Henry Schein 2003 Annual Report Download - page 59

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data)
Note 13–Commitments and Contingencies (Continued)
Purchase Commitments
In our healthcare distribution business, we sometimes enter into long-term purchase commitments to ensure the availability of products
for distribution. Future minimum annual payments for inventory purchase commitments as of December 27, 2003 were:
2004 $149,891
2005 128,495
2006 945
2007 ––
2008 ––
Thereafter ––
Total minimum inventory purchase
commitment payments $279,331
Litigation
Our business involves a risk of product liability claims and other claims in the ordinary course of business, and from time to time we are
named as a defendant in cases as a result of our distribution of pharmaceutical and other healthcare products. As a business practice,
we generally obtain product indemnification from our suppliers for manufactured products.
We have various insurance policies, including product liability insurance, covering risks and in amounts we consider adequate. In many
cases in which we have been sued in connection with products manufactured by others, the manufacturer provides us with
indemnification. There can be no assurance that the insurance coverage we maintain is sufficient or will be available in adequate amounts
or at a reasonable cost, or that indemnification agreements will provide us with adequate protection. In our opinion, all pending matters,
including those described below, are covered by insurance or will not otherwise seriously harm our financial condition.
Product Liability Claims
As of December 27, 2003, we were a defendant in approximately 16 product liability cases. Of these cases, 11 involve claims made by
healthcare workers who claim allergic reaction relating to exposure to latex gloves. In each of these cases, we acted as a distributor of
brand name and/or "Henry Schein" private brand latex gloves, which were manufactured by third parties. To date, discovery in these
cases has generally been limited to product identification issues. The manufacturers in these cases have withheld indemnification of us
pending product identification; however, we have impleaded or filed cross claims against those manufacturers in each case in which we
are a defendant.
As of December 27, 2003, we had accrued our best estimate of potential losses relating to product liability claims for which we were able
to determine a reasonable estimated loss. This accrued amount was not material to our financial position, results of operations or cash
flows. Our method for determining estimated losses considers currently available facts, presently enacted laws and regulations and other
external factors, including potential recoveries from third parties.
Texas Class Action
On January 27, 1998, in District Court in Travis County, Texas, we and one of our subsidiaries were named as defendants in a matter
entitled "Shelly E. Stromboe and Jeanne Taylor, on Behalf of Themselves and all others Similarly Situated vs. Henry Schein, Inc., Easy
Dental Systems, Inc. and Dentisoft, Inc.", Case No. 98-00886. The petition alleges, among other things, negligence, breach of contract,
fraud, and violations of certain Texas commercial statutes involving the sale of certain practice management software products sold prior
to 1998 under the Easy Dental®name.
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