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What changed in Henry Schein's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Henry Schein's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+364 added−364 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-21)

Top changes in Henry Schein's 2023 10-K

364 paragraphs added · 364 removed · 262 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

92 edited+30 added−42 removed170 unchanged
Biggest changeSupply Chain Control Tower. ● (i) Publishing our annual Corporate Social Responsibility and Sustainability Report according to the Global Reporting Initiative and Sustainability Accounting Standards Board reporting standards and issuing our first Taskforce for Climate-related Financial Disclosures report; (ii) committing to announcing our carbon reduction goal by the end of 2023; (iii) continued initiatives and programs to advance health equity efforts to promote access to care for underserved and underrepresented communities, investing in diversity for greater health equity in partnership with health care professionals, and increasing awareness of health equity needs globally; (iv) announced the top line findings of our pay equity analysis across the U.S., which reviews compensation across gender and ethnic groups; (v) expanding our Diversity and Inclusion (“D&I”) learning journey, such as by educating global directors and vice presidents on more advanced topics of D&I including privilege and equity, as well as offering education to all global TSMs below director level on the importance of D&I; and (vi) continuing to drive a culture of wellness for our TSMs by fostering an environment where they can feel engaged, included and psychologically safe.
Biggest changeOverseen by the Nominating and Governance Committee of our Board of Directors (“Board”) with the Compensation Committee also playing a role in ESG matters related to human capital engagement and executive compensation, some key 2023 highlights related to human capital matters include: • continuing to evaluate our pay equity analysis for the majority of the U.S. workforce, which reviews compensation across gender and ethnic groups for equity and fairness; • expanding our Diversity and Inclusion (“D&I”) learning journey by educating TSMs on key D&I topics; and • continuing to drive a culture of wellness and engagement for our TSMs by fostering an environment where they can feel engaged, included and psychologically safe.
Under the Controlled Substances Act, as a distributor of controlled substances, we are required to obtain and renew annually registrations for our facilities from the United States Drug Enforcement Administration (“DEA”) permitting us to handle controlled substances.
As a distributor of controlled substances, we are required, under the Controlled Substances Act, to obtain and renew annually registrations for our facilities from the United States Drug Enforcement Administration (“DEA”) permitting us to handle controlled substances.
Pendergast was the employed by VSP Global from 2008 to 2018, most recently as the Chief Technology Officer and Chief Information Officer. Prior to VSP Global, Mr.
Pendergast was employed by VSP Global from 2008 to 2018, most recently as the Chief Technology Officer and Chief Information Officer. Prior to VSP Global, Mr.
Among other things, the EU MDR: • strengthens the rules on placing devices on the market and reinforces surveillance once they are available; • establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • improves the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • sets up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; • strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market; and • identifies importers and distributors and medical device products through registration in a database (EUDAMED, which is not fully functional for the time being and might not be so before the end of 2024 at the earliest; therefore, the use of this database is only possible through a voluntary basis and, by a way of consequence, is currently not mandatory).
Among other things, the EU MDR: • strengthens the rules on placing devices on the market and reinforces surveillance once they are available; • establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • improves the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • sets up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; • strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market; and • identifies importers and distributors and medical device products through registration in a database (EUDAMED, which is not fully functional for the time being and might not be so before the end of 2027 at the earliest; therefore, the use of this database is only possible through a voluntary basis and, by a way of consequence, is currently not mandatory).
While we believe we have substantially compliant programs and controls in place to comply with the GDPR, CCPA, PIPL, CPRA and state law requirements, our compliance with data privacy and cybersecurity laws is likely to impose additional costs on us, and we cannot predict whether the interpretations of the requirements, or changes in our practices in response to new requirements or interpretations of the requirements, could have a material adverse effect on our business.
While we believe we have substantially compliant programs and controls in place to comply with the GDPR, CCPA, PIPL, CPRA and other state law requirements, our compliance with data privacy and cybersecurity laws is likely to impose additional costs on us, and we cannot predict whether the interpretations of the requirements, or changes in our practices in response to new requirements or interpretations of the requirements, could have a material adverse effect on our business.
At the federal level, several related bills have been introduced and regulations proposed which, if enacted or finalized, respectively, would impact drug pricing and related costs. As a result of political, economic and regulatory influences, the health care distribution industry in the United States is under intense scrutiny and subject to fundamental changes.
Also at the federal level, several related bills have been introduced and regulations proposed which, if enacted or finalized, respectively, would impact drug pricing and related costs. As a result of political, economic and regulatory influences, the health care distribution industry in the United States is under intense scrutiny and subject to fundamental changes.
South has been our Senior Vice President and Chief Financial Officer (and principal financial officer and principal accounting officer) since April 2022. Prior to holding his current position, Mr. South was our Corporate Finance and Chief Accounting Officer from 2013 until April 2022. Prior to joining us in 2008 as our Vice President, Corporate Finance, Mr.
South has been our Senior Vice President and Chief Financial Officer (and principal financial officer and principal accounting officer) since 2022. Prior to holding his current position, Mr. South was our Vice President Corporate Finance, and Chief Accounting Officer from 2013 until 2022. Prior to joining us in 2008 as our Vice President, Corporate Finance, Mr.
Other EU regulations that may apply under appropriate circumstances include EU Regulation No. 1907/2006 of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals , which requires importers to register substances or mixtures that they import in the EU beyond certain quantities, and the EU Regulation No. 1272/2008 of 16 December 2008 on classification, labelling and packaging of substances and mixtures, which sets various obligations with respect to the labelling and packaging of concerned substances and mixtures.
Other EU regulations that may apply under appropriate circumstances include EU Regulation No. 1907/2006 of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals , which requires importers to register substances or mixtures that they import in the EU beyond certain quantities, and the EU Regulation No. 1272/2008 of 16 December 2008 on classification, labelling and packaging of substances and mixtures (currently under revision), which sets various obligations with respect to the labelling and packaging of concerned substances and mixtures.
Ettinger served as Senior Vice President, Corporate & Legal Affairs, Chief of Staff and Secretary from 2015 to July 2022, Senior Vice President, Corporate & Legal Affairs and Secretary from 2013 to 2015, Corporate Senior Vice President, General Counsel & Secretary from 2006 to 2013, Vice President, General Counsel and Secretary from 2000 to 2006, Vice President and Associate General Counsel from 1998 to 2000 and Associate General Counsel from 1994 to 1998.
Ettinger served as Senior Vice President, Corporate & Legal Affairs, Chief of Staff and Secretary from 2015 to 2022, Senior Vice President, Corporate & Legal Affairs and Secretary from 2013 to 2015, Corporate Senior Vice President, General Counsel & Secretary from 2006 to 2013, Vice President, General Counsel and Secretary from 2000 to 2006, Vice President and Associate General Counsel from 1998 to 2000 and Associate General Counsel from 1994 to 1998.
With more than 90 years of experience distributing health care products, we have built a vast set of small, mid-sized and large customers in the dental and medical markets, serving more than one million customers worldwide across dental practices, laboratories, physician practices, and ambulatory surgery centers, as well as government, institutional health care clinics and other alternate care clinics.
With more than 91 years of experience distributing health care products, we have built a vast set of small, mid-sized and large customers in the dental and medical markets, serving more than one million customers worldwide across dental practices, laboratories, physician practices, and ambulatory surgery centers, as well as government, institutional health care clinics and other alternate care clinics.
Various federal initiatives involve the adoption and use by health care providers of certain electronic health care records systems and processes. The initiatives include, among others, programs that incentivize physicians and dentists, through MIPS, to use EHR technology in accordance with certain evolving requirements, including regarding quality, promoting interoperability, cost and improvement activities.
Various federal initiatives involve the adoption and use by health care providers of certain EHR systems and processes. The initiatives include, among others, programs that incentivize physicians and dentists, through MIPS, to use EHR technology in accordance with certain evolving requirements, including regarding quality, promoting interoperability, cost and improvement activities.
Trinh Clark has been our Senior Vice President and Chief Global Customer Experience Officer since August 2022. Ms. Clark joined us in 2007 and has served as Vice President, Technology Enablement, North American Distribution Group. Prior to joining Henry Schein, Ms. Clark held various positions of increasing responsibilities at eSurg.
Trinh Clark has been our Senior Vice President and Chief Global Customer Experience Officer since August 2022. Ms. Clark joined us in 2007 and has served as Vice President, Technology Enablement, North American Distribution Group. Prior to joining Henry Schein, Ms. Clark held various positions of increasing responsibility at eSurg.
The CPRA came into effect on January 1, 2023, applying to information collected by businesses on or after January 1, 2022. Other states, as well as the federal government, have increasingly considered the adoption of similarly expansive personal privacy laws, backed by significant civil penalties for non-compliance.
The CPRA came into effect on January 1, 2023, applying to information collected by businesses on or after January 1, 2022. As noted above, other states, as well as the federal government, have increasingly considered the adoption of similarly expansive personal privacy laws, backed by significant civil penalties for non-compliance.
Our BOLD+1 Strategic Plan consists of the following: • Build (“B”) Complementary software, specialty, and services businesses for high growth • Operationalize (“O”) One Distribution to deliver exceptional customer experience, increased efficiency, and growth • Leverage (“L”) One Schein to broaden and deepen relationships with our customers • Drive (“D”) Drive digital transformation for our customers and for Henry Schein • +1 Create Value for our stakeholders To accomplish this, we apply our competitive strengths in executing the following strategies: • Increase penetration of our existing customer base.
Our BOLD+1 Strategic Plan consists of the following: • Build (“B”) Complementary software, specialty, and services businesses for high growth • Operationalize (“O”) One Distribution to deliver exceptional customer experience, increased efficiency, and growth • Leverage (“L”) One Schein to broaden and deepen relationships with our customers • Drive (“D”) Drive digital transformation for our customers and for Henry Schein • +1 Create Value for our stakeholders Table of Contents 8 To accomplish this, we apply our competitive strengths in executing the following strategies: • Increase penetration of our existing customer base.
For instance, the American Rescue Plan Act of 2021 enhanced premium tax credits, which has resulted in an expansion of the number of people covered under the ACA. These changes are time-limited, with some enhancements in place for 2021 only and others available through the end of 2022.
For instance, the American Rescue Plan Act of 2021 enhanced premium tax credits, which has resulted in an expansion of the number of people covered under the ACA. These changes were time-limited, with some enhancements in place for 2021 only and others available through the end of 2022.
Member states may, subject notably to transparency conditions and to the statement of reasons based upon objective and verifiable criteria, regulate the price charged (or its increases) for authorized medicines and their level Table of Contents 16 of reimbursement, or they may freeze prices, place controls on the profitability of persons responsible for placing medicinal products on the market, and include or exclude the medicine on the list of products covered by national health insurance systems.
Member states may, subject notably to transparency conditions and to the statement of reasons based upon objective and verifiable criteria, regulate the price charged (or its increases) for authorized medicines and their level of reimbursement, or they may freeze prices, place controls on the profitability of persons responsible for placing medicinal products on the market, and include or exclude the medicine on the list of products covered by national health insurance systems.
For information on revenues and long-lived assets by geographic area, see Note 3 – Segment and Geographic Data of “Notes to Consolidated Financial Statements.” Seasonality and Other Factors Affecting Our Business and Quarterly Results We experience fluctuations in quarterly earnings.
For information on revenues and long-lived assets by geographic area, see Note 4 – Segment and Geographic Data of “Notes to Consolidated Financial Statements.” Seasonality and Other Factors Affecting Our Business and Quarterly Results We experience fluctuations in quarterly earnings.
McGlynn has served as Vice President, Global Human Resources and Financial Operations from 2008 to 2013, Chief Financial Officer, International Group and Vice President of Global Financial Operations from 2002 to 2008 and Vice President, Finance, North America from 1999 to 2002. Prior to joining us, Ms. McGlynn served as Assistant Vice President of Finance at Adecco Corporation.
McGlynn has served as Vice President, Global Human Resources and Financial Operations from 2008 to 2013, Chief Financial Officer, International Group and Vice President of Global Financial Operations from 2002 to 2008 and Vice President, Finance, North America from 1999 to 2002. Prior to joining us, Ms. McGlynn served as Assistant Vice President of Finance at Adecco Corporation. Mark E.
Competitive Strengths We have more than 90 years of experience in distributing products to health care practitioners resulting in strong awareness of the Henry Schein ® brand. Our competitive strengths include: A focus on meeting our customers’ unique needs .
Competitive Strengths We have more than 91 years of experience in distributing products to health care practitioners resulting in strong awareness of the Henry Schein ® brand. Our competitive strengths include: A focus on meeting our customers’ unique needs .
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 (as amended, the “ACA”).
Table of Contents 10 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 (as amended, the “ACA”).
An ACA provision, generally referred to as the Physician Payment Sunshine Act or Open Payments Program (the “Sunshine Act”), imposes annual reporting and disclosure requirements for drug and device manufacturers and distributors with regard to payments or other transfers of value made to certain covered recipients (including physicians, dentists, teaching hospitals, physician assistants, nurse practitioners, clinical nurse specialists, certified Table of Contents 15 registered nurse anesthetists, and certified nurse midwives), and for such manufacturers and distributors and for group purchasing organizations, with regard to certain ownership interests held by covered recipients in the reporting entity.
An ACA provision, generally referred to as the Physician Payments Sunshine Act or Open Payments Program (the “Sunshine Act”), imposes annual reporting and disclosure requirements for drug and device manufacturers and distributors with regard to payments or other transfers of value made to certain covered recipients (including physicians, dentists, teaching hospitals, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives), and for such manufacturers and distributors and for group purchasing organizations, with regard to certain ownership interests held by covered recipients in the reporting entity.
Table of Contents 13 Furthermore, compliance with legal requirements has required and may in the future require us to delay product release, sale or distribution, or institute voluntary recalls of, or other corrective action with respect to products we sell, each of which could result in regulatory and enforcement actions, financial losses and potential reputational harm.
Furthermore, compliance with legal requirements has required and may in the future require us to delay product release, sale or distribution, or institute voluntary recalls of, or other corrective action with respect to products we sell, each of which could result in regulatory and enforcement actions, financial losses and potential reputational harm.
Also, these measures may be interpreted or applied by a prosecutorial, regulatory or Table of Contents 14 judicial authority in a manner that could require us to make changes in our operations or incur substantial defense and settlement expenses. Even unsuccessful challenges by regulatory authorities or private relators could result in reputational harm and the incurring of substantial costs.
Also, these measures may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations or incur substantial defense and settlement expenses. Even unsuccessful challenges by regulatory authorities or private relators could result in reputational harm and the incurring of substantial costs.
At the state level, several states have adopted laws that require drug manufacturers to provide advance notice of certain price increases and to report information relating to those price increases, while others have taken legislative or administrative action to establish prescription drug affordability boards or multi- payer purchasing pools to reduce the cost of prescription drugs.
At the state level, several states have adopted laws that require drug manufacturers (including relabelers and repackagers) to provide advance notice of certain price increases and to report information relating to those price increases, while others have taken legislative or administrative action to establish prescription drug affordability boards or multi-payer purchasing pools to reduce the cost of prescription drugs.
Our primary competitors in the U.S. medical market, which accounts for the large majority of our global medical sales, are McKesson Corporation and Medline Industries, Inc., which are national distributors. We also compete with a number of regional and local medical distributors, as well as a number of manufacturers that sell directly to physicians.
Our primary competitors in the U.S. medical market, which accounts for the large majority of our global medical sales, are McKesson Corporation and Medline Industries, Inc., which are national distributors. We also compete with a number of regional and local medical distributors, as well as a number of manufacturers that sell directly to physicians and patients in their homes.
EU “regulations” apply in all member states, whereas “directives” are implemented by the individual laws of member states. Table of Contents 12 On medicines for humans, we are regulated under Directive No. 2001/83/EC of 6 November 2001, as amended by Directive 2003/63/EC of 25 June 2003, and EU Regulation (EC) No. 726/2004 of 31 March 2004.
EU “regulations” apply in all member states, whereas “directives” are implemented by the individual laws of member states. On medicines for humans, we are regulated under Directive No. 2001/83/EC of 6 November 2001, as amended by Directive 2003/63/EC of 25 June 2003, and EU Regulation (EC) No. 726/2004 of 31 March 2004.
We continue to explore ways and means to improve and expand our online presence and capabilities, including our online commerce offerings and our use of various social media outlets. International Transactions United States and foreign import and export laws and regulations require us to abide by certain standards relating to the importation and exportation of products.
Table of Contents 19 We continue to explore ways and means to improve and expand our online presence and capabilities, including our online commerce offerings and our use of various social media outlets. International Transactions United States and foreign import and export laws and regulations require us to abide by certain standards relating to the importation and exportation of products.
Table of Contents 24 James Mullins has been our Senior Vice President of Global Supply Chain since 2018. Mr. Mullins joined us in 1988 and has held a number of key positions with increasing responsibility, including Global Chief Customer Service Officer. Kelly Murphy has been our Senior Vice President and General Counsel since 2021. Since joining us in 2011, Ms.
James Mullins has been our Senior Vice President of Global Supply Chain since 2018. Mr. Mullins joined us in 1988 and has held a number of key positions with increasing responsibility, including Global Chief Customer Service Officer. Kelly Murphy has been our Senior Vice President and General Counsel since 2021. Since joining us in 2011, Ms.
We also sell medical software for practice management, certified electronic health records (“EHR”) and e-Prescribe medications and prescription solutions through MicroMD®. We have technical representatives supporting customers using our practice management solutions and services.
We also sell medical software for practice management, certified electronic health records (“EHR”) and e-Prescribe medications and prescription solutions. We have technical representatives supporting customers using our practice management solutions and services.
Previously, Mr. Siegel was our Senior Vice President and General Counsel from 2013 until 2021. Prior to joining us, Mr. Siegel was employed with Standard Microsystems Corporation, a publicly traded global semiconductor company from 2005 to 2012, holding positions of increasing responsibility, most recently as Senior Vice President, General Counsel and Secretary.
Siegel was our Senior Vice President and General Counsel from 2013 until 2021. Prior to joining us, Mr. Siegel was employed with Standard Microsystems Corporation, a publicly traded global semiconductor company from 2005 to 2012, holding positions of increasing responsibility, most recently as Senior Vice President, General Counsel and Secretary. Ronald N.
The health care distribution reportable segment, combining our global dental and medical businesses, 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 products (“PPE”) and vitamins.
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 products (“PPE”) and vitamins.
Murphy has held several key positions of increasing responsibility within the legal function, most recently serving as Deputy General Counsel. Christopher Pendergast has been our Senior Vice President and Chief Technology Officer since 2018. Prior to joining us, Mr.
Murphy has held several key positions of increasing responsibility within the legal function, most recently serving as Deputy General Counsel. Table of Contents 24 Christopher Pendergast has been our Senior Vice President and Chief Technology Officer since 2018. Prior to joining us, Mr.
Certain additional state and federal laws, such as the federal Physician Self-Referral Law, commonly known as the “Stark Law,” prohibit physicians and other health professionals from referring a patient to an entity with which the physician (or family member) has a financial relationship, for the furnishing of certain designated health services (for example, durable medical equipment and medical supplies), unless an exception applies.
Certain additional state and federal laws, such Table of Contents 14 as the federal Physician Self-Referral Law, commonly known as the “Stark Law,” prohibit physicians and other health care professionals from referring a patient to an entity with which the physician (or family member) has a financial relationship, for the furnishing of certain designated health services (for example, durable medical equipment and medical supplies), unless an exception applies.
For example, we are directly or indirectly subject to numerous and evolving federal, state, local and foreign laws and regulations that protect the privacy and security of personal information, such as the federal Health Insurance Portability and Accountability Act of 1996, as amended, and implementing regulations (“HIPAA”), the Controlling the Assault of Non-Solicited Pornography and Marketing Act, the Telephone Consumer Protection Act of 1991, Section 5 of the Federal Trade Commission Act, the California Privacy Act (“CCPA”), and the California Privacy Rights Act (“CPRA”) that became effective on January 1, 2023.
For example, we are directly or indirectly subject to numerous and evolving federal, state, local and foreign laws and regulations that protect the privacy and security of personal information, such as the federal Health Insurance Portability and Accountability Act of 1996, as amended, and implementing regulations (“HIPAA”), the Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM”), the Telephone Consumer Protection Act of 1991 (“TCPA”), Section 5 of the Federal Trade Commission Act (“FTC Act”), the California Privacy Act (“CCPA”), and the California Privacy Rights Act (“CPRA”) that became effective on January 1, 2023.
Our broad global footprint has evolved over time through our organic success as well as through contribution from strategic acquisitions. We offer a comprehensive selection of more than 300,000 branded products and Henry Schein corporate brand products through our distribution centers.
Our broad global footprint has evolved over time through our organic success as well as through contribution from strategic acquisitions. We stock a comprehensive selection of more than 300,000 branded products and Henry Schein corporate brand products through our main distribution centers.
Qualification for the MIPS Table of Contents 18 incentive payments requires the use of EHRs that are certified as having certain capabilities designated in evolving standards adopted by CMS and the Office of the National Coordinator for Health Information Technology of HHS (“ONC”).
Qualification for the MIPS incentive payments requires the use of EHRs that are certified as having certain capabilities designated in evolving standards adopted by CMS and the Office of the National Coordinator for Health Information Technology of HHS (“ONC”).
We have over 130 equipment sales and service centers worldwide that provide a variety of repair, installation and technical services for our health care customers. Our technicians provide installation and repair services for: dental handpieces, dental and medical small equipment, table-top sterilizers and large dental equipment. • Financial services.
We have 119 equipment sales and service centers worldwide that provide a variety of repair, installation and technical services for our health care customers. Our technicians provide installation and repair services for dental handpieces, dental and medical small equipment, table-top sterilizers and large dental equipment. • Financial services.
We have over 1 million customers worldwide and we intend to increase sales to our existing customer base and enhance our position as their primary supplier.
We have over one million customers worldwide and we intend to increase sales to our existing customer base and enhance our position as their primary supplier.
Leigh Benowitz has been our Senior Vice President and Chief Global Digital Transformation Officer since August 2022. Ms. Benowitz joined us in 2017 and has held several key positions including Vice President Digital & Customer Experience and Global eCommerce Platform Digital Transformation Officer. Prior to joining Henry Schein, Ms. Benowitz held various positions with increasing responsibilities at Citi.
Leigh Benowitz has been our Senior Vice President and Chief Global Digital Transformation Officer since August 2022. Ms. Benowitz joined us in 2017 and has held several key positions including Vice President Digital & Customer Experience and Global eCommerce Platform Digital Transformation Officer. Prior to joining Henry Schein, Ms. Benowitz held various positions of increasing responsibility at Citi.
We also provide staffing services, dental practice valuation and brokerage services. Commitment to superior customer service . We maintain a strong commitment to providing superior customer service. We frequently monitor our customer service through customer surveys, focus groups and statistical reports. Our customer service policy primarily focuses on: Table of Contents 7 • Exceptional order fulfillment .
We also provide staffing services, dental practice valuation and brokerage services. Commitment to superior customer service . We maintain a strong commitment to providing superior customer service. We frequently monitor our customer service through customer surveys, focus groups and statistical reports. Our customer service policy primarily focuses on: • Exceptional order fulfillment .
There is increasing demand for new technologies that allow dentists to increase Table of Contents 9 productivity, and this is being driven in the U.S. by lower insurance reimbursement rates. At the same time, there is an expected increase in dental insurance coverage.
There is increasing demand for new technologies that allow dentists to increase productivity, and this is being driven in the U.S. by lower insurance reimbursement rates. At the same time, there is an expected increase in dental insurance coverage.
The industry ranges from sole practitioners working out of relatively small offices to mid-sized and large group practices ranging in size from a few practitioners to several hundred practices owned or operated by dental support organizations (DSOs), medical group purchasing organizations (GPOs), hospital systems or integrated delivery networks (IDNs).
The industry ranges from sole practitioners working out of relatively small offices to mid-sized and large group practices ranging in size from a few practitioners to several hundred practices owned or operated by dental support organizations (“DSOs”), medical group purchasing organizations (“GPOs”), hospital systems or integrated delivery networks.
Table of Contents 8 Business Strategy Our mission is to provide innovative, integrated health care products and services; and to be trusted advisors and consultants to our customers - enabling them to deliver the best quality patient care and enhance their practice management efficiency and profitability.
Business Strategy Our mission is to provide innovative, integrated health care products and services; and to be trusted advisors and consultants to our customers - enabling them to deliver the best quality patient care and enhance their practice management efficiency and profitability.
Additionally, we seek to expand our dental full-service model and medical offerings in countries where opportunities exist. We do this through both direct sales and by partnering with local distribution and manufacturing companies.
Table of Contents 9 Additionally, we seek to expand our dental full-service model and medical offerings in countries where opportunities exist. We do this through both direct sales and by partnering with local distribution and manufacturing companies.
In addition, we offer dentists and physicians a broad suite of electronic health records, patient communication services including electronic marketing and web-site design, analytics and patient demand generation.
In addition, we offer dentists and physicians a broad suite of electronic health records, patient communication services including electronic marketing and website design, analytics and patient demand generation.
In 2022, our top 10 health care distribution suppliers and our single largest supplier accounted for approximately 28% and 4%, respectively, of our aggregate purchases. Efficient distribution . We distribute our products from our 29 strategically located distribution centers. We strive to maintain optimal inventory levels in order to satisfy customer demand for prompt delivery and complete order fulfillment.
In 2023, our top 10 health care distribution suppliers and our single largest supplier accounted for approximately 24% and 4%, respectively, of our aggregate purchases. Efficient distribution . We distribute our products from our 36 strategically located distribution centers. We strive to maintain optimal inventory levels in order to satisfy customer demand for prompt delivery and complete order fulfillment.
As of December 31, 2022, we had an active user base of approximately 110,000 practices and 380,000 consumers, including users of AxiUm, Dentally®, Dentrix Ascend®, Dental Vision®, Dentrix® Dental Systems, Dentrix® Enterprise, Easy Dental®, EndoVision®, Evolution® and EXACT®, Gesden®, Jarvis Analytics™, Julie® Software, Oasis, OMSVision®, Orisline®, PBS Endo®, PerioVision®, Power Practice® Px, PowerDent, and Viive® and subscriptions for Demandforce®, Sesame, and Lighthouse360® for dental practices and DentalPlans.com® for dental patients; and MicroMD® for physician practices. • Repair services.
As of December 30, 2023, we had an active user base of approximately 110,000 practices and 350,000 consumers, including users of AxiUm, Dentally®, Dentrix Ascend®, Dental Vision®, Dentrix® Dental Systems, Dentrix® Enterprise, Easy Dental®, EndoVision®, Evolution® and EXACT®, Gesden®, Jarvis Analytics™, Julie® Software, Oasis, OMSVision®, Orisline®, PBS Endo®, PerioVision®, Power Practice® Px, PowerDent, and Viive® and subscriptions for Demandforce®, Sesame, and Lighthouse360® for dental practices and DentalPlans.com® for dental patients. • Repair services.
Markets Served Demographic trends indicate that our markets are growing, as an aging U.S. population is increasingly using health care services. According to the U.S. Census Bureau’s International Database, between 2022 and 2032, the 45 and older population is expected to grow by approximately 11%. Between 2022 and 2042, this age group is expected to grow by approximately 21%.
Markets Served Demographic trends indicate that our markets are growing, as an aging U.S. population is increasingly using health care services. According to the U.S. Census Bureau’s International Database, between 2023 and 2033, the 45 and older population is expected to grow by approximately 11%. Between 2023 and 2043, this age group is expected to grow by approximately 21%.
The law’s track and trace requirements applicable to manufacturers, wholesalers, third-party logistics providers (e.g., trading partners), repackagers and dispensers (e.g., pharmacies) of prescription drugs took effect in January 2015, and continues to be implemented.
The law’s track and trace requirements applicable to manufacturers, wholesalers, third-party logistics providers (e.g., trading partners), repackagers and dispensers (e.g., Table of Contents 11 pharmacies) of prescription drugs took effect in January 2015, and, as stated, continues to be implemented.
Products and Services The following table sets forth the percentage of consolidated net sales by principal categories of products and services offered through our health care distribution and technology and value-added services reportable segments: December 31, December 25, December 26, 2022 2021 2020 Health care distribution: Dental products (1) 59.1 % 60.8 % 58.4 % Medical products (2) 35.2 34.0 35.8 Total health care distribution 94.3 94.8 94.2 Technology and value-added services: Software and related products and other value-added products (3) 5.7 5.2 5.1 Total excluding Corporate TSA net sales 100.0 100.0 99.3 Corporate TSA net sales (4) - - 0.7 Total 100.0 100.0 100.0 (1) Includes infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, dental implants, gypsum, acrylics, articulators, abrasives, dental chairs, delivery units and lights, X-ray supplies and equipment, PPE products, equipment repair and high-tech and digital restoration equipment.
Products and Services The following table sets forth the percentage of consolidated net sales by principal categories of products and services offered through our health care distribution and technology and value-added services reportable segments: December 30, December 31, December 25, 2023 2022 2021 Health care distribution: Dental products (1) 61.1 % 59.1 % 60.8 % Medical products (2) 32.4 35.2 34.0 Total health care distribution 93.5 94.3 94.8 Technology and value-added services: Software and related products and other value-added products (3) 6.5 5.7 5.2 Total 100.0 100.0 100.0 (1) Includes infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, dental implants, gypsum, acrylics, articulators, abrasives, dental chairs, delivery units and lights, X-ray supplies and equipment, PPE products, equipment repair and high-tech and digital restoration equipment.
Our infrastructure, including over 3.8 million square feet of space in 29 strategically located distribution and 19 manufacturing facilities around the world, enables us to historically provide rapid and accurate order fulfillment, better serve our customers and increase our operating efficiency.
Our infrastructure, including over 5.3 million square feet of space in 36 strategically located distribution and 22 manufacturing facilities around the world, enables us to historically provide rapid and accurate order fulfillment, better serve our customers and increase our operating efficiency.
We also sell products and services that health care providers, such as physicians and dentists, use to store and manage patient medical or dental records.
Table of Contents 18 We also sell products and services that health care providers, such as physicians and dentists, use to store and manage patient medical or dental records.
Table of Contents 19 See “ Item 1A. Risk Factors . ” for a discussion of additional burdens, risks and regulatory developments that may affect our results of operations and financial condition. Proprietary Rights We hold trademarks relating to the “Henry Schein ® ” name and logo, as well as certain other trademarks.
See “ Item 1A. Risk Factors . ” for a discussion of additional burdens, risks and regulatory developments that may affect our results of operations and financial condition. Proprietary Rights We hold trademarks relating to the “Henry Schein ® ” name and logo, as well as certain other trademarks. We intend to protect our trademarks to the fullest extent practicable.
At Henry Schein, our employees are our greatest asset. We employ more than 22,000 people, approximately 50% of our workforce is based in the United States and approximately 50% is based outside of the United States. Approximately 12% of our employees are subject to collective bargaining agreements. We believe that our relations with our employees are excellent.
At Henry Schein, our employees are our greatest asset. We employ more than 25,000 people, approximately 55% of our workforce is based in the United States and approximately 45% is based outside of the United States. Approximately 14% of our employees are subject to collective bargaining agreements. We believe that our relations with our employees are excellent.
This compares with expected total U.S. population growth rates of approximately 6% between 2022 and 2032 and approximately 12% between 2022 and 2042. In the dental industry, there is predicted to be a rise in oral health care expenditures as the 45-and-older segment of the population increases.
This compares with expected total U.S. population growth rates of approximately 6% between 2023 and 2033 and approximately 11% between 2023 and 2043. In the dental industry, there is predicted to be a rise in oral health care expenditures as the 45-and-older segment of the population increases.
Table of Contents 11 The Food and Drug Administration Amendments Act of 2007 and the Food and Drug Administration Safety and Innovation Act of 2012 amended the FDC Act to require the FDA to promulgate regulations to implement a unique device identification (“UDI”) system.
The Food and Drug Administration Amendments Act of 2007 and the Food and Drug Administration Safety and Innovation Act of 2012 amended the FDC Act to require the FDA to promulgate regulations to implement a unique device identification (“UDI”) system for medical devices.
We are headquartered in Melville, New York and employ more than 22,000 people. Approximately 50% of our workforce is based in the United States and approximately 50% is based outside of the United States. We have operations or affiliates in 32 countries and territories.
We are headquartered in Melville, New York and employ more than 25,000 people. Approximately 55% of our workforce is based in the United States and approximately 45% is based outside of the United States. We have operations or affiliates in 33 countries and territories.
Government Certain of our businesses involve the distribution, manufacturing, importation, exportation, marketing and sale of, and/or third party payment for, 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 business that distributes and sells medical equipment and supplies directly to Table of Contents 10 patients.
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.
Other Executive Management The following table sets forth certain information regarding other Executive Management: Name Age Position Andrea Albertini 52 Chief Executive Officer, International Distribution Group Leigh Benowitz 55 Senior Vice President and Chief Global Digital Transformation Officer Trinh Clark 49 Senior Vice President and Chief Global Customer Experience Officer James Mullins 58 Senior Vice President, Global Supply Chain Kelly Murphy 42 Senior Vice President and General Counsel Christopher Pendergast 60 Senior Vice President and Chief Technology Officer Michael Racioppi 68 Senior Vice President, Chief Merchandising Officer René Willi, Ph.D. 55 Chief Executive Officer, Global Oral Reconstruction Group Andrea Albertini has been Chief Executive Officer, International Distribution Group since 2023.
Other Executive Management The following table sets forth certain information regarding other Executive Management: Name Age Position Andrea Albertini 53 Chief Executive Officer, International Distribution Group Leigh Benowitz 56 Senior Vice President and Chief Global Digital Transformation Officer Trinh Clark 50 Senior Vice President and Chief Global Customer Experience Officer James Mullins 59 Senior Vice President, Global Supply Chain Kelly Murphy 43 Senior Vice President and General Counsel Christopher Pendergast 61 Senior Vice President and Chief Technology Officer René Willi, Ph.D. 56 Chief Executive Officer, Global Oral Reconstruction Group Andrea Albertini has been Chief Executive Officer, International Distribution Group since 2023.
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.
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.
Prior to Bristol-Myers Squibb, he served as North American Director of Corporate Audit at PepsiCo, and held several roles of increasing responsibility with PricewaterhouseCoopers LLP, where he advised clients located in the United States, Europe, and Latin America. Mr. South is a certified public accountant. Walter Siegel has been our Senior Vice President and Chief Legal Officer since 2021.
Prior to Bristol-Myers Squibb, he served as North American Director of Corporate Audit at PepsiCo, and held several roles of increasing responsibility with PricewaterhouseCoopers LLP, where he advised clients located in the United States, Europe, and Latin America. Mr. South is a certified public accountant.
The 21st Century Cures Act (the “Cures Act”), signed into law on December 13, 2016, among other things, amended the medical device definition to exclude certain software from FDA regulation, including clinical decision support software that meets certain criteria.
The 21st Century Cures Act (the “Cures Act”), signed into law on December 13, 2016, among other things, amended the medical device definition to exclude certain software from FDA regulation, including clinical decision support software that meets certain criteria. On September 27, 2019, the FDA issued a guidance document describing the impact the Cures Act on existing software policies.
Additionally, Virginia, Colorado, Connecticut and Utah recently passed comprehensive privacy legislation, and several privacy bills have been proposed both at the federal and state level that may result in additional legal requirements that impact our business. Laws and regulations relating to privacy and data protection are continually evolving and subject to potentially differing interpretations.
Several other states have also passed comprehensive privacy legislation, and several privacy bills have been proposed both at the federal and state level Table of Contents 17 that may result in additional legal requirements that impact our business. Laws and regulations relating to privacy and data protection are continually evolving and subject to potentially differing interpretations.
Bergman held the position of Executive Vice President from 1985 to 1989 and Vice President of Finance and Administration from 1980 to 1985. James P. Breslawski has been our Vice Chairman since 2018, President since 2005 and a director since 1992. Mr. Breslawski was the Chief Executive Officer of our Henry Schein Global Dental Group from 2005 to 2018. Mr.
Breslawski has been our Vice Chairman since 2018, President since 2005 and a director since 1992. Mr. Breslawski was the Chief Executive Officer of our Henry Schein Global Dental Group from 2005 to 2018. Mr. Breslawski held the position of Executive Vice President and President of U.S.
In addition, certain of our businesses must operate in compliance with a variety of burdensome and complex billing and record-keeping requirements in order to substantiate claims for payment under federal, state and commercial healthcare reimbursement programs.
In addition, certain of our businesses must operate in compliance with a variety of burdensome and complex billing and record-keeping requirements in order to substantiate claims for payment under federal, state and commercial healthcare reimbursement programs. Certain of our businesses also maintain contracts with governmental agencies and are subject to certain regulatory requirements specific to government contractors.
Throughout his career, he has received numerous industry honors, including the John F. Sasen Leadership Award from the Health Industry Distributors Association (HIDA), in recognition of his service to the industry, and induction into the Medical Distribution Hall of Fame by Repertoire Magazine. Michael S. Ettinger has been our Executive Vice President and Chief Operating Officer since July 2022.
Sasen Leadership Award from the Health Industry Distributors Association (HIDA), in recognition of his service to the industry, and induction into the Medical Distribution Hall of Fame by Repertoire Magazine. Michael S. Ettinger has been our Executive Vice President and Chief Operating Officer since 2022. Prior to his current position, Mr.
Breslawski held the position of Executive Vice President and President of U.S. Dental from 1990 to 2005, with primary responsibility for the North American Dental Group. Between 1980 and 1990, Mr. Breslawski held various positions with us, including Chief Financial Officer, Vice President of Finance and Administration and Corporate Controller.
Dental from 1990 to 2005, with primary responsibility for the North American Dental Group. Between 1980 and 1990, Mr. Breslawski held various positions with us, including Chief Financial Officer, Vice President of Finance and Administration and Corporate Controller. Brad Connett has been our Chief Executive Officer, North American Distribution Group since 2021. Previously Mr.
The Centers for Medicare and Medicaid Services (“CMS”) publishes information from these reports on a publicly available website, including amounts transferred and physician, dentist, teaching hospital, and non-physician practitioner identities.
CMS publishes information from these reports on a publicly available website, including amounts transferred and physician, dentist, teaching hospital, and non-physician practitioner identities.
In the most recent ACA litigation, the federal Fifth Circuit Court of Appeals found the individual mandate to be unconstitutional, and returned the case to the District Court for the Northern District of Texas for consideration of whether the remainder of the ACA could survive the excision of the individual mandate.
An ACA lawsuit decided by the federal Fifth Circuit Court of Appeals found the individual mandate to be Table of Contents 15 unconstitutional, and returned the case to the District Court for the Northern District of Texas for consideration of whether the remainder of the ACA could survive the excision of the individual mandate.
We continue to monitor developments and whether the proposed amendment and new deadlines will be approved by the European Parliament and Council. Nevertheless, EU MDR requirements regarding the distribution, marketing and sale including quality systems and post-market surveillance have to be observed by manufacturers, importers and distributors as of the application date (i.e., since May 26, 2021).
Nevertheless, EU MDR requirements regarding the distribution, marketing and sale including quality systems and post-market surveillance have to be observed by manufacturers, importers and distributors as of the application date (i.e., since May 26, 2021).
Information derived from talent planning efforts informs curriculum design and content to help focus on the right capabilities and help ensure alignment of career development efforts with the future needs of the organization. Our BOD is provided with periodic updates regarding our talent and succession planning efforts and participates in professional development activities with our TSMs.
Information derived from talent planning efforts informs curriculum design and content to help focus on the right capabilities and help ensure alignment of career development efforts with the future needs of the organization.
We offer over 300,000 branded products, through our distribution centers, to our customers. We also market and sell our own corporate brand portfolio of cost-effective, high-quality consumable merchandise products and manufacture certain dental specialty products in the areas of implants, orthodontics and endodontics. • Technology and other value-added products and services.
We also market and sell our own corporate brand portfolio of cost-effective, high- quality consumable merchandise products and manufacture certain dental specialty products in the areas of implants, orthodontics and endodontics. • Technology and other value-added products and services. We sell practice management, business analytics, patient engagement and patient demand creation software solutions to our dental customers.
Table of Contents 22 Information about our Executive Officers The following table sets forth certain information regarding our executive officers: Name Age Position Stanley M. Bergman 73 Chairman, Chief Executive Officer, Director James P.
Table of Contents 22 Information about our Executive Officers The following table sets forth certain information regarding our executive officers: Name Age Position Stanley M. Bergman 74 Chairman, Chief Executive Officer, Director James P. Breslawski 70 Vice Chairman, President, Director Brad Connett 65 Chief Executive Officer, North America Distribution Group Michael S.
Table of Contents 23 Mark E. Mlotek has been our Executive Vice President and Chief Strategic Officer since 2012. Mr. Mlotek was Senior Vice President and subsequently Executive Vice President of the Corporate Business Development Group between 2000 and 2012. Prior to that, Mr.
Mlotek has been our Executive Vice President and Chief Strategic Officer since 2012. Mr. Mlotek was Senior Vice President and subsequently Executive Vice President of the Corporate Business Development Group between 2000 and 2012. Prior to that, Mr. Mlotek was Vice President, General Counsel and Secretary from 1994 to 1999 and became a director in 1995.
In addition, Section 301 of the National Organ Transplant Act, and a number of comparable state laws, impose civil and/or criminal penalties for the transfer of certain human tissue (for example, human bone products) for valuable consideration, while generally permitting payments for the reasonable costs incurred in procuring, processing, storing and distributing that tissue.
Table of Contents 12 In addition, Section 301 of the National Organ Transplant Act, and a number of comparable state laws, impose civil and/or criminal penalties for the transfer of human organs, as defined in the regulations, for valuable consideration, while generally permitting payments for the reasonable costs incurred in their procurement, processing, storage and distribution.
South 61 Senior Vice President, Chief Financial Officer Walter Siegel 63 Senior Vice President and Chief Legal Officer Stanley M. Bergman has been our Chairman and Chief Executive Officer since 1989 and a director since 1982. Mr. Bergman held the position of President from 1989 to 2005. Mr.
Bergman has been our Chairman and Chief Executive Officer since 1989 and a director since 1982. Mr. Bergman held the position of President from 1989 to 2005. Mr. Bergman held the position of Executive Vice President from 1985 to 1989 and Vice President of Finance and Administration from 1980 to 1985. James P.
Finally, our value-added practice solutions include practice consultancy, education, integrated revenue cycle management and the facilitation of financial service offerings (on a non-recourse basis) to help dentists and physicians operate and expand their business operations. We believe our hands-on consultative approach to provide solutions to support practice decision-making is a key differentiator for our business.
Our value-added practice solutions include practice consultancy, education, integrated revenue cycle management and the facilitation of financial service offerings (on a non-recourse basis) to help dentists and physicians operate and expand their business operations, e-services, practice technology, network and hardware services, as well as consulting, and continuing education services for practitioners.
In addition, activities to control medical costs, including laws and regulations lowering reimbursement rates for pharmaceuticals, medical devices and/or medical treatments or services, are ongoing. Many of these laws and regulations are subject to change and their evolving implementation may impact our operations and our financial performance.
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.
Brad Connett has been our Chief Executive Officer, North American Distribution Group since 2021. Previously Mr. Connett was the President of our U.S. Medical Group from 2018 to 2021. Mr. Connett joined us in 1997 and has held a number of roles of increasing responsibility at the Company.
Connett was the President of our U.S. Medical Group from 2018 to 2021. Mr. Connett joined us in 1997 and has held a number of roles of increasing responsibility at the Company. Throughout his career, he has received numerous industry honors, including the John F.
Pendergast served in roles of increasing responsibility at Natural Organics, Inc., from 2006 to 2008, IdeaSphere Inc./Twinlab Corporation from 2000 to 2006, IBM Corporation from 1987 to 1994 and 1998 to 2000 and Rohm and Haas from 1994 to 1998. Michael Racioppi has been our Senior Vice President, Chief Merchandising Officer since 2008. Prior to holding his current position, Mr.
Pendergast served in roles of increasing responsibility at Natural Organics, Inc., from 2006 to 2008, IdeaSphere Inc./Twinlab Corporation from 2000 to 2006, IBM Corporation from 1987 to 1994 and 1998 to 2000 and Rohm and Haas from 1994 to 1998. René Willi, Ph.D. has been our Chief Executive Officer, Global Oral Reconstruction Group since 2021. Previously, Dr.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese uncertainties, include, among other things: • election results; • changes to laws and policies governing foreign trade (including, without limitation, the United States- Mexico-Canada Agreement (USMCA), the EU-UK Trade and Cooperation Agreement of December 2020 (that went into effect in 2021) and other international trade agreements); • greater restrictions on imports and exports; • supply chain disruptions; • changes in laws and policies governing health care or data privacy; • tariffs and sanctions; • changes to the relationship between the United States and China; • sovereign debt levels; • the inability of political institutions to effectively resolve actual or perceived economic, currency or budgetary crises or issues; • consumer confidence; • unemployment levels (and a corresponding increase in the uninsured and underinsured population); • changes in regulatory and tax regulations; • interest rate fluctuations, and strengthening of the dollar, which have and will continue to impact our results of operations; • availability of capital; • increases in fuel and energy costs; • the effect of inflation on our ability to procure products and our ability to increase prices over time and pass through to our customers price increases we may receive; • changes in tax rates and the availability of certain tax deductions; • increases in labor costs; • increases in health care costs; • our aspirations, goals and disclosures related to environmental, social and governance (ESG) matters; • the threat or outbreak of war, terrorism or public unrest (including, without limitation, the war in Ukraine and the possibility of a wider European or global conflict); and • changes in laws and policies governing manufacturing, development and investment in territories and countries where we do business.
Biggest changeThese uncertainties, include, among other things: • election results; • changes to laws and policies governing foreign trade, tariffs and sanctions, or greater restrictions on imports and exports; • supply chain disruptions; • changes in laws and policies governing health care or data privacy; • changes to the relationship between the United States and China; • sovereign debt levels; • the inability of political institutions to effectively resolve actual or perceived economic, currency or budgetary crises or issues; • consumer confidence; • unemployment levels (and a corresponding increase in the uninsured and underinsured population); • changes in regulatory and tax regulations; • interest rate fluctuations, and strengthening of the dollar, which have and will continue to impact our results of operations; • availability of capital; • increases in fuel and energy costs; • the effect of inflation on our ability to procure products and our ability to increase prices over time and pass through to our customers price increases we may receive; Table of Contents 31 • changes in tax rates and the availability of certain tax deductions; • increases in labor costs or health care costs; • the threat or outbreak of war, terrorism or public unrest (including, without limitation, the war in Ukraine, the Israel-Gaza war and other unrest and threats in the Middle East, and the possibility of a wider European or global conflict); and • changes in laws and policies governing manufacturing, development, and investment in territories and countries where we do business.
While we believe we are substantially in compliance with such certifications and with applicable fraud and abuse laws and regulations and that we have adequate compliance programs and controls in place to ensure substantial compliance, we cannot predict whether changes in applicable law, or interpretation of laws, or resulting changes in our, could have a material adverse effect on our business.
While we believe we are substantially in compliance with such certifications and with applicable fraud and abuse laws and regulations and that we have adequate compliance programs and controls in place to ensure substantial compliance, we cannot predict whether changes in applicable law, or interpretation of laws, or resulting changes in our compliance programs and controls, could have a material adverse effect on our business.
Certain additional state and federal laws, such as the federal Physician Self-Referral Law, commonly known as the “Stark Law,” prohibit physicians and other health professionals from referring a patient to an entity with which the physician (or family member) has a financial relationship, for the furnishing of certain designated health services (for example, durable medical equipment and medical supplies), unless an exception applies.
Certain additional state and federal laws, such as the federal Physician Self-Referral Law, commonly known as the “Stark Law,” prohibit physicians and other health care professionals from referring a patient to an entity with which the physician (or family member) has a financial relationship, for the furnishing of certain designated health services (for example, durable medical equipment and medical supplies), unless an exception applies.
Among other things, such laws, and the regulations promulgated thereunder: • regulate the introduction, manufacture, advertising, marketing and promotion, sampling, pricing and reimbursement, labeling, packaging, storage, handling, returning or recalling, reporting, and distribution of, and record keeping for drugs, HCT/P products and medical devices, including requirements with respect to unique medical device identifiers; • subject us to inspection by the FDA and DEA and similar state authorities; • regulate the storage, transportation and disposal of certain of our products that are considered hazardous materials; • require us to advertise and promote our drugs and devices in accordance with applicable FDA requirements; • require us to report average sales price (ASP) for drugs or biologicals payable under Medicare Part B to CMS with or without a Medicaid drug rebate agreement; • require registration with the FDA and the DEA and various state agencies; • require record keeping and documentation of transactions involving drug products; • require us to design and operate a system to identify and report suspicious orders of controlled substances to the DEA and certain states; • require us to manage returns of products that have been recalled and subject us to inspection of our recall procedures and activities; • impose on us reporting requirements if a pharmaceutical, HCT/P product or medical device causes serious illness, injury or death; • require manufacturers, wholesalers, repackagers and dispensers of prescription drugs to identify and trace certain prescription drugs as they are distributed; • require the licensing of prescription drug wholesalers and third-party logistics providers; and • mandate compliance with standards for the recordkeeping, storage and handling of prescription drugs, and associated reporting requirements.
Among other things, such laws, and the regulations promulgated thereunder: • regulate the introduction, manufacture, advertising, marketing and promotion, sampling, pricing and reimbursement, labeling, packaging, storage, handling, returning or recalling, reporting, and distribution of, and record keeping for drugs, HCT/P products and medical devices, including requirements with respect to unique medical device identifiers; • subject us to inspection by the FDA and DEA and similar state authorities; • regulate the storage, transportation and disposal of certain of our products that are considered hazardous materials; • require us to advertise and promote our drugs and devices in accordance with applicable FDA requirements; • require us to report average sales price (ASP) for drugs or biologicals payable under Medicare Part B to CMS with or without a Medicaid drug rebate agreement; • require registration with the FDA and the DEA and various state agencies; • require record keeping and documentation of transactions involving drug products; • require us to design and operate a system to identify and report suspicious orders of controlled substances to the DEA and certain states; • require us to manage returns of products that have been recalled and subject us to inspection of our recall procedures and activities; • impose on us reporting requirements if a pharmaceutical, HCT/P product or medical device causes serious illness, injury or death; • require manufacturers, wholesalers, re-packagers and dispensers of prescription drugs to identify and trace certain prescription drugs as they are distributed; • require the licensing of prescription drug wholesalers and third-party logistics providers; and • mandate compliance with standards for the recordkeeping, storage and handling of prescription drugs, and associated reporting requirements.
Other laws, referred to as “anti-kickback laws,” prohibit soliciting, offering, receiving or paying remuneration in order to induce the referral of a patient or ordering, purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing of, items or services that are paid for by federal, state and other health care payers and programs.
Other laws, referred to as “anti-kickback laws,” prohibit soliciting, offering, receiving or paying remuneration in order to induce or reward the referral of a patient or ordering, purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing of, items or services that are paid for by federal, state and other health care payers and programs.
Our business involves a risk of product liability, intellectual property infringement and other claims in the ordinary course of business, and from time to time we are named as a defendant in cases as a result of our distribution of products. Additionally, we own interests in companies that manufacture certain dental products.
Our business involves a risk of product liability, intellectual property infringement and other claims in the ordinary course of business, and from time to time we are named as a defendant in cases as a result of our distribution of products. Additionally, we own interests in companies that manufacture certain dental and medical products.
Non-compliance with government requirements could also adversely affect our ability to participate in important federal and state government health care programs, such as Medicare and Medicaid, and damage our reputation. The EU Medical Device Regulation may adversely affect our business.
Non-compliance with government requirements could also adversely affect our ability to participate in important federal and state government health care programs, such as Medicare and Medicaid, and damage our reputation. The EU Medical Device Regulation (“MDR”) may adversely affect our business.
Our businesses that involve physician and dental practice management products, and our specialty home medical supply business, include electronic information technology systems that store and process personal health, clinical, financial and other sensitive information of individuals.
Our businesses that involve physician and dental practice management products, and our specialty home medical supply businesses, include electronic information technology systems that store and process personal health, clinical, financial, and other sensitive information of individuals.
In addition, we develop products and provide services to our customers that are technology-based, and a cyberattack that bypasses the IS security systems of our products or services causing a security breach and/or perceived security vulnerabilities in our products or services could also cause significant loss of business and reputational harm, and actual or perceived vulnerabilities may lead to claims against us by our customers and/or governmental agencies.
In addition, we develop products and provide services to our customers that are technology-based, and a cyberattack that bypasses the IS supporting our products or services causing a security breach and/or perceived security vulnerabilities in our products or services could also cause significant loss of business and reputational harm, and actual or perceived vulnerabilities may lead to claims against us by our customers and/or governmental agencies.
Applicable federal, state, local and foreign laws and regulations also may require us to meet various standards relating to, among other things, licensure or registration, program eligibility, procurement, third-party reimbursement, sales and marketing practices, product integrity and supply tracking to product manufacturers, product labeling, personnel, privacy and security of health or other personal information, installation, maintenance and repair of equipment and the importation and exportation of products.
Table of Contents 33 Applicable federal, state, local, and foreign laws and regulations also may require us to meet various standards relating to, among other things, licensure or registration, program eligibility, procurement, third-party reimbursement, sales and marketing practices, product integrity, and supply tracking to product manufacturers, product labeling, personnel, privacy and security of health or other personal information, installation, maintenance and repair of equipment and the importation and exportation of products.
As a global healthcare solutions company, the COVID-19 pandemic and the governmental responses to it had, and may again have, a material adverse effect on our business, results of operations and cash flows and may result in a material adverse effect on our financial condition and liquidity.
For example, as a global healthcare solutions company, the COVID-19 pandemic and the governmental responses to it had, and may again have, a material adverse effect on our business, results of operations and cash flows and may result in a material adverse effect on our financial condition and liquidity.
The strengthening of the dollar, likewise, has impacted our revenues and costs, but neither inflation nor exchange rates have materially impacted our results of operations in fiscal year 2022. We generally sell products to customers with payment terms.
The strengthening of the dollar, likewise, has impacted our revenues and costs, but neither inflation nor exchange rates have materially impacted our results of operations in fiscal year 2023. We generally sell products to customers with payment terms.
We and our subsidiaries may be required to report information under certain state transparency laws that address circumstances not covered by the Sunshine Act, and some of these state laws, as well as the federal law, can be unclear. We are also subject to foreign regulations requiring transparency of certain interactions between suppliers and their customers.
We and our subsidiaries may be required to report information under certain state Table of Contents 32 transparency laws that address circumstances not covered by the Sunshine Act, and some of these state laws, as well as the federal law, can be unclear. We are also subject to foreign regulations requiring transparency of certain interactions between suppliers and their customers.
We may determine to enter into settlements, make payments, agree to consent decrees or enter into other arrangements to resolve such matters. Intentional or unintentional failure to comply with consent decrees could materially adversely affect our business.
We may determine to enter into settlements, make payments, agree to consent decrees or enter into other arrangements to resolve such matters. Intentional or unintentional failure to comply with settlement agreements or consent decrees could materially adversely affect our business.
With respect to the personal data it protects, the Table of Contents 36 GDPR requires, among other things, controller accountability, consents from Data Subjects or another acceptable legal basis to process the personal data, notification within 72 hours of a personal data breach where required, data integrity and security, and fairness and transparency regarding the storage, use or other processing of the personal data.
With respect to the personal data it protects, the GDPR requires, among other things, controller accountability, consents from Data Subjects or another acceptable legal basis to process the personal data, notification within 72 hours of a personal data breach where required, data integrity and security, and fairness and transparency regarding the storage, use or other processing of the personal data.
In particular, certain of our practice management products and services purchased by health care providers, such as physicians and dentists, are used to store and manage patient medical or dental records.
In addition, certain of our practice management products and services purchased by health care providers, such as physicians and dentists, are used to store and manage patient medical or dental records.
Table of Contents 28 The provisions of our certificate of incorporation and by-laws may make it more difficult for a third-party to acquire us, may discourage acquisition bids and may impact the price that certain investors might be willing to pay in the future for shares of our common stock.
The provisions of our certificate of incorporation and by-laws may make it more difficult for a third-party to acquire us, may discourage acquisition bids and may impact the price that certain investors might be willing to pay in the future for shares of our common stock.
The FDA and DEA, as well as CMS (including with respect to complex Medicare reimbursement requirements applicable to our specialty home medical supplies business), have recently increased their regulatory and enforcement activities and, in particular, the DEA has heightened enforcement activities due to the opioid crisis in the United States.
The FDA and DEA, as well as CMS (including with respect to complex Medicare reimbursement requirements applicable to our specialty home medical supplies business) and state Medicaid agencies, have recently increased their regulatory and enforcement activities and, in particular, the DEA has heightened enforcement activities due to the opioid crisis in the United States.
Additionally, factors outside of our control, such as customer preferences, consolidation of suppliers or supply issues, can have a material impact on our ability to achieve the growth goals established by our suppliers, which may reduce the amount of rebates or incentives we receive.
Additionally, factors outside of our control, such as customer preferences, consolidation of suppliers or supply issues, can have a material impact on our ability to achieve the growth goals established by our suppliers, Table of Contents 27 which may reduce the amount of rebates or incentives we receive.
Table of Contents 32 Our business is subject to additional requirements under various local, state, federal and international laws and regulations applicable to the sale and distribution of, and third-party payment for, pharmaceuticals and medical devices and HCT/P products.
Our business is subject to additional requirements under various local, state, federal and international laws and regulations applicable to the sale and distribution of, and third-party payment for, pharmaceuticals and medical devices and HCT/P products.
Among other things, the EU MDR: • strengthens the rules on placing devices on the market and reinforce surveillance once they are available; • establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • improves the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • sets up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; • strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market; and • identifies importers and distributors and medical device products through registration in a database (EUDAMED not due until 2024 and after as mentioned above).
Among other things, the EU MDR: • strengthens the rules on placing devices on the market and reinforces surveillance once they are available; • establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • improves the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • sets up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; • strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market; and • identifies importers and distributors and medical device products through registration in a database (EUDAMED not due, for the time being, until the end of 2027 at the earliest, as mentioned above).
Although we are seeking to obtain similar terms from manufacturers to access lower prices demanded by GPO and DSO contracts or other contracts, and to Table of Contents 30 develop relationships with existing and emerging provider networks, GPOs and DSOs, we cannot guarantee that such terms will be obtained or contracts executed.
Although we are seeking to obtain similar terms from manufacturers to access lower prices demanded by GPO and DSO contracts or other contracts, and to develop relationships with existing and emerging provider networks, GPOs and DSOs, we cannot guarantee that such terms will be obtained or contracts executed.
We rely on information systems (IS) in our business to obtain, rapidly process, analyze, manage and store customer, product, supplier and employee data to, among other things: • maintain and manage worldwide systems to facilitate the purchase and distribution of thousands of inventory items from numerous distribution centers; • receive, process and ship orders on a timely basis; • manage the accurate billing and collections for thousands of customers; • process payments to suppliers; and • provide products and services that maintain certain of our customers’ electronic medical or dental records (including protected health information of their patients).
We rely on information systems (“IS”) in our business to obtain, rapidly process, analyze, manage and store customer, product, supplier and employee data to, among other things: • maintain and manage worldwide systems to facilitate the purchase and distribution of thousands of inventory items from numerous distribution centers; • receive, process and ship orders on a timely basis; • manage the accurate billing and collections for our customers; • process payments to suppliers; • provide products and services that maintain certain of our customers’ electronic medical or dental records (including protected health information of their patients); and • maintain and manage global human resources, compensation and payroll systems.
Bribery Act, German anti-corruption laws Table of Contents 35 and other anti-bribery laws and laws pertaining to the accuracy of our internal books and records, which have been the focus of increasing enforcement activity globally in recent years.
Bribery Act, German anti-corruption laws and other anti-bribery laws and laws pertaining to the accuracy of our internal books and records, which have been the focus of increasing enforcement activity globally in recent years.
We also are subject to certain United States and foreign laws and regulations concerning the conduct of our foreign operations, including the U.S. Foreign Corrupt Practices Act, the U.K.
Table of Contents 35 We also are subject to certain United States and foreign laws and regulations concerning the conduct of our foreign operations, including the U.S. Foreign Corrupt Practices Act, the U.K.
Table of Contents 27 Our future growth (especially for our technology and value-added services segment) is dependent upon our ability to develop or acquire and maintain and protect new products and technologies that achieve market acceptance with acceptable margins.
Our future growth (especially for our technology and value-added services segment) is dependent upon our ability to develop or acquire and maintain and protect new products and technologies that achieve market acceptance with acceptable margins.
Under the GDPR, health data belong to the category of “sensitive data” and benefit from specific protections. Processing of such data is generally prohibited, except for specific exceptions.
Additionally, under the GDPR, health data belong to the category of “sensitive data” and benefit from specific protection. Processing of such data is generally prohibited, except for specific exceptions.
In addition, the European Parliament and the Council of the EU adopted the GDPR effective from May 25, 2018, which increased privacy rights for individuals (“Data Subjects”), including individuals who are our customers, suppliers and employees.
In addition, the European Parliament and the Council of the EU adopted the GDPR effective from May 25, 2018, which increased privacy rights for Data Subjects, including individuals who are our customers, suppliers and employees.
Table of Contents 31 Additionally, changes in government, government debt and/or budget crises may lead to reductions in government spending in certain countries, which could reduce overall health care spending, and/or higher income or corporate taxes, which could depress spending overall.
Additionally, changes in government, government debt and/or budget crises may lead to reductions in government spending in certain countries, which could reduce overall health care spending, and/or higher income or corporate taxes, which could depress spending overall.
If any of our EHR systems do not meet these standards, yet have been relied upon by health care providers to receive federal incentive payments, we may be Table of Contents 37 exposed to risk, such as under federal health care fraud and abuse laws, including the False Claims Act.
If any other EHR systems do not meet these standards, yet have been relied upon by health care providers to receive federal incentive payments, we may be exposed to risk, such as under federal health care fraud and abuse laws, including the False Claims Act.
Such transactions require significant management attention, may place significant demands on our operations, information systems, legal, regulatory, compliance-functions and financial resources, and there is risk that one or more may not succeed.
Such transactions require significant management attention, may place significant demands on our operations, information systems, legal, regulatory, compliance, financial, and human resources functions, and there Table of Contents 26 is risk that one or more may not succeed.
The modifications created by the EU MDR may have an impact on the way we design and manufacture products and the way we conduct our business in the European Economic Area.
The modifications created by the EU MDR may have an impact on the way we design and manufacture products and the way we conduct our business in the EEA.
At the state level, several states have adopted laws that require drug manufacturers to provide advance notice of certain price increases and to report information relating to those price increases, while others have taken legislative or administrative action to establish prescription drug affordability boards or multi-payer purchasing pools to reduce the cost of prescription drugs.
At the state level, several states have adopted laws, that may apply to some of our operations, that require drug manufacturers, including re-packagers or re-labelers, to provide advance notice of certain price increases and to report information relating to those price increases, while others have taken legislative or administrative action to establish prescription drug affordability boards or multi-payer purchasing pools to reduce the cost of prescription drugs.
Any outcome of future cases that change the ACA, in addition to future legislation, regulation, guidance and/or Executive Orders that do the same, could have a significant impact on the U.S. healthcare industry.
Any outcome of future court cases that change the ACA, in addition to future legislation, regulation, guidance and/or Executive Orders that do the same, could have a significant impact on the U.S. healthcare industry and the ability or willingness of individuals to engage with it.
Table of Contents 38 GENERAL RISKS Security risks generally associated with our information systems and our technology products and services could materially adversely affect our business, and our results of operations could be materially adversely affected if such products, services or systems (or third-party systems we rely on) are interrupted, damaged by unforeseen events, are subject to cyberattacks or fail for any extended period of time.
INDUSTRY RISKS Security risks generally associated with our information systems and our technology products and services have in the recent past adversely affected our business and results of operations, and could in the future materially adversely affect our business and our results of operations if such products, services, or systems (or third-party systems we rely on) are interrupted, damaged by unforeseen events, are subject to cyberattacks or fail for any extended period of time.
Certain of our businesses involve the manufacture and sale of EHR systems and other products linked to government supported incentive programs, where the EHR systems must be certified as having certain capabilities designated in evolving standards, such as those adopted by CMS and ONC. In order to maintain certification of our EHR products, we must satisfy the changing governmental standards.
Certain of our businesses involve the manufacture and sale of electronic health record (EHR) systems and other products linked to government supported incentive programs, where the EHR systems must be certified as having certain capabilities designated in evolving standards, such as those adopted by CMS and ONC.
The risks that our global operations are subject to include, among other things: • difficulties and costs relating to staffing and managing foreign operations; • difficulties and delays inherent in sourcing products, establishing channels of distribution and contract manufacturing in foreign markets; • fluctuations in the value of foreign currencies (including, without limitation, in connection with Brexit); • uncertainties relating to the EU-UK Trade and Cooperation Agreement of December 2020, which went into effect in 2021, including for example potential implementation issues, potential disputes over the interpretation of the provisions of the Agreement and possible changes to the Agreement restricting the free movement of goods between the U.K. and the European Union; • longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions; • repatriation of cash from our foreign operations to the United States; • regulatory requirements, including, without limitation, anti-bribery, anti-corruption and laws pertaining to the accuracy of our internal books and records; • litigation risks, new or unanticipated litigation developments and the status of litigation matters; • unexpected difficulties in importing or exporting our products and import/export tariffs, quotas, sanctions or penalties; • limitations on our ability under local laws to protect our intellectual property; • unexpected regulatory, legal, economic and political changes in foreign markets; • changes in tax regulations that influence purchases of capital equipment; • civil disturbances, geopolitical turmoil, including terrorism, war or political or military coups; • risks associated with climate change, including physical risks such as impacts from extreme weather events and other potential physical consequences, regulatory and technological requirements, market developments, stakeholder expectations and reputational risk; and • public health emergencies, including COVID-19.
The risks that our global operations are subject to include, among other things: • difficulties and costs relating to staffing and managing foreign operations; • difficulties and delays inherent in sourcing products, establishing channels of distribution and contract manufacturing in foreign markets; • fluctuations in the value of foreign currencies; • uncertainties relating to trade agreements and international trade relationships; • longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions; • repatriation of cash from our foreign operations to the United States; • regulatory requirements, including, without limitation, anti-bribery, anti-corruption and laws pertaining to the accuracy of our internal books and records; • litigation risks, new or unanticipated litigation developments and the status of litigation matters; • unexpected difficulties in importing or exporting our products and import/export tariffs, quotas, sanctions or penalties; • limitations on our ability under local laws to protect our intellectual property; • unexpected regulatory, legal, economic and political changes in foreign markets; • changes in tax regulations that influence purchases of capital equipment; • civil disturbances, geopolitical turmoil, including terrorism, war or political or military coups; and • risks associated with climate change, including physical risks such as impacts from extreme weather events and other potential physical consequences, regulatory and technological requirements, market developments, stakeholder expectations and reputational risk.
We also are subject to the requirements of the new Directive No. 2022/2464 on corporate sustainability reporting ("CSR Directive") adopted on December 14, 2022 and has to be implemented by EU members states by July 6, 2024, at the latest.
All EU Member States other than Poland and Estonia have now implemented the Directive. We also are subject to the requirements of the new Directive No. 2022/2464 on corporate sustainability reporting (“CSR Directive”) adopted on December 14, 2022 and which has to be implemented by EU members states by July 6, 2024, at the latest.
In the United States, in addition to other government efforts to control health care costs, there has been increased scrutiny on drug pricing and concurrent efforts to control or reduce drug costs by Congress, the President, executive branch agencies and various states.
In the United States, in addition to other government efforts to control health care costs, there has been increased scrutiny on drug pricing and concurrent efforts to control or reduce drug costs by Congress, the President, executive branch agencies and various states. We and our subsidiaries may be required to report drug pricing data under federal laws and regulations.
COMPANY RISKS Our business, results of operations, cash flows, financial condition and liquidity may be negatively impacted by the effects of disease outbreaks, epidemics, pandemics, or similar wide-spread public health concerns and other natural disasters .
Our business operations, results of operations, cash flows, financial condition and liquidity may be negatively impacted by the effects of disease outbreaks, epidemics, pandemics, similar wide-spread public health concerns and other natural or man-made disasters, such as terrorism, civil unrest, fire, and extreme weather (“disasters”).
We compete with numerous companies, including several major manufacturers and distributors. Some of our competitors have greater financial and other resources than we do, which could allow them to compete more successfully. Most of our products are available from several sources and our customers tend to have relationships with several distributors.
Some of our competitors have greater financial and other resources than we do, which could allow them to compete more successfully. Most of our products are available from several sources and our customers tend to have relationships with several distributors. Competitors could obtain exclusive rights to market particular products, which we would then be unable to market.
Industry consolidation among health care product distributors and manufacturers, price competition, product unavailability, whether due to our inability to gain access to products or Table of Contents 29 to interruptions in manufacturing supply, or the emergence of new competitors, also could increase competition.
Manufacturers also could increase their efforts to sell directly to end-users and thereby eliminate or reduce our role in distribution. Industry consolidation among health care product distributors and manufacturers, price competition, product unavailability, whether due to our inability to gain access to products or to interruptions in manufacturing supply, or the emergence of new competitors, also could increase competition.
We continue to monitor developments and whether the proposed amendment and new deadlines will be approved by the European Parliament and Council. Nevertheless, EU MDR requirements regarding the distribution, marketing and sale including quality systems and post-market surveillance have to be observed by manufacturers, importers and distributors as of the application date (i.e., May 26, 2021).
Nevertheless, EU MDR requirements regarding the distribution, marketing and sale including quality systems and post-market surveillance have to be observed by manufacturers, importers and distributors as of the application date (i.e., May 26, 2021).
The multi-tiered costing structure continues to expand as many large integrated health care providers and others with significant purchasing power, such as GPOs and DSOs, demand more favorable pricing terms.
Under this structure, certain institutions can obtain more favorable prices for health care products than we are able to obtain. The multi-tiered costing structure continues to expand as many large integrated health care providers and others with significant purchasing power, such as GPOs and DSOs, demand more favorable pricing terms.
The failure to comply with any of these laws or regulations, or new interpretations of existing laws and regulations, or the imposition of any additional laws and regulations, could materially adversely affect our business.
Our business is also subject to requirements of similar and other foreign governmental laws and regulations affecting our operations abroad. The failure to comply with any of these laws or regulations, or new interpretations of existing laws and regulations, or the imposition of any additional laws and regulations, could materially adversely affect our business.
We are directly or indirectly subject to numerous and evolving federal, state, local and foreign laws and regulations that protect the privacy and security of personal information, such as HIPAA, the Controlling the Assault of Non- Solicited Pornography and Marketing Act, the Telephone Consumer Protection Act of 1991, Section 5 of the Federal Trade Commission Act, the CCPA, and the CPRA that becomes effective on January 1, 2023.
We are directly or indirectly subject to numerous and evolving federal, state, local and foreign laws and regulations that protect the privacy and security of personal information, such as HIPAA, CAN-SPAM, TCPA, Section 5 of the FTC Act, the CCPA, and the CPRA that became effective on January 1, 2023.
Our future success is substantially dependent upon our senior management, and our revenues and profitability depend on our relationships with capable sales personnel as well as customers, suppliers and manufacturers of the products that we distribute. Our future success is substantially dependent upon the efforts and abilities of members of our existing senior management, particularly Stanley M.
Table of Contents 39 Our future success is substantially dependent upon our senior management, and our revenues and profitability depend on our relationships with capable sales representatives, service technicians, and other personnel who interact directly with our customers, as well as customers, suppliers and manufacturers of the products that we distribute.
The emergence of such potential competition and our inability to anticipate and effectively respond to changes on a timely basis could have a material adverse effect on our business. The repeal or judicial prohibition on implementation of the Affordable Care Act could materially adversely affect our business.
The emergence of such potential competition and our inability to anticipate and effectively respond to changes on a timely basis could have a material adverse effect on our business. The health care industry is experiencing changes due to political, economic and regulatory influences that could materially adversely affect our business.
The health care industry is experiencing changes due to political, economic and regulatory influences that could materially adversely affect our business. The health care industry is highly regulated and subject to changing political, economic and regulatory influences.
The health care industry is highly regulated and subject to changing political, economic, and regulatory influences.
Noncompliance can result in penalties of up to the greater of EUR 20 million, or 4% of global company revenues (sanction that may be public), and Data Subjects may seek damages. Member states may individually impose additional requirements and penalties regarding certain limited matters (for which the GDPR left some room of flexibility), such as employee personal data.
Noncompliance can result in penalties of up to the greater of EUR 20 million, or 4% of global company revenues (sanction that may be public), and Data Subjects may seek damages.
Any failure to develop sourcing relationships with a broad and deep supplier base could have an adverse effect on our business, financial condition or operating results. INDUSTRY RISKS The health care products distribution industry is highly competitive (including, without limitation, competition from third-party online commerce sites) and consolidating, and we may not be able to compete successfully.
The health care products distribution industry is highly competitive (including, without limitation, competition from third-party online commerce sites) and consolidating, and we may not be able to compete successfully. We compete with numerous companies, including several major manufacturers and distributors.
We obtain a significant volume of the products we distribute from third parties, with whom we generally do not have long-term contracts. While there is typically more than one source of supply, some key suppliers, in the aggregate, supply a significant portion of the products we sell.
COMPANY RISKS We are dependent upon third parties for the manufacture and supply of a significant volume of our products. We obtain a significant volume of the products we distribute from third parties, with whom we generally do not have long-term contracts.
In 2022, our top 10 health care distribution suppliers and our single largest supplier accounted for approximately 28% and 4%, respectively, of our aggregate purchases.
While there is typically more than one source of supply, some key suppliers, in the aggregate, supply a significant portion of the products we sell. In 2023, our top 10 health care distribution suppliers and our single largest supplier accounted for approximately 25% and 4%, respectively, of our aggregate purchases.
Bergman, Chairman and Chief Executive Officer. The loss of the services of Mr. Bergman could have a material adverse effect on our business. We have an employment agreement with Mr. Bergman. We do not currently have “key man” life insurance policies on any of our employees.
Bergman, the loss of the services of Mr. Bergman could have a material adverse effect on our business. We do not currently have “key man” life insurance policies on any of our employees. Competition for senior management is intense, burnout and turn-over rates are increasing workplace concerns, and we may not be successful in attracting and retaining key personnel.
Information security risks have generally increased in recent years, and a cyberattack that bypasses our IS security systems (including third-party systems we rely on) causing an IS security breach may lead to a material disruption of our IS business systems (including third-party systems we rely on) and/or the loss of business information, as well as claims against us by affected parties and/or governmental agencies, and involve fines and penalties, costs for remediation, and substantial defense and settlement expenses.
A cyberattack that bypasses or compromises our IS cybersecurity / or general computer controls or those of third parties with whom we engage may also lead to claims against us by affected parties and/or governmental agencies, and involve fines and penalties, as well as substantial defense and settlement expenses.
In the EU, the Directive No. 2019/1937 of October 23, 2019, on the protection of persons who report breaches of Union law, organizes the legal protection of whistleblowers. This Directive covers whistleblowers reporting breaches of certain EU laws, in particular as regards public health, the above-mentioned Directive No. 2001/83, Regulation No. 726/2004 or, as regards data protection, the GDPR.
This Directive covers whistleblowers reporting breaches of certain EU laws, in particular as regards public health, the above-mentioned Directive No. 2001/83, Regulation No. 726/2004 or, as regards data protection, the GDPR. The Directive protects a wide range of people and includes former employees. All private companies with 50 or more employees are required to create effective internal reporting channels.
Our business, results of operations, cash flows, financial condition and liquidity may be negatively impacted by the effects of disease outbreaks, epidemics, pandemics, similar wide-spread public health concerns and other natural disasters. The COVID-19 pandemic has had, and continues to have, an unprecedented impact on society, worldwide economic activity, and the health care sector (particularly, the dental market).
GENERAL RISKS Our business operations, results of operations, cash flows, financial condition and liquidity may be negatively Table of Contents 38 impacted by the effects of disease outbreaks, epidemics, pandemics, or similar wide-spread public health concerns and other natural or man-made disasters, such as terrorism, civil unrest, fire, and extreme weather .
Volatility in the financial markets may materially adversely affect the availability and cost of credit to us; The impact of the COVID-19 pandemic may also exacerbate other risks discussed below, any of which could have a material adverse effect on us. We are dependent upon third parties for the manufacture and supply of a significant volume of our products.
The impact from disasters may also exacerbate other risks discussed herein, any of which could have a material adverse effect on us. Our global operations are subject to inherent risks that could materially adversely affect our business. Our global operations are subject to risks that could materially adversely affect our business.
The health care products industry is subject to a multi-tiered costing structure, which can vary by manufacturer and/or product. Under this structure, certain institutions can obtain more favorable prices for health care products than we are able to obtain.
Table of Contents 30 Expansion of GPOs, DSOs or provider networks and the multi-tiered costing structure may place us at a competitive disadvantage. The health care products industry is subject to a multi-tiered costing structure, which can vary by manufacturer and/or product.
If we are unable to react effectively to these and other changes in the health care industry, our business could be materially adversely affected. Expansion of group purchasing organizations (“GPO”), dental support organizations (“DSO”) or provider networks and the multi-tiered costing structure may place us at a competitive disadvantage.
If we are unable to react effectively to these and other changes in the health care industry, our business could be materially adversely affected. The ACA greatly expanded health insurance coverage in the United States and has been the target of litigation and Congressional reform efforts since its adoption.
Competition for senior management is intense, burnout and turn-over rates are increasing workplace concerns during and after the COVID-19 pandemic, and we may not be successful in attracting and retaining key personnel. Additionally, our future revenues and profitability depend on our ability to maintain satisfactory relationships with qualified sales personnel as well as customers, suppliers and manufacturers.
Additionally, our future revenues and profitability depend on our ability to maintain satisfactory relationships with qualified sales representatives, service technicians, and other personnel who interact directly with our customers, as well as customers, suppliers, and manufacturers.
Removed
The COVID-19 pandemic and the responses of governments to it had, and may again have, a material adverse effect on our business, results of operations and cash flows and may result in a material adverse effect on our financial condition and liquidity.
Added
In addition, we are exposed to the risk that our competitors or our large customers may introduce their own private label, generic, or low-cost products that compete with our products at lower price points. Such products could capture significant market share or decrease market prices overall, eroding our sales and margins.
Removed
Even after the COVID-19 pandemic has begun to subside, we may again experience material adverse impacts to our business, results of operations and cash flows as a result of, among other things, its global economic impact, including any recession that may occur in the future, or a prolonged period of economic slowdown or the reluctance of patients to return for elective dental or medical care.
Added
Any failure to develop sourcing relationships with a broad and deep supplier base could have an adverse effect on our business, financial condition or operating results.
Removed
The impacts and potential impacts from the COVID-19 pandemic include, but are not limited to: • Significant volatility in supply, demand and selling prices for personal protective equipment (PPE), COVID-19 tests and other COVID-19 related products.
Added
In addition to health information in our customers’ electronic medical and dental records, certain of our IS stores other sensitive personal and financial information, such as healthcare and other information related to our employees, as well as other sensitive information such as credit card information from our third-party business partners, that is confidential, and in many cases subject to privacy laws.
Removed
Available supply, customer demand and selling prices for PPE, COVID-19 tests and other COVID-19 related products fluctuated in fiscal 2022 and we expect such volatility to continue for the duration of the COVID-19 pandemic. This has resulted in inventory reserves, fluctuating margins and increased revenue related to such products.
Added
Our IS are vulnerable to, among other things, natural disasters, power losses, computer viruses, telecommunication failures, cybersecurity threats and other criminal activity. Information security risks have significantly increased in recent years in part because of an overall increase in cyber incidents, their increased sophistication, and the involvement of organized crime, hackers, terrorists and foreign state agents.
Removed
The volatility in sales of COVID-19 test kits has moderated, albeit at a significantly lower level of sales compared with 2021, resulting in us recording an inventory obsolescence reserve of $17 million for COVID-19 test kits during the year ended December 31, 2022 and we expect further declines in sales volumes.
Added
The healthcare industry in particular has been targeted by threat actors seeking to undermine companies’ cybersecurity defensive measures. We have processes in place intended to ensure that our security measures keep pace with new and emerging risks. We regularly review, monitor and implement multiple layers of security through technology, processes and our people.
Removed
Our estimates for supply, demand and selling prices are inherently uncertain and if supply, demand, selling prices or other market dynamics significantly fluctuate in the future beyond our current assumptions, additional inventory reserves may be required, margins may be reduced and/or revenue may decline for such products, each which could materially adversely impact our business, results of operations and cash flows.
Added
We utilize security technologies designed to protect and maintain the integrity of our IS and data, and our Table of Contents 28 defenses are monitored and routinely tested internally and by external parties.
Removed
Additionally, governmental policies designed to reduce the transmission of COVID-19 and variants thereof could once again lead to the closure of dental offices or deferral of elective procedures and wellness exams by medical and dental patients.
Added
Despite these efforts, our facilities and systems and those of our third-party service providers have been, and may in the future be, vulnerable to privacy and security incidents, cybersecurity attacks and data breaches, acts of vandalism or theft, computer viruses and other malicious code, misplaced or lost data, programming and/or human errors, attacks or other acts undermining IS of third party business partners including our customers, or other similar events that could impact the security, reliability and availability of our systems.
Removed
Such previous closures and restrictions impacted our customers’ spending with us and had, and if reinstated may again have, a material adverse effect on our business, results of operations and cash flows.
Added
In addition, hardware, software or applications developed internally or procured from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security.
Removed
Although we believe that most practices currently are able to access adequate supply, we still may be unable to supply our customers with the specific brand and/or quantity of certain PPE products, COVID-19 tests and other COVID-19 related products they demand, which may lead to our customers seeking alternative sources of supply.
Added
As a practical matter, so long as we depend on IS to operate our business, and our business partners do the same, there can be no guaranty that such measures will successfully stop any one particular cybersecurity incident given the constantly evolving nature of the threat.
Removed
Healthcare professionals’ inability to obtain a sufficient quantity and/or brand of certain PPE, COVID-19 tests and other COVID-19 related products would adversely impact our business, results of operations and cash flows, and could materially adversely affect our financial condition and liquidity; Table of Contents 26 • Reduction in Peoples’ Ability and Willingness to be in Public.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties Within our health care distribution segment (for properties with more than 100,000 square feet) we lease and/or own approximately 5.8 million square feet of properties, consisting of distribution, office, showroom, manufacturing and sales space, in locations including the United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, United Arab Emirates and the United Kingdom.
Biggest changeProperties Within our health care distribution segment (for properties with more than 100,000 square feet) we lease and/or own approximately 5.7 million square feet of properties, consisting of distribution, office, showroom, manufacturing and sales space, in locations including the United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, Morocco, the Netherlands, New Zealand, Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, United Arab Emirates and the United Kingdom.
Lease expirations range from 2023 to 2041. We believe that our properties are in good condition, are well maintained and are suitable and adequate to carry on our business. We have additional operating capacity at certain distribution center facilities.
Lease expirations range from 2024 to 2041. We believe that our properties are in good condition, are well maintained and are suitable and adequate to carry on our business. We have additional operating capacity at certain distribution center facilities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of December 31, 2022, we had repurchased approximately $4.5 billion of common stock (87,180,669 shares) under these initiatives, with $115 million available for future common stock share repurchases. On February 8, 2023, our Board of Directors authorized the repurchase of up to an additional $400 million in shares of our common stock.
Biggest changeAs of December 30, 2023, we had repurchased approximately $4.7 billion of common stock (90,394,805 shares) under these initiatives, with $265 million available for future common stock share repurchases.
We intend to retain earnings to finance the expansion of our business and for general corporate purposes, including our share repurchase program. Any declaration of dividends will be at the discretion of our Board of Directors and will depend upon the earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends and other factors.
We intend to retain earnings to finance the expansion of our business and for general corporate purposes, including our share repurchase program. Any declaration of dividends will be at the discretion of our Board and will depend upon the earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends and other factors.
Dividend Policy We have not declared any cash or stock dividends on our common stock during fiscal years 2022 or 2021. We currently do not anticipate declaring any cash or stock dividends on our common stock in the foreseeable future.
Dividend Policy We have not declared any cash or stock dividends on our common stock during fiscal years 2023 or 2022. We currently do not anticipate declaring any cash or stock dividends on our common stock in the foreseeable future.
Dow Jones US Health Care Index NASDAQ Composite Index Stock Performance Graph The graph below compares the cumulative total stockholder return on $100 invested, assuming the reinvestment of all dividends, on December 30, 2017, the last trading day before the beginning of our 2018 fiscal year, through the end of our 2022 fiscal year with the cumulative total return on $100 invested for the same period in the Dow Jones U.S.
Dow Jones US Health Care Index NASDAQ Composite Index Stock Performance Graph The graph below compares the cumulative total stockholder return on $100 invested, assuming the reinvestment of all dividends, on December 29, 2018, the last trading day before the beginning of our 2019 fiscal year, through the end of our 2023 fiscal year with the cumulative total return on $100 invested for the same period in the Dow Jones U.S.
Table of Contents 42 $50 $100 $150 $200 $250 $300 December 2017 December 2018 December 2019 December 2020 December 2021 December 2022 Henry Schein, Inc.
Table of Contents 43 $50 $100 $150 $200 $250 $300 December 2018 December 2019 December 2020 December 2021 December 2022 December 2023 Henry Schein, Inc.
On February 7, 2023, there were approximately 88,000 holders of record of our common stock and the last reported sales price was $87.14. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions.
On February 20, 2024, there were approximately 107,000 holders of record of our common stock and the last reported sales price was $75.64. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions.
Subsequent additional increases totaling $4.5 billion, authorized by our Board of Directors, to the repurchase program provide for a total of $4.6 billion (including $400 million authorized on August 17, 2022) of shares of our common stock to be repurchased under this program.
Subsequent additional increases totaling $4.9 billion, authorized by our Board, 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.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN ASSUMES $100 INVESTED ON DECEMBER 30, 2017 ASSUMES DIVIDENDS REINVESTED December 30, December 29, December 28, December 26, December 25, December 31, 2017 2018 2019 2020 2021 2022 Henry Schein, Inc. $ 100.00 $ 111.49 $ 122.98 $ 121.58 $ 138.37 $ 147.48 Dow Jones U.S.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN ASSUMES $100 INVESTED ON DECEMBER 29, 2018 ASSUMES DIVIDENDS REINVESTED December 29, December 28, December 26, December 25, December 31, December 30, 2018 2019 2020 2021 2022 2023 Henry Schein, Inc. $ 100.00 $ 110.31 $ 109.05 $ 124.11 $ 132.28 $ 125.37 Dow Jones U.S.
The following table summarizes repurchases of our common stock under our stock repurchase program during the fiscal quarter ended December 31, 2022: 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) 9/25/2022 through 10/29/2022 - - - 5,703,693 10/30/2022 through 11/26/2022 1,249,083 $ 76.29 1,249,083 3,741,485 11/27/2022 through 12/31/2022 2,333,467 81.30 2,333,467 1,439,841 3,582,550 3,582,550 (1) All repurchases were executed in the open market under our existing publicly announced authorized program.
The following table summarizes repurchases of our common stock under our stock repurchase program during the fiscal quarter ended December 30, 2023: 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) 10/1/2023 through 11/4/2023 - - - 5,048,074 11/5/2023 through 12/2/2023 - - - 4,529,764 12/3/2023 through 12/30/2023 692,441 $ 72.32 692,441 3,499,205 692,441 692,441 (1) All repurchases were executed in the open market under our existing publicly announced authorized program.
Removed
Health Care Index 100.00 104.72 129.31 147.48 183.33 176.40 NASDAQ Stock Market Composite Index 100.00 96.41 133.30 191.21 235.27 158.65
Added
Health Care Index 100.00 123.48 140.83 175.06 168.44 171.61 NASDAQ Stock Market Composite Index 100.00 138.27 198.34 244.03 164.56 238.01

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+34 added−19 removed49 unchanged
Biggest changeRisk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to: risks associated with COVID-19 and any variants thereof, as well as other disease outbreaks, epidemics, pandemics, or similar wide-spread public health concerns and other natural disasters; 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; legal, regulatory, compliance, cybersecurity, financial and tax risks associated 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; effects of a highly competitive (including, without limitation, competition from third-party online commerce sites) and consolidating market; the repeal or judicial prohibition on implementation of the Affordable Care Act; 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, 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; 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; litigation risks; new or unanticipated litigation developments and the status of litigation matters; risks associated with customs policies or legislative import restrictions; cyberattacks or other privacy or data security breaches; risks associated with our global operations; our dependence on our senior management, employee hiring and retention, and our relationships with customers, suppliers and manufacturers; and disruptions in financial markets.
Biggest changeRisk 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.
We are currently unable in good faith to make a determination of an estimate of the amount or range of amounts expected to be incurred in connection with these activities, both with respect to each major type of cost associated therewith and with respect to the total cost, or an estimate of the amount or range of amounts that will result in future cash expenditures.
We are currently unable in good faith to make a determination of an estimate of the amount or range of amounts expected to be incurred in connection with these activities, both with respect to each major type of cost associated therewith and to the total cost, or an estimate of the amount or range of amounts that will result in future cash expenditures.
Critical Accounting Policies and Estimates Our accounting policies are more fully described in Note 1 – Basis of Presentation and Significant Accounting Policies of the consolidated financial statements. The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities.
Critical Accounting Estimates Our accounting policies are more fully described in Note 1 – Basis of Presentation and Significant Accounting Policies of the consolidated financial statements. The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities.
Accounting Standards Codification (“ASC”) 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.
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.
If the cash flows associated with the asset or asset group are less than the carrying value, we would perform a fair value assessment of the asset, or asset group. If the carrying amount is found to be greater than the fair value, we record an impairment loss for the excess of book value over the fair value.
If the cash flows associated with the asset or asset group are less than the carrying value, we perform a fair value assessment of the asset, or asset group. If the carrying amount is found to be greater than the fair value, we record an impairment loss for the excess of book value over the fair value.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular the risks discussed under the caption “Risk Factors” in Item 1A of this report and those that may be discussed in other documents we file with the Securities and Exchange Commission (SEC).
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular the risks discussed under the caption “Risk Factors” in Item 1A of this report and those that may be discussed in other documents we file with the Securities and Exchange Commission (“SEC”).
Table of Contents 45 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.
Table of Contents 46 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 90 years of experience distributing health care products.
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 91 years of experience distributing health care products.
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 unable to absorb price increases, thus positioning us to protect our gross profit.
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.
Census Bureau’s International Database, in 2022 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.
Census Bureau’s International Database, in 2023 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.
We finance our business primarily through cash generated from our operations, revolving credit facilities and debt placements. Please see Note 12 – Debt 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.
We finance our business primarily through cash generated from our operations, revolving credit facilities and debt placements. Please see Note 13 – Debt 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.
The amount recognized is measured as the largest amount of benefit that has a greater than 50% likely of being realized upon ultimate audit settlement. In the normal course of business, our tax returns are subject to examination by various taxing authorities.
The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate audit settlement. In the normal course of business, our tax returns are subject to examination by various taxing authorities.
The quantitative impairment model is a two-step test under which we first calculate the recoverability of the carrying value by comparing the undiscounted, probability-weighted value of the projected cash flows associated with the asset or asset group, including its estimated residual value, to the carrying amount.
The quantitative impairment model is a two-step test under which we first calculate the recoverability of the carrying value by comparing the undiscounted projected cash flows associated with the asset or asset group, including its estimated residual value, to the carrying amount.
Table of Contents 46 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.
Table of Contents 47 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.
The population aged 65 to 84 years is projected to increase by approximately 27% during the same period. As a result of these market dynamics, annual expenditures for health care services continue to increase in the United States.
The population aged 65 to 84 years is projected to increase by approximately 23% during the same period. As a result of these market dynamics, annual expenditures for health care services continue to increase in the United States.
Such examinations may result in future tax and interest assessments by these taxing authorities for uncertain tax positions taken in respect of certain tax matters. Please see Note 13 – Income Taxes for further discussion.
Such examinations may result in future tax and interest assessments by these taxing authorities for uncertain tax positions taken in respect of certain tax matters. Please see Note 14 – Income Taxes for further discussion.
Additionally, changes to tax laws and statutory tax rates can have an impact on our determination. Our intention is to evaluate the realizability of our deferred tax assets quarterly. ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in the financial statements in accordance with other provisions contained within this guidance.
Additionally, changes to tax laws and statutory tax rates can have an impact on our determination. Our intention is to evaluate the realizability of our deferred tax assets quarterly. ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in the financial statements in accordance with provisions contained within its guidance.
We elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. Accounting Standards Update For a discussion of accounting standards updates that have been adopted or will be adopted in the future, please see Note 1 – Basis of Presentation and Significant Accounting Policies included under Item 8. Table of Contents 58
We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. Accounting Standards Update For a discussion of accounting standards updates that have been adopted or will be adopted in the future, please see Note 1 – Basis of Presentation and Significant Accounting Policies included under Item 8.
Table of Contents 53 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.
Table of Contents 55 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.
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 Newsroom page of our website.
Table of Contents 45 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 Newsroom page of our website.
Goodwill Goodwill is subject to impairment analysis at least once annually as of the first day of our fourth quarter, or if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.
Goodwill Goodwill is subject to impairment analysis at least once annually as of the first day of our fourth quarter, or if an event occurs or circumstances change that would more likely than not reduce a reporting unit’s fair value below carrying value.
This topic prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by the taxing authorities.
This topic prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to Table of Contents 60 be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by the taxing authorities.
Health care spending is projected to reach approximately $6.2 trillion in 2028, or 19.7% of the nation’s projected gross domestic product. Government 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. See “ Item 1.
Health care spending is projected to reach approximately $7.2 trillion by 2031, or 19.6% of the nation’s projected gross domestic product. Government 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. See “ Item 1.
The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income (“GILTI”), states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred.
The Financial Accounting Standards Board Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low- Taxed Income (“GILTI”), states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred.
Based on our quantitative assessment for the year ended December 31, 2022, we recorded a $20 million impairment of goodwill relating to the disposal of an unprofitable business whose estimated fair value was lower than its carrying value.
Based on our quantitative assessment for the year ended December 31, 2022, we recorded a $20 million impairment of goodwill relating to the disposal of an unprofitable business for which estimated fair value was lower than carrying value.
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 2022 and 2032, the 45 and older population is expected to grow by approximately 11%.
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 2023 and 2033, the 45 and older population is expected to grow by approximately 11%.
Table of Contents 55 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 year to approximately 19 years, some of which may include options to extend the leases for up to 15 years.
Table of Contents 57 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 year to approximately 18 years, some of which may include options to extend the leases for up to 15 years.
Cost is determined by the first-in, first-out method for merchandise or actual cost for large equipment and high tech equipment. In estimating carrying value of inventory, we consider many factors including the condition and salability of the inventory by reviewing on-hand quantities, historical sales, forecasted sales and market and economic trends.
Cost is determined by the first-in, first-out method for merchandise and actual cost for large equipment and high tech equipment. In estimating carrying value of inventory, we consider many factors including the condition and Table of Contents 58 salability of the inventory by reviewing on-hand quantities, historical sales, forecasted sales and market and economic trends.
We believe that the following critical accounting estimates, which have been discussed with the Audit Committee of our Board of Directors, affect the significant estimates and judgments used in the preparation of our financial statements: Table of Contents 56 Inventories and Reserves Inventories consist primarily of finished goods and are valued at the lower of cost or net realizable value.
We believe that the following critical accounting estimates, which have been discussed with the Audit Committee of our Board, affect the significant estimates and judgments used in the preparation of our consolidated financial statements: Inventories and Reserves Inventories consist primarily of finished goods and are valued at the lower of cost or net realizable value.
The Centers for Medicare and Medicaid Services, or CMS, published “National Health Expenditure Data” indicating that total national health care spending reached approximately $4.3 trillion in 2021, or 18.3% of the nation’s gross domestic product, the benchmark measure for annual production of goods and services in the United States.
The Centers for Medicare and Medicaid Services, or 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.
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 pharmacology treatments, and expanded third-party insurance coverage, partially offset by the effects of unemployment on insurance coverage.
Table of Contents 48 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.
Income Tax When determining if the realization of the deferred tax asset is likely by assessing the need for a valuation allowance, estimates and judgement are required. We consider all available evidence, both positive and negative, including estimated future taxable earnings, ongoing planning strategies, future reversals of existing temporary differences and historical operating results.
Income Tax When determining if the realization of a deferred tax asset is likely to assess the need to record a valuation allowance, estimates and judgement are required. We consider all available evidence, both positive and negative, including estimated future taxable earnings, ongoing planning strategies, future reversals of existing temporary differences and historical operating results.
We also have invested in expanding our sales/marketing Table of Contents 47 infrastructure to include a focus on building relationships with decision makers who do not reside in the office- based practitioner setting.
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.
Table of Contents 48 Results of Operations Refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2021 compared to fiscal year 2020.
Table of Contents 49 Results of Operations Refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2022 compared to fiscal year 2021.
Such impairment analyses for goodwill require a comparison of the fair value to the carrying value of reporting units. We regard our reporting units to be our operating segments: global dental, global medical, and technology and value-added services. Goodwill is allocated to such reporting units, for the purposes of preparing our impairment analyses, based on a specific identification basis.
We regard our reporting units to be our operating segments: our global dental and medical businesses, and technology and value-added services. Goodwill is allocated to such reporting units, for the purposes of preparing our impairment analyses, based on a specific identification basis.
For example, sales of our corporate brand products achieve gross profit margins that are higher than average total gross profit margins of all products.
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.
Table of Contents 57 Definite-Lived Intangible Assets Annually, definite-lived intangible assets such as non-compete agreements, trademarks, trade names, customer relationships and lists, and product development are reviewed for impairment indicators. If any impairment indicators exist, quantitative testing is performed on the asset.
Table of Contents 59 Definite-Lived Intangible Assets Annually or if we identify an impairment indicator, definite-lived intangible assets such as non-compete agreements, trademarks, trade names, customer relationships and lists, and product development are reviewed for impairment indicators. If any impairment indicators exist, quantitative testing is performed on the asset.
We are headquartered in Melville, New York, employ approximately 22,000 people (of which approximately 10,700 are based outside of the United States) and have operations or affiliates in 32 countries and territories. Our broad global footprint has evolved over time through our organic success as well as through contribution from strategic acquisitions.
We are headquartered in Melville, New York, employ approximately 25,000 people (of which approximately 11,500 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.
During the years ended December 31, 2022 and December 25, 2021, we wrote off approximately $10 million and $8 million, respectively, of fully reserved accounts receivable against our trade receivable reserve. Our inventory turns from operations was 4.7 as of December 31, 2022 and 5.2 as of December 25, 2021.
During the years ended December 30, 2023 and December 31, 2022, we wrote off approximately $16 million and $10 million, respectively, of fully reserved accounts receivable against our trade receivable reserve. Our inventory turns from operations was 4.5 as of December 30, 2023 and 4.7 as of December 31, 2022.
During the three months ended December 31, 2022, in connection with our restructuring plan, we vacated one of the buildings at our corporate headquarters in Melville NY, which resulted in an accelerated amortization of right- of-use lease asset of $34 million.
During the year ended December 31, 2022, in connection with our restructuring plan, we vacated one of the buildings at our corporate headquarters in Melville, New York, which resulted in an accelerated amortization of a right-of-use lease asset of $34 million.
We also initiated the disposal of a non-profitable US business and recorded related costs of $49 million which primarily consisted of impairment of intangible assets and goodwill, inventory impairment, and severance and employee-related costs. These expenses are included in the $128 million of restructuring charges discussed above. The disposal is expected to be completed in the first quarter of 2023.
We also initiated the disposal of a non-profitable U.S. business and recorded related costs of $49 million, which primarily consisted of impairment of intangible assets and goodwill, inventory impairment, and severance and employee-related costs. These expenses are included in the $128 million of restructuring charges discussed above. The disposal was completed during the first quarter of 2023.
Unrecognized tax benefits As more fully disclosed in Note 13 – Income Taxes of “Notes to Consolidated Financial Statements,” we cannot reasonably estimate the timing of future cash flows related to the unrecognized tax benefits, including accrued interest, of $94 million as of December 31, 2022.
Unrecognized tax benefits As more fully disclosed in Note 14 – Income Taxes of “Notes to Consolidated Financial Statements,” we cannot reasonably estimate the timing of future cash flows related to our unrecognized tax benefits, including accrued interest, of $115 million as of December 30, 2023.
The rate is dependent on a number of underlying assumptions, including the risk-free rate, tax rate, equity risk premium, debt to equity ratio and pre-tax cost of debt. Long-term growth rates are applied to our estimation of future cash flows.
Our third-party valuation specialists provide inputs into our determination of the discount rate. The rate is dependent on a number of underlying assumptions, including the risk-free rate, tax rate, equity risk premium, debt to equity ratio and pre-tax cost of debt. Long-term growth rates are applied to our estimation of future cash flows.
While our primary go-to-market strategy is in our capacity as a distributor, we also market and sell under our own corporate brand portfolio of cost-effective, high-quality consumable merchandise products, and manufacture certain dental specialty products in the areas of implants, orthodontics and endodontics.
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.
The most significant inputs include estimation of detailed future cash flows based on budget expectations, and determination of comparable companies to develop a weighted average cost of capital for each reporting unit. On an annual basis, we prepare annual and medium-term financial projections.
The most significant inputs include estimation of detailed future cash flows based on budget expectations, and determination of comparable companies to develop a weighted average cost of capital for each reporting unit. On an annual basis, we prepare financial projections. These projections are based on input from our leadership and are presented annually to our Board.
Between 2022 and 2042, this age group is expected to grow by approximately 21%. This compares with expected total U.S. population growth rates of approximately 6% between 2022 and 2032 and approximately 12% between 2022 and 2042. According to the U.S.
Between 2023 and 2043, this age group is expected to grow by approximately 21%. This compares with expected total U.S. population growth rates of approximately 6% between 2023 and 2033 and approximately 11% between 2023 and 2043. According to the U.S.
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 increased primarily due to the increase in net sales discussed above.
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.
The following tables summarize the significant components of our operating results and cash flows from continuing operations: Years Ended December 31, December 25, December 26, 2022 2021 2020 Operating results: Net sales $ 12,647 $ 12,401 $ 10,119 Cost of sales 8,816 8,727 7,303 Gross profit 3,831 3,674 2,816 Operating expenses: Selling, general and administrative 2,771 2,634 2,086 Depreciation and amortization 182 180 163 Restructuring and integration costs 131 8 32 Operating income $ 747 $ 852 $ 535 Other expense, net $ (26) $ (21) $ (35) Gain on sale of equity investments, net of tax - 7 2 Net income from continuing operations 566 660 419 Income from discontinued operations, net of tax - - 1 Net income attributable to Henry Schein, Inc. 538 631 404 Years Ended December 31, December 25, December 26, 2022 2021 2020 Cash flows: Net cash provided by operating activities from continuing operations $ 602 $ 710 $ 594 Net cash used in investing activities from continuing operations (276) (677) (115) Net cash used in financing activities from continuing operations (315) (333) (182) Table of Contents 49 Plans of Restructuring and Integration Costs On August 1, 2022, we committed to a restructuring plan focused on funding the priorities of the strategic plan and streamlining operations and other initiatives to increase efficiency.
The following tables summarize the significant components of our operating results and cash flows: Years Ended December 30, December 31, December 25, 2023 2022 2021 Operating results: Net sales $ 12,339 $ 12,647 $ 12,401 Cost of sales 8,478 8,816 8,727 Gross profit 3,861 3,831 3,674 Operating expenses: Selling, general and administrative 2,956 2,771 2,634 Depreciation and amortization 210 182 180 Restructuring and integration costs 80 131 8 Operating income $ 615 $ 747 $ 852 Other expense, net $ (73) $ (26) $ (21) Gain on sale of equity investment - - 7 Net income 436 566 660 Net income attributable to Henry Schein, Inc. 416 538 631 Years Ended December 30, December 31, December 25, 2023 2022 2021 Cash flows: Net cash provided by operating activities $ 500 $ 602 $ 710 Net cash used in investing activities (1,135) (276) (677) Net cash provided by (used in) financing activities 701 (315) (333) Table of Contents 50 Plans of Restructuring and Integration Costs On August 1, 2022, we committed to a restructuring plan focused on funding the priorities of the BOLD+1 strategic plan, streamlining operations and other initiatives to increase efficiency.
As of December 31, 2022 and December 25, 2021, our balance for redeemable noncontrolling interests was $576 million and $613 million, respectively. Please see Note 18 – Redeemable Noncontrolling Interests for further information.
As of December 30, 2023 and December 31, 2022, our balance for redeemable noncontrolling interests was $864 million and $576 million, respectively. Please see Note 19 – Redeemable Noncontrolling Interests for further information.
Business Combinations The estimated fair value of acquired identifiable intangible assets (trademarks and trade names, customer relationships and lists, non-compete agreements and product development) is based on critical estimates, judgments and assumptions derived from: analysis of market conditions; discount rates; projected cash flows; customer retention rates; and estimated useful lives.
Business Combinations The estimated fair value of acquired identifiable intangible assets (i.e., customer relationships and lists, trademarks and trade names, product development and non-compete agreements) is based on critical judgments and assumptions derived from analysis of market conditions, including discount rates, projected revenue growth rates (which are based on historical trends and assessment of financial projections), estimated customer attrition and projected cash flows.
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.
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.
Net cash used in financing activities was $315 million for the year ended December 31, 2022, compared to net cash used in financing activities of $333 million for the prior year. The net change of $18 million was primarily due to increased net borrowings from debt, partially offset by increased repurchases of common stock.
Net cash provided by financing activities was $701 million for the year ended December 30, 2023, compared to net cash used in financing activities of $315 million for the prior year. The net change of $1,016 million was primarily due to increased net borrowings from debt to finance our investments, partially offset by decreased repurchases of common stock.
Table of Contents 54 The following table summarizes selected measures of liquidity and capital resources: December 31, December 25, 2022 2021 Cash and cash equivalents $ 117 $ 118 Working capital (1) 1,764 1,537 Debt: Bank credit lines $ 103 $ 51 Current maturities of long-term debt 6 11 Long-term debt 1,040 811 Total debt $ 1,149 $ 873 Leases: Current operating lease liabilities $ 73 $ 76 Non-current operating lease liabilities 275 268 (1) Includes $327 million and $138 million of certain accounts receivable which serve as security for U.S. trade accounts receivable securitization at December 31, 2022 and December 25, 2021, respectively.
Table of Contents 56 The following table summarizes selected measures of liquidity and capital resources: December 30, December 31, 2023 2022 Cash and cash equivalents $ 171 $ 117 Working capital (1) 1,805 1,764 Debt: Bank credit lines $ 264 $ 103 Current maturities of long-term debt 150 6 Long-term debt 1,937 1,040 Total debt $ 2,351 $ 1,149 Leases: Current operating lease liabilities $ 80 $ 73 Non-current operating lease liabilities 310 275 (1) Includes $284 million and $327 million of certain accounts receivable which serve as security for U.S. trade accounts receivable securitizations at December 30, 2023 and December 31, 2022, respectively.
As of December 31, 2022, our right-of-use assets related to operating leases were $284 million and our current and non-current operating lease liabilities were $73 million and $275 million, respectively. Please see Note 6 – Leases for further information.
As of December 30, 2023, our right-of-use assets related to operating leases were $325 million and our current and non-current operating lease liabilities were $80 million and $310 million, respectively. Please see Note 7 – Leases for further information.
The order in which these factors appear should not be construed to indicate their relative importance or priority. Table of Contents 44 We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control or predict.
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.
Gross Profit Gross profit and gross margin percentages by segment and in total were as follows: Gross Gross Increase 2022 Margin % 2021 Margin % $ % Health care distribution $ 3,357 28.2 % $ 3,239 27.6 % $ 118 3.6 % Technology and value-added services 474 65.5 435 67.2 39 9.0 Total $ 3,831 30.3 $ 3,674 29.6 $ 157 4.3 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.
Gross Profit Gross profit and gross margin percentages by segment and in total were as follows: Gross Gross Increase / (Decrease) 2023 Margin % 2022 Margin % $ % Health care distribution $ 3,312 28.7 % $ 3,357 28.2 % $ (45) (1.3) % Technology and value-added services 549 68.0 474 65.5 75 15.7 Total $ 3,861 31.3 $ 3,831 30.3 $ 30 0.8 Table of Contents 53 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.
Technology and value-added services gross profit increased as a result of an increase in gross profit from internally generated sales and gross profit from acquisitions, partially offset by a decrease in gross margin rates.
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, as well as an increase in gross margin rates primarily due to product mix and increases in productivity.
On February 8, 2023, our Board of Directors authorized the repurchase of up to an additional $400 million in shares of our common stock. Redeemable Noncontrolling Interests Some minority stockholders in certain of our consolidated subsidiaries have the right, at certain times, to require us to acquire their ownership interest in those entities.
Redeemable Noncontrolling Interests Some minority stockholders in certain of our consolidated subsidiaries have the right, at certain times, to require us to acquire their ownership interest in those entities.
Global Sales Global net sales for the year ended December 31, 2022 increased 2.0% based upon the components presented in the table above. We estimate that sales for the year ended December 31, 2022 of PPE products and COVID-19 test kits were approximately $1,245 million, an estimated decrease of 34.7% versus the prior year.
In addition, we estimate that sales of PPE products and COVID-19 test kits were approximately $713 million and $1,245 million for the years ended December 30, 2023 and December 31, 2022, respectively, representing an Table of Contents 52 estimated decrease of $532 million or 42.7% versus the prior year, with the $532 million net decrease year-over- year representing 4.2% of global net sales for the year ended December 30, 2023.
Interest expense increased primarily due to increased borrowings and increased interest rates. Income Taxes For the year ended December 31, 2022, our effective tax rate was 23.5% compared to 23.8% for the prior year period.
Interest expense increased primarily due to increased borrowings and increased interest rates. Income Taxes Our effective tax rate was 22.1% for the year ended December 30, 2023 compared to 23.5% for the prior year. In each year, the difference between our effective and federal statutory tax rates primarily relates to state and foreign income taxes and interest expense.
Excluding PPE products and COVID-19 test kits, the estimated increase in internally generated local currency sales was 6.7%. Dental Dental net sales for the year ended December 31, 2022 decreased 0.9% based upon the components presented in the table above. Our sales growth in local currency for dental merchandise decreased primarily due to a decrease in PPE product sales.
Global net sales for the year ended December 30, 2023 decreased 2.4%. The components of our sales growth are presented in the table above. The 4.4% decrease in our internally generated local currency sales was primarily attributable to a decrease in sales of PPE products and COVID-19 test kits.
During the years ended December 31, 2022, December 25, 2021 and December 26, 2020, we recorded total impairment charges on intangible assets of approximately $49 million ($34 million related to impairment of customer lists and relationships attributable to customer attrition rates being higher than expected in certain businesses and $15 million due to the disposal of an unprofitable business), $1 million and $20 million, respectively.
During the year ended December 31, 2022 we recorded $49 million of impairment charges related to businesses in our health care distribution segment, the components of which were a $15 million charge related to the disposal of an unprofitable business and a $34 million charge related to customer lists and relationships attributable to customer attrition rates being higher than expected in certain other health care distribution businesses.
Within our health care distribution segment, gross profit margins may vary from one period to the next. Changes in the mix of products sold as well as changes in our customer mix have been the most significant drivers affecting our gross profit margin.
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.
These projections are based on input from our leadership and are presented annually to our Board of Directors. Influences on this year's forecasted financial information and the fair value model include: the impact of planned strategic initiatives, the continued integration of recent acquisitions and overall market conditions.
Influences on this year's forecasted financial information and the fair value model include: the impact of planned strategic initiatives, the continued integration of recent acquisitions and overall market conditions. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors.
Contractual obligations The following table summarizes our contractual obligations related to fixed and variable rate long-term debt and finance lease obligations, including interest (assuming a weighted average interest rate of 4.3%), as well as inventory purchase commitments and operating lease obligations as of December 31, 2022: Payments due by period 2 - 3 years 4 - 5 years > 5 years Total Contractual obligations: Long-term debt, including interest $ 41 $ 508 $ 134 $ 538 $ 1,221 Inventory purchase commitments 5 8 8 - 21 Operating lease obligations 82 122 79 98 381 Transition tax obligations 19 23 - - 42 Finance lease obligations, including interest 5 4 1 1 11 Total $ 152 $ 665 $ 222 $ 637 $ 1,676 For information relating to our debt please see Note 12 – Debt .
Contractual obligations The following table summarizes our contractual obligations related to fixed and variable rate long-term debt and finance lease obligations, including interest (assuming a weighted average interest rate of 4.8%), as well as inventory purchase commitments and operating lease obligations as of December 30, 2023: Payments due by period 2 - 3 years 4 - 5 years > 5 years Total Contractual obligations: Long-term debt, including interest $ 243 $ 1,097 $ 346 $ 783 $ 2,469 Inventory purchase commitments 5 8 4 - 17 Operating lease obligations 92 141 86 119 438 Transition tax obligations 11 24 - - 35 Finance lease obligations, including interest 4 3 2 - 9 Total $ 355 $ 1,273 $ 438 $ 902 $ 2,968 For information relating to our debt please see Note 13 – Debt .
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.
We undertake no duty and have no obligation to update forward-looking statements except as required by law.
Net cash provided by operating activities was $602 million for the year ended December 31, 2022, compared to net cash from continuing operations provided by operating activities of $710 million for the prior year.
Net cash provided by operating activities was $500 million for the year ended December 30, 2023, compared to net cash provided by operating activities of $602 million for the prior year. The net change of $102 million was primarily attributable to lower cash net income.
During the year ended December 31, 2022, we recorded restructuring charges of $128 million primarily related to severance and employee-related costs, accelerated amortization of right-of-use lease assets, impairment of other long-lived assets and lease exit costs.
During the year ended December 30, 2023, we also incurred $11 million of direct costs, primarily professional fees, for the remediation of the cybersecurity incident. The restructuring and integration costs are primarily related to severance and employee-related costs, accelerated amortization of right-of-use lease assets and fixed assets, and other lease exit costs.
Net cash used in investing activities was $276 million for the year ended December 31, 2022, compared to $677 million for the prior year. The net change of $401 million was primarily attributable to decreased payments for equity investments and business acquisitions.
Net cash used in investing activities was $1,135 million for the year ended December 30, 2023, compared to net cash used in investing activities of $276 million for the prior year.
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 41.9 days as of December 31, 2022 from 41.8 days as of December 25, 2021.
Our cash and cash equivalents consist of bank balances and investments in money market funds representing overnight investments with a high degree of liquidity.
For the year ended December 31, 2022 impairment charges were recorded within our health care distribution segment. For the years ended December 25, 2021 and December 26, 2020, impairment charges were recorded within our health care distribution and technology and value-added services segments.
During the year ended December 25, 2021, we recorded a $1 million impairment charge related ratably to a business within our health care distribution segment and a business within our technology and value-added services segment.
Stock Repurchases On March 8, 2021, we announced the reinstatement of our share repurchase program, which had been temporarily suspended in April of 2020. From March 3, 2003 through December 31, 2022, we repurchased $4.5 billion, or 87,180,669 shares, under our common stock repurchase programs, with $115 million available as of December 31, 2022 for future common stock share repurchases.
Stock Repurchases On February 8, 2023, our Board authorized the repurchase of up to an additional $400 million in shares of our common stock. From March 3, 2003 through December 30, 2023, we repurchased $4.7 billion, or 90,394,805 shares, under our common stock repurchase programs, with $265 million available as of December 30, 2023 for future common stock share repurchases.
We estimate that global dental sales for the year ended December 31, 2022 of PPE products were approximately $447 million, an estimated decrease of 32.5% versus the prior year. Excluding PPE products, the estimated increase in internally generated local currency dental sales was 3.8%.
We estimate that sales of PPE products were approximately $338 million and $448 million for the years ended December 30, 2023 and December 31, 2022, respectively, representing an estimated decrease of $110 million or 24.5% versus the prior year, with the $110 million net decrease year-over-year representing 1.5% of dental net sales for the year ended December 30, 2023.
Other Expense, Net Other expense, net was as follows: Variance 2022 2021 $ % Interest income $ 17 $ 7 $ 10 158.9 % Interest expense (44) (28) (16) (59.1) Other, net 1 - 1 n/a Other expense, net $ (26) $ (21) $ (5) (26.0) Interest income increased primarily due to increased interest rates.
Table of Contents 54 Other Expense, Net Other expense, net was as follows: Variance 2023 2022 $ % Interest income $ 17 $ 8 $ 9 125.1 % Interest expense (87) (35) (52) (148.7) Other, net (3) 1 (4) n/a Other expense, net $ (73) $ (26) $ (47) (172.9) % Interest income increased primarily due to increased interest rates.
Please see Note 4 – Business Acquisitions and Divestitures for further discussion of our acquisitions.
These assumptions are forward-looking and could be affected by future economic and market conditions. Please see Note 5 – Business Acquisitions and Divestitures for further discussion of our acquisitions.
Te chnology and value-added services Technology and value-added services net sales for the year ended December 31, 2022 increased 11.8% based upon the components presented in the table above.
Technology and value-added services Technology and value-added services net sales for the year ended December 30, 2023 increased 11.4%. The components of our sales growth are presented in the table above. During the year ended December 30, 2023, the trend for sales of practice management software growth remains strong as we continued to increase the number of cloud-based users.
Table of Contents 50 2022 Compared to 2021 Net Sales Net sales were as follows: % of % of Increase / (Decrease) 2022 Total 2021 Total $ % Health care distribution (1) Dental $ 7,473 59.1 % $ 7,544 60.8 % $ (71) (0.9) % Medical 4,451 35.2 4,210 34.0 241 5.7 Total health care distribution 11,924 94.3 11,754 94.8 170 1.4 Technology and value-added services (2) 723 5.7 647 5.2 76 11.8 Total $ 12,647 100.0 $ 12,401 100.0 $ 246 2.0 The components of our sales growth were as follows: Local Currency Growth Total Sales Growth Foreign Exchange Impact Total Local Currency Growth Acquisition Growth Extra Week Impact Local Internal Growth Health care distribution (1) Dental Merchandise (2.6) % (3.5) % 0.9 % 1.3 % 1.0 % (1.4) % Dental Equipment 4.7 (4.6) 9.3 0.6 2.3 6.4 Total Dental (0.9) (3.7) 2.8 1.2 1.2 0.4 Medical 5.7 (0.3) 6.0 2.4 1.5 2.1 Total Health Care Distribution 1.4 (2.5) 3.9 1.6 1.3 1.0 Technology and value-added services (2) 11.8 (1.5) 13.3 5.4 0.8 7.1 Total 2.0 (2.4) 4.4 1.8 1.3 1.3 Note: Percentages for Net Sales; Gross Profit; Selling, General and Administrative; 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: % of % of Increase / (Decrease) 2023 Total 2022 Total $ % Health care distribution (1) Dental $ 7,539 61.1 % $ 7,473 59.1 % $ 66 0.9 % Medical 3,994 32.4 4,451 35.2 (457) (10.3) Total health care distribution 11,533 93.5 11,924 94.3 (391) (3.3) Technology and value-added services (2) 806 6.5 723 5.7 83 11.4 Total $ 12,339 100.0 $ 12,647 100.0 $ (308) (2.4) The components of our sales growth were as follows: Local Currency Growth/(Decline) Total Local Currency Growth/(Decline) Foreign Exchange Impact Total Sales Growth/(Decline) Local Internal Growth Acquisition Growth Extra Week Impact Health care distribution (1) Dental Merchandise (1.6) % 4.2 % (1.0) % 1.6 % 0.1 % 1.7 % Dental Equipment (0.9) 1.1 (2.1) (1.9) - (1.9) Total Dental (1.4) 3.4 (1.3) 0.7 0.2 0.9 Medical (11.2) 2.2 (1.3) (10.3) - (10.3) Total Health Care Distribution (5.1) 2.9 (1.2) (3.4) 0.1 (3.3) Technology and value-added services (2) 7.2 5.0 (0.8) 11.4 - 11.4 Total (4.4) 3.1 (1.2) (2.5) 0.1 (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 and vitamins.
Globally, we estimate our medical business recorded sales of approximately $798 million of sales of PPE products and COVID-19 test kits for the year ended December 31, 2022, an estimated decrease of approximately 27.4% compared to the prior year. Excluding PPE products and COVID-19 test kits, the estimated increase in internally generated local currency medical sales was 2.1%.
We estimate that sales of PPE products and COVID-19 test kits were approximately $375 million and $797 million for the years ended December 30, 2023 and December 31, 2022, respectively, representing an estimated decrease of $422 million or 52.9% versus the prior year, with the $422 million net decrease year-over-year representing 10.6% of medical net sales for the year ended December 30, 2023.
Table of Contents 52 Operating Expenses Operating expenses (consisting of selling, general and administrative expenses; depreciation and amortization, restructuring and integration costs) by segment and in total were as follows: % of % of Respective Respective Increase 2022 Net Sales 2021 Net Sales $ % Health care distribution $ 2,738 23.0 % $ 2,512 21.4 % $ 226 9.0 % Technology and value-added services 346 47.8 310 48.0 36 11.4 Total $ 3,084 24.4 $ 2,822 22.8 $ 262 9.3 The net increase in operating expenses is attributable to the following: Change in Restructuring and Integration Costs Increase in Operating Costs Acquisitions Total Health care distribution $ 121 $ 39 $ 66 $ 226 Technology and value-added services 2 20 14 36 Total $ 123 $ 59 $ 80 $ 262 The increase in restructuring and integration costs is attributable to our disposal of an unprofitable business, acceleration of amortization of right-of-use lease assets related to the exit from one of the properties at our corporate headquarters, severance costs, and other costs relating to the exit of some facilities.
Operating Expenses Operating expenses (consisting of selling, general and administrative expenses; depreciation and amortization, restructuring and integration costs) by segment and in total were as follows: % of % of Respective Respective Increase 2023 Net Sales 2022 Net Sales $ % Health care distribution $ 2,842 24.6 % $ 2,738 23.0 % $ 104 3.8 % Technology and value-added services 404 50.1 346 47.8 58 16.8 Total $ 3,246 26.3 % $ 3,084 24.4 % $ 162 5.3 % The net increase in operating expenses is attributable to the following: Operating Costs Restructuring and Integration Costs Acquisitions Total Health care distribution $ 92 $ (55) $ 67 $ 104 Technology and value-added services 5 4 49 58 Total $ 97 $ (51) $ 116 $ 162 The increase in operating costs during the year ended December 30, 2023 includes increases in payroll and payroll related costs, travel, convention and consulting expenses in both of our reportable segments and increased acquisition expenses in our healthcare distribution segment.
During the year ended December 25, 2021, patient traffic levels returned to levels approaching pre-pandemic levels. Demand for dental products and certain medical products throughout 2021 was driven by sales of PPE and COVID-19 test kits. During the year ended December 31, 2022 we experienced a decrease in the sales volume of PPE and COVID-19 test kits.
Recent Developments During the years ended December 30, 2023 and December 31, 2022 we continued to experience a decrease in the sales of PPE and COVID-19 test kits as compared to the comparable prior-year periods, primarily due to lower market pricing of PPE and lower market demand for COVID-19 test kits.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt December 31, 2022 the outstanding balance was $330 million under this securitization facility. During the year ended December 31, 2022, the average outstanding balance under this securitization facility was approximately $166 million.
Biggest changeAs of December 30, 2023, the commercial paper rate was 5.67% plus 0.75%, for a combined rate of 6.42%, and the outstanding balance under this securitization facility was $210 million. During the year ended December 30, 2023, the average outstanding balance was approximately $238 million.
Short-Term Investments We limit our credit risk with respect to our cash equivalents, short-term investments and derivative instruments, by monitoring the credit worthiness of the financial institutions who are the counterparties to such financial instruments. As a risk management policy, we limit the amount of credit exposure by diversifying and utilizing numerous investment grade counterparties.
Credit Risk Monitoring We limit our credit risk with respect to our cash equivalents, short-term investments and derivative instruments, by monitoring the credit worthiness of the financial institutions who are the counterparties to such financial instruments. As a risk management policy, we limit the amount of credit exposure by diversifying and utilizing numerous investment grade counterparties.
For the years ended December 31, 2022 ended and December 25, 2021, we have recorded a gain/(loss), within the selling, general and administrative line item in our consolidated statement of income, of approximately $(17) million and $12 million, respectively, net of transaction costs, related to this undesignated swap.
For the years ended December 30, 2023, December 31, 2022, and December 25, 2021 we have recorded a gain/(loss), within selling, general and administrative expense, of approximately $10 million, $(17) million and $12 million, respectively, net of transaction costs, related to this undesignated swap.
Total Return Swaps On March 20, 2020, we entered into a total return swap for the purpose of economically hedging our unfunded non- qualified supplemental retirement plan (“SERP”) and our deferred compensation plan (“DCP”). This swap will offset changes in our SERP and DCP liabilities. At the inception, the notional value of the investments in these plans was $43 million.
Total Return Swaps On March 20, 2020, we entered into a total return swap for the purpose of economically hedging our unfunded non- qualified supplemental retirement plan and our deferred compensation plan obligation. Table of Contents 61 At inception, the notional value of the investments in these plans was $43 million.
This swap is expected to be renewed on an annual basis after its current expiration date of March 31, 2023, and is expected to result in a neutral impact to our results of operations.
This swap is expected to be renewed on an annual basis and is expected to result in a neutral impact to our results of operations.
Table of Contents 59 Variable Interest Rate Debt As of December 31, 2022, we had variable interest rate exposure for certain of our revolving credit facilities and our U.S. trade accounts receivable securitization.
Interest Rate Risk As of December 30, 2023, we had variable interest rate exposure for certain of our revolving credit facilities and our U.S. trade accounts receivable securitization.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks as well as changes in foreign currency exchange rates as measured against the U.S. dollar and each other, and changes to the credit markets. We attempt to minimize these risks by primarily using foreign currency forward contracts and by maintaining counter-party credit limits.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks, interest rate risks as well as changes in foreign currency exchange rates as measured against the U.S. dollar and each other, and changes to the credit markets.
As of December 31, 2022, we had forward foreign currency exchange agreements, which expire through November 16, 2023, with a fair value of $23 million as determined by quoted market prices.
As of December 30, 2023, our forward foreign currency exchange agreements, which expire through November 3, 2028, had a fair value of $(8) million as determined by quoted market prices.
Our U.S trade accounts receivable securitization, which we entered into on April 17, 2013 and expires on December 15, 2025, has an interest rate that is based upon the asset-backed commercial paper rate. As of December 31, 2022, the commercial paper rate was 4.58% plus 0.75%, for a combined rate of 5.33%.
Our U.S. trade accounts receivable securitization, which we entered into on April 17, 2013 and expires on December 15, 2025, has a variable interest rate that is based upon the asset-backed commercial paper rate.
These hedging activities provide only limited protection against currency exchange and credit risks. Factors that could influence the effectiveness of our hedging programs include currency markets and availability of hedging instruments and liquidity of the credit markets.
We attempt to minimize these risks primarily by using foreign currency forward contracts and by maintaining counter-party credit limits. These hedging activities provide only limited protection against currency exchange and credit risks. Factors that could influence the effectiveness of our hedging programs include currency markets and availability of hedging instruments and liquidity of the credit markets.
Based upon our average outstanding balance for this securitization facility, for each hypothetical increase of 25 basis points, our interest expense thereunder would have increased by $0.4 million. Table of Contents 60
Based upon our average outstanding balances, for each hypothetical increase of 25 basis points, our interest expense thereunder would have increased by $1 million.
We do not enter into such contracts for speculative purposes and we manage our credit risks by diversifying our investments, maintaining a strong balance sheet and having multiple sources of capital.
We do not enter into such contracts for speculative purposes and we manage our credit risks by diversifying our investments, maintaining a strong balance sheet and having multiple sources of capital. Foreign Currency The value of certain foreign currencies compared to the U.S. dollar may affect our financial results.
Included in the forward foreign currency exchange agreements, Henry Schein, Inc. had net investment designated EUR/USD forward contracts with notional values of approximately €200 million, with a reported fair value of these contracts of $20 million.
Included in the forward foreign currency exchange agreements, Henry Schein, Inc. had net investment designated EUR/USD forward contracts with notional values of approximately €300 million and reported fair values of $(7) million. A 5% increase in the value of the Euro to the USD from December 30, 2023 would decrease the fair value of these forward contracts by $18 million.
We do not hedge the translation of foreign currency profits into U.S. dollars, as we regard this as an accounting exposure, not an economic exposure. A hypothetical 5% change in the average value of the U.S. dollar in 2022 compared to foreign currencies would have changed our 2022 reported Net income attributable to Henry Schein, Inc. by approximately $7 million.
A hypothetical 5% change in the average value of the U.S. dollar in 2023 compared to foreign currencies would have changed our 2023 reported Net income attributable to Henry Schein, Inc. by approximately $5 million.
At December 31, 2022, the notional value of the investments in these plans was $78 million. At December 31, 2022, the financing blended rate for this swap was based on LIBOR of 4.03% plus 0.55%, for a combined rate of 4.58%.
At December 30, 2023, the notional value of the investments in these plans was $96 million. At December 30, 2023, the financing blended rate for this swap was based on the Secured Overnight Financing Rate (“SOFR”) of 5.33% plus 0.52%, for a combined rate of 5.85%.
Our revolving credit facility which we entered into on August 20, 2021 and expires on August 20, 2026, has an interest rate that is based on the U.S. Dollar LIBOR plus a spread based on our leverage ratio at the end of each financial reporting quarter.
Our revolving credit facility which we entered into on July 11, 2023 and expires on July 11, 2028, has a variable interest rate that is based on the SOFR plus a spread based on our leverage ratio at the end of each financial reporting quarter. As of December 30, 2023, there was $200 million outstanding under this revolving credit facility.
Removed
Foreign Currency Agreements The value of certain foreign currencies as compared to the U.S. dollar and the value of certain underlying functional currencies of the Company, including its foreign subsidiaries, may affect our financial results.
Added
We do not hedge the translation of foreign currency profits into U.S. dollars, as we consider foreign currency translation to be an accounting exposure, not an economic exposure.
Removed
A 5% increase in the value of the Euro to the USD from December 31, 2022, with all other variables held constant, would have had an unfavorable effect on the fair value of these forward contracts by decreasing the value of these instruments by $10 million.
Added
During the year ended December 30, 2023, the average outstanding balance was approximately $61 million. Based upon our average outstanding balances, for each hypothetical increase of 25 basis points, our interest expense thereunder would have increased by $0.2 million.
Removed
As of December 31, 2022, there was $0 million outstanding under this revolving credit facility. During the year ended December 31, 2022, we had no borrowings under this revolving credit facility.
Added
On July 11, 2023, we entered into interest rate swap agreements to hedge the cash flow of our variable rate $750 million floating debt term loan facility, with three years maturity, effectively changing the floating rate portion of our obligation to a fixed rate.
Added
Under the terms of the interest rate swap agreements, we receive variable interest payments based on the one-month Term SOFR rate and pay interest at a fixed rate. As of December 30, 2023, the notional value of the interest rate swap agreements was $741 million. This term loan matures on July 11, 2026.
Added
At December 30, 2023, the interest on this Term Credit Agreement was 5.36% plus 1.35% for a combined rate of 6.71%. However, we have a hedge in place (see Note 12 – Derivatives and Hedging Activities for additional information) that ultimately creates an effective fixed rate of 5.79%. Table of Contents 62

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