McKesson 2016 Annual Report Download - page 35

McKESSON CORPORATION
We could face significant liability if we withdraw from participation in one or more multiemployer pension
plans in which we participate, or if one or more multiemployer plans in which we participate is reported to
have underfunded liabilities.
We participate in various multiemployer pension plans. In the event that we withdraw from participation in
one of these plans, then applicable law could require us to make additional cash contributions to the plans in
installments. Our withdrawal liability for any multiemployer plan would depend on the extent of the plan’s
funding of vested benefits. The multiemployer plans could have significant unfunded vested liabilities. Such
underfunding may increase in the event other employers become insolvent or withdraw from the applicable plan
or upon the inability or failure of withdrawing employers to pay their withdrawal liability. In addition, such
underfunding may increase as a result of lower than expected returns on pension fund assets or other funding
deficiencies. The occurrence of any of these events could have a material adverse impact on our consolidated
financial position, results of operations or cash flows.
We may not realize the expected benefits from our restructuring and business process initiatives.
On March 14, 2016, the Company committed to a restructuring plan to lower its operating costs (“Cost
Alignment Plan”). The Cost Alignment Plan primarily consists of a reduction in workforce and business process
initiatives that will be substantially implemented prior to the end of 2019. Expense reduction initiatives could
yield unintended consequences such as distraction of our management and employees, business disruption,
attrition beyond any planned reduction in workforce, inability to attract or retain key personnel, and reduced
employee productivity which could negatively affect our business, sales, financial condition and results of
operations. Moreover, our restructuring and business process initiatives result in charges and expenses that
impact our operating results. We cannot guarantee that the activities under any restructuring and business
initiative will result in the desired efficiencies and estimated cost savings.
We may experience difficulties with outsourcing and similar third party relationships.
Our ability to conduct our business might be negatively impacted if we experience difficulties with
outsourcing and managing similar third-party relationships. We outsource certain business and administrative
functions and rely on third parties to perform certain services on our behalf. If we fail to develop, implement and
monitor our outsourcing strategies, such strategies prove to be ineffective or fail to provide expected cost
savings, or our third party providers fail to perform as anticipated, we may experience operational difficulties and
increased costs may adversely affect the results of our operations.
We may face risks associated with our retail expansion.
In recent years, we have expanded our retail operations through a number of acquisitions. As we expand our
retail footprint, we may face risks that are different from those we currently encounter. Our expansion into
additional retail markets, such as those in Europe and Canada, could result in increased competitive,
merchandising and distribution challenges. We may encounter difficulties in attracting customers to our retail
locations due to a lack of customer familiarity with our brands and our lack of familiarity with local customer
preferences and seasonal differences in the market. Our ability to expand successfully will depend on acceptance
of our retail store experience by customers, including our ability to design our stores in a manner that resonates
locally and to offer the correct product assortment to appeal to consumers. Furthermore, our continued growth in
the retail sector may strain relations with certain of our distribution customers who also compete in the retail
pharmacy sector. There can be no assurance that our retail locations will be received as well as, or achieve net
sales or profitability levels consistent with, our projected targets or be comparable to those of our existing stores
in the time periods estimated by us, or at all. If our retail expansion fails to achieve, or unable to sustain,
acceptable net sales and profitability levels, our business, results of operations and growth prospects may be
materially adversely affected.
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