false 0001000228 --12-28 none 480000000 0.01 0.01 1000000 33.33 0.004 0 Q2 NASDAQ P5Y December 24, 2012 December 24, 2024 June 16, 2017 June 16, 2027 September 15, 2017 September 15, 2029 January 2, 2018 January 2, 2028 September 2, 2020 September 2, 2030 June 2, 2021 June 2, 2031 June 2, 2021 June 2, 2033 May 4, 2023 May 4, 2028 May 4, 2023 May 4, 2030 May 4, 2023 May 4, 2033 May 4, 2023 May 4, 2033 P3Y P4Y P3Y P6Y P10Y 0001000228 2023-01-01 2023-07-01 0001000228 2023-12-31 2024-06-29 0001000228 2023-12-30 0001000228 2023-01-01 2023-12-30 0001000228 2024-06-29 0001000228 us-gaap:RetainedEarningsMember 2023-12-31 2024-06-29 0001000228 us-gaap:LoansPayableMember srt:MinimumMember 2023-12-30 0001000228 us-gaap:RevolvingCreditFacilityMember 2023-12-30 0001000228 us-gaap:CommonStockMember 2023-12-31 2024-06-29 0001000228 us-gaap:LoansPayableMember srt:MaximumMember 2024-06-29 0001000228 2022-12-31 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-12-31 2024-06-29 0001000228 us-gaap:NoncontrollingInterestMember 2023-12-31 2024-06-29 0001000228 us-gaap:RevolvingCreditFacilityMember 2024-06-29 0001000228 us-gaap:LoansPayableMember srt:MaximumMember 2023-12-30 0001000228 us-gaap:LoansPayableMember srt:MinimumMember 2024-06-29 0001000228 us-gaap:AdditionalPaidInCapitalMember 2023-12-31 2024-06-29 0001000228 us-gaap:AdditionalPaidInCapitalMember 2024-03-31 2024-06-29 0001000228 us-gaap:RetainedEarningsMember 2024-03-31 2024-06-29 0001000228 us-gaap:EquityMethodInvesteeMember 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities8Member 2024-06-29 0001000228 hsic:HealthCareDistributionMember 2023-01-01 2023-07-01 0001000228 hsic:TechnologyAndValueAddedServicesMember 2023-01-01 2023-07-01 0001000228 us-gaap:CommonStockMember 2024-03-31 2024-06-29 0001000228 hsic:OtherShortTermCreditLinesMember 2023-12-30 0001000228 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-07-01 0001000228 hsic:PrivatePlacementFacilitiesMember 2023-12-30 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember 2023-12-30 0001000228 us-gaap:LoansPayableMember 2024-06-29 0001000228 us-gaap:LoansPayableMember 2023-12-30 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities1Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities2Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities3Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities4Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities5Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities6Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities7Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities1Member 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities2Member 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities3Member 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities4Member 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities5Member 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities6Member 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities7Member 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities8Member 2023-12-31 2024-06-29 0001000228 2024-07-29 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:InternationalMember 2023-01-01 2023-07-01 0001000228 srt:NorthAmericaMember hsic:TechnologyAndValueAddedServicesMember 2023-01-01 2023-07-01 0001000228 hsic:InternationalMember hsic:TechnologyAndValueAddedServicesMember 2023-01-01 2023-07-01 0001000228 srt:NorthAmericaMember 2023-01-01 2023-07-01 0001000228 hsic:InternationalMember 2023-01-01 2023-07-01 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember hsic:DentalMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:DentalMember hsic:InternationalMember 2023-01-01 2023-07-01 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember hsic:MedicalMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:MedicalMember hsic:InternationalMember 2023-01-01 2023-07-01 0001000228 us-gaap:EquityMethodInvesteeMember 2023-01-01 2023-07-01 0001000228 2024-03-31 2024-06-29 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-03-31 2024-06-29 0001000228 us-gaap:NoncontrollingInterestMember 2024-03-31 2024-06-29 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember hsic:DentalMember 2023-12-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:DentalMember hsic:InternationalMember 2023-12-31 2024-06-29 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember hsic:MedicalMember 2023-12-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:MedicalMember hsic:InternationalMember 2023-12-31 2024-06-29 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember 2023-12-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:InternationalMember 2023-12-31 2024-06-29 0001000228 srt:NorthAmericaMember hsic:TechnologyAndValueAddedServicesMember 2023-12-31 2024-06-29 0001000228 hsic:InternationalMember hsic:TechnologyAndValueAddedServicesMember 2023-12-31 2024-06-29 0001000228 srt:NorthAmericaMember 2023-12-31 2024-06-29 0001000228 hsic:InternationalMember 2023-12-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember 2023-12-31 2024-06-29 0001000228 hsic:TechnologyAndValueAddedServicesMember 2023-12-31 2024-06-29 0001000228 hsic:PerformanceBasedRestrictedStockRestrictedUnitsMember 2023-12-31 2024-06-29 0001000228 hsic:NonEmployeeDirectorStockIncentivePlanMember hsic:TimeBasedRestrictedStockRestrictedUnitsMember 2023-12-31 2024-06-29 0001000228 us-gaap:EmployeeStockOptionMember 2023-12-31 2024-06-29 0001000228 us-gaap:EmployeeStockOptionMember 2023-12-31 2024-06-29 0001000228 us-gaap:RestrictedStockUnitsRSUMember 2023-12-31 2024-06-29 0001000228 us-gaap:RoyaltyAgreementsMember hsic:InternetBrandsIncMember 2023-12-31 2024-06-29 0001000228 hsic:TimeBasedRestrictedStockRestrictedUnitsMember 2023-12-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember 2024-06-29 0001000228 hsic:TechnologyAndValueAddedServicesMember 2024-06-29 0001000228 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember us-gaap:AssetPledgedAsCollateralMember 2023-12-30 0001000228 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember us-gaap:RecourseMember 2023-12-30 0001000228 srt:NorthAmericaMember 2024-03-31 2024-06-29 0001000228 hsic:InternationalMember 2024-03-31 2024-06-29 0001000228 us-gaap:EquityMethodInvesteeMember 2024-03-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember 2024-03-31 2024-06-29 0001000228 hsic:TechnologyAndValueAddedServicesMember 2024-03-31 2024-06-29 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember 2024-03-31 2024-06-29 0001000228 srt:NorthAmericaMember hsic:TechnologyAndValueAddedServicesMember 2024-03-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:InternationalMember 2024-03-31 2024-06-29 0001000228 hsic:InternationalMember hsic:TechnologyAndValueAddedServicesMember 2024-03-31 2024-06-29 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember hsic:DentalMember 2024-03-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:DentalMember hsic:InternationalMember 2024-03-31 2024-06-29 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember hsic:MedicalMember 2024-03-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:MedicalMember hsic:InternationalMember 2024-03-31 2024-06-29 0001000228 2023-04-02 2023-07-01 0001000228 hsic:HealthCareDistributionMember 2023-04-02 2023-07-01 0001000228 hsic:TechnologyAndValueAddedServicesMember 2023-04-02 2023-07-01 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember 2023-04-02 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:InternationalMember 2023-04-02 2023-07-01 0001000228 srt:NorthAmericaMember hsic:TechnologyAndValueAddedServicesMember 2023-04-02 2023-07-01 0001000228 hsic:InternationalMember hsic:TechnologyAndValueAddedServicesMember 2023-04-02 2023-07-01 0001000228 srt:NorthAmericaMember 2023-04-02 2023-07-01 0001000228 hsic:InternationalMember 2023-04-02 2023-07-01 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember hsic:DentalMember 2023-04-02 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:DentalMember hsic:InternationalMember 2023-04-02 2023-07-01 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionMember hsic:MedicalMember 2023-04-02 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:MedicalMember hsic:InternationalMember 2023-04-02 2023-07-01 0001000228 us-gaap:EquityMethodInvesteeMember 2023-04-02 2023-07-01 0001000228 hsic:PrivatePlacementFacilitiesMember 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember 2023-12-31 2024-06-29 0001000228 srt:MinimumMember hsic:PrivatePlacementFacilitiesMember 2023-12-31 2024-06-29 0001000228 srt:MaximumMember hsic:PrivatePlacementFacilitiesMember 2023-12-31 2024-06-29 0001000228 us-gaap:OtherLiabilitiesMember 2024-06-29 0001000228 us-gaap:OtherLiabilitiesMember 2023-12-30 0001000228 hsic:HealthCareDistributionMember 2023-12-30 0001000228 hsic:TechnologyAndValueAddedServicesMember 2023-12-30 0001000228 hsic:TimeBasedRestrictedStockRestrictedUnitsMember 2023-12-30 0001000228 hsic:TimeBasedRestrictedStockRestrictedUnitsMember 2024-06-29 0001000228 hsic:PerformanceBasedRestrictedStockRestrictedUnitsMember 2023-12-30 0001000228 hsic:PerformanceBasedRestrictedStockRestrictedUnitsMember 2024-06-29 0001000228 us-gaap:EmployeeStockOptionMember 2024-03-31 2024-06-29 0001000228 us-gaap:EmployeeStockOptionMember 2023-04-02 2023-07-01 0001000228 us-gaap:RestrictedStockUnitsRSUMember 2024-03-31 2024-06-29 0001000228 us-gaap:RestrictedStockUnitsRSUMember 2023-04-02 2023-07-01 0001000228 us-gaap:EquityMethodInvesteeMember 2024-06-29 0001000228 hsic:ActionsConsolidatedInTheMultiDistrictLitigationMember 2023-01-01 2023-12-30 0001000228 us-gaap:NoncontrollingInterestMember 2023-12-30 0001000228 us-gaap:CommonStockMember 2023-12-30 0001000228 us-gaap:RetainedEarningsMember 2023-12-30 0001000228 us-gaap:AdditionalPaidInCapitalMember 2023-12-30 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-12-30 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities9Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities10Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities11Member 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities9Member 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities10Member 2023-12-31 2024-06-29 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities11Member 2023-12-31 2024-06-29 0001000228 us-gaap:RestrictedStockUnitsRSUMember 2023-01-01 2023-07-01 0001000228 hsic:TermCreditAgreementMember 2023-12-30 0001000228 2024-03-30 0001000228 us-gaap:NoncontrollingInterestMember 2024-03-30 0001000228 us-gaap:CommonStockMember 2024-03-30 0001000228 us-gaap:RetainedEarningsMember 2024-03-30 0001000228 us-gaap:AdditionalPaidInCapitalMember 2024-03-30 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-03-30 0001000228 us-gaap:EquityMethodInvesteeMember 2023-12-30 0001000228 hsic:BiotechDentalMember 2023-12-31 2024-06-29 0001000228 hsic:SINImplantSystemMember 2023-07-05 0001000228 hsic:BiotechDentalMember 2023-04-05 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember srt:MinimumMember 2023-12-30 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember srt:MaximumMember 2023-12-30 0001000228 hsic:BiotechDentalMember 2023-07-02 2024-03-30 0001000228 hsic:BiotechDentalMember 2024-03-30 0001000228 hsic:CustomerRelationshipsAndListsMember hsic:BiotechDentalMember 2023-04-05 2023-04-05 0001000228 us-gaap:TrademarksAndTradeNamesMember hsic:BiotechDentalMember 2023-04-05 2023-04-05 0001000228 hsic:BiotechDentalMember hsic:ProductDevelopmentMember 2023-04-05 2023-04-05 0001000228 hsic:BiotechDentalMember 2023-04-05 2023-04-05 0001000228 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2024-06-29 0001000228 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2023-12-30 0001000228 us-gaap:RevolvingCreditFacilityMember 2021-08-20 2021-08-20 0001000228 us-gaap:RevolvingCreditFacilityMember 2023-12-31 2024-06-29 0001000228 hsic:OtherShortTermCreditLinesMember 2024-06-29 0001000228 hsic:TermCreditAgreementMember 2023-12-31 2024-06-29 0001000228 hsic:TermCreditAgreementMember 2024-06-29 0001000228 us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember hsic:TermCreditAgreementMember 2024-06-29 0001000228 us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember hsic:TermCreditAgreementMember 2023-12-31 2024-06-29 0001000228 us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember hsic:TermCreditAgreementMember 2023-12-30 0001000228 us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember hsic:TermCreditAgreementMember 2023-01-01 2023-12-30 0001000228 us-gaap:InterestRateSwapMember hsic:TermCreditAgreementMember 2023-12-30 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember 2023-12-31 2024-06-29 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember 2024-06-29 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember hsic:AverageAssetBackedCommercialPaperRateMember 2024-06-29 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember hsic:AverageAssetBackedCommercialPaperRateMember 2023-12-31 2024-06-29 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember hsic:AverageAssetBackedCommercialPaperRateMember 2023-12-30 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember hsic:AverageAssetBackedCommercialPaperRateMember 2023-01-01 2023-12-30 0001000228 srt:MaximumMember 2024-06-29 0001000228 hsic:OtherHospitalsLocatedThroughoutFloridaMember 2023-12-31 2024-06-29 0001000228 us-gaap:SegmentContinuingOperationsMember hsic:ActionsConsolidatedInTheMultiDistrictLitigationMember 2023-01-01 2023-12-30 0001000228 hsic:EmployeesAndMinorityShareholdersMember hsic:OperatingLeaseLiabilitiesCurrentMember hsic:RelatedPartyConcentrationRiskMember 2023-01-01 2023-12-30 0001000228 hsic:EmployeesAndMinorityShareholdersMember hsic:OperatingLeaseLiabilitiesNoncurrentMember hsic:RelatedPartyConcentrationRiskMember 2023-01-01 2023-12-30 0001000228 hsic:SINImplantSystemMember 2023-07-05 2023-07-05 0001000228 2023-07-01 0001000228 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2024-06-29 0001000228 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2024-06-29 0001000228 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2024-06-29 0001000228 us-gaap:FairValueMeasurementsRecurringMember 2024-06-29 0001000228 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:DesignatedAsHedgingInstrumentMember 2024-06-29 0001000228 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:DesignatedAsHedgingInstrumentMember 2024-06-29 0001000228 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:DesignatedAsHedgingInstrumentMember 2024-06-29 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:DesignatedAsHedgingInstrumentMember 2024-06-29 0001000228 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:DesignatedAsHedgingInstrumentMember 2023-12-30 0001000228 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:DesignatedAsHedgingInstrumentMember 2023-12-30 0001000228 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:DesignatedAsHedgingInstrumentMember 2023-12-30 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:DesignatedAsHedgingInstrumentMember 2023-12-30 0001000228 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2024-06-29 0001000228 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2024-06-29 0001000228 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2024-06-29 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2024-06-29 0001000228 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2023-12-30 0001000228 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2023-12-30 0001000228 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2023-12-30 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2023-12-30 0001000228 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2023-12-30 0001000228 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2023-12-30 0001000228 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2023-12-30 0001000228 us-gaap:FairValueMeasurementsRecurringMember 2023-12-30 0001000228 hsic:InternetBrandsIncMember 2023-12-30 0001000228 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember us-gaap:AssetPledgedAsCollateralMember 2024-06-29 0001000228 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember us-gaap:RecourseMember 2024-06-29 0001000228 us-gaap:NoncontrollingInterestMember 2024-06-29 0001000228 us-gaap:CommonStockMember 2024-06-29 0001000228 us-gaap:RetainedEarningsMember 2024-06-29 0001000228 us-gaap:AdditionalPaidInCapitalMember 2024-06-29 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2024-06-29 0001000228 2023-04-01 0001000228 us-gaap:CommonStockMember 2023-04-01 0001000228 us-gaap:AdditionalPaidInCapitalMember 2023-04-01 0001000228 us-gaap:RetainedEarningsMember 2023-04-01 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-04-01 0001000228 us-gaap:NoncontrollingInterestMember 2023-04-01 0001000228 us-gaap:RetainedEarningsMember 2023-04-02 2023-07-01 0001000228 us-gaap:NoncontrollingInterestMember 2023-04-02 2023-07-01 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-04-02 2023-07-01 0001000228 us-gaap:AdditionalPaidInCapitalMember 2023-04-02 2023-07-01 0001000228 us-gaap:CommonStockMember 2023-04-02 2023-07-01 0001000228 us-gaap:CommonStockMember 2023-07-01 0001000228 us-gaap:AdditionalPaidInCapitalMember 2023-07-01 0001000228 us-gaap:RetainedEarningsMember 2023-07-01 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-07-01 0001000228 us-gaap:NoncontrollingInterestMember 2023-07-01 0001000228 us-gaap:CommonStockMember 2022-12-31 0001000228 us-gaap:CommonStockMember 2023-01-01 2023-07-01 0001000228 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001000228 us-gaap:RetainedEarningsMember 2022-12-31 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-12-31 0001000228 us-gaap:NoncontrollingInterestMember 2022-12-31 0001000228 us-gaap:RetainedEarningsMember 2023-01-01 2023-07-01 0001000228 us-gaap:NoncontrollingInterestMember 2023-01-01 2023-07-01 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-01-01 2023-07-01 0001000228 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:DentalMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:MedicalMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:DentalMember 2023-12-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:MedicalMember 2023-12-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:DentalMember 2023-04-02 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:MedicalMember 2023-04-02 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:DentalMember 2024-03-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:MedicalMember 2024-03-31 2024-06-29 0001000228 hsic:TriMedIncMember 2023-12-31 2024-06-29 0001000228 hsic:TriMedIncMember 2024-04-01 0001000228 hsic:ShieldHealthcareIncMember 2023-10-02 0001000228 hsic:ShieldHealthcareIncMember 2023-10-02 2023-10-02 0001000228 hsic:TriMedIncMember 2024-04-01 2024-04-01 0001000228 hsic:ProductDevelopmentMember hsic:TriMedIncMember 2024-04-01 2024-04-01 0001000228 us-gaap:TrademarksAndTradeNamesMember hsic:TriMedIncMember 2024-04-01 2024-04-01 0001000228 us-gaap:InProcessResearchAndDevelopmentMember hsic:TriMedIncMember 2024-04-01 2024-04-01 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember srt:MaximumMember 2024-06-29 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2023-12-31 2024-06-29 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2024-06-29 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember hsic:CustomerRelationshipsAndListsMember 2024-06-29 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember hsic:ProductDevelopmentMember 2024-06-29 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember hsic:CustomerRelationshipsAndListsMember 2023-12-31 2024-06-29 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember hsic:ProductDevelopmentMember 2023-12-31 2024-06-29 0001000228 hsic:ShieldHealthcareIncMember 2023-12-31 2024-06-29 0001000228 hsic:ShieldHealthcareIncMember 2023-12-30 0001000228 srt:RestatementAdjustmentMember hsic:ShieldHealthcareIncMember 2024-06-29 0001000228 hsic:ShieldHealthcareIncMember 2024-06-29 0001000228 hsic:ShieldHealthcareIncMember 2023-01-01 2023-12-30 0001000228 srt:RestatementAdjustmentMember hsic:ShieldHealthcareIncMember 2023-12-31 2024-06-29 0001000228 hsic:CustomerRelationshipsAndListsMember hsic:ShieldHealthcareIncMember 2023-10-02 2023-10-02 0001000228 hsic:SINImplantSystemMember 2023-12-31 2024-06-29 0001000228 hsic:SINImplantSystemMember 2023-12-30 0001000228 srt:RestatementAdjustmentMember hsic:SINImplantSystemMember 2024-06-29 0001000228 hsic:SINImplantSystemMember 2024-06-29 0001000228 hsic:SINImplantSystemMember 2023-01-01 2023-12-30 0001000228 hsic:CustomerRelationshipsAndListsMember hsic:SINImplantSystemMember 2023-07-05 2023-07-05 0001000228 hsic:ProductDevelopmentMember hsic:SINImplantSystemMember 2023-07-05 2023-07-05 0001000228 us-gaap:TrademarksAndTradeNamesMember hsic:SINImplantSystemMember 2023-07-05 2023-07-05 0001000228 hsic:September2023ThroughJune2024Member 2023-12-31 2024-06-29 0001000228 hsic:September2024ThroughJune2026Member 2023-12-31 2024-06-29 0001000228 us-gaap:InterestRateSwapMember hsic:TermCreditAgreementMember 2024-06-29 0001000228 us-gaap:RoyaltyAgreementsMember hsic:InternetBrandsIncMember 2024-03-31 2024-06-29 0001000228 us-gaap:RoyaltyAgreementsMember hsic:InternetBrandsIncMember 2023-04-02 2023-07-01 0001000228 us-gaap:RoyaltyAgreementsMember hsic:InternetBrandsIncMember 2023-01-01 2023-07-01 0001000228 hsic:InternetBrandsIncMember 2024-06-29 0001000228 srt:MinimumMember hsic:EmployeesAndMinorityShareholdersMember 2024-06-29 0001000228 srt:MaximumMember hsic:EmployeesAndMinorityShareholdersMember 2024-06-29 0001000228 hsic:EmployeesAndMinorityShareholdersMember 2024-06-29 0001000228 hsic:EmployeesAndMinorityShareholdersMember hsic:OperatingLeaseLiabilitiesCurrentMember hsic:RelatedPartyConcentrationRiskMember 2023-12-31 2024-06-29 0001000228 hsic:EmployeesAndMinorityShareholdersMember hsic:OperatingLeaseLiabilitiesNoncurrentMember hsic:RelatedPartyConcentrationRiskMember 2023-12-31 2024-06-29 0001000228 hsic:CyberIncidentMember 2024-03-31 2024-06-29 0001000228 hsic:CyberIncidentMember 2023-12-31 2024-06-29 0001000228 hsic:OtherShortTermCreditLinesMember 2023-12-31 2024-06-29 0001000228 us-gaap:NoncompeteAgreementsMember us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2024-06-29 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember us-gaap:TrademarksAndTradeNamesMember 2024-06-29 0001000228 us-gaap:NoncompeteAgreementsMember us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2023-12-31 2024-06-29 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember us-gaap:TrademarksAndTradeNamesMember 2023-12-31 2024-06-29 0001000228 us-gaap:TrademarksAndTradeNamesMember hsic:ShieldHealthcareIncMember 2023-10-02 2023-10-02 0001000228 us-gaap:RevolvingCreditFacilityMember 2023-01-01 2023-12-30 0001000228 hsic:HealthCareDistributionMember hsic:SeveranceAndEmployeeRelatedCostsMember 2023-04-02 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:AcceleratedDepreciationAndAmortizationMember 2023-04-02 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:ExitAndOtherRelatedCostsMember 2023-04-02 2023-07-01 0001000228 hsic:TechnologyAndValueAddedServicesMember hsic:SeveranceAndEmployeeRelatedCostsMember 2023-04-02 2023-07-01 0001000228 hsic:TechnologyAndValueAddedServicesMember hsic:AcceleratedDepreciationAndAmortizationMember 2023-04-02 2023-07-01 0001000228 hsic:SeveranceAndEmployeeRelatedCostsMember 2023-04-02 2023-07-01 0001000228 hsic:AcceleratedDepreciationAndAmortizationMember 2023-04-02 2023-07-01 0001000228 hsic:ExitAndOtherRelatedCostsMember 2023-04-02 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:SeveranceAndEmployeeRelatedCostsMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:AcceleratedDepreciationAndAmortizationMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:ExitAndOtherRelatedCostsMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:DisposalOfBusinessMember 2023-01-01 2023-07-01 0001000228 hsic:TechnologyAndValueAddedServicesMember hsic:SeveranceAndEmployeeRelatedCostsMember 2023-01-01 2023-07-01 0001000228 hsic:TechnologyAndValueAddedServicesMember hsic:AcceleratedDepreciationAndAmortizationMember 2023-01-01 2023-07-01 0001000228 hsic:TechnologyAndValueAddedServicesMember hsic:ExitAndOtherRelatedCostsMember 2023-01-01 2023-07-01 0001000228 hsic:SeveranceAndEmployeeRelatedCostsMember 2023-01-01 2023-07-01 0001000228 hsic:AcceleratedDepreciationAndAmortizationMember 2023-01-01 2023-07-01 0001000228 hsic:ExitAndOtherRelatedCostsMember 2023-01-01 2023-07-01 0001000228 hsic:DisposalOfBusinessMember 2023-01-01 2023-07-01 0001000228 hsic:HealthCareDistributionMember hsic:SeveranceAndEmployeeRelatedCostsMember 2024-03-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:AcceleratedDepreciationAndAmortizationMember 2024-03-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:ExitAndOtherRelatedCostsMember 2024-03-31 2024-06-29 0001000228 hsic:TechnologyAndValueAddedServicesMember hsic:SeveranceAndEmployeeRelatedCostsMember 2024-03-31 2024-06-29 0001000228 hsic:SeveranceAndEmployeeRelatedCostsMember 2024-03-31 2024-06-29 0001000228 hsic:AcceleratedDepreciationAndAmortizationMember 2024-03-31 2024-06-29 0001000228 hsic:ExitAndOtherRelatedCostsMember 2024-03-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:SeveranceAndEmployeeRelatedCostsMember 2023-12-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:AcceleratedDepreciationAndAmortizationMember 2023-12-31 2024-06-29 0001000228 hsic:HealthCareDistributionMember hsic:ExitAndOtherRelatedCostsMember 2023-12-31 2024-06-29 0001000228 hsic:TechnologyAndValueAddedServicesMember hsic:SeveranceAndEmployeeRelatedCostsMember 2023-12-31 2024-06-29 0001000228 hsic:SeveranceAndEmployeeRelatedCostsMember 2023-12-31 2024-06-29 0001000228 hsic:AcceleratedDepreciationAndAmortizationMember 2023-12-31 2024-06-29 0001000228 hsic:ExitAndOtherRelatedCostsMember 2023-12-31 2024-06-29 0001000228 srt:MinimumMember us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2024-06-29 0001000228 srt:MinimumMember hsic:USTradeAccountsReceivableSecuritizationMember 2023-12-31 2024-06-29 0001000228 srt:MaximumMember hsic:USTradeAccountsReceivableSecuritizationMember 2023-12-31 2024-06-29 0001000228 srt:ScenarioForecastMember 2024-06-30 2024-12-28 0001000228 hsic:Other2023AcquisitionsMember 2024-03-31 2024-06-29 0001000228 hsic:Other2023AcquisitionsMember 2023-12-31 2024-06-29 iso4217:USD xbrli:pure xbrli:shares iso4217:USD xbrli:shares hsic:number hsic:segments hsic:countries hsic:claims
 
 
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
 
QUARTERLY
 
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the
quarterly
 
period ended
June 29, 2024
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
ACT
 
OF 1934
For the transition period from ____________ to ____________
Commission File Number:
 
0-27078
HENRY SCHEIN, INC.
(Exact name of registrant as specified in its charter)
Delaware
11-3136595
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
135 Duryea Road
Melville
,
New York
(Address of principal executive offices)
11747
(Zip Code)
(
631
)
843-5500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $.01 per share
HSIC
The
Nasdaq
 
Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required
 
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
 
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
 
past 90 days.
Yes
 
No
 
Indicate by check mark whether the registrant has submitted electronically every
 
Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
 
the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
Yes
 
No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company.
 
See the definitions of “large accelerated filer,”
 
“accelerated filer,”
“smaller reporting company,”
 
and “emerging growth company”
 
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
 
 
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
 
for
complying with any new or revised financial accounting standards provided
 
pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
 
No
 
As of July 29, 2024,
there were
126,707,799
 
shares of the registrant’s common stock outstanding.
 
HENRY SCHEIN, INC.
INDEX
Page
3
4
5
6
7
 
8
9
9
10
11
12
13
14
19
21
24
25
26
28
30
30
32
32
33
34
50
51
52
52
52
52
53
54
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
3
PART
 
I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions,
 
except share data)
June 29,
December 30,
2024
2023
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
 
$
138
$
171
Accounts receivable, net of allowance for credit losses of $
82
 
and $
83
 
(1)
1,559
1,863
Inventories, net of reserves of $
145
 
and $
192
1,657
1,815
Prepaid expenses and other
 
587
639
Total current assets
 
3,941
4,488
Property and equipment, net
 
518
498
Operating lease right-of-use assets
304
325
Goodwill
 
3,905
3,875
Other intangibles, net
 
1,081
916
Investments and other
502
471
Total assets
 
$
10,251
$
10,573
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
 
$
867
$
1,020
Bank credit lines
 
505
264
Current maturities of long-term debt
 
106
150
Operating lease liabilities
75
80
Accrued expenses:
Payroll and related
 
279
332
Taxes
 
150
137
Other
 
567
700
Total current liabilities
 
2,549
2,683
Long-term debt (1)
1,891
1,937
Deferred income taxes
 
115
54
Operating lease liabilities
261
310
Other liabilities
 
431
436
Total liabilities
 
5,247
5,420
Redeemable noncontrolling interests
 
856
864
Commitments and contingencies
 
(nil)
(nil)
Stockholders' equity:
Preferred stock, $
0.01
 
par value,
1,000,000
 
shares authorized,
none
 
outstanding
-
-
Common stock, $
0.01
 
par value,
480,000,000
 
shares authorized,
127,080,545
 
outstanding on June 29, 2024 and
129,247,765
 
outstanding on December 30, 2023
1
1
Additional paid-in capital
-
-
Retained earnings
 
3,803
3,860
Accumulated other comprehensive loss
 
(292)
(206)
Total Henry Schein, Inc. stockholders' equity
3,512
3,655
Noncontrolling interests
636
634
Total stockholders' equity
 
4,148
4,289
Total liabilities, redeemable noncontrolling
 
interests and stockholders' equity
$
10,251
$
10,573
(1)
Amounts presented include balances held by our consolidated variable interest entity (“VIE”).
 
At June 29, 2024 and December 30,
2023, includes trade accounts receivable of $
330
 
million and $
284
 
million, respectively, and long-term debt of $
195
 
million and
$
210
 
million, respectively.
 
See
 
for further information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
4
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENTS
 
OF INCOME
(in millions,
 
except share and per share data)
(unaudited)
Three Months Ended
Six Months Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Net sales
 
$
3,136
$
3,100
$
6,308
$
6,160
Cost of sales
 
2,118
2,125
4,278
4,219
Gross profit
 
1,018
975
2,030
1,941
Operating expenses:
 
Selling, general and administrative
 
781
707
1,572
1,424
Depreciation and amortization
63
49
124
93
Restructuring costs
 
15
18
25
48
Operating income
 
159
201
309
376
Other income (expense):
 
Interest income
 
6
3
11
6
Interest expense
 
(32)
(19)
(62)
(33)
Other, net
 
(1)
1
1
-
Income before taxes, equity in earnings of affiliates and
noncontrolling interests
132
186
259
349
Income taxes
 
(33)
(41)
(65)
(80)
Equity in earnings of affiliates, net of tax
 
6
3
9
7
Net income
 
105
148
203
276
Less: Net income attributable to noncontrolling interests
 
(1)
(8)
(6)
(15)
Net income attributable to Henry Schein, Inc.
 
$
104
$
140
$
197
$
261
Earnings per share attributable to Henry Schein, Inc.:
 
Basic
 
$
0.81
$
1.07
$
1.53
$
1.99
Diluted
 
$
0.80
$
1.06
$
1.52
$
1.97
Weighted-average common
 
shares outstanding:
 
Basic
 
127,784,380
130,905,899
128,252,628
131,136,450
Diluted
 
128,646,506
131,873,174
129,206,780
132,465,749
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
5
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENTS
 
OF COMPREHENSIVE INCOME
(in millions)
 
(unaudited)
Three Months Ended
Six Months Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Net income
$
105
$
148
$
203
$
276
Other comprehensive income, net of tax:
Foreign currency translation gain (loss)
(62)
3
(116)
28
Unrealized gain (loss) from hedging activities
 
4
(1)
15
(4)
Other comprehensive income (loss), net of tax
(58)
2
(101)
24
Comprehensive income
 
47
150
102
300
Comprehensive income attributable to noncontrolling interests:
 
Net income
(1)
(8)
(6)
(15)
Foreign currency translation loss (gain)
5
1
15
(1)
Comprehensive (income) loss attributable to noncontrolling
interests
 
4
(7)
9
(16)
Comprehensive income attributable to Henry Schein, Inc.
 
$
51
$
143
$
111
$
284
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
6
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENT
 
OF CHANGES IN
 
STOCKHOLDERS’ EQUITY
(in millions, except share data)
(unaudited)
Accumulated
Common Stock
Additional
Other
Total
$0.01 Par Value
Paid-in
Retained
Comprehensive
Noncontrolling
Stockholders'
Shares
Amount
Capital
Earnings
Income / (Loss)
 
Interests
Equity
Balance, March 30, 2024
128,480,909
$
1
$
-
$
3,838
$
(239)
$
637
$
4,237
Net income (excluding loss of $
3
 
attributable to Redeemable
noncontrolling interests)
-
-
-
104
-
4
108
Foreign currency translation loss (excluding loss of $
5
attributable to Redeemable noncontrolling interests)
-
-
-
-
(57)
-
(57)
Unrealized gain from hedging activities,
net of tax of $
2
-
-
-
-
4
-
4
Distributions to noncontrolling shareholders
-
-
-
-
-
(5)
(5)
Change in fair value of redeemable securities
-
-
(39)
-
-
-
(39)
Noncontrolling interests and adjustments related to
business acquisitions
-
-
(11)
-
-
-
(11)
Repurchase and retirement of common stock
(1,415,706)
-
(14)
(87)
-
-
(101)
Stock issued upon exercise of stock options
4,301
-
1
-
-
-
1
Stock-based compensation expense
15,339
-
12
-
-
-
12
Shares withheld for payroll taxes
(4,298)
-
(1)
-
-
-
(1)
Transfer of charges in excess of
 
capital
-
-
52
(52)
-
-
-
Balance, June 29, 2024
127,080,545
$
1
$
-
$
3,803
$
(292)
$
636
$
4,148
Accumulated
Common Stock
Additional
Other
Total
$0.01 Par Value
Paid-in
Retained
Comprehensive
Noncontrolling
Stockholders'
Shares
Amount
Capital
Earnings
Income / (Loss)
 
Interests
Equity
Balance, April 1, 2023
131,196,783
$
1
$
-
$
3,684
$
(213)
$
655
$
4,127
Net income (excluding $
5
 
attributable to Redeemable
noncontrolling interests)
-
-
-
140
-
3
143
Foreign currency translation gain (excluding loss of $
1
attributable to Redeemable noncontrolling interests)
-
-
-
-
4
-
4
Unrealized loss from hedging activities,
including tax benefit of $
1
-
-
-
-
(1)
-
(1)
Distributions to noncontrolling shareholders
-
-
-
-
-
(27)
(27)
Change in fair value of redeemable securities
-
-
(17)
-
-
-
(17)
Noncontrolling interests and adjustments related to
business acquisitions
-
-
1
-
-
(5)
(4)
Repurchase and retirement of common stock
(638,095)
-
(7)
(44)
-
-
(51)
Stock-based compensation expense
20,598
-
14
-
-
-
14
Stock issued upon exercise of stock options
5,081
-
-
-
-
-
-
Shares withheld for payroll taxes
(6,671)
-
(3)
-
-
-
(3)
Settlement of stock-based compensation awards
(890)
-
1
-
-
-
1
Transfer of charges in excess of
 
capital
-
-
11
(11)
-
-
-
Balance, July 1, 2023
130,576,806
$
1
$
-
$
3,769
$
(210)
$
626
$
4,186
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
7
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENT
 
OF CHANGES IN
 
STOCKHOLDERS' EQUITY
(in millions, except share data)
(unaudited)
Accumulated
Common Stock
Additional
Other
Total
$.01 Par Value
Paid-in
Retained
Comprehensive
Noncontrolling
Stockholders'
Shares
Amount
Capital
Earnings
Income / (Loss)
 
Interests
Equity
Balance, December 30, 2023
129,247,765
$
1
$
-
$
3,860
$
(206)
$
634
$
4,289
Net income (excluding loss of $
1
 
attributable to Redeemable
noncontrolling interests)
 
-
-
-
197
-
7
204
Foreign currency translation loss (excluding loss of $
15
attributable to Redeemable noncontrolling interests)
-
-
-
-
(101)
-
(101)
Unrealized gain from hedging activities,
net of tax of $
6
-
-
-
-
15
-
15
Distributions to noncontrolling shareholders
-
-
-
-
-
(5)
(5)
Change in fair value of redeemable securities
 
-
-
(81)
-
-
-
(81)
Noncontrolling interests and adjustments related to
business acquisitions
-
-
(10)
-
-
-
(10)
Repurchase and retirement of common stock
 
(2,414,434)
-
(24)
(152)
-
-
(176)
Stock issued upon exercise of stock options
 
25,240
-
2
-
-
-
2
Stock-based compensation expense
330,098
-
20
-
-
-
20
Shares withheld for payroll taxes
 
(108,163)
-
(9)
-
-
-
(9)
Settlement of stock-based compensation awards
39
-
-
-
-
-
-
Transfer of charges in excess of
 
capital
-
-
102
(102)
-
-
-
Balance, June 29, 2024
127,080,545
$
1
$
-
$
3,803
$
(292)
$
636
$
4,148
Accumulated
Common Stock
Additional
Other
Total
$.01 Par Value
Paid-in
Retained
Comprehensive
Noncontrolling
Stockholders'
Shares
Amount
Capital
Earnings
Income / (Loss)
 
Interests
Equity
Balance, December 31, 2022
131,792,817
$
1
$
-
$
3,678
$
(233)
$
649
$
4,095
Net income (excluding $
9
 
attributable to Redeemable
noncontrolling interests)
 
-
-
-
261
-
6
267
Foreign currency translation gain (excluding gain of $
1
attributable to Redeemable noncontrolling interests)
-
-
-
-
27
-
27
Unrealized loss from hedging activities,
including tax benefit of $
2
-
-
-
-
(4)
-
(4)
Distributions to noncontrolling shareholders
-
-
-
-
-
(27)
(27)
Change in fair value of redeemable securities
-
-
(14)
-
-
-
(14)
Noncontrolling interests and adjustments related to
business acquisitions
-
-
1
-
-
(2)
(1)
Repurchase and retirement of common stock
 
(1,862,014)
-
(20)
(131)
-
-
(151)
Stock-based compensation expense
1,036,898
-
24
-
-
-
24
Stock issued upon exercise of stock options
 
15,860
-
1
-
-
-
1
Shares withheld for payroll taxes
 
(405,865)
-
(32)
-
-
-
(32)
Settlement of stock-based compensation awards
(890)
-
1
-
-
-
1
Transfer of charges in excess of
 
capital
-
-
39
(39)
-
-
-
Balance, July 1, 2023
130,576,806
$
1
$
-
$
3,769
$
(210)
$
626
$
4,186
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
8
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENTS
 
OF CASH FLOWS
(in millions)
(unaudited)
Six Months Ended
June 29,
July 1,
2024
2023
Cash flows from operating activities:
Net income
 
$
203
$
276
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
 
147
111
Non-cash restructuring charges
6
10
Stock-based compensation expense
20
24
Provision for losses on trade and other accounts receivable
 
7
2
Benefit from deferred income taxes
(19)
(3)
Equity in earnings of affiliates
(9)
(7)
Distributions from equity affiliates
 
9
9
Changes in unrecognized tax benefits
 
3
3
Other
 
(9)
(9)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
 
270
18
Inventories
 
107
163
Other current assets
 
50
(1)
Accounts payable and accrued expenses
 
(292)
(295)
Net cash provided by operating activities
493
301
Cash flows from investing activities:
Purchases of property and equipment
(78)
(68)
Payments related to equity investments and business acquisitions,
net of cash acquired
 
(181)
(251)
Proceeds from loan to affiliate
3
3
Capitalized software costs
(20)
(20)
Other
 
(5)
(4)
Net cash used in investing activities
 
(281)
(340)
Cash flows from financing activities:
Net change in bank credit lines
242
218
Proceeds from issuance of long-term debt
 
90
408
Principal payments for long-term debt
 
(177)
(366)
Proceeds from issuance of stock upon exercise of stock options
 
2
1
Payments for repurchases and retirement of common stock
 
(175)
(150)
Payments for taxes related to shares withheld for employee taxes
(8)
(33)
Distributions to noncontrolling shareholders
(28)
(6)
Acquisitions of noncontrolling interests in subsidiaries
 
(211)
(13)
Net cash provided by (used in) financing activities
(265)
59
Effect of exchange rate changes on cash and cash equivalents
20
-
Net change in cash and cash equivalents
(33)
20
Cash and cash equivalents, beginning of period
 
171
117
Cash and cash equivalents, end of period
 
$
138
$
137
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
9
Note 1 – Basis of Presentation
Our condensed consolidated financial statements include the accounts of Henry
 
Schein, Inc., and all of our
controlled subsidiaries (“we”, “us” and “our”).
 
All intercompany accounts and transactions are eliminated in
consolidation.
 
Investments in unconsolidated affiliates for which we have the ability to influence
 
the operating or
financial decisions are accounted for under the equity method.
 
Certain prior period amounts have been reclassified
to conform to the current period presentation.
 
These reclassifications, individually and in the aggregate, did
 
not
have a material impact on our condensed consolidated financial condition,
 
results of operations or cash flows.
Our accompanying unaudited condensed consolidated financial statements
 
have been prepared in accordance with
accounting principles generally accepted in the United States
 
(“U.S. GAAP”) for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
 
Accordingly, they do not include all of the
information and footnote disclosures required by U.S. GAAP for complete
 
financial statements.
The unaudited interim condensed consolidated financial statements should be
 
read in conjunction with the audited
consolidated financial statements and notes to the consolidated financial
 
statements contained in our Annual Report
on Form 10-K for the year ended December 30, 2023 and with the information
 
contained in our other publicly-
available filings with the Securities and Exchange Commission.
 
The condensed consolidated financial statements
reflect all adjustments considered necessary for a fair presentation of
 
the consolidated results of operations and
financial position for the interim periods presented.
 
All such adjustments are of a normal recurring nature.
 
The preparation of financial statements in conformity with accounting principles
 
generally accepted in the United
States requires us to make estimates and assumptions that affect the reported amounts of
 
assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
 
statements and the reported amounts of
revenues and expenses during the reporting period.
 
Actual results could differ from those estimates.
 
The results of
operations for the three and six months ended June 29, 2024 are not necessarily
 
indicative of the results to be
expected for any other interim period or for the year ending December
 
28, 2024.
Our condensed consolidated financial statements reflect estimates and
 
assumptions made by us that affect, among
other things, our goodwill, long-lived asset and definite-lived intangible
 
asset valuation; inventory valuation; equity
investment valuation; assessment of the annual effective tax rate; valuation of
 
deferred income taxes and income
tax contingencies; the allowance for doubtful accounts; hedging activity;
 
supplier rebates; measurement of
compensation cost for certain share-based performance awards and cash bonus
 
plans; and pension plan
assumptions.
We consolidate the results of operations and financial position of a trade accounts receivable securitization which
we consider a VIE because we are its primary beneficiary, as we have the power to direct activities that most
significantly affect its economic performance and have the obligation to absorb the
 
majority of its losses or
benefits.
 
For this VIE, the trade accounts receivable transferred
 
to the VIE are pledged as collateral to the related
debt.
 
The VIE’s creditors have recourse to us for losses on these trade accounts receivable.
 
At June 29, 2024 and
December 30, 2023, certain trade accounts receivable that can only be used
 
to settle obligations of this VIE were
$
330
 
million and $
284
 
million, respectively, and the liabilities of this VIE where the creditors have recourse to us
were $
195
 
million and $
210
 
million, respectively.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
10
Note 2 – Significant Accounting Policies and Recently Issued Accounting
 
Standards
Significant Accounting Policies
 
There have been no material changes in our significant accounting policies during
 
the three and six months ended
June 29, 2024, as compared to the significant accounting policies described
 
in Item 8 of our Annual Report on
Form 10-K for the year ended December 30, 2023.
Recently Issued Accounting Standards
In March 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2024-01, “
Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and
Similar Awards,
” which clarifies how to determine whether a profit interest and
 
similar awards should be accounted
for as a share-based payment arrangement under Topic 718 or within the scope of other guidance.
 
The ASU
provides an illustrative example with multiple fact patterns and amends
 
the structure of paragraph 718-10-15-3 of
Topic 718 to improve its clarity and operability.
 
The guidance in ASU 2024-01 applies to all entities that
 
issue
profits interest awards as compensation to employees or nonemployees
 
in exchange for goods or services.
 
Entities
can apply the amendments either retrospectively to all periods presented
 
in the financial statements or prospectively
to profits interest awards granted or modified on or after the date
 
of adoption.
 
If prospective application is elected,
an entity must disclose the nature of and reason for the change in accounting principle
 
that resulted from the
adoption of the ASU.
 
This ASU is effective for fiscal years beginning after December 15, 2024,
 
including interim
periods within those fiscal years.
 
We do not expect that the requirements of ASU 2024 – 01 will have a material
impact on our consolidated financial statements.
In December 2023, FASB issued ASU 2023-09, “
Income Taxes (Topic
 
740): Improvements to Income Tax
Disclosures
,” which requires public business entities to disclose additional
 
information in specified categories with
respect to the reconciliation of the effective tax rate to the statutory rate for federal, state and
 
foreign income taxes.
 
It also requires greater detail about individual reconciling items in
 
the rate reconciliation to the extent the impact of
those items exceeds a specified threshold.
 
In addition to new disclosures associated with the rate reconciliation,
 
the
ASU requires information pertaining to taxes paid (net of refunds received)
 
to be disaggregated for federal, state
and foreign taxes and further disaggregated for specific jurisdictions
 
to the extent the related amounts exceed a
quantitative threshold.
 
The ASU also describes items that need to be disaggregated
 
based on their nature, which is
determined by reference to the item’s fundamental or essential characteristics, such as the transaction or event
 
that
triggered the establishment of the reconciling item and the activity with which
 
the reconciling item is associated.
 
The ASU eliminates the historic requirement that entities disclose information
 
concerning unrecognized tax
benefits having a reasonable possibility of significantly increasing
 
or decreasing in the 12 months following the
reporting date.
 
This ASU is effective for annual periods beginning after December 15, 2024.
 
Early adoption is
permitted for annual financial statements that have not yet been
 
issued or made available for issuance.
 
This ASU
should be applied on a prospective basis; however, retrospective application is permitted.
 
We are currently
evaluating the impact that ASU 2023-09 will have on our consolidated
 
financial statements.
In November 2023, the FASB issued ASU 2023-07, “
Segment Reporting (Topic 280): Improvements to Reportable
Segments
,” which aims to improve financial reporting by requiring disclosure
 
of incremental segment information
on an annual and interim basis for all public entities to enable investors to
 
develop more decision-useful financial
analyses.
 
Currently, Topic
 
280 requires that a public entity disclose certain information about its
 
reportable
segments.
 
For example, a public entity is required to report a measure of
 
segment profit or loss that the chief
operating decision maker uses to assess segment performance and
 
make decisions about allocating resources.
 
Topic 280 also requires other specified segment items and amounts, such as depreciation, amortization and
depletion expense, to be disclosed under certain circumstances.
 
The amendments in this ASU do not change or
remove those disclosure requirements and do not change how a public
 
entity identifies its operating segments,
aggregates those operating segments or applies the quantitative thresholds
 
to determine its reportable segments.
 
This ASU is effective for fiscal years beginning after December 15, 2023, and interim
 
periods within fiscal years
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
11
 
beginning after December 15, 2024.
 
Early adoption is permitted.
 
We are currently evaluating the impact that ASU
2023- 07 will have on our consolidated financial statements.
Note 3 – Cyber Incident
In October 2023 Henry Schein experienced a cyber incident that primarily
 
affected the operations of our North
American and European dental and medical distribution businesses.
 
Henry Schein One, our practice management
software, revenue cycle management and patient relationship management
 
solutions business, was not affected, and
our manufacturing businesses were mostly unaffected.
 
On November 22, 2023, we experienced a disruption of our
ecommerce platform and related applications, which was remediated.
During the three and six months ended June 29, 2024, we continued to
 
experience a residual impact of the cyber
events noted above relating primarily to decreased sales to episodic customers
 
(customers that had generally
registered a less continuous level of demand pre-incident).
During the three and six months ended June 29, 2024, we incurred $
3
 
million and $
8
 
million, respectively, of
expenses directly related to the cyber incident, mostly consisting of professional
 
fees.
 
We maintain cyber
insurance, subject to certain retentions and policy limitations.
 
With respect to the October 2023 cyber incident, we
have a $
60
 
million insurance policy, following a $
5
 
million retention.
 
During the three and six months ended June
29, 2024, we received insurance proceeds of $
10
 
million, representing a partial insurance recovery of losses
 
related
to the cyber incident.
 
The expenses and insurance recoveries related to the cyber
 
incident are included in the
selling, general and administrative line in our condensed consolidated
 
statements of income.
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
12
Note 4 – Net Sales from Contracts with Customers
Net sales are recognized in accordance with policies disclosed in Item
 
8 of our Annual Report on Form 10-K for
the year ended December 30, 2023.
Disaggregation of Net Sales
The following table disaggregates our net sales by reportable and operating segment
 
and geographic area:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
June 29, 2024
June 29, 2024
North
America
International
Global
North
America
International
Global
Net sales:
Health care distribution
 
Dental
 
$
1,129
$
795
$
1,924
$
2,232
$
1,606
$
3,838
Medical
 
970
28
998
1,984
55
2,039
Total health care distribution
2,099
823
2,922
4,216
1,661
5,877
Technology
 
and value-added services
 
186
28
214
375
56
431
Total net sales
$
2,285
$
851
$
3,136
$
4,591
$
1,717
$
6,308
Three Months Ended
 
Six Months Ended
July 1, 2023
July 1, 2023
North
America
International
Global
North
America
International
Global
Net sales:
Health care distribution
 
Dental
 
$
1,169
$
788
$
1,957
$
2,313
$
1,542
$
3,855
Medical
 
925
25
950
1,876
45
1,921
Total health care distribution
2,094
813
2,907
4,189
1,587
5,776
Technology
 
and value-added services
 
168
25
193
334
50
384
Total net sales
$
2,262
$
838
$
3,100
$
4,523
$
1,637
$
6,160
Contract Liabilities
At June 29, 2024,
 
December 30, 2023,
 
and December 31, 2022, the current and non-current contract
 
liabilities were
$
77
 
million and $
8
 
million; $
89
 
million and $
9
 
million; and $
86
 
million and $
8
 
million, respectively.
 
During the
six months ended June 29, 2024, we recognized, in net sales, $
55
 
million of the amount that was previously
deferred at December 30, 2023.
 
During the six months ended July 1, 2023, we recognized in net sales
 
$
56
 
million
of the amount that was previously deferred at December 31, 2022.
 
Current contract liabilities are included in
accrued expenses: other and the non-current contract liabilities are
 
included in other liabilities within our
consolidated balance sheets.
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
13
 
Note 5
 
Segment Data
We conduct our business through
two
 
reportable segments: (i) health care distribution and (ii) technology and
value-added services.
 
These segments offer different products and services to the same customer base.
 
Our global
dental businesses serve office-based dental practitioners, dental laboratories, schools, government
 
and other
institutions.
 
Our medical businesses serve physician offices, urgent care centers, ambulatory care sites,
 
emergency
medical technicians, dialysis centers, home health, federal and state governments
 
and large enterprises, such as
group practices, and integrated delivery networks, among other providers
 
across a wide range of specialties.
 
Our
dental and medical groups serve practitioners in
33
 
countries worldwide.
The health care distribution reportable segment aggregates our global dental
 
and medical operating segments.
 
This
segment distributes consumable products, dental specialty products (including
 
implant, orthodontic and endodontic
products),
 
small equipment, laboratory products, large equipment, equipment repair
 
services, branded and generic
pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, personal
 
protective
equipment (“PPE”) products, vitamins and orthopedic implants.
 
Our global technology and value-added services reportable segment provides
 
software, technology and other value-
added services to health care practitioners.
 
Our technology offerings include practice management software
systems for dental and medical practitioners.
 
Our value-added practice solutions include practice consultancy,
education, revenue cycle management and financial services on a non-recourse
 
basis, e-services, continuing
education services for practitioners,
 
practice technology, network and hardware services, and other services.
The following tables present information about our reportable and operating
 
segments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Net sales:
Health care distribution
(1)
Dental
 
$
1,924
$
1,957
$
3,838
$
3,855
Medical
 
998
950
2,039
1,921
Total health care distribution
2,922
2,907
5,877
5,776
Technology
 
and value-added services
(2)
214
193
431
384
Total
 
$
3,136
$
3,100
$
6,308
$
6,160
(1)
Consists of consumable products, dental specialty products (including implant, orthodontic and endodontic products), small
equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical
products, diagnostic tests, infection-control products, PPE products, vitamins and orthopedic implants.
(2)
Consists of practice management software and other value-added products, which are distributed primarily to health care providers,
practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, continuing
education services for practitioners, practice technology, network and hardware services, and other services.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Operating Income:
Health care distribution
 
$
146
$
166
$
272
$
311
Technology
 
and value-added services
 
13
35
37
65
Total
$
159
$
201
$
309
$
376
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
14
Note 6
 
Business Acquisitions
Our acquisition strategy is focused on investments in companies that
 
add new customers and sales teams, increase
our geographic footprint (whether entering a new country, such as emerging markets, or building scale where we
have already invested in businesses), and finally, those that enable us to access new products and technologies.
Acquisition of TriMed
On April 1, 2024, we acquired a
60
% voting equity interest in TriMed Inc. (“TriMed”), a global developer of
solutions for the orthopedic treatment of lower and upper extremities, headquartered
 
in California.
The following table aggregates
 
the preliminary estimated fair value, as of the date of acquisition, of
 
consideration
paid and net assets acquired in the TriMed acquisition:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2024
Acquisition consideration:
Cash
$
141
Deferred consideration
22
Redeemable noncontrolling interests
153
Total consideration
$
316
Identifiable assets acquired and liabilities assumed:
Current assets
$
36
Intangible assets
221
Other noncurrent assets
10
Current liabilities
(9)
Deferred income taxes
(62)
Other noncurrent liabilities
(6)
Total identifiable
 
net assets
190
Goodwill
126
Total net assets acquired
$
316
Goodwill is a result of synergies that are expected to originate from the acquisition as well as
 
the expected growth
potential of TriMed.
 
The acquired goodwill is not deductible for tax purposes.
 
The following table summarizes the
preliminary identifiable intangible assets acquired as part of the acquisition
 
of TriMed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2024
Weighted Average
 
Useful
Lives (in years)
Product development
$
204
9
Trademarks / Tradenames
9
7
In process research & development
8
-
Total
$
221
The accounting for the acquisition of TriMed has not been completed in several areas,
 
including but not limited to
pending assessments of accounts receivable, inventory, intangible assets, right-of-use lease assets, accrued
liabilities, income and non-income based taxes and valuation of redeemable
 
noncontrolling interests.
 
To assist
management in the allocation, we engaged valuation specialists to
 
prepare appraisals.
 
We will finalize the amounts
recognized as the information necessary to complete the analysis
 
is obtained.
 
We expect to finalize these amounts
as soon as possible but no later than one year from the acquisition date.
The pro forma financial information has not been presented because the
 
impact of the TriMed acquisition during
the three and six months ended June 29, 2024 was immaterial to our
 
condensed consolidated financial statements.
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
15
Other 2024 Acquisitions
During the six months ended June 29, 2024, we acquired companies
 
within the health care distribution and
technology and value-added services segments.
 
Our acquired ownership interest in these companies range from
51
% to
100
%.
 
Total consideration for these acquisitions was $
23
 
million.
 
Net assets acquired primarily consisted
of $
13
 
million of goodwill and $
14
 
million of intangible assets.
 
The intangible assets acquired consisted of
customer relationships and lists of $
7
 
million, product development of $
4
 
million, non-compete agreements of $
2
million and trademarks and tradenames of $
1
 
million.
 
Weighted average useful lives for these acquired intangible
assets were
10
 
years,
10
 
years,
5
 
years and
5
 
years, respectively.
Goodwill is a result of the synergies and cross-selling opportunities that these acquisitions
 
are expected to provide
for us, as well as the expected growth potential.
 
Approximately half of the acquired goodwill is deductible
 
for tax
purposes.
 
The impact of these acquisitions, individually and in the aggregate, was
 
not considered material to our condensed
consolidated financial statements.
2023 Acquisitions
Acquisition of Shield Healthcare
On October 2, 2023 we acquired a
90
% voting equity interest in Shield Healthcare, Inc. (“Shield”), a supplier
 
of
homecare medical products delivered directly to patients in their homes,
 
for consideration of $
348
 
million
(including cash paid of $
289
 
million, deferred consideration of $
22
 
million and redeemable noncontrolling interests
of $
37
 
million).
 
Shield expands our existing medical business by delivering
 
a diverse range of products, including
items such as incontinence, urology, ostomy, enteral nutrition, advanced wound care and diabetes supplies.
 
Additionally, Shield offers continuous glucose monitoring devices directly to patients in their homes.
During the quarter ended June 29, 2024, we completed the accounting for our
 
acquisition of Shield.
 
The following
table aggregates the final fair value, as of the date of the acquisition, of consideration
 
paid and net assets acquired
in the Shield acquisition, including measurement period adjustments recorded
 
through June 29, 2024:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preliminary
Allocation as of
December 30, 2023
Measurement
Period
Adjustments
Final Allocation
Acquisition consideration:
Cash
$
286
$
3
$
289
Deferred consideration
43
(21)
22
Redeemable noncontrolling interests
37
-
37
Total consideration
$
366
$
(18)
$
348
Identifiable assets acquired and liabilities assumed:
Current assets
$
41
$
-
$
41
Intangible assets
166
-
166
Other noncurrent assets
14
2
16
Current liabilities
(24)
-
(24)
Deferred income taxes
(41)
(2)
(43)
Other noncurrent liabilities
(7)
-
(7)
Total identifiable
 
net assets
149
-
149
Goodwill
217
(18)
199
Total net assets acquired
$
366
$
(18)
$
348
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
16
Goodwill is a result of synergies that are expected to originate from the acquisition as well as
 
the expected growth
potential of Shield.
 
The acquired goodwill is not deductible for tax purposes.
 
The following table summarizes the identifiable intangible assets acquired
 
as part of the acquisition of Shield:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2023
Weighted Average
 
Useful Lives
(in years)
Customer relationships and lists
$
156
12
Trademarks / Tradenames
10
5
Total
$
166
The pro forma financial information has not been presented because the impact
 
of the Shield acquisition was
immaterial to our consolidated financial statements.
Acquisition of S.I.N. Implant System
On July 5, 2023, we acquired a
100
% voting equity interest in S.I.N. Implant System (“S.I.N.”) for consideration of
$
329
 
million.
 
Based in São Paulo, S.I.N. manufactures an extensive line of products
 
to perform dental implant
procedures and is focused on advancing the development of value-priced dental
 
implants.
 
In 2023, S.I.N. expanded
the distribution of its products into the United States and other international
 
markets
.
During the quarter ended June 29, 2024, we completed the accounting for our
 
acquisition of S.I.N.
 
The following
table aggregates the final fair value, as of the date of acquisition, of consideration
 
paid and net assets acquired in
the S.I.N. acquisition, including measurement period adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preliminary
Allocation as of
December 30, 2023
Measurement
Period
Adjustments
Final
Allocation
Acquisition consideration:
Cash
$
329
$
-
$
329
Total consideration
$
329
$
-
$
329
Identifiable assets acquired and liabilities assumed:
Current assets
$
67
$
6
$
73
Intangible assets
87
-
87
Other noncurrent assets
46
2
48
Current liabilities
(33)
-
(33)
Long-term debt
(22)
-
(22)
Deferred income taxes
(35)
(3)
(38)
Other noncurrent liabilities
(27)
-
(27)
Total identifiable
 
net assets
83
5
88
Goodwill
246
(5)
241
Total net assets acquired
$
329
$
-
$
329
Goodwill is a result of synergies that are expected to originate from the acquisition as well as
 
the expected growth
potential of S.I.N.
 
The acquired goodwill is not deductible for tax purposes.
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
17
The following table summarizes the identifiable intangible assets acquired
 
as part of the acquisition of S.I.N.:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2023
Weighted Average
 
Useful Lives
(in years)
Customer relationships and lists
$
38
7
Product development
36
8
Trademarks / Tradenames
13
10
Total
$
87
The pro forma financial information has not been presented because the impact
 
of the S.I.N. acquisition was
immaterial to our consolidated financial statements.
Acquisition of Biotech Dental
On April 5, 2023, we acquired a
57
% voting equity interest, for preliminary consideration of $
423
 
million
(including cash paid of $
216
 
million, $
25
 
million of contributed equity share in a controlled subsidiary, and
redeemable noncontrolling interests of $
182
 
million) in Biotech Dental (“Biotech Dental”), which is a provider of
dental implants, clear aligners, individualized prosthetics and innovative
 
digital dental software based in
France.
 
Biotech Dental has several important solutions for dental practices
 
and dental labs, including Nemotec, a
comprehensive, integrated suite of planning and diagnostic software
 
using open architecture that connects disparate
medical devices to create a digital view of the patient, offering greater diagnostic
 
accuracy and an improved patient
experience.
 
The integration of Biotech Dental’s software with Henry Schein One’s industry-leading practice
management software solutions will help customers streamline their
 
clinical as well as administrative workflow for
the ultimate benefit of patients.
During the quarter ended March 30, 2024, we completed the accounting
 
for our acquisition of Biotech Dental.
 
The
following table aggregates the final fair value, as of the date of acquisition,
 
of consideration paid and net assets
acquired in the Biotech Dental acquisition, including measurement period
 
adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Final Allocation
Acquisition consideration:
Cash
$
216
Fair value of contributed equity share in a controlled subsidiary
25
Redeemable noncontrolling interests
182
Total consideration
$
423
Identifiable assets acquired and liabilities assumed:
Current assets
$
74
Intangible assets
189
Other noncurrent assets
69
Current liabilities
(60)
Long-term debt
(73)
Deferred income taxes
(53)
Other noncurrent liabilities
(20)
Total identifiable
 
net assets
126
Goodwill
297
Total net assets acquired
$
423
Goodwill is a result of synergies that are expected to originate from the acquisition as well as
 
the expected growth
potential of Biotech Dental.
 
The acquired goodwill is not deductible for tax purposes.
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
18
The following table summarizes the identifiable intangible assets acquired
 
as part of the acquisition of Biotech
Dental:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2023
Weighted Average
 
Useful
Lives (in years)
Product development
$
124
10
Customer relationships and lists
47
9
Trademarks / Tradenames
18
7
Total
$
189
The pro forma financial information has not been presented because the
 
impact of the Biotech Dental acquisition
was immaterial to our condensed consolidated financial statements.
Other 2023 Acquisitions
During the year ended December 30, 2023, in addition to those noted above,
 
we acquired companies within the
health care distribution and technology and value-added services segments.
 
Our acquired ownership interest ranged
between
51
% to
100
%.
 
During the three and six months ended June 29, 2024, we
 
recorded an adjustment of $
23
million and $
38
 
million, respectively, within the selling, general and administrative line in our condensed
consolidated statements of income, representing a change in the fair value
 
of contingent consideration related to a
2023 acquisition.
During the six months ended June 29, 2024 we completed the accounting
 
for certain acquisitions that occurred in
the year ended December 30, 2023.
 
In relation to these acquisitions, we did not record material
 
adjustments in our
condensed consolidated financial statements relating to changes in estimated
 
values of assets acquired, liabilities
assumed and contingent consideration assets and liabilities.
Goodwill is a result of the synergies and cross-selling opportunities that these acquisitions
 
are expected to provide
for us, as well as the expected growth potential.
 
The majority of the acquired goodwill is deductible for
 
tax
purposes.
The pro forma financial information for our 2023 acquisitions has not been
 
presented because the impact of the
acquisitions was immaterial to our condensed consolidated
 
financial statements.
Acquisition Costs
During the three and six months ended June 29, 2024 we incurred $
1
 
million and $
3
 
million in acquisition costs,
respectively.
 
During the three and six months ended July 1, 2023 we
 
incurred $
6
 
million and $
13
 
million in
acquisition costs, respectively.
 
These costs are included in the selling, general and administrative
 
line in our
condensed consolidated statements of income.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
19
Note 7 – Fair Value Measurements
 
 
 
 
 
 
 
 
 
Fair value is defined as the price that would be received to sell an asset or
 
paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
 
The fair value hierarchy distinguishes between
(1) market participant assumptions developed based on market data obtained
 
from independent sources (observable
inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best
information available in the circumstances (unobservable inputs).
The fair value hierarchy consists of three broad levels, which gives the
 
highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1) and the lowest priority
 
to unobservable inputs (Level 3).
 
The three levels of the fair value hierarchy are described as follows:
 
Level 1— Unadjusted quoted prices in active markets for identical assets
 
or liabilities that are accessible at the
measurement date.
 
Level 2— Inputs other than quoted prices included within Level 1 that are
 
observable for the asset or liability,
either directly or indirectly.
 
Level 2 inputs include: quoted prices for similar assets or liabilities
 
in active markets;
quoted prices for identical or similar assets or liabilities in markets
 
that are not active; inputs other than quoted
prices that are observable for the asset or liability; and inputs that are
 
derived principally from or corroborated by
observable market data by correlation or other means.
 
Level 3— Inputs that are unobservable for the asset or liability.
 
 
 
 
 
 
 
 
 
 
 
The following section describes the fair values of our financial instruments
 
and the methodologies that we used to
measure their fair values.
 
Investments and notes receivable
There are no quoted market prices available for investments in unconsolidated
 
affiliates and notes receivable.
 
Certain of our notes receivable contain variable interest rates.
 
We believe the carrying amounts are a reasonable
estimate of fair value based on the interest rates in the applicable
 
markets.
 
Our investments and notes receivable
fair value is based on Level 3 inputs within the fair value hierarchy.
 
Debt
The fair value of our debt (including bank credit lines, current maturities
 
of long-term debt and long-term debt) is
based on Level 3 inputs within the fair value hierarchy, and as of June 29, 2024 and December 30, 2023 was
estimated at $
2,502
 
million and $
2,351
 
million, respectively.
 
Factors that we considered when estimating the fair
value of our debt include market conditions, such as interest rates and credit
 
spreads.
Derivative contracts
Derivative contracts are valued using quoted market prices and
 
significant other observable inputs.
 
Our derivative
instruments primarily include foreign currency forward agreements, forecasted
 
inventory purchase commitments,
foreign currency forward contracts, interest rate swaps and total return swaps.
The fair values for the majority of our foreign currency derivative contracts
 
are obtained by comparing our contract
rate to a published forward price of the underlying market rates, which
 
are based on market rates for comparable
transactions that are classified within Level 2 of the fair value hierarchy.
The fair value of the interest rate swap, which is classified within Level 2
 
of the fair value hierarchy, is determined
by comparing our contract rate to a forward market rate as of the
 
valuation date.
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
20
 
 
 
 
 
 
 
The fair value of total return swaps is determined by valuing the underlying
 
exchange traded funds of the swap
using market-on-close pricing by industry providers as of the valuation
 
date that are classified within Level 2 of the
fair value hierarchy.
Redeemable noncontrolling interests
The values for redeemable noncontrolling interests are based on recent
 
transactions and/or implied multiples of
earnings that are classified within Level 3 of the fair value hierarchy.
 
See
 
for additional information.
Assets measured on a non-recurring basis at fair value include intangibles.
 
Inputs for measuring intangibles are
classified as Level 3 within the fair value hierarchy.
The following table presents our assets and liabilities that are measured and
 
recognized at fair value on a recurring
basis classified under the appropriate level of the fair value hierarchy as of
 
June 29, 2024 and December 30, 2023:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 29, 2024
Level 1
Level 2
Level 3
Total
Assets:
Derivative contracts designated as hedges
$
-
$
8
$
-
$
8
Derivative contracts undesignated
-
1
-
1
Total return
 
swap
-
1
-
1
Total assets
 
$
-
$
10
$
-
$
10
Liabilities:
Derivative contracts designated as hedges
$
-
$
1
$
-
$
1
Derivative contracts undesignated
-
1
-
1
Total liabilities
 
$
-
$
2
$
-
$
2
Redeemable noncontrolling interests
 
$
-
$
-
$
856
$
856
December 30, 2023
Level 1
Level 2
Level 3
Total
Assets:
Derivative contracts designated as hedges
$
-
$
1
$
-
$
1
Derivative contracts undesignated
-
1
-
1
Total return
 
swap
-
4
-
4
Total assets
 
$
-
$
6
$
-
$
6
Liabilities:
Derivative contracts designated as hedges
$
-
$
18
$
-
$
18
Derivative contracts undesignated
-
2
-
2
Total liabilities
 
$
-
$
20
$
-
$
20
Redeemable noncontrolling interests
 
$
-
$
-
$
864
$
864
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
21
Note 8 – Debt
Bank Credit Lines
Bank credit lines consisted of the following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 29,
December 30,
2024
2023
Revolving credit agreement
$
-
$
200
Other short-term bank credit lines
505
64
Total
 
$
505
$
264
Revolving Credit Agreement
On
August 20, 2021
, we entered into a $
1.0
 
billion revolving credit agreement (the “Revolving Credit Agreement”)
which was subsequently amended and restated on
July 11, 2023
 
to extend the maturity date to
July 11, 2028
 
and
update the interest rate provisions to reflect the current market approach
 
for a multicurrency facility.
 
The interest
rate on this revolving credit facility is based on Term Secured Overnight Financing Rate (“Term SOFR”) plus a
spread based on our leverage ratio at the end of each financial reporting
 
quarter.
 
As of June 29, 2024 the interest
rate on this revolving credit agreement was
5.33
% plus
1.10
% for a combined rate of
6.43
%.
 
As of December 30,
2023 the interest rate on this revolving credit agreement was
5.36
% plus
1.00
% for a combined rate of
6.36
%.
 
The Revolving Credit Agreement requires, among other things, that we
 
maintain certain maximum leverage ratios.
 
Additionally, the Revolving Credit Agreement contains customary representations, warranties and affirmative
covenants as well as customary negative covenants, subject to negotiated
 
exceptions, on liens, indebtedness,
significant corporate changes (including mergers), dispositions and certain restrictive
 
agreements.
 
As of June 29,
2024 and December 30, 2023, we had $
0
 
million and $
200
 
million in borrowings, respectively under this revolving
credit facility.
 
During the six months ended June 29, 2024, the average outstanding
 
balance under the Revolving
Credit Agreement was approximately $
77
 
million.
 
As of June 29, 2024 and December 30, 2023, there were
 
$
11
million and $
10
 
million of letters of credit, respectively, provided to third parties under this Revolving Credit
Agreement.
Other Short-Term Bank Credit
 
Lines
As of June 29, 2024 and December 30, 2023, we had various other short-term
 
bank credit lines available, in various
currencies, with a maximum borrowing capacity of $
586
 
million and $
368
 
million, respectively.
 
As of June 29,
2024 and December 30, 2023, $
505
 
million and $
64
 
million, respectively, were outstanding.
 
During the six months
ended June 29, 2024, the average outstanding balances under our various
 
other short-term bank credit lines was
approximately $
263
 
million.
 
At June 29, 2024 and December 30, 2023, borrowings under other
 
short-term bank
credit lines had weighted average interest rates of
6.15
% and
6.02
%, respectively.
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
22
Long-term debt
Long-term debt consisted of the following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 29,
December 30,
2024
2023
Private placement facilities
 
$
1,024
$
1,074
Term loan
731
741
U.S. trade accounts receivable securitization
195
210
Various
 
collateralized and uncollateralized loans payable with interest,
in varying installments through 2030 at interest rates
from
0.00
% to
9.42
% at June 29, 2024 and
 
from
0.00
% to
9.42
% at December 30, 2023
40
54
Finance lease obligations
7
8
Total
 
1,997
2,087
Less current maturities
 
(106)
(150)
Total long-term debt
 
$
1,891
$
1,937
 
 
 
 
 
 
 
 
 
 
 
Private Placement Facilities
Our private placement facilities include
four
 
insurance companies, have a total facility amount of $
1.5
 
billion, and
are available on an uncommitted basis at fixed rate economic
 
terms to be agreed upon at the time of issuance, from
time to time through
October 20, 2026
.
 
The facilities allow us to issue senior promissory notes to the
 
lenders at a
fixed rate based on an agreed upon spread over applicable treasury notes
 
at the time of issuance.
 
The term of each
possible issuance will be selected by us and can range from
five
 
to
15 years
 
(with an average life no longer than
12
years).
 
The proceeds of any issuances under the facilities will be used
 
for general corporate purposes, including
working capital and capital expenditures, to refinance existing indebtedness,
 
and/or to fund potential acquisitions.
 
The agreements provide, among other things, that we maintain
 
certain maximum leverage ratios, and contain
restrictions relating to subsidiary indebtedness, liens, affiliate transactions, disposal
 
of assets and certain changes in
ownership.
 
These facilities contain make-whole provisions in the event that we
 
pay off the facilities prior to the
applicable due dates.
 
 
The components of our private placement facility borrowings, which
 
have a weighted average interest rate of
3.66
%, as of June 29, 2024 are presented in the following table:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount of
Date of
Borrowing
Borrowing
 
Borrowing
Outstanding
Rate
Due Date
December 24, 2012
$
50
3.00
%
December 24, 2024
June 16, 2017
100
3.42
June 16, 2027
September 15, 2017
100
3.52
September 15, 2029
January 2, 2018
100
3.32
January 2, 2028
September 2, 2020
100
2.35
September 2, 2030
June 2, 2021
100
2.48
June 2, 2031
June 2, 2021
100
2.58
June 2, 2033
May 4, 2023
75
4.79
May 4, 2028
May 4, 2023
75
4.84
May 4, 2030
May 4, 2023
75
4.96
May 4, 2033
May 4, 2023
150
4.94
May 4, 2033
Less: Deferred debt issuance costs
(1)
Total
$
1,024
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
23
Term Loan
On July 11, 2023, we entered into a
three-year
 
$
750
 
million term loan credit agreement (the “Term Credit
Agreement”).
 
The interest rate on this term loan is based on the Term SOFR plus a spread based on our leverage
ratio at the end of each financial reporting quarter.
 
This term loan matures on July 11, 2026.
 
We have been
required to make quarterly payments of $
5
 
million from September 2023 through June 2024 and are required to
make quarterly payments of $
9
 
million from September 2024 through June 2026, with the remaining
 
balance due in
July 2026.
 
As of June 29, 2024, the borrowings outstanding under this
 
term loan were $
731
 
million.
 
At June 29,
2024, the interest rate under the Term Credit Agreement was
5.33
% plus
1.47
% for a combined rate of
6.80
%.
 
As
of December 30, 2023, the borrowings outstanding under this term
 
loan were $
741
 
million.
 
At December 30, 2023,
the interest rate under the Term Credit Agreement was
5.36
% plus
1.35
% for a combined rate of
6.71
%.
 
However,
we have a hedge in place that ultimately creates an effective fixed rate of
5.91
% and
5.79
% at June 29, 2024 and
December 30, 2023,
 
respectively.
 
The Term Credit Agreement requires, among other things, that we maintain
certain maximum leverage ratios.
 
Additionally, the Term
 
Credit Agreement contains customary representations,
warranties and affirmative covenants as well as customary negative covenants, subject
 
to negotiated exceptions, on
liens, indebtedness, significant corporate changes (including mergers), dispositions
 
and certain restrictive
agreements.
 
U.S. Trade Accounts Receivable Securitization
We have a facility agreement based on our U.S. trade accounts receivable that is structured as an asset-backed
securitization program with pricing committed for up to
three years
.
 
This facility agreement has a purchase limit of
$
450
 
million with
two
 
banks as agents, and expires on
December 15, 2025
.
As of June 29, 2024 and December 30, 2023, the borrowings outstanding
 
under this securitization facility were
$
195
 
million and $
210
 
million, respectively.
 
At June 29, 2024, the interest rate on borrowings under
 
this facility
was based on the asset-backed commercial paper rate of
5.49
% plus
0.75
%, for a combined rate of
6.24
%.
 
At
December 30, 2023, the interest rate on borrowings under this facility was
 
based on the asset-backed commercial
paper rate of
5.67
% plus
0.75
%, for a combined rate of
6.42
%.
If our accounts receivable collection pattern changes due to customers
 
either paying late or not making payments,
our ability to borrow under this facility may be reduced.
We are required to pay a commitment fee of
30
 
to
35
 
basis points depending upon program utilization.
On May 17, 2024, we amended this facility to temporarily adjust certain covenant
 
levels.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
24
Note 9 – Income Taxes
 
 
 
For the six months ended June 29, 2024 our effective tax rate was
25.2
%, compared to
22.8
% for the prior year
period.
 
The difference between our effective tax rate and the federal statutory tax rate primarily
 
relates to state and
foreign income taxes.
The Organization of Economic Co-Operation and Development (OECD) issued
 
technical and administrative
guidance on Pillar Two rules in December 2021, which provides for a global minimum tax rate on the earnings of
large multinational businesses on a country-by-country basis.
 
Effective January 1, 2024, the minimum global tax
rate is 15% for various jurisdictions pursuant to the Pillar Two rules.
 
As of June 29, 2024, the impact of the Pillar
Two rules to our financial statements was immaterial.
 
As we operate in jurisdictions which have adopted Pillar
Two,
 
we are continuing to analyze the implications to effectively manage the impact
 
for 2024 and beyond.
 
Future
tax reform resulting from these developments may result in changes to
 
long-standing tax principles, which may
adversely impact our effective tax rate going forward or result in higher cash tax liabilities.
The total amount of unrecognized tax benefits, which are included in
 
“other liabilities” within our condensed
consolidated balance sheets, as of June 29, 2024 and December 30, 2023, was
 
$
107
 
million and $
115
 
million,
respectively, of which $
99
 
million and $
107
 
million, respectively, would affect the effective tax rate if recognized.
 
It is possible that the amount of unrecognized tax benefits will
 
change in the next 12 months, which may result in a
material impact on our condensed consolidated statements of income.
All tax returns audited by the IRS are officially closed through 2019.
 
The tax years subject to examination by the
IRS include years 2020 and forward.
 
In addition, limited positions reported in the 2017 tax year are subject
 
to IRS
examination.
The amount of tax interest expense included as a component of the provision
 
for taxes was $
1
 
million and $
1
million for the six months ended June 29, 2024 and July 1, 2023, respectively.
 
The total amount of accrued interest
is included in “other liabilities,” and was $
18
 
million as of June 29, 2024 and $
16
 
million as of December 30, 2023.
 
The amount of penalties accrued for during the periods presented was not
 
material to our condensed consolidated
financial statements.
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
25
Note 10 – Plans of Restructuring
 
 
 
 
 
On August 1, 2022, we committed to a restructuring plan (the “2022 Plan”)
 
focused on funding the priorities of the
BOLD+1 strategic plan, streamlining operations and other initiatives to
 
increase efficiency.
 
The 2022 Plan has
been completed as of July 31, 2024.
 
We expect to record restructuring charges of $
12
 
million related to the 2022
Plan during the remainder of 2024.
On August 6, 2024, we committed to a new restructuring plan (the “2024
 
Plan”) to integrate recent acquisitions,
right-size operations and further increase efficiencies.
 
We expect to record restructuring charges associated with
the 2024 Plan during the second half of 2024 and in 2025, however an
 
estimate of the amount of these charges has
not yet been determined.
 
 
 
 
 
During the three months ended June 29, 2024, and July 1, 2023, in connection
 
with our 2022 Plan, we recorded
restructuring costs of $
15
 
million and $
18
 
million, respectively.
 
During the six months ended June 29, 2024, and
July 1, 2023, we recorded restructuring costs of $
25
 
million and $
48
 
million, respectively.
 
The restructuring costs
for these periods primarily related to severance and employee-related
 
costs, accelerated amortization of right-of-use
lease assets and fixed assets, and other lease exit costs.
 
 
Restructuring costs recorded for the three and six months ended June
 
29, 2024 and July 1, 2023, consisted of the
following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
June 29, 2024
Six Months Ended
 
June 29, 2024
Health Care
Distribution
Technology
and Value-
Added Services
Total
Health Care
Distribution
Technology
and Value-
Added Services
Total
Severance and employee-related costs
$
8
$
1
$
9
$
14
$
2
$
16
Accelerated depreciation and amortization
5
-
5
6
-
6
Exit and other related costs
1
-
1
3
-
3
Total restructuring
 
costs
$
14
$
1
$
15
$
23
$
2
$
25
Three Months Ended
 
July 1, 2023
Six Months Ended
 
July 1, 2023
Health Care
Distribution
Technology
and Value-
Added Services
Total
Health Care
Distribution
Technology
and Value-
Added Services
Total
Severance and employee-related costs
$
13
$
1
$
14
$
30
$
4
$
34
Accelerated depreciation and amortization
2
1
3
9
1
10
Exit and other related costs
1
-
1
2
1
3
Loss on disposal of a business
-
-
-
1
-
1
Total restructuring
 
costs
$
16
$
2
$
18
$
42
$
6
$
48
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
26
The following table summarizes,
 
by reportable segment, the activity related to the liabilities associated
 
with our
restructuring initiatives
 
for the six months ended June 29, 2024.
 
The remaining accrued balance of restructuring
costs as of June 29, 2024, which primarily relates to severance and employee-related
 
costs, is included in accrued
expenses: other within our condensed consolidated balance sheets.
 
Liabilities related to exited leased facilities are
recorded within our current and non-current operating lease liabilities within
 
our condensed consolidated balance
sheets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Technology
 
and
Health Care
Value-Added
Distribution
Services
Total
Balance, December 30, 2023
 
$
22
$
1
$
23
Restructuring costs
23
2
25
Non-cash accelerated depreciation and amortization
(6)
-
(6)
Cash payments and other adjustments
 
(18)
(3)
(21)
Balance, June 29, 2024
 
$
21
$
-
$
21
Note 11 – Legal Proceedings
Henry Schein, Inc. has been named as a defendant in multiple opioid
 
related lawsuits (currently less than one-
hundred and seventy-five (
175
); one or more of Henry Schein, Inc.’s subsidiaries is also named as a defendant in a
number of those cases).
 
Generally, the lawsuits allege that the manufacturers of prescription opioid drugs engaged
in a false advertising campaign to expand the market for such drugs and
 
their own market share and that the entities
in the supply chain (including Henry Schein, Inc. and its subsidiaries) reaped
 
financial rewards by refusing or
otherwise failing to monitor appropriately and restrict the improper distribution
 
of those drugs.
 
These actions
consist of some that have been consolidated within the MultiDistrict Litigation
 
(“MDL”) proceeding In Re National
Prescription Opiate Litigation (MDL No. 2804; Case No. 17-md-2804)
 
and are currently stayed, and others which
remain pending in state courts and are proceeding independently and outside
 
of the MDL.
 
At this time, the
following case is set for trial: the action filed by Florida Health Sciences Center, Inc. (and
25
other hospitals located
throughout the State of Florida) in Florida state court, which is currently
 
scheduled for a jury trial in September
2025.
 
Of Henry Schein’s 2023 net sales of approximately $
12.3
 
billion, sales of opioids represented less than
four
-
tenths of 1 percent.
 
Opioids represent a negligible part of our business.
 
We intend to defend ourselves vigorously
against these actions.
In August 2022, Henry Schein received a Grand Jury Subpoena from the United
 
States Attorney’s Office for the
Western District of Virginia,
 
seeking documents in connection with an investigation of possible
 
violations of the
Federal Food, Drug & Cosmetic Act by Butler Animal Health Supply, LLC (“Butler”), a former subsidiary of
Henry Schein.
 
The investigation relates to the sale of veterinary prescription drugs
 
to certain customers.
 
In
October 2022, Henry Schein received a second Grand Jury Subpoena
 
from the United States Attorney’s Office for
the Western District of Virginia.
 
The October 2022 Subpoena seeks documents relating to payments Henry
 
Schein
received from Butler or Covetrus, Inc. (“Covetrus”).
 
Butler was spun off into a separate company and became a
subsidiary of Covetrus in 2019 and is no longer owned by Henry Schein.
 
We are cooperating with the
investigation.
On January 18, 2024, a putative class action was filed against the Company
 
in the U.S. District Court for the
Eastern District of New York (“EDNY”), Case No. 24-cv-387 (the “Cruz-Bermudez Action”), based on the
October 2023 cyber incident described in
.
 
 
On January 26, 2024, a second putative class
action was filed against the Company based on the cyber incident, also
 
in the EDNY,
 
Case No. 24-cv-550 (the
“Depperschmidt Action”).
 
On February 12, 2024, the Depperschmidt Action was voluntarily dismissed
 
without
prejudice.
 
On February 16, 2024, an amended complaint was filed in
 
the Cruz-Bermudez Action with additional
plaintiffs’ counsel from the Depperschmidt Action and an additional new plaintiff.
 
 
Plaintiffs in the Cruz-Bermudez Action seek to represent a class of all individuals
 
whose personally identifying
information and personal health information was compromised by
 
the incident.
 
Plaintiffs generally claim to have
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
27
 
been harmed by alleged actions and/or omissions by the Company
 
in connection with the incident and that the
Company made deceptive public statements regarding privacy and data protection.
 
Plaintiffs assert a variety of
claims seeking monetary damages, injunctive relief, costs and attorneys’
 
fees, and other related relief.
 
On March
22, 2024, plaintiffs voluntarily withdrew two of their five causes of action.
 
On April 8, 2024, the court denied the
Company’s motion to dismiss the remaining claims.
 
The case remains pending.
On June 6, 2024, plaintiffs and the Company informed the court that they had agreed
 
to a term sheet for a class
action settlement of the Cruz-Bermudez Action.
 
The settlement agreement is subject to the parties’ finalization
 
and
the court’s approval.
 
The final settlement terms enumerated in a settlement agreement,
 
including the settlement
amount, will depend in part on the outcome of Henry Schein’s review of the data impacted in the cyber incident
 
to
determine the final class size total.
 
The court stayed the Cruz-Bermudez Action through September 13,
 
2024 and
ordered plaintiffs to move for preliminary approval of the proposed settlement by
 
that date.
 
We expect any
settlement will be for an immaterial amount.
Henry Schein, Inc. and its subsidiary, North American Rescue, LLC (“NAR”), have been named as defendants
 
in a
qui tam lawsuit brought under the federal False Claims Act (“FCA”), in
 
an action entitled
Russ and Murphy ex rel.
United States v. North American Rescue, LLC et al.
; Case No. 21-cv-04238, filed in the United States District
 
Court
for the Eastern District of Pennsylvania.
 
The case was filed under seal in 2021 by two relators (Corey
 
Russ and
Chris Murphy) who worked for one of NAR’s competitors.
 
Relators also name C-A-T Resources, LLC (“CAT-R”)
as a defendant.
 
CAT
 
-R manufactures one of the products at issue in the case (the
 
combat application tourniquet, or
“CAT”).
 
After the Department of Justice declined to intervene, the case was unsealed,
 
and Relators filed their first
amended complaint in November 2023.
 
In response to motions to dismiss filed by Henry Schein, NAR
 
and CAT-
R, Relators requested and obtained leave to file their Second Amended
 
Complaint on April 24, 2024.
 
Relators’
FCA claims are based on allegations that NAR and Henry Schein made false
 
representations and certifications in
connection with, and sold and submitted false claims for payment to the federal
 
government for, various medical
products that Relators contend violated certain “Buy American”
 
laws (e.g., the Berry Amendment and Trade
Agreements Act of 1979) and/or were not properly sterilized as noted
 
on the products’ packaging, and thus
misbranded.
 
These products include the CAT,
 
syringes, compressed gauze, tracheostomy kits, hypothermia
blankets, eye, ear, nose and throat kits, and trauma dressing.
 
Relators allege Henry Schein controlled and
supervised NAR’s alleged misconduct for a period of time.
 
Relators seek three times the amount of damages to be
proved at trial, statutory civil penalties, reasonable expenses, attorneys’
 
fees and costs, and prejudgment
interest.
 
On July 26, 2024, the court ruled on motions to dismiss
 
filed by Henry Schein, NAR and CAT-R.
 
The
court dismissed the claims against Henry Schein (without prejudice) and Henry
 
Schein is no longer in the case.
 
The motions to dismiss filed by NAR and CAT-R were denied.
 
We intend to defend ourselves vigorously against
this action.
From time to time, we may become a party to other legal proceedings,
 
including, without limitation, product
liability claims, employment matters, commercial disputes, governmental
 
inquiries and investigations (which may
in some cases involve our entering into settlement arrangements or consent
 
decrees), and other matters arising out
of the ordinary course of our business.
 
While the results of any legal proceeding cannot be predicted with certainty,
in our opinion none of these other pending matters are currently
 
anticipated to have a material adverse effect on our
consolidated financial position, liquidity or results of operations.
As of June 29, 2024, we had accrued our best estimate of potential
 
losses relating to claims that were probable to
result in liability and for which we were able to reasonably estimate a
 
loss.
 
This accrued amount, as well as related
expenses, 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
factors, including probable recoveries from third parties.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
28
Note 12 – Stock-Based Compensation
 
 
 
 
 
 
Stock-based awards are provided to certain employees under our 2024 Stock Incentive
 
Plan (formerly known as our
2020 Stock Incentive Plan) and to non-employee directors under our 2023 Non-Employee
 
Director Stock Incentive
Plan (together, the “Plans”).
 
The Plans are administered by the Compensation Committee of the Board
 
of Directors
(the “Compensation Committee”).
 
Historically, equity-based awards to our employees have been granted solely in
the form of time-based and performance-based restricted stock units (“RSUs”) with
 
the exception of our 2021 plan
year in which non-qualified stock options were issued in place of performance-based
 
RSUs and in 2022, when we
granted time-based and performance-based RSUs, as well as non-qualified
 
stock options.
 
Starting with our 2023
plan year,
 
we returned to granting our employees equity-based awards
 
solely in the form of time-based and
performance-based RSUs.
 
Our non-employee directors receive equity-based awards solely in the form
 
of time-
based RSUs.
RSUs are stock-based awards granted to recipients with specified vesting provisions.
 
In the case of RSUs, common
stock is delivered on or following satisfaction of vesting conditions.
 
We issue RSUs to employees that primarily
vest (i) solely based on the recipient’s continued service over time, primarily with
four
-year cliff vesting and/or (ii)
based on achieving specified performance measurements and the recipient’s continued service over time, primarily
with
three
-year cliff vesting.
 
RSUs granted to our non-employee directors primarily include
12
-month cliff vesting.
 
For these RSUs, we recognize the cost as compensation expense on a straight-line
 
basis.
For all RSUs, we estimate the fair value based on our closing stock
 
price on the grant date.
 
With respect to
performance-based RSUs, the number of shares that ultimately vest and
 
are received by the recipient is based upon
our performance as measured against specified targets over a specified period, as
 
determined by the Compensation
Committee.
 
Although there is no guarantee that performance targets will be achieved, we
 
estimate the fair value of
performance-based RSUs based on our closing stock price at time of grant.
Each of the Plans provide for certain adjustments to the performance
 
measurement in connection with awards under
the Plans.
 
With respect to the performance-based RSUs granted under our 2024 Stock Incentive Plan, such
performance measurement adjustments relate to significant events, including,
 
without limitation, acquisitions,
divestitures, new business ventures, certain capital transactions (including share
 
repurchases), differences in
budgeted average outstanding shares (other than those resulting from capital
 
transactions referred to above),
restructuring costs, if any, amortization expense recorded for acquisition-related intangible assets (solely with
respect to performance-based RSUs granted in the 2023 and 2024 plan years),
 
certain litigation settlements or
payments, if any, changes in accounting principles or in applicable laws or regulations, changes in income tax rates
in certain markets, foreign exchange fluctuations, the financial impact
 
either positive or negative, of the difference
in projected earnings generated by COVID-19 test kits (solely with respect
 
to performance-based RSUs granted in
the 2022 and 2023 plan years) and impairment charges (solely with respect to performance-based
 
RSUs granted in
the 2023 and 2024 plan years), and unforeseen events or circumstances
 
affecting us.
Over the performance period, the number of RSUs that will ultimately vest
 
and be issued and the related
compensation expense is adjusted upward or downward based upon our
 
estimation of achieving such performance
targets.
 
The ultimate number of shares delivered to recipients and the related compensation
 
cost recognized as an
expense is based on our actual performance metrics as defined under
 
the 2024 Stock Incentive Plan.
Stock options are awards that allow the recipient to purchase shares of our
 
common stock after vesting at a fixed
price set at the time of grant.
 
Stock options were granted at an exercise price equal to our
 
closing stock price on the
date of grant.
 
Stock options issued in 2021 and 2022 vest
one-third
 
per year based on the recipient’s continued
service, subject to the terms and conditions of the 2020 Stock Incentive Plan,
 
are fully vested
three years
 
from the
grant date and have a contractual term of
ten years
 
from the grant date, subject to earlier termination of term and
term acceleration upon certain events.
 
Compensation expense for stock options is recognized using
 
a graded
vesting method.
 
We estimate grant date fair value of stock options using the Black-Scholes valuation model.
 
During the six months ended June 29, 2024, we did
no
t grant any stock options.
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
29
 
 
 
Our condensed consolidated statements of income reflect pre-tax share-based compensation
 
expense of $
12
 
million,
and $
20
 
million for the three and six months ended June 29, 2024, respectively.
 
For the three and six months ended
July 1, 2023, we recorded pre-tax share-based compensation expense of $
14
 
million, and $
24
 
million.
Total unrecognized compensation cost related to unvested awards as of June 29, 2024 was $
104
 
million, which is
expected to be recognized over a weighted-average period of approximately
2.6
 
years.
Our condensed consolidated statements of cash flows present our
 
stock-based compensation expense as a
reconciling adjustment between net income and net cash provided by operating
 
activities for all periods presented.
 
There were no cash benefits associated with tax deductions in excess of
 
recognized compensation for the six
months ended June 29, 2024 and July 1, 2023.
 
 
 
 
 
 
 
We have not declared cash dividends on our stock in the past and we do not anticipate declaring cash dividends in
the foreseeable future.
 
The expected stock price volatility is based on implied volatilities
 
from traded options on
our stock, historical volatility of our stock and other factors.
 
The risk-free interest rate is based on the U.S.
Treasury yield curve in effect at the time of grant that most closely aligns to the expected life of options.
 
The
six
-
year expected life of the options was determined using the simplified
 
method for estimating the expected term as
permitted under Staff Accounting Bulletin Topic 14.
The following table summarizes the stock option activity for the six months
 
ended June 29, 2024:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock Options
Weighted Average
Weighted Average
Aggregate
Exercise
Remaining Contractual
 
 
Intrinsic
Shares
Price
Life (in years)
 
Value
Outstanding at beginning of period
 
1,078,459
$
71.46
 
Granted
 
-
 
-
 
Exercised
 
(44,750)
62.71
 
Forfeited
 
(4,608)
84.60
 
Outstanding at end of period
 
1,029,101
$
71.78
 
7.1
 
$
1
Options exercisable at end of period
 
889,060
$
69.71
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average
Weighted Average
Aggregate
Number of
Exercise
Remaining Contractual
Intrinsic
Options
Price
Life (in years)
Value
Expected to vest
140,041
$
84.94
7.7
$
-
The following tables summarize the activity of our unvested RSUs for
 
the six months ended June 29, 2024:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time-Based Restricted Stock Units
Performance-Based Restricted Stock Units
Weighted
 
Weighted
 
Average
 
Intrinsic
 
Average
 
Intrinsic
Grant Date Fair
Value
Grant Date Fair
Value
Shares/Units
Value Per Share
Per Share
Shares/Units
Value Per Share
Per Share
Outstanding at beginning of period
 
1,655,393
$
70.34
208,742
$
78.02
Granted
 
461,798
75.88
408,681
76.31
Vested
 
(321,460)
62.79
(8,262)
66.53
Forfeited
 
(59,283)
77.31
(35,527)
80.55
Outstanding at end of period
 
1,736,448
$
72.99
$
64.10
573,634
$
75.78
$
64.10
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
30
Note 13 – Redeemable Noncontrolling Interests
Some minority stockholders in certain of our subsidiaries have the right,
 
at certain times, to require us to acquire
their ownership interest in those entities at fair value.
 
Accounting Standards Codification Topic 480-10 is
applicable for noncontrolling interests where we are or may be required
 
to purchase all or a portion of the
outstanding interest in a consolidated subsidiary from the noncontrolling
 
interest holder under the terms of a put
option contained in contractual agreements.
 
The components of the change in the redeemable noncontrolling
interests for the six months ended June 29, 2024 and the year ended December
 
30, 2023 are presented in the
following table:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 29,
December 30,
2024
2023
Balance, beginning of period
 
$
864
$
576
Decrease in redeemable noncontrolling interests due to acquisitions of
 
 
noncontrolling interests in subsidiaries
(205)
(19)
Increase in redeemable noncontrolling interests due to business acquisitions
154
326
Net income (loss) attributable to redeemable noncontrolling interests
 
(1)
6
Distributions declared, net of capital contributions
(22)
(19)
Effect of foreign currency translation gain (loss) attributable to
 
redeemable noncontrolling interests
 
(15)
5
Change in fair value of redeemable securities
 
81
(11)
Balance, end of period
 
$
856
$
864
 
 
 
 
Note 14 – Comprehensive Income
Comprehensive income includes certain gains and losses that, under U.S. GAAP, are excluded from net income and
are recorded directly to stockholders’ equity.
 
The following table summarizes our Accumulated other comprehensive loss, net of
 
applicable taxes as of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 29,
December 30,
2024
2023
Attributable to redeemable noncontrolling interests:
Foreign currency translation adjustment
 
$
(47)
$
(32)
Attributable to noncontrolling interests:
Foreign currency translation adjustment
 
$
(1)
$
(1)
Attributable to Henry Schein, Inc.:
Foreign currency translation adjustment
$
(289)
$
(188)
Unrealized gain (loss) from hedging activities
 
2
(13)
Pension adjustment loss
 
(5)
(5)
Accumulated other comprehensive loss
 
$
(292)
$
(206)
Total Accumulated
 
other comprehensive loss
 
$
(340)
$
(239)
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
31
The following table summarizes the components of comprehensive income, net
 
of applicable taxes as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Net income
$
105
$
148
$
203
$
276
Foreign currency translation gain (loss)
(62)
3
(116)
28
Tax effect
 
-
-
-
-
Foreign currency translation gain (loss)
(62)
3
(116)
28
Unrealized gain (loss) from hedging activities
6
(2)
21
(6)
Tax effect
 
(2)
1
(6)
2
Unrealized gain (loss) from hedging activities
4
(1)
15
(4)
Comprehensive income
 
$
47
$
150
$
102
$
300
Our financial statements are denominated in U.S. Dollars.
 
Fluctuations in the value of foreign currencies as
compared to the U.S. Dollar may have a significant impact on our
 
comprehensive income.
 
The foreign currency
translation gain (loss) during the six months ended June 29, 2024 and six
 
months ended July 1, 2023 was primarily
due to changes in foreign currency exchange rates of the Brazilian Real, Euro,
 
British Pound, Canadian Dollar,
Australian Dollar and Swiss Franc.
The hedging gain (loss) during the three and six months ended June 29, 2024,
 
and July 1, 2023 was attributable to a
net investment hedge.
The following table summarizes our total comprehensive income, net of
 
applicable taxes as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Comprehensive income attributable to
Henry Schein, Inc.
 
$
51
$
143
$
111
$
284
Comprehensive income attributable to
noncontrolling interests
 
4
3
7
6
Comprehensive income (loss) attributable to
Redeemable noncontrolling interests
 
(8)
4
(16)
10
Comprehensive income
 
$
47
$
150
$
102
$
300
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
32
Note 15
 
Earnings Per Share
Basic earnings per share is computed by dividing net income attributable
 
to Henry Schein, Inc. by the weighted-
average number of common shares outstanding for the period.
 
Our diluted earnings per share is computed similarly
to basic earnings per share, except that it reflects the effect of common shares issuable
 
for unvested RSUs and upon
exercise of stock options using the treasury stock method in periods
 
in which they have a dilutive effect.
A reconciliation of shares used in calculating earnings per basic and
 
diluted share follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Basic
 
127,784,380
130,905,899
128,252,628
131,136,450
Effect of dilutive securities:
Stock options and restricted stock units
 
862,126
967,275
954,152
1,329,299
Diluted
 
128,646,506
131,873,174
129,206,780
132,465,749
The number of antidilutive securities that were excluded from the calculation
 
of diluted weighted average common
shares outstanding are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Stock options
416,790
426,002
417,819
427,355
Restricted stock units
792,247
19,405
495,077
19,405
Total anti-dilutive
 
securities excluded from earnings per
share computation
1,209,037
445,407
912,896
446,760
Note 16 – Supplemental Cash Flow Information
 
Cash paid for interest and income taxes was:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
June 29,
July 1,
2024
2023
Interest
$
63
$
32
Income taxes
82
118
For the six months ended June 29, 2024 and July 1, 2023, we had
 
$
21
 
million and $
(6)
 
million of non-cash net
unrealized gains (losses) related to hedging activities, respectively.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
33
Note 17 – Related Party Transactions
In connection with the formation of Henry Schein One, LLC, our joint venture
 
with Internet Brands, which was
formed on July 1, 2018, we entered into a
ten-year
 
royalty agreement with Internet Brands whereby we will pay
Internet Brands approximately $
31
 
million annually for the use of their intellectual property.
 
During the three and
six months ended June 29, 2024, we recorded $
8
 
million and $
16
 
million, respectively, in connection with costs
related to this royalty agreement.
 
During the three and six months ended July 1, 2023, we recorded $
8
 
million and
$
16
 
million, respectively, in connection with costs related to this royalty agreement.
 
As of June 29, 2024 and
December 30, 2023, Henry Schein One, LLC had a net payable balance
 
to Internet Brands of $
11
 
million and $
1
million, respectively, comprised of amounts related to results of operations and the royalty agreement.
 
The
components of this payable are recorded within accrued expenses: other within
 
our condensed consolidated balance
sheets.
We have interests in entities that we account for under the equity accounting method.
 
In our normal course of
business, during the three and six months ended June 29, 2024, we recorded net
 
sales of $
12
 
million and $
24
million respectively, to such entities.
 
During the three and six months ended July 1, 2023, we recorded net sales of
$
11
 
million and $
23
 
million respectively, to such entities.
 
During the three and six months ended June 29, 2024,
we purchased $
2
 
million and $
5
 
million respectively, from such entities.
 
During the three and six months ended
July 1, 2023, we purchased $
3
 
million and $
5
 
million respectively, from such entities.
 
At June 29, 2024 and
December 30, 2023, we had an aggregate $
31
 
million and $
32
 
million, respectively, due from our equity affiliates,
and $
5
 
million and $
5
 
million, respectively, due to our equity affiliates.
Certain of our facilities related to our acquisitions are leased from employees
 
and minority shareholders.
 
These
leases are classified as operating leases and have a remaining lease term
 
ranging from
two months
 
to
13
 
years.
 
As
of June 29, 2024, current and non-current liabilities associated with related
 
party operating leases were $
6
 
million
and $
22
 
million, respectively.
 
At June 29, 2024 related party leases represented
7.5
% and
8.6
% of the total current
and non-current operating lease liabilities, respectively.
 
At December 30, 2023 related party leases represented
6.3
% and
7.4
% of the total current and non-current operating lease liabilities, respectively.
34
ITEM 2.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
Cautionary Note Regarding Forward-Looking Statements
In accordance with the “Safe Harbor” provisions of the Private Securities
 
Litigation Reform Act of 1995, we
provide the following cautionary remarks regarding important factors
 
that, among others, could cause future results
to differ materially from the forward-looking statements, expectations and assumptions
 
expressed or implied
herein.
 
All forward-looking statements made by us are subject to
 
risks and uncertainties and are not guarantees of
future performance.
 
These forward-looking statements involve known and unknown
 
risks, uncertainties and other
factors that may cause our actual results, performance and achievements
 
or industry results to be materially
different from any future results, performance or achievements expressed or implied by such
 
forward-looking
statements.
 
These statements are generally identified by the use of such
 
terms as “may,” “could,” “expect,”
“intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,”
 
“to be,” “to make” or other comparable
terms.
 
Factors that could cause or contribute to such differences include, but are not limited
 
to, those discussed in
the documents we file with the Securities and Exchange Commission
 
(SEC), including our Annual Report on Form
10-K.
 
Risk factors and uncertainties that could cause actual results to differ materially from
 
current and historical results
include, but are not limited to: our dependence on third parties for
 
the manufacture and supply of our products; our
ability to develop or acquire and maintain and protect new products (particularly
 
technology products) and
technologies that achieve market acceptance with acceptable margins; transitional
 
challenges associated with
acquisitions, dispositions and joint ventures, including the failure
 
to achieve anticipated synergies/benefits, as well
as significant demands on our operations, information systems,
 
legal, regulatory, compliance, financial and human
resources functions in connection with acquisitions, dispositions and
 
joint ventures; certain provisions in our
governing documents that may discourage third-party acquisitions of us; adverse
 
changes in supplier rebates or
other purchasing incentives; risks related to the sale of corporate brand products;
 
security risks associated with our
information systems and technology products and services, such as
 
cyberattacks or other privacy or data security
breaches (including the October 2023 incident); effects of a highly competitive (including, without
 
limitation,
competition from third-party online commerce sites) and consolidating
 
market; changes in the health care industry;
risks from expansion of customer purchasing power and multi-tiered
 
costing structures; increases in shipping costs
for our products or other service issues with our third-party shippers; general
 
global and domestic macro-economic
and political conditions, including inflation, deflation, recession, ongoing
 
wars, fluctuations in energy pricing and
the value of the U.S. dollar as compared to foreign currencies, and changes
 
to other economic indicators,
international trade agreements, potential trade barriers and terrorism; geopolitical
 
wars; failure to comply with
existing and future regulatory requirements; risks associated with the EU Medical
 
Device Regulation; failure to
comply with laws and regulations relating to health care fraud or other
 
laws and regulations; failure to comply with
laws and regulations relating to the collection, storage and processing of
 
sensitive personal information or standards
in electronic health records or transmissions; changes in tax legislation;
 
risks related to product liability, intellectual
property and other claims; risks associated with customs policies
 
or legislative import restrictions; risks associated
with disease outbreaks, epidemics, pandemics (such as the COVID-19
 
pandemic), or similar wide-spread public
health concerns and other natural or man-made disasters; risks associated with our
 
global operations; litigation
risks; new or unanticipated litigation developments and the status
 
of litigation matters; our dependence on our
senior management, employee hiring and retention, and our relationships
 
with customers, suppliers and
manufacturers; and disruptions in financial markets.
 
The order in which these factors appear should not be
construed to indicate their relative importance or priority.
We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control
or predict.
 
Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction
of actual results.
 
We undertake no duty and have no obligation to update forward-looking statements except as
required by law.
35
Where You
 
Can Find Important Information
We may disclose important information through one or more of the following channels: SEC filings, public
conference calls and webcasts, press releases, the investor relations
 
page of our website (www.henryschein.com)
and the social media channels identified on the About Media Center page
 
of our website.
Recent Developments
While the U.S. economy has experienced inflationary pressures and
 
strengthening of the U.S. dollar, their impacts
have not been material to our results of operations.
 
Though inflation impacts both our revenues and costs, the
 
depth
and breadth of our product portfolio often allows us to offer lower-cost national brand solutions
 
or corporate brand
alternatives to our more price-sensitive customers who are unwilling to
 
absorb price increases, thus positioning us
to protect our gross profit.
Cyber Incident
In October 2023 Henry Schein experienced a cyber incident that primarily
 
affected the operations of our North
American and European dental and medical distribution businesses.
 
Henry Schein One, our practice management
software, revenue cycle management and patient relationship management
 
solutions business, was not affected, and
our manufacturing businesses were mostly unaffected.
 
On November 22, 2023, we experienced a disruption of our
ecommerce platform and related applications, which was remediated.
During the three and six months ended June 29, 2024, we continued to
 
experience a residual impact of the cyber
events noted above relating primarily to decreased sales to episodic customers
 
(customers that had generally
registered a less continuous level of demand pre-incident).
 
We have a number of programs underway focused on
re-establishing these customers.
We maintain cyber insurance, subject to certain retentions and policy limitations.
 
With respect to the October 2023
cyber incident, we have a $60 million insurance policy, following a $5 million retention.
 
During the three and six
months ended June 29, 2024, we received insurance proceeds of $10
 
million, representing a partial insurance
recovery of losses related to the cyber incident.
36
Executive-Level Overview
Henry Schein, Inc. is a solutions company for health care professionals powered
 
by a network of people and
technology.
 
We
believe we are the world’s largest provider of health care products and services primarily to office-
based dental and medical practitioners, as well as alternate sites of care.
 
We
serve more than one million customers
worldwide including dental practitioners, laboratories, physician practices and
 
ambulatory surgery centers, as well
as government, institutional health care clinics and other alternate care clinics.
 
We
believe that we have a strong
brand identity due to our more than 92 years of experience distributing health
 
care products.
We are headquartered in Melville, New York,
 
employ approximately 26,000 people (of which approximately
13,000 are based outside of the United States) and have operations or
 
affiliates in 33 countries and territories.
 
Our
broad global footprint has evolved over time through our organic success as well as
 
through contribution from
strategic acquisitions.
We
have established strategically located distribution centers around
 
the world to enable us to better serve our
customers and increase our operating efficiency.
 
This infrastructure, together with broad product and service
offerings at competitive prices, and a strong commitment to customer service, enables
 
us to be a single source of
supply for our customers’ needs.
While our primary go-to-market strategy is in our capacity as a distributor, we also market and sell our own
corporate brand portfolio of cost-effective, high-quality consumable merchandise products,
 
including in vitro
diagnostic devices, manufacture certain dental specialty products in
 
the areas of implants, orthodontics and
endodontics, manufacture drug products, and repackage/relabel prescription drugs
 
and/or devices.
 
We
have
achieved scale in these global businesses primarily through acquisitions, as
 
manufacturers of these products
typically do not utilize a distribution channel to serve customers.
We
conduct our business through two reportable segments: (i) health
 
care distribution and (ii) technology and
value-added services.
 
These segments offer different products and services to the same customer base.
 
Our global
dental businesses serve office-based dental practitioners, dental laboratories, schools, government
 
and other
institutions.
 
Our medical businesses serve physician offices, urgent care centers, ambulatory care sites,
 
emergency
medical technicians, dialysis centers, home health, federal and state governments
 
and large enterprises, such as
group practices, and integrated delivery networks, among other providers
 
across a wide range of specialties.
 
The health care distribution reportable segment, combining our global dental and
 
medical operating segments,
distributes consumable products, small equipment, laboratory products, large equipment, equipment
 
repair services,
branded and generic pharmaceuticals, vaccines, surgical products, dental specialty
 
products (including implant,
orthodontic and endodontic products), diagnostic tests, infection-control products,
 
personal protective equipment
(“PPE”) products, vitamins and orthopedic implants.
 
Our global technology and value-added services business provides software, technology
 
and other value-added
services to health care practitioners.
 
Our technology business offerings include practice management software
systems for dental and medical practitioners.
 
Our value-added practice solutions include practice consultancy,
education, revenue cycle management and financial services on a non-recourse
 
basis, e-services, practice
technology, network and hardware services, as well as consulting, and continuing education services for
practitioners.
A key element to grow closer to our customers is our One Schein initiative, which
 
is a unified go-to-market
approach that enables practitioners to work synergistically with our supply chain,
 
equipment sales and service and
other value-added services, allowing our customers to leverage the
 
combined value that we offer through a single
program.
 
Specifically, One Schein provides customers with streamlined access to our comprehensive offering of
national brand products, our corporate brand products and proprietary specialty
 
products and solutions (including
implant, orthodontic and endodontic products).
 
In addition, customers have access to a wide range of services,
including software and other value-added services.
 
 
37
Industry Overview
In recent years, the health care industry has increasingly focused on cost containment.
 
This trend has benefited
distributors capable of providing a broad array of products and services at low
 
prices.
 
It also has accelerated the
growth of HMOs, group practices, other managed care accounts and collective buying
 
groups, which, in addition to
their emphasis on obtaining products at competitive prices, tend to favor distributors
 
capable of providing
specialized management information support.
 
We
believe that the trend towards cost containment has the potential
to favorably affect demand for technology solutions, including software, which can
 
enhance the efficiency and
facilitation of practice management.
Our operating results in recent years have been significantly affected by strategies
 
and transactions that we
undertook to expand our business, domestically and internationally, in part to address significant changes in the
health care industry, including consolidation of health care distribution companies, health care reform, trends
toward managed care, cuts in Medicare and collective purchasing arrangements.
Industry Consolidation
The health care products distribution industry, as it relates to office-based health care practitioners, is fragmented
and diverse.
 
The industry ranges from sole practitioners working out of
 
relatively small offices to group practices
or service organizations ranging in size from a few practitioners to a large number of practitioners who have
combined or otherwise associated their practices.
Due in part to the inability of office-based health care practitioners to store and manage
 
large quantities of supplies
in their offices, the distribution of health care supplies and small equipment to office-based health
 
care practitioners
has been characterized by frequent, small quantity orders, and a need for rapid,
 
reliable and substantially complete
order fulfillment.
 
The purchasing decisions within an office-based health care practice are typically
 
made by the
practitioner or an administrative assistant.
 
Supplies and small equipment are generally purchased from more
 
than
one distributor, with one generally serving as the primary supplier.
The trend of consolidation extends to our customer base.
 
Health care practitioners are increasingly seeking to
partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician
hospital organizations.
 
In many cases, purchasing decisions for consolidated groups
 
are made at a centralized or
professional staff level; however, orders are delivered to the practitioners’ offices.
We
believe that consolidation within the industry will continue to
 
result in a number of distributors, particularly
those with limited financial, operating and marketing resources, seeking to
 
combine with larger companies that can
provide growth opportunities.
 
This consolidation also may continue to result in distributors seeking
 
to acquire
companies that can enhance their current product and service offerings or provide
 
opportunities to serve a broader
customer base.
Our approach to acquisitions and joint ventures has been to expand our role as
 
a provider of products and services
to the health care industry.
 
This trend has resulted in our expansion into service areas that complement
 
our existing
operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired
 
businesses.
As industry consolidation continues, we believe that we are positioned to
 
capitalize on this trend, as we believe we
have the ability to support increased sales through our existing infrastructure, although
 
there can be no assurances
that we will be able to successfully accomplish this.
 
We
also have invested in expanding our sales/marketing
infrastructure to include a focus on building relationships with decision
 
makers who do not reside in the office-
based practitioner setting.
As the health care industry continues to change, we continually evaluate possible
 
candidates for joint venture or
acquisition and intend to continue to seek opportunities to expand our
 
role as a provider of products and services to
the health care industry.
 
There can be no assurance that we will be able to successfully pursue
 
any such
opportunity or consummate any such transaction, if pursued.
 
If additional transactions are entered into or
consummated, we would incur merger and/or acquisition-related costs, and there
 
can be no assurance that the
integration efforts associated with any such transaction would be successful.
38
Aging Population and Other Market Influences
The health care products distribution industry continues to experience growth
 
due to the aging population,
increased health care awareness, the proliferation of medical technology
 
and testing, new pharmacological
treatments, and expanded third-party insurance coverage, partially offset by the effects of unemployment
 
on
insurance coverage.
 
In addition, the physician market continues to benefit from the
 
shift of procedures and
diagnostic testing from acute care settings to alternate-care sites, particularly
 
physicians’ offices.
According to the U.S. Census Bureau’s International Database, between 2024
 
and 2034, the 45 and older
population is expected to grow by approximately 11%.
 
Between 2024 and 2044, this age group is expected to grow
by approximately 20%.
 
This compares with expected total U.S. population growth
 
rates of approximately 6%
between 2024 and 2034
 
and approximately 11% between 2024 and 2044.
According to the U.S. Census Bureau’s International Database, in 2024
 
there are approximately seven million
Americans aged 85 years or older, the segment of the population most in need of long-term care
 
and elder-care
services.
 
By the year 2050, that number is projected to nearly triple to approximately
 
19 million.
 
The population
aged 65 to 84 years is projected to increase by approximately 20% during
 
the same period.
As a result of these market dynamics, annual expenditures for health
 
care services continue to increase in the
United States.
 
We believe that demand for our products and services will grow while continuing to be impacted by
current and future operating, economic, and industry conditions.
 
The Centers for Medicare and Medicaid Services
(“CMS”) published “National Health Expenditure Data” indicating that total
 
national health care spending reached
approximately $4.5 trillion in 2022, or 17.3% of the nation’s gross domestic product, the benchmark
 
measure for
annual production of goods and services in the United States.
 
Health care spending is projected to reach
approximately $7.7 trillion by 2032, or 19.7% of the nation’s projected gross domestic product.
Government
Certain of our businesses involve the distribution, manufacturing, importation,
 
exportation, marketing, sale and
promotion of pharmaceuticals and/or medical devices, and in this regard, we
 
are subject to extensive local, state,
federal and foreign governmental laws and regulations, including as applicable
 
to our wholesale distribution of
pharmaceuticals and medical devices, manufacturing activities, and as part of
 
our specialty home medical supply
businesses that distribute and sell medical equipment and supplies directly
 
to patients.
 
Federal, state and certain
foreign governments have also increased enforcement activity in the health care
 
sector, particularly in areas of fraud
and abuse, anti-bribery and anti-corruption, controlled substances handling,
 
medical device regulations and data
privacy and security standards.
Certain of our businesses involve pharmaceuticals and/or medical devices,
 
including in vitro diagnostic devices,
that are paid for by third parties and must operate in compliance with a variety of
 
burdensome and complex coding,
billing and record-keeping requirements in order to substantiate claims for
 
payment under federal, state and
commercial healthcare reimbursement programs.
Government and private insurance programs fund a large portion of the total cost of medical care,
 
and there have
been efforts to limit such private and government insurance programs, including efforts, thus far
 
unsuccessful, to
seek repeal of the entire United States Patient Protection and Affordable Care Act,
 
as amended by the Health Care
and Education Reconciliation Act, each enacted in March 2010.
Certain of our businesses are subject to various additional federal, state,
 
local and foreign laws and regulations,
including with respect to the sale, transportation, importation, storage, handling
 
and disposal of hazardous or
potentially hazardous substances; “forever chemicals” such as per-and
 
polyfluoroalkyl substances; amalgam bans;
pricing disclosures; supply chain transparency around labor practices; and safe working
 
conditions.
 
In addition,
activities to control medical costs, including laws and regulations lowering
 
reimbursement rates for
pharmaceuticals, medical devices, medical supplies and/or medical treatments
 
or services, are ongoing.
 
CMS
recently released the 2024 durable medical equipment, prosthetics, orthotics
 
and supplies (“DMEPOS”)
reimbursement schedule, which, effective January 1, 2024, reduced the DMEPOS reimbursement
 
rates for non-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
39
rural suppliers, such as us, by removing the Coronavirus Aid, Relief,
 
and Economic Security (aka CARES) Act
relief rates in effect during the COVID-19 pandemic.
 
This and other laws and regulations are subject to change and
their evolving implementation may impact our operations and our
 
financial performance.
Our businesses are generally subject to numerous laws and regulations that could
 
impact our financial performance,
and failure to comply with such laws or regulations could have a material adverse
 
effect on our business.
A more detailed discussion of governmental laws and regulations
 
is included in Management’s Discussion &
Analysis of Financial Condition and Results of Operations, contained
 
in our Annual Report on Form 10-K for the
fiscal year ended December 30, 2023, filed with the SEC on February 28, 2024.
Results of Operations
The following tables summarize the significant components of our operating
 
results for the three and six months
ended June 29, 2024 and July 1, 2023 and cash flows for the six
 
months ended June 29, 2024 and July 1, 2023:
Three Months Ended
Six Months Ended
June 29,
July 1,
June 29,
July 1,
2024
2023
2024
2023
Operating results:
Net sales
 
$
3,136
$
3,100
$
6,308
$
6,160
Cost of sales
 
2,118
2,125
4,278
4,219
Gross profit
 
1,018
975
2,030
1,941
Operating expenses:
Selling, general and administrative
 
781
707
1,572
1,424
Depreciation and amortization
63
49
124
93
Restructuring costs
15
18
25
48
Operating income
$
159
$
201
$
309
$
376
Other expense, net
 
$
(27)
$
(15)
$
(50)
$
(27)
Net income
105
148
203
276
Net income attributable to Henry Schein, Inc.
104
140
197
261
Six Months Ended
June 29,
July 1,
2024
2023
Cash flows:
 
Net cash provided by operating activities
$
493
$
301
Net cash used in investing activities
(281)
(340)
Net cash provided by (used in) financing activities
(265)
59
Plans of Restructuring
On August 1, 2022, we committed to a restructuring plan (the “2022 Plan”)
 
focused on funding the priorities of the
BOLD+1 strategic plan, streamlining operations and other initiatives to
 
increase efficiency.
 
The 2022 Plan has
been completed as of July 31, 2024.
 
We expect to record restructuring charges of $12 million related to the 2022
Plan during the remainder of 2024.
On August 6, 2024, we committed to a new restructuring plan (the “2024
 
Plan”) to integrate recent acquisitions,
right-size operations and further increase efficiencies.
 
We expect to record restructuring charges associated with
the 2024 Plan during the second half of 2024 and in 2025, however an
 
estimate of the amount of these charges has
not yet been determined.
During the three months ended June 29, 2024, and July 1, 2023, in connection
 
with our 2022 Plan, we recorded
restructuring costs of $15 million and $18 million, respectively.
 
During the six months ended June 29, 2024, and
July 1, 2023, we recorded restructuring costs of $25 million and $48
 
million, respectively.
 
The restructuring costs
for these periods primarily related to severance and employee-related
 
costs, accelerated amortization of right-of-use
lease assets and fixed assets, and other lease exit costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40
Three Months Ended June 29, 2024 Compared to Three Months Ended July 1, 2023
Note: Percentages for Net Sales; Gross Profit; Operating Expenses; Other Expense,
 
Net; and Income Taxes are
based on actual values and may not recalculate due to rounding.
Net Sales
Net sales were as follows:
June 29,
% of
July 1,
% of
Increase/ (Decrease)
2024
Total
2023
Total
$
%
Health care distribution
(1)
Dental
 
$
1,924
61.4
%
$
1,957
63.1
%
$
(33)
(1.7)
%
Medical
 
998
31.8
950
30.7
48
5.0
 
Total health care distribution
 
2,922
93.2
2,907
93.8
15
0.5
Technology and value-added services
(2)
214
6.8
193
6.2
21
10.8
Total
 
$
3,136
100.0
%
$
3,100
100.0
%
$
36
1.1
%
The components of our sales growth were as follows:
Total Local
Currency
Growth
Foreign
Exchange
Impact
Total Sales
Growth
Local Currency Growth
Local Internal
Growth
Acquisition
Growth
Health care distribution
(1)
Dental Merchandise
(2.6)
%
1.4
%
(1.2)
%
(0.7)
%
(1.9)
%
Dental Equipment
(0.4)
0.2
(0.2)
(0.5)
(0.7)
Total Dental
(2.1)
1.2
(0.9)
(0.8)
(1.7)
Medical
(4.3)
9.3
5.0
-
5.0
Total Health Care Distribution
(2.8)
3.8
1.0
(0.5)
0.5
Technology and value-added services
(2)
3.9
7.0
10.9
(0.1)
10.8
Total
(2.4)
%
4.0
%
1.6
%
(0.5)
%
1.1
%
(1)
Consists of consumable products, dental specialty products (including implant, orthodontic and endodontic products), small
equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical
products, diagnostic tests, infection-control products, PPE products, vitamins and orthopedic implants.
(2)
Consists of practice management software and other value-added products, which are distributed primarily to health care providers,
practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, continuing
education services for practitioners, practice technology, network and hardware services, and other services.
Global Sales
Global net sales for the three months ended June 29, 2024 increased 1.1%.
 
The components of our sales growth are
presented in the table above.
The 2.4% decrease in our internally generated local currency sales was primarily
 
attributable to the slower than
anticipated pace of recovery from the cyber incident, the challenging economic
 
environment in certain markets and
lower sales of PPE products and COVID-19 test kits.
 
For the three months ended June 29, 2024, the estimated
decrease in internally generated local currency sales, excluding PPE
 
products and COVID-19 test kits, was 1.8%.
We estimate that sales of PPE products and COVID-19 test kits were approximately $140 million and $164 million
for the three months ended June 29, 2024 and July 1, 2023, respectively, representing an estimated decrease of $24
million, or 14.3%
 
versus the prior year, with the $24 million net decrease year-over-year representing 0.7%
 
of
global net sales for the three months ended June 29, 2024.
 
 
 
 
 
41
Dental
Dental net sales for the three months ended June 29, 2024 decreased 1.7%.
 
The components of our sales decline
are presented in the table above.
The decrease in local currency sales was attributable to a decrease
 
in internally generated local currency sales for
dental merchandise primarily attributable to the slower than anticipated pace
 
of recovery from the cyber incident,
the challenging economic environment in certain markets, and lower
 
sales of PPE products, partially offset by sales
from our entities acquired during the twelve months ended June 29, 2024.
 
The sales decrease in internally
generated local currency for dental equipment was primarily attributable
 
to sales declines in certain international
markets, partially offset by sales growth in traditional equipment,
 
digital imaging and our parts and service business
in North America.
We estimate that sales of PPE products were approximately $77 million and $89 million for the three months ended
June 29, 2024 and July 1, 2023, respectively, representing an estimated decrease of $12 million, or 12.6% versus
the prior year, with the $12 million net decrease year-over-year representing 0.6% of dental net sales for
 
the three
months ended June 29, 2024.
 
The decrease in sales of PPE products is primarily due to lower glove prices.
 
The
estimated decrease in internally generated local currency sales, excluding
 
PPE products,
 
was 1.7%.
 
Medical
Medical net sales for the three months ended June 29, 2024 increased
 
5.0%.
 
The components of our sales growth
are presented in the table above.
The increase in local currency sales was attributable to our expansion
 
in the Home Solutions market including the
acquisition of Shield Healthcare during the year ended December
 
30, 2023.
 
The internally generated local currency
decrease in medical sales is primarily attributable to the slower than anticipated
 
pace of recovery from the cyber
incident as well as the conversion of certain pharmaceutical product sales
 
to lower priced generics,
 
and lower sales
of PPE products,
 
also primarily due to lower glove prices.
We estimate that sales of PPE products and COVID-19 test kits were approximately $63 million and $75 million
for the three months ended June 29, 2024 and July 1, 2023,
 
respectively, representing an estimated decrease of $12
million, or 16.2%
 
versus the prior year, with the $12 million net decrease year-over-year representing 1.2%
 
of
medical net sales for the three months ended June 29, 2024.
 
The decrease in sales of these products is primarily
due to lower market prices of PPE products (primarily lower glove
 
pricing).
 
The estimated decrease in internally
generated local currency sales, excluding PPE products and COVID-19
 
test kits, was 3.2%.
Technology and value-added services
Technology and value-added services net sales for the three months ended June 29, 2024 increased 10.8%.
 
The
components of our sales growth are presented in the table above.
 
The internally generated local currency increase
in technology and value-added services sales is primarily attributable
 
to a continued increase in the number of
cloud-based users of our practice management software and an increase
 
in revenue cycle management solutions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42
Gross Profit
Gross profit and gross margin percentages by segment and in total were as follows:
June 29,
Gross
July 1,
Gross
Increase
 
2024
Margin %
2023
Margin %
$
%
Health care distribution
 
$
875
30.0
%
$
846
29.1
%
$
29
3.5
%
Technology and value-added services
143
66.6
129
66.8
14
10.5
Total
 
$
1,018
32.5
$
975
31.4
$
43
4.4
As a result of different practices of categorizing costs associated with distribution networks
 
throughout our
industry, our gross margins may not necessarily be comparable to other distribution companies.
 
Additionally, we
realize substantially higher gross margin percentages in our technology and value-added services
 
segment than in
our health care distribution segment.
 
These higher gross margins result from being both the developer and seller of
software products and services, as well as certain financial services.
 
The software industry typically realizes higher
gross margins to recover investments in product development.
Within our health care distribution segment, gross profit margins may vary between the periods as a result of
 
the
changes in the mix of products sold as well as changes in our customer mix.
 
For example, sales of our corporate
brand and certain specialty products achieve gross profit margins that are higher than
 
average total gross profit
margins of all products.
 
With respect to customer mix, sales to our large-group customers are typically completed
at lower gross margins due to the higher volumes sold as opposed to the gross margin on sales to office-based
practitioners, who normally purchase lower volumes.
 
Health care distribution gross profit for the three months ended June 29, 2024
 
increased compared to the prior-year-
period due to gross profit from acquisitions and gross margin expansion as a result of
 
a favorable impact of sales
mix of higher-margin products.
Technology and value-added services gross profit increased as a result of a higher gross profit from internally
generated sales and gross profit from acquisitions.
 
The slight decrease in gross margin rates was primarily due to
increased amortization expense.
Operating Expenses
Operating expenses (consisting of selling, general and administrative
 
expenses; depreciation and amortization; and
restructuring costs) by segment and in total were as follows:
% of
% of
June 29,
Respective
July 1,
Respective
Increase
2024
Net Sales
2023
Net Sales
$
%
Health care distribution
 
$
729
25.0
%
$
680
23.4
%
$
49
7.2
%
Technology and value-added services
 
130
60.3
94
49.0
36
36.4
Total
 
$
859
27.4
$
774
25.0
$
85
10.8
The net increase in operating expenses is attributable to the following:
Operating Costs
Restructuring Costs
Acquisitions
Total
Health care distribution
 
$
11
$
(2)
$
40
$
49
Technology and value-added services
31
(1)
6
36
Total
 
$
42
$
(3)
$
46
$
85
The components of the net increase in operating expenses are presented
 
in the table above.
 
The increase in
operating costs during the three months ended June 29, 2024 includes increases
 
in payroll and payroll related costs,
travel, convention expenses and litigation settlement costs in both of our
 
reportable segments, as well as increased
acquisition intangible amortization in our healthcare distribution segment.
 
We
also recorded an increase of $23
million in accrued contingent consideration related to a 2023 acquisition in
 
our technology and value-added
services segment.
 
During the three months ended June 29, 2024, we also incurred
 
$3 million of expenses, within
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43
our health care distribution segment, directly related to the cyber incident,
 
mostly consisting of professional fees.
 
During the three months ended June 29, 2024, we received insurance proceeds
 
of $10 million representing a partial
insurance recovery of losses related to the cyber incident.
Other Expense, Net
Other expense, net was as follows:
June 29,
July 1,
Variance
2024
2023
$
%
Interest income
 
$
6
$
3
$
3
80.7
%
Interest expense
 
(32)
(19)
(13)
(72.4)
Other, net
 
(1)
1
(2)
(350.7)
Other expense, net
 
$
(27)
$
(15)
$
(12)
(87.7)
Interest income increased primarily due to increased interest rates.
 
Interest expense increased primarily due to
increased borrowings and increased interest rates.
Income Taxes
Our effective tax rate was 24.9% for the three months ended June 29, 2024 compared to 22.0%
 
for the prior year
period.
 
The difference between our effective and federal statutory tax rates primarily relates to state
 
and foreign
income taxes.
The Organization of Economic Co-Operation and Development (OECD) issued
 
technical and administrative
guidance on Pillar Two rules in December 2021, which provides for a global minimum tax rate on the earnings of
large multinational businesses on a country-by-country basis.
 
Effective January 1, 2024, the minimum global tax
rate is 15% for various jurisdictions pursuant to the Pillar Two rules.
 
As of June 29, 2024, the impact of the Pillar
Two rules to our financial statements was immaterial.
 
As we operate in jurisdictions which have adopted Pillar
Two, we are continuing to analyze the implications to effectively manage the impact for 2024 and beyond.
 
Future
tax reform resulting from these developments may result in changes to long-standing
 
tax principles, which may
adversely impact our effective tax rate going forward or result in higher cash tax liabilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44
Six Months Ended June 29, 2024 Compared to Six Months Ended July 1, 2023
Note: Percentages for Net Sales; Gross Profit; Operating Expenses; Other
 
Expense, Net; and Income Taxes are
based on actual values and may not recalculate due to rounding.
Net Sales
Net sales were as follows:
June 29,
% of
July 1,
% of
Increase / (Decrease)
2024
Total
2023
Total
$
%
Health care distribution
(1)
Dental
 
$
3,838
60.9
%
$
3,855
62.6
%
$
(17)
(0.5)
%
Medical
 
2,039
32.3
1,921
31.2
118
6.2
Total health care distribution
 
5,877
93.2
5,776
93.8
101
1.7
Technology and value-added services
(2)
431
6.8
384
6.2
47
12.3
Total
 
$
6,308
100.0
%
$
6,160
100.0
%
$
148
2.4
%
The components of our sales growth were as follows:
Total Local
Currency
Growth
Foreign
Exchange
Impact
Total Sales
Growth
Local Currency Growth
Local Internal
Growth
Acquisition
Growth
Health care distribution
(1)
Dental Merchandise
(3.2)
%
2.6
%
(0.6)
%
-
%
(0.6)
%
Dental Equipment
(0.1)
0.1
-
-
-
Total Dental
(2.5)
2.1
(0.4)
(0.1)
(0.5)
Medical
(2.4)
8.6
6.2
-
6.2
Total Health Care Distribution
(2.5)
4.3
1.8
(0.1)
1.7
Technology and value-added services
(2)
3.6
8.5
12.1
0.2
12.3
Total
(2.1)
%
4.5
%
2.4
%
-
%
2.4
%
(1)
Consists of consumable products, dental specialty products (including implant, orthodontic and endodontic products), small
equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical
products, diagnostic tests, infection-control products, PPE products, vitamins and orthopedic implants.
(2)
Consists of practice management software and other value-added products, which are distributed primarily to health care providers,
practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, continuing
education services for practitioners, practice technology, network and hardware services, and other services.
Global Sales
Global net sales for the six months ended June 29, 2024 increased 2.4%.
 
The components of our sales growth are
presented in the table above.
The 2.1% decrease in our internally generated local currency sales was primarily
 
attributable to the slower than
anticipated pace of recovery from the cyber incident, the challenging economic
 
environment in certain markets and
lower sales of PPE products.
 
For the six months ended June 29, 2024, the estimated decrease in
 
internally
generated local currency sales, excluding PPE products and COVID-19
 
test kits, was 1.5%.
We estimate that sales of PPE products and COVID-19 test kits were approximately $321
 
million and $365 million
for the six months ended June 29, 2024 and July 1, 2023, respectively, representing an estimated decrease of $44
million, or 11.9%
 
versus the prior year, with the $44 million net decrease year-over-year representing 0.7%
 
of
global net sales for the six months ended June 29, 2024.
 
 
 
 
 
45
Dental
Dental net sales for the six months ended June 29, 2024 decreased 0.5%.
 
The components of our sales decline are
presented in the table above.
 
The decrease in local currency sales was attributable to a decrease
 
in internally generated local currency sales for
dental merchandise primarily attributable to the slower than anticipated pace
 
of recovery from the cyber incident,
the challenging economic environment in certain markets, and
 
lower sales of PPE products, partially offset by sales
from our entities acquired during the twelve months ended June 29, 2024.
 
Our sales growth in internally generated
local currency for dental equipment was relatively flat compared to the comparable
 
prior year period primarily due
to growth in traditional equipment, digital imaging and our parts and
 
service business in North America, partially
offset by sales declines in certain international markets, and some sales shifting into
 
the first quarter of 2024 due to
the delay of equipment installations during the fourth quarter of 2023
 
resulting from the impact of the cyber
incident.
We estimate that sales of PPE products were approximately $156 million and $181 million for the six months
ended June 29, 2024 and July 1, 2023, respectively, representing an estimated decrease of $25 million, or 13.6%
versus the prior year, with the $25 million net decrease year-over-year representing 0.6% of dental net
 
sales for the
six months ended June 29, 2024.
 
The decrease in sales of PPE products is primarily due to lower glove
 
prices and
reduced demand following the cyber incident.
 
The estimated decrease in internally generated local currency
 
sales,
excluding PPE products, was 1.9%.
 
Medical
Medical net sales for the six months ended June 29, 2024 increased 6.2%.
 
The components of our sales growth are
presented in the table above.
 
The increase in local currency sales was attributable to our expansion
 
in the Home
Solutions market including the acquisition of Shield Healthcare during
 
the year ended December 30, 2023.
The internally generated local currency decrease in medical sales is primarily
 
attributable to the slower than
anticipated pace of recovery from the cyber incident as well as the conversion
 
of certain pharmaceutical product
sales to lower priced generics, and lower sales of PPE products, partially
 
offset by strong sales of point-of-care
diagnostics including multi-assay flu/COVID combination test kits.
We estimate that sales of PPE products and COVID-19 test kits were approximately $165 million and $184 million
for the six months ended June 29, 2024 and July 1, 2023,
 
respectively, representing an estimated decrease of $19
million, or 10.3%
 
versus the prior year, with the $19 million net decrease year-over-year representing 0.9%
 
of
medical net sales for the six months ended June 29, 2024.
 
The decrease in sales of these products is primarily due
to lower market prices of PPE products (primarily lower glove pricing).
 
The estimated decrease in internally
generated local currency sales, excluding PPE products and COVID-19
 
test kits, was 1.6%.
Technology and value-added services
Technology and value-added services net sales for the six months ended June 29, 2024 increased 12.3%.
 
The
components of our sales growth are presented in the table above.
 
The internally generated local currency increase
in technology and value-added services sales is primarily attributable
 
to a continued increase in the number of
cloud-based users of our practice management software and an increase
 
in revenue cycle management solutions and
our analytical products.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46
Gross Profit
Gross profit and gross margin percentages by segment and in total were as follows:
June 29,
Gross
July 1,
Gross
Increase
2024
Margin %
2023
Margin %
$
%
Health care distribution
 
$
1,742
29.6
%
$
1,683
29.1
%
$
59
3.5
%
Technology and value-added services
288
66.7
258
67.1
30
11.6
Total
 
$
2,030
32.2
$
1,941
31.5
$
89
4.6
As a result of different practices of categorizing costs associated with distribution networks
 
throughout our
industry, our gross margins may not necessarily be comparable to other distribution companies.
 
Additionally, we
realize substantially higher gross margin percentages in our technology and value-added services
 
segment than in
our health care distribution segment.
 
These higher gross margins result from being both the developer and seller of
software products and services, as well as certain financial services.
 
The software industry typically realizes higher
gross margins to recover investments in product development.
Within our health care distribution segment, gross profit margins may vary between the periods as a result of
 
the
changes in the mix of products sold as well as changes in our customer
 
mix.
 
For example, sales of our corporate
brand and certain specialty products achieve gross profit margins that are higher than
 
average total gross profit
margins of all products.
 
With respect to customer mix, sales to our large-group customers are typically completed
at lower gross margins due to the higher volumes sold as opposed to the gross margin on sales to office-based
practitioners, who normally purchase lower volumes.
 
Health care distribution gross profit for the six months ended June 29,
 
2024 increased compared to the prior-year-
period due to gross profit from acquisitions and gross margin expansion as a result of
 
a favorable impact of sales
mix of higher-margin products.
Technology and value-added services gross profit increased as a result of a higher gross profit from internally
generated sales and gross profit from acquisitions.
 
The slight decrease in gross margin rates was primarily due to
increased amortization expense.
Operating Expenses
Operating expenses (consisting of selling, general and administrative
 
expenses; depreciation and amortization; and
restructuring costs) by segment and in total were as follows:
% of
% of
June 29,
Respective
July 1,
Respective
Increase
2024
Net Sales
2023
Net Sales
$
%
Health care distribution
 
$
1,470
25.0
%
$
1,372
23.8
%
$
98
7.1
%
Technology and value-added services
 
251
58.0
193
50.3
58
29.6
Total
 
$
1,721
27.3
$
1,565
25.4
$
156
9.9
The net increase in operating expenses is attributable to the following:
Operating Costs
Restructuring Costs
Acquisitions
Total
Health care distribution
 
$
29
$
(19)
$
88
$
98
Technology and value-added services
50
(4)
12
58
Total
 
$
79
$
(23)
$
100
$
156
The components of the net increase in operating expenses are presented
 
in the table above.
 
The increase in
operating costs during the six months ended June 29, 2024 includes
 
increases in payroll and payroll related costs,
travel, convention expenses and litigation settlement costs in both of our
 
reportable segments, as well as increased
acquisition intangible amortization in our healthcare distribution segment.
 
We
also recorded an increase of $38
million in accrued contingent consideration related to a 2023 acquisition in
 
our technology and value-added
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47
services segment.
 
During the six months ended June 29, 2024, we also incurred $8 million
 
of expenses, within our
health care distribution segment, directly related to the cyber incident, mostly
 
consisting of professional fees.
 
During the six months ended June 29, 2024, we received insurance proceeds
 
of $10 million representing a partial
insurance recovery of losses related to the cyber incident.
Other Expense, Net
Other expense, net was as follows:
June 29,
July 1,
Variance
2024
2023
$
%
Interest income
 
$
11
$
6
$
5
100.4
%
Interest expense
 
(62)
(33)
(29)
(90.6)
Other, net
 
1
-
1
(400.9)
Other expense, net
 
$
(50)
$
(27)
$
(23)
(84.9)
Interest income increased primarily due to increased interest rates.
 
Interest expense increased primarily due to
increased borrowings and increased interest rates.
Income Taxes
Our effective tax rate was 25.2% for the six months ended June 29, 2024 compared to 22.8%
 
for the prior year
period.
 
The difference between our effective and federal statutory tax rates primarily relates to state
 
and foreign
income taxes.
The Organization of Economic Co-Operation and Development (OECD) issued
 
technical and administrative
guidance on Pillar Two rules in December 2021, which provides for a global minimum tax rate on the earnings of
large multinational businesses on a country-by-country basis.
 
Effective January 1, 2024, the minimum global tax
rate is 15% for various jurisdictions pursuant to the Pillar Two rules.
 
As of June 29, 2024, the impact of the Pillar
Two rules to our financial statements was immaterial.
 
As we operate in jurisdictions which have adopted Pillar
Two, we are continuing to analyze the implications to effectively manage the impact for 2024 and beyond.
 
Future
tax reform resulting from these developments may result in changes to long-standing
 
tax principles, which may
adversely impact our effective tax rate going forward or result in higher cash tax liabilities.
 
48
Liquidity and Capital Resources
Our principal capital requirements have included funding of acquisitions, purchases
 
of additional noncontrolling
interests, repayments of debt principal, the funding of working capital needs,
 
purchases of fixed assets and
repurchases of common stock.
 
Working capital requirements generally result from increased sales, special
inventory forward buy-in opportunities and payment terms for receivables
 
and payables.
 
Historically, sales have
tended to be stronger during the second half of the year and special inventory
 
forward buy-in opportunities have
been most prevalent just before the end of the year, and have caused our working capital requirements
 
to be higher
from the end of the third quarter to the end of the first quarter of
 
the following year.
We finance our business primarily through cash generated from our operations, revolving credit facilities and debt
placements.
 
Please see
 
for further information.
 
Our ability to generate sufficient cash flows from
operations is dependent on the continued demand of our customers
 
for our products and services, and access to
products and services from our suppliers.
Our business requires a substantial investment in working capital, which
 
is susceptible to fluctuations during the
year as a result of inventory purchase patterns and seasonal demands.
 
Inventory purchase activity is a function of
sales activity, special inventory forward buy-in opportunities and our desired level of inventory.
 
We anticipate
future increases in our working capital requirements.
We finance our business to provide adequate funding for at least 12 months.
 
Funding requirements are based on
forecasted profitability and working capital needs, which, on occasion, may
 
change.
 
Consequently, we may change
our funding structure to reflect any new requirements.
We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,
and our available funds under existing credit facilities provide us with
 
sufficient liquidity to meet our currently
foreseeable short-term and long-term capital needs.
Our acquisition strategy is focused on investments in companies that
 
add new customers and sales teams, increase
our geographic footprint (whether entering a new country, such as emerging markets, or building scale where we
have already invested in businesses), and finally, those that enable us to access new products and technologies.
Net cash provided by operating activities was $493 million for the
 
six months ended June 29, 2024, compared to
net cash provided by operating activities of $301 million for the
 
prior year.
 
The net change of $192 million was
primarily attributable to changes in working capital accounts, primarily
 
accounts receivable and inventory; partially
offset by slightly lower cash net income.
 
During the six months ended June 29, 2024, the cyber incident had
several residual impacts to the operating cash flows from our working capital,
 
net of acquisitions, including an
increase in operating cash flows from accounts receivable due to improved
 
collection levels and decreased cash
flows from accounts payable and accrued expenses resulting from previously delayed
 
payments.
Net cash used in investing activities was $281 million for the
 
six months ended June 29, 2024, compared to net
cash used in investing activities of $340 million for the prior year.
 
The net change of $59 million was primarily
attributable to decreased payments for equity investments and business
 
acquisitions, and increased purchases of
fixed assets resulting from our continued investment in our facilities and operations.
Net cash used in financing activities was $265 million for the
 
six months ended June 29, 2024, compared to net
cash provided by financing activities of $59 million for the prior year.
 
The net change of $324 million was
primarily due to increased net borrowings from debt to finance our investments
 
and increased acquisitions of
noncontrolling interests in subsidiaries and increased repurchases of common
 
stock.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49
The following table summarizes selected measures of liquidity and capital
 
resources:
June 29,
December 30,
2024
2023
Cash and cash equivalents
 
$
138
$
171
Working
 
capital
 
(1)
1,392
1,805
Debt:
Bank credit lines
 
$
505
$
264
Current maturities of long-term debt
 
106
150
Long-term debt
 
1,891
1,937
Total debt
 
$
2,502
$
2,351
Leases:
Current operating lease liabilities
$
75
$
80
Non-current operating lease liabilities
261
310
(1)
 
Includes $330 million and $284 million of certain accounts receivable which serve as security for U.S. trade accounts receivable
securitization at June 29, 2024 and December 30, 2023, respectively.
Our cash and cash equivalents consist of bank balances and investments
 
in money market funds representing
overnight investments with a high degree of liquidity.
Accounts receivable days sales outstanding and inventory turns
Our accounts receivable days sales outstanding from operations
 
increased to 48.9 days as of June 29, 2024 from
43.3 days as of July 1, 2023, which was primarily attributable to the impact
 
of the cyber incident.
 
During the six
months ended June 29, 2024, we wrote off approximately $4 million of fully reserved
 
accounts receivable against
our trade receivable reserve.
 
Our inventory turns from operations increased to 5.0 as of June 29, 2024
 
from 4.4 as
of July 1, 2023.
 
Our working capital accounts may be impacted by current and
 
future economic conditions.
Leases
We
have operating and finance leases for corporate offices, office space, distribution and other facilities,
 
vehicles
and certain equipment.
 
Our leases have remaining terms of less than one month
 
to approximately 17 years, some of
which may include options to extend the leases for up to 15 years.
 
As of June 29, 2024, our right-of-use assets
related to operating leases were $304 million and our current and non-current
 
operating lease liabilities were $75
million and $261 million, respectively.
Stock Repurchases
On July 31, 2024 our Board of Directors authorized the repurchase of up
 
to an additional $500 million in shares of
our common stock.
From March 3, 2003 through June 29, 2024, we repurchased $4.9 billion,
 
or 92,809,239 shares, under our common
stock repurchase programs, with $90 million available as of June 29, 2024
 
for future common stock share
repurchases.
 
Subject to market conditions and other factors, we currently plan to
 
accelerate our share repurchase
activity in light of our favorable cash position.
Redeemable Noncontrolling Interests
Some minority stockholders in certain of our subsidiaries have the right,
 
at certain times, to require us to acquire
their ownership interest in those entities at fair value.
 
Accounting Standards Codification Topic 480-10 is
applicable for noncontrolling interests where we are or may be required
 
to purchase all or a portion of the
outstanding interest in a consolidated subsidiary from the noncontrolling
 
interest holder under the terms of a put
option contained in contractual agreements.
 
As of June 29, 2024 and December 30, 2023, our balance
 
for
redeemable noncontrolling interests was $856 million and $864 million,
 
respectively.
 
Please see
 
for further information.
50
Critical Accounting Policies and Estimates
There have been no material changes in our critical accounting policies and
 
estimates from those disclosed in Item
7 of our Annual Report on Form 10-K for the year ended December 30, 2023.
Accounting Standards Update
For a discussion of accounting standards updates that have been adopted
 
or will be adopted, see
 
of the Notes to the Condensed Consolidated
Financial Statements included under Item 1.
ITEM 3.
 
QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk
 
from that disclosed in Item 7A of our Annual
Report on Form 10-K for the year ended December 30, 2023.
51
ITEM 4.
 
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including
 
our principal executive officer and
principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this quarterly report
 
as such term is defined in Rules 13a-15(e)
and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as
 
amended (the “Exchange Act”).
 
Based
on this evaluation, our management, including our principal executive
 
officer and principal financial officer,
concluded that our disclosure controls and procedures were effective as of June 29, 2024,
 
to ensure that all material
information required to be disclosed by us in reports that we file or submit
 
under the Exchange Act is accumulated
and communicated to them as appropriate to allow timely decisions
 
regarding required disclosure and that all such
information is recorded, processed, summarized and reported within the
 
time periods specified in the SEC’s rules
and forms, and the rules of the Nasdaq stock exchange.
Changes in Internal Control over Financial Reporting
On April 1, 2024, we acquired a 60% voting equity interest in TriMed Inc (“TriMed”),
 
a global developer of
solutions for the orthopedic treatment of lower and upper extremities, headquartered
 
in Santa Clarita, California.
 
The full integration of TriMed will extend beyond year-end and, therefore, we anticipate excluding TriMed from
our annual assessment of internal control over financial reporting as of
 
December 28, 2024, as permitted by related
SEC staff interpretive guidance for newly acquired businesses.
The combination of acquisitions (including TriMed), continued acquisition integrations and systems
implementation activity undertaken during the quarter and carried over
 
from prior quarters when considered in the
aggregate, represents a material change in our internal control over financial reporting.
During the quarter ended June 29, 2024,
 
post-acquisition integration related activities continued for our medical
 
and
dental subsidiaries acquired during prior quarters.
 
These acquisitions, the majority of which utilize separate
information and financial accounting systems, have been included
 
in our condensed consolidated financial
statements since their respective dates of acquisition.
We completed the systems implementation activities related to the integration of one of our U.S. dental subsidiaries
into our existing corporate ERP system and the upgrade of an ERP
 
system for one of our dental subsidiaries in the
Netherlands.
 
Also, we initiated systems implementation activities
 
related to warehouse operations improvements
for our France dental subsidiary.
 
Finally, we continued systems implementation activities for two of our dental
subsidiaries in the U.S. and Brazil, respectively.
All continued acquisition integrations and systems implementation activity
 
involve necessary and appropriate
change-management controls that are considered in our quarterly assessment of
 
the design and operating
effectiveness of our internal control over financial reporting.
The deficiencies in internal control over financial reporting identified
 
as of December 30, 2023 at the application
control level related to logical and user access management and segregation
 
of duties have continued to be the
subject of ongoing remediation including implementation of specific
 
action plans and the testing / validation of
control operating effectiveness, which continue to be expected to be completed prior
 
to year-end.
Limitations of the Effectiveness of Internal Control
A control system, no matter how well conceived and operated, can provide
 
only reasonable, not absolute, assurance
that the objectives of the internal control system are met.
 
Because of the inherent limitations of any internal control
system, no evaluation of controls can provide absolute assurance that
 
all control issues, if any, within a company
have been detected.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
52
PART
 
II.
 
OTHER INFORMATION
 
ITEM 1.
 
LEGAL PROCEEDINGS
 
For a discussion of Legal Proceedings, see
 
of the Notes to the Condensed Consolidated
Financial Statements included under Item 1.
ITEM 1A. RISK FACTORS
 
There have been no material changes from the risk factors disclosed in
 
Part 1, Item 1A, of our Annual Report on
Form 10-K for the year ended December 30, 2023.
ITEM 2.
 
UNREGISTERED SALES OF EQUITY SECURITIES
 
AND USE OF PROCEEDS
Purchases of equity securities by the issuer
Our share repurchase program, announced on March 3, 2003, originally
 
allowed us to repurchase up to two million
shares pre-stock splits (eight million shares post-stock splits) of our common
 
stock, which represented
approximately 2.3% of the shares outstanding at the commencement
 
of the program.
 
Subsequent additional
increases totaling $4.9
 
billion, authorized by our Board of Directors, to the repurchase program
 
provide for a total
of $5.0 billion (including $400 million authorized on February 8, 2023) of shares
 
of our common stock to be
repurchased under this program.
As of June 29, 2024, we had repurchased approximately $4.9 billion
 
of common stock (92,809,239 shares) under
these initiatives, with $90 million available for future common stock
 
share repurchases.
On July 31, 2024 our Board of Directors authorized the repurchase of up
 
to an additional $500 million in shares of
our common stock.
The following table summarizes repurchases of our common stock
 
under our stock repurchase program during the
fiscal quarter ended June 29, 2024:
Total Number
Maximum Number
Total
of Shares
of Shares
Number
Average
Purchased as Part
that May Yet
of Shares
Price Paid
of Our Publicly
Be Purchased Under
Fiscal Month
Purchased (1)
Per Share
Announced Program
Our Program (2)
3/31/2024 through 4/27/2024
409,607
$
72.12
409,607
2,193,132
4/28/2024 through 6/1/2024
579,491
71.82
579,491
1,669,176
6/2/2024 through 6/29/2024
426,608
67.60
426,608
1,402,885
1,415,706
1,415,706
(1)
 
All repurchases were executed in the open market under our existing publicly announced authorized program.
(2)
 
The maximum number of shares that may yet be purchased under this program is determined at the end of each month based on the
closing price of our common stock at that time.
 
This table excludes shares withheld from employees to satisfy minimum tax withholding
requirements for equity-based transactions.
ITEM 5.
 
OTHER INFORMATION
On August 6, 2024, we committed to a new restructuring plan (the “2024
 
Plan”) to integrate recent acquisitions,
right-size operations and further increase efficiencies.
 
We expect to record restructuring charges associated with
the 2024 Plan during the second half of 2024 and in 2025, however an
 
estimate of the amount of these charges has
not yet been determined.
 
Relating to charges under the 2022 Plan, see
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
53
ITEM 6.
 
EXHIBITS
101.INS
Inline XBRL Instance Document - the instance document does not appear
 
in the
Interactive Data File because its XBRL tags are embedded within the
 
Inline
XBRL document+
101.SCH
Inline XBRL Taxonomy Extension Schema Document+
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document+
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document+
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document+
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document+
104
The cover page of Henry Schein, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended June 29, 2024, formatted in Inline XBRL (included within
Exhibit 101 attachments).+
+ Filed or furnished herewith.
 
54
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
 
Registrant has duly caused this Report to
be signed on its behalf by the undersigned thereunto duly authorized.
Henry Schein, Inc.
(Registrant)
By: /s/ Ronald N. South
Ronald N. South
Senior Vice President and
Chief Financial Officer
(Authorized Signatory and Principal Financial
and Accounting Officer)
Dated: August 6, 2024