McKesson 2015 Annual Report Download - page 119

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Company is one of multiple recipients of a New Jersey Department of Environmental Protection Agency
directive and a separate United States Environmental Protection Agency directive relating to potential natural
resources damages (“NRD”) associated with one of these six sites. Although the Company’s potential allocation
under either directive cannot be determined at this time, it has agreed to participate with a potentially responsible
party (“PRP”) group in the funding of certain tasks to support an NRD assessment, the costs of which are
reflected in the aggregate estimates set forth below.
Based on a determination by the Company’s environmental staff, in consultation with outside environmental
specialists and counsel, the current estimate of the Company’s probable loss associated with the remediation
costs for these six sites is $7 million, net of amounts anticipated from third parties. The $7 million is expected to
be paid out between April 2015 and March 2035. The Company’s estimated probable loss for these
environmental matters has been entirely accrued for in the accompanying consolidated balance sheets.
In addition, the Company has been designated as a PRP under the Superfund law for environmental
assessment and cleanup costs as the result of its alleged disposal of hazardous substances at 14 sites. With respect
to these sites, numerous other PRPs have similarly been designated and while the current state of the law
potentially imposes joint and several liability upon PRPs, as a practical matter, costs of these sites are typically
shared with other PRPs. At one of these sites, the United States Environmental Protection Agency has selected a
preferred remedy with an estimated cost of approximately $70 million. It is not certain at this point in time what
proportion of this estimated liability will be borne by the Company or by the other PRPs. Accordingly, the
Company’s estimated probable loss at those 14 sites is approximately $22 million, which has been entirely
accrued for in the accompanying consolidated balance sheets. However, it is possible that the ultimate costs of
these matters may exceed or be less than the reserves.
IV. Value Added Tax Assessments
We operate in various countries outside the United States which collect value added taxes (“VAT”). The
determination of the manner in which a VAT applies to our foreign operations is subject to varying
interpretations arising from the complex nature of the tax laws. We have received assessments for VAT which
are in various stages of appeal. We disagree with these assessments and believe that we have strong legal
arguments to defend our tax positions. Certain VAT assessments relate to years covered by an indemnification
agreement. Due to the complex nature of the tax laws, it is not possible to estimate the outcome of these
matters. However, based on the currently available information, we believe the ultimate outcome of these matters
will not have a material adverse effect on our financial position, cash flows or results of operations.
V. Average Wholesale Price (“AWP”) Litigation
The Company has a reserve relating to AWP public entity claims, which is reviewed at least quarterly and
whenever events or circumstances indicate changes. We recorded nil, $68 million and $72 million of pre-tax
charges relating to changes in the Company’s AWP litigation reserve, including accrued interest, in 2015, 2014
and 2013. All charges were recorded in operating expenses within our Distribution Solutions segment. Cash
payments of nil, $105 million and $483 million were made in 2015, 2014 and 2013. At March 31, 2015, the
reserve for this matter was not material; at March 31, 2014, the reserve was $42 million.
VI. Other Matters
The Company is involved in various other litigation and governmental proceedings, not described above,
that arise in the normal course of business. While it is not possible to determine the ultimate outcome or the
duration of any such litigation or governmental proceedings, the Company believes, based on current knowledge
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