Medtronic 2015 Annual Report Download - page 33

predict what health care programs and regulations will be ultimately implemented at the federal or state level, or the effect of
any future legislation or regulation. However, any changes that lower reimbursement for our products or reduce medical
procedure volumes could adversely affect our business and results of operations.
Our self-insurance program may not be adequate to cover future losses.
We have elected to self-insure most of our insurable risks. We made this decision based on conditions in the insurance
marketplace that have led to increasingly higher levels of self-insurance retentions, increasing numbers of coverage limitations,
and dramatically higher insurance premium rates. We maintain a directors and officers policy providing limited coverage and
continue to monitor the insurance marketplace to evaluate the value to us of obtaining insurance coverage for other categories of
losses in the future. While based on historical loss trends we believe that our self-insurance program accruals and our existing
insurance coverage will be adequate to cover future losses, we cannot guarantee that this will remain true. Historical trends may
not be indicative of future losses. The fact that we do not maintain third-party insurance coverage for all categories of losses
increases our exposure to unanticipated claims and these losses could have a material adverse impact on our consolidated
earnings, financial condition, and/or cash flows.
If we experience decreasing prices for our goods and services and we are unable to reduce our expenses, our results of
operations will suffer.
We may experience decreasing prices for our goods and services due to pricing pressure experienced by our customers from
managed care organizations and other third-party payers, increased market power of our customers as the medical device
industry consolidates, and increased competition among medical engineering and manufacturing services providers. If the prices
for our goods and services decrease and we are unable to reduce our expenses, our results of operations will be adversely
affected.
We may experience higher costs to produce our products as a result of changes in prices for oil, gas and other commodities.
We use resins, other petroleum-based materials and pulp as raw materials in some of our products. Prices of oil and gas also
significantly affect our costs for freight and utilities. Oil, gas and pulp prices are volatile and may increase, resulting in higher
costs to produce and distribute our products. New laws or regulations adopted in response to climate change could also increase
energy costs and the costs of certain raw materials and components. Due to the highly competitive nature of the healthcare
industry and the cost-containment efforts of our customers and third-party payers, we may be unable to pass along cost increases
through higher prices. If we are unable to fully recover these costs through price increases or offset these increases through cost
reductions, we could experience lower margins and profitability and our business, results of operations, financial condition and
cash flows could be materially and adversely affected.
Continuing worldwide economic instability could adversely affect our revenues, financial condition or results of operations.
Since fiscal year 2008, the global economy has been impacted by the sequential effects of an ongoing global financial crisis.
This global financial crisis continues to cause disruption in the financial markets, including diminished liquidity and credit
availability, during certain periods. There can be no assurance that there will not be further deterioration in the global economy.
Our customers and vendors may experience financial difficulties or be unable to borrow money to fund their operations which
may adversely impact their ability to purchase our products or to pay for our products on a timely basis, if at all. As with our
customers and vendors, these economic conditions make it more difficult for us to accurately forecast and plan our future
business activities. In addition, a significant amount of our trade receivables are with national health care systems in many
countries. Repayment of these receivables is dependent upon the financial stability of the economies of those countries.
In light of these global economic fluctuations, we continue to monitor the creditworthiness of customers located outside the U.S.
Failure to receive payment of all or a significant portion of these receivables could adversely affect our results of operations.
We are subject to a variety of market and financial risks due to our international operations that could adversely affect those
operations or our profitability and operating results.
Operations in countries outside of the U.S., accounting for approximately 44 percent of our net sales for the fiscal year ended
April 24, 2015, are accompanied by certain financial and other risks. We intend to continue to pursue growth opportunities in
23