreign currency contracts or other derivative instruments intended to
hedge a portion of our foreign currency exchange rate risks. Additionally, we may use foreign currency
borrowings to hedge some of our foreign currency exchange rate risks. These hedging activities may not
completely offset the adverse financial effects of unfavorable movements in foreign currency exchange rates
during the time the hedges are in place.
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 significant 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; the realization of potential operating synergies; the
assimilation and retention of the personnel of the acquired companies; accounting, regulatory or compliance
issues that could arise, including internal control over financial reporting; and challenges retaining the customers
of the combined businesses. Further, acquisitions may have a material adverse impact on our operating results if
unanticipated expenses or charges to earnings were to occur, including unanticipated depreciation and
amortization expenses over the useful lives of certain assets acquired, as well as costs related to potential
impairment charges, assumed litigation and unknown liabilities. In addition, we may potentially require
additional financing in order to fund future acquisitions, which may or may not be attainable and is subject to
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