Henry Schein 2013 Annual Report Download - page 29

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20
Expansion of group purchasing organizations (“GPO”) or provider networks and the multi-tiered costing
structure may place us at a competitive disadvantage.
The medical products industry is subject to a multi-tiered costing structure, which can vary by manufacturer
and/or product. Under this structure, certain institutions can obtain more favorable prices for medical products than
we are able to obtain. The multi-tiered costing structure continues to expand as many large integrated health care
providers and others with significant purchasing power, such as GPOs, demand more favorable pricing terms.
Additionally, the formation of provider networks and GPOs may shift purchasing decisions to entities or persons
with whom we do not have a historical relationship. This may threaten our ability to compete effectively, which
would in turn negatively impact our results of operations. Although we are seeking to obtain similar terms from
manufacturers, obtain access to lower prices demanded by GPO contracts or other contracts, and develop
relationships with provider networks and new GPOs, we cannot assure that such terms will be obtained or contracts
will be executed.
Increases in the cost of shipping or service issues with our third-party shippers could harm our business.
Shipping is a significant expense in the operation of our business. We ship almost all of our orders through
third-party delivery services, and typically bear the cost of shipment. Accordingly, any significant increase in
shipping rates could have an adverse effect on our operating results. Similarly, strikes or other service interruptions
by those shippers could cause our operating expenses to rise and adversely affect our ability to deliver products on a
timely basis.
Uncertain global macro-economic conditions could adversely affect our results of operations and financial
condition.
Uncertain global macro-economic conditions that affect the economy and the economic outlook of the United
States, Europe and other parts of the world could adversely affect our customers and vendors, which could
adversely affect our results of operations and financial condition. These uncertainties, including, among other
things, sovereign debt levels, the inability of political institutions to effectively resolve actual or perceived
economic, currency or budgetary crises or issues, consumer confidence, unemployment levels (and a corresponding
increase in the uninsured and underinsured population), interest rates, availability of capital, fuel and energy costs,
tax rates, health care costs and the threat or outbreak of terrorism or public unrest, could adversely impact our
customers and vendors, which could adversely affect us. Government debt and/or budget crises may lead to
reductions in government spending in certain countries, which could reduce overall health care spending, and/or
higher income or corporate taxes, which could depress spending overall. Additionally, recessionary conditions and
depressed levels of consumer and commercial spending may 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 sale. 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 markets 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.