Henry Schein 2009 Annual Report Download - page 27

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15
ITEM 1A. Risk Factors
Declining economic conditions could adversely affect our results of operations and financial condition.
Disruptions in the financial markets and other macro-economic uncertainties that affect the economy and
the economic outlook of the United States and other parts of the world could adversely impact our customers
and vendors, which could adversely affect us. Recessionary conditions and depressed levels of consumer and
commercial spending have caused and may continue to cause customers to reduce, modify, delay or cancel
plans to purchase our products and may cause vendors to reduce their output or change their terms of sales.
We generally sell products to customers with payment terms. If customers’ cash flow or operating and
financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, they
may not be able to pay, or may delay payment to us. Likewise, for similar reasons vendors may restrict credit
or impose different payment terms. Any inability of current and/or potential customers to pay us for our
products and/or services or any demands by vendors for different payment terms may adversely affect our
results of operations and financial condition.
Disruptions in the financial market may adversely affect the availability and cost of credit to us.
Our ability to make scheduled payments or refinance our obligations with respect to indebtedness will
depend on our operating and financial performance, which in turn is subject to prevailing economic
conditions and financial, business and other factors beyond our control. Disruptions in the financial markets
may adversely affect the availability and cost of credit to us.
The healthcare products distribution industry is highly competitive, and we may not be able to compete
successfully.
We compete with numerous companies, including several major manufacturers and distributors. Some of
our competitors have greater financial and other resources than we do, which could allow them to compete
more successfully. Most of our products are available from several sources and our customers tend to have
relationships with several distributors. Competitors could obtain exclusive rights to market particular
products, which we would then be unable to market. Manufacturers also could increase their efforts to sell
directly to end-users and thereby eliminate or reduce our role and that of other distributors. Industry
consolidation among healthcare products distributors, price competition, the unavailability of products,
whether due to our inability to gain access to products or to interruptions in supply from manufacturers, or the
emergence of new competitors also could increase competition. In the future, we may be unable to compete
successfully and competitive pressures may reduce our revenues.
The healthcare industry is experiencing changes that could adversely affect our business.
The healthcare industry is highly regulated and subject to changing political, economic and regulatory
influences. In recent years, the healthcare industry has undergone significant change driven by various efforts
to reduce costs, including the reduction of spending budgets by government and private insurance programs,
such as Medicare, Medicaid and corporate health insurance plans; pressures relating to potential healthcare
reform; trends toward managed care; consolidation of healthcare distribution companies; consolidation of
healthcare manufacturers; collective purchasing arrangements and consolidation among office-based
healthcare practitioners; and changes in reimbursements to customers. Both our own profit margins and the
profit margins of our customers may be adversely affected by laws and regulations reducing reimbursement
rates for pharmaceuticals and/or medical treatments or services or changing the methodology by which
reimbursement levels are determined. If we are unable to react effectively to these and other changes in the
healthcare industry, our operating results could be adversely affected. In addition, the enactment of any
significant healthcare reforms could have a material adverse effect on our business.