Henry Schein 2014 Annual Report Download - page 33

Download and view the complete annual report

Please find page 33 of the 2014 Henry Schein annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 131

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131

19
ITEM 1A. Risk Factors
The risks described below could have a material adverse effect on our business, reputation, financial condition
or the trading price of our common stock. Although it is not possible to predict or identify all such risks and
uncertainties, they may include, but are not limited to, the factors discussed below. Our business operations could
also be affected by additional factors that are not presently known to us or that we currently consider not to be
material to our operations. You should not consider this list to be a complete statement of all risks and
uncertainties. The order in which these factors appear should not be construed to indicate their relative importance
or priority.
The health care 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 health care product
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.
Because substantially all of the products that we distribute are not manufactured by us, we are dependent upon
third parties for the manufacture and supply of substantially all of our products.
We obtain substantially all of our products from third-party suppliers. Generally, we do not have long-term
contracts with our suppliers committing them to supply products to us. Therefore, suppliers may not provide the
products we need in the quantities we request. While there is generally more than one source of supply for most of
the categories of products we sell, some key suppliers, in the aggregate, supply a significant portion of the products
we sell. Additionally, because we generally do not control the actual production of the products we sell, we may be
subject to delays caused by interruption in production based on conditions outside of our control, including the
failure to comply with applicable government requirements. The failure of manufacturers of products regulated by
the FDA to meet these requirements could result in product recall, cessation of sales or other market disruptions. In
the event that any of our third-party suppliers were to become unable or unwilling to continue to provide the
products in required volumes, we would need to identify and obtain acceptable replacement sources on a timely
basis. There is no guarantee that we would be able to obtain such alternative sources of supply on a timely basis, if
at all. An extended interruption in the supply of our products, especially any high sales volume product, would
have an adverse effect on our results of operations, which most likely would adversely affect the value of our
common stock.
Our revenues depend on our relationships with capable sales personnel as well as customers, suppliers and
manufacturers of the products that we distribute.
Our future operating results depend on our ability to maintain satisfactory relationships with qualified sales
personnel as well as customers, suppliers and manufacturers. If we fail to maintain our existing relationships with
such persons or fail to acquire relationships with such key persons in the future, our business may be adversely
affected.
Our future success is substantially dependent upon our senior management.
Our future success is substantially dependent upon the efforts and abilities of members of our existing senior
management, particularly Stanley M. Bergman, Chairman and Chief Executive Officer, among others. The loss of
the services of Mr. Bergman could have a material adverse effect on our business. We have an employment
agreement with Mr. Bergman. We do not currently have “key man” life insurance policies on any of our
employees. Competition for senior management is intense and we may not be successful in attracting and retaining
key personnel.