UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
☒
For the
or
☐
For the transition period from ____________ to ____________
Commission File Number:
HENRY SCHEIN, INC.
(Exact name of registrant as specified in its charter)
Delaware | 11-3136595 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
135 Duryea Road
Melville,
(Address of principal executive offices)
11747
(Zip Code)
(631) 843-5500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $.01 per share | HSIC | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities
Yes ☒ | No ☐ |
Indicate bycheck markwhether the registranthas submittedelectronically every InteractiveData Filerequired tobe submitted
Yes ☒ | No ☐ |
Indicate bycheck markwhether theregistrant isa largeaccelerated filer,an acceleratedfiler,a non-acceleratedfiler,a smaller
Large accelerated filer ☒ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company ☐ | |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition periodfor
Indicate by check mark whether the registrant is a shell company (as definedin Rule 12b-2 of the Exchange Act).
Yes ☐ | No ☒ |
As of AprilJuly 26, 2021
HENRY SCHEIN, INC.
INDEX
I.FINANCIAL INFORMATION
PARTI. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
|
|
|
| June 26, |
| December 26, | |||
|
|
|
|
| 2021 |
| 2020 | ||
|
|
|
|
| (unaudited) |
|
|
| |
ASSETS |
|
|
|
|
|
| |||
Current assets: |
|
|
|
|
|
| |||
| Cash and cash equivalents |
| $ | 167,228 |
| $ | 421,185 | ||
| Accounts receivable, net of reserves of $81,113 and $88,030 |
|
| 1,356,881 |
|
| 1,424,787 | ||
| Inventories, net |
|
| 1,688,210 |
|
| 1,512,499 | ||
| Prepaid expenses and other |
|
| 529,929 |
|
| 432,944 | ||
|
|
| Total current assets |
|
| 3,742,248 |
|
| 3,791,415 |
Property and equipment, net |
|
| 358,224 |
|
| 342,004 | |||
Operating lease right-of-use assets |
|
| 301,440 |
|
| 288,847 | |||
Goodwill |
|
| 2,722,974 |
|
| 2,504,392 | |||
Other intangibles, net |
|
| 604,515 |
|
| 479,429 | |||
Investments and other |
|
| 394,665 |
|
| 366,445 | |||
|
|
| Total assets |
| $ | 8,124,066 |
| $ | 7,772,532 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
| |||
Current liabilities: |
|
|
|
|
|
| |||
| Accounts payable |
| $ | 903,859 |
| $ | 1,005,655 | ||
| Bank credit lines |
|
| 72,105 |
|
| 73,366 | ||
| Current maturities of long-term debt |
|
| 9,839 |
|
| 109,836 | ||
| Operating lease liabilities |
|
| 75,008 |
|
| 64,716 | ||
| Accrued expenses: |
|
|
|
|
|
| ||
|
| Payroll and related |
|
| 313,892 |
|
| 295,329 | |
|
| Taxes |
|
| 156,176 |
|
| 138,671 | |
|
| Other |
|
| 562,762 |
|
| 595,529 | |
|
|
| Total current liabilities |
|
| 2,093,641 |
|
| 2,283,102 |
Long-term debt |
|
| 706,487 |
|
| 515,773 | |||
Deferred income taxes |
|
| 46,528 |
|
| 30,065 | |||
Operating lease liabilities |
|
| 243,232 |
|
| 238,727 | |||
Other liabilities |
|
| 423,416 |
|
| 392,781 | |||
|
|
| Total liabilities |
|
| 3,513,304 |
|
| 3,460,448 |
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests |
|
| 604,081 |
|
| 327,699 | |||
Commitments and contingencies |
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
| |||
| Preferred stock, $0.01 par value, 1,000,000 shares authorized, |
|
|
|
|
|
| ||
|
| NaN outstanding |
|
| 0 |
|
| 0 | |
| Common stock, $0.01 par value, 480,000,000 shares authorized, |
|
|
|
|
|
| ||
|
| 139,780,841 outstanding on June 26, 2021 and |
|
|
|
|
|
| |
|
| 142,462,571 outstanding on December 26, 2020 |
|
| 1,398 |
|
| 1,425 | |
| Additional paid-in capital |
|
| 0 |
|
| 0 | ||
| Retained earnings |
|
| 3,465,647 |
|
| 3,454,831 | ||
| Accumulated other comprehensive loss |
|
| (106,779) |
|
| (108,084) | ||
|
| Total Henry Schein, Inc. stockholders' equity |
|
| 3,360,266 |
|
| 3,348,172 | |
| Noncontrolling interests |
|
| 646,415 |
|
| 636,213 | ||
|
|
| Total stockholders' equity |
|
| 4,006,681 |
|
| 3,984,385 |
|
| Total liabilities, redeemable noncontrolling interests and stockholders' equity |
| $ | 8,124,066 |
| $ | 7,772,532 | |
See accompanying notes.
3
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTSOF INCOME
(in thousands, except per share data)
(unaudited)
|
|
|
| Three Months Ended |
| Six Months Ended | |||||||||
|
|
|
|
| June 26, |
| June 27, |
| June 26, |
| June 27, | ||||
|
|
|
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 2,967,223 |
| $ | 1,684,399 |
| $ | 5,892,184 |
| $ | 4,113,270 | |||
Cost of sales |
|
| 2,077,472 |
|
| 1,230,133 |
|
| 4,111,582 |
|
| 2,912,990 | |||
|
| Gross profit |
|
| 889,751 |
|
| 454,266 |
|
| 1,780,602 |
|
| 1,200,280 | |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| |||
| Selling, general and administrative |
|
| 678,801 |
|
| 445,765 |
|
| 1,336,793 |
|
| 1,013,127 | ||
| Restructuring costs |
|
| 604 |
|
| 15,934 |
|
| 3,535 |
|
| 20,721 | ||
|
| Operating income (loss) |
|
| 210,346 |
|
| (7,433) |
|
| 440,274 |
|
| 166,432 | |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
| |||
| Interest income |
|
| 1,357 |
|
| 1,997 |
|
| 3,340 |
|
| 5,187 | ||
| Interest expense |
|
| (6,376) |
|
| (10,486) |
|
| (12,861) |
|
| (18,298) | ||
| Other, net |
|
| 354 |
|
| (291) |
|
| 663 |
|
| (511) | ||
|
| Income (loss) from continuing operations before taxes, |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| equity in earnings of affiliates and noncontrolling interests |
|
| 205,681 |
|
| (16,213) |
|
| 431,416 |
|
| 152,810 |
Income tax benefit (expense) |
|
| (48,027) |
|
| 950 |
|
| (104,712) |
|
| (36,960) | |||
Equity in earnings of affiliates |
|
| 6,323 |
|
| 1,411 |
|
| 12,201 |
|
| 4,145 | |||
Net income (loss) from continuing operations |
|
| 163,977 |
|
| (13,852) |
|
| 338,905 |
|
| 119,995 | |||
Income from discontinued operations, net of tax |
|
| 0 |
|
| 585 |
|
| 0 |
|
| 303 | |||
Net income (loss) |
|
| 163,977 |
|
| (13,267) |
|
| 338,905 |
|
| 120,298 | |||
| Less: Net (income) loss attributable to noncontrolling interests |
|
| (8,261) |
|
| 2,470 |
|
| (17,192) |
|
| (834) | ||
| Plus: Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
| from discontinued operations |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
Net income (loss) attributable to Henry Schein, Inc. |
| $ | 155,716 |
| $ | (10,797) |
| $ | 321,713 |
| $ | 119,464 | |||
Amounts attributable to Henry Schein Inc.: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Continuing operations |
| $ | 155,716 |
| $ | (11,382) |
| $ | 321,713 |
| $ | 119,161 | |||
Discontinued operations |
|
| 0 |
|
| 585 |
|
| 0 |
|
| 303 | |||
Net income (loss) attributable to Henry Schein, Inc. |
| $ | 155,716 |
| $ | (10,797) |
| $ | 321,713 |
| $ | 119,464 | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share from continuing operations attributable to Henry Schein, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
| $ | 1.11 |
| $ | (0.08) |
| $ | 2.28 |
| $ | 0.84 | ||
| Diluted |
| $ | 1.10 |
| $ | (0.08) |
| $ | 2.26 |
| $ | 0.84 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share from discontinued operations attributable to Henry Schein, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
| $ | 0 |
| $ | 0 |
| $ | 0 |
| $ | 0 | ||
| Diluted |
| $ | 0 |
| $ | 0 |
| $ | 0 |
| $ | 0 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to Henry Schein, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
| $ | 1.11 |
| $ | (0.08) |
| $ | 2.28 |
| $ | 0.84 | ||
| Diluted |
| $ | 1.10 |
| $ | (0.08) |
| $ | 2.26 |
| $ | 0.84 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
| |||
| Basic |
|
| 140,358 |
|
| 142,350 |
|
| 141,316 |
|
| 142,654 | ||
| Diluted |
|
| 141,657 |
|
| 142,350 |
|
| 142,538 |
|
| 142,654 | ||
See accompanying notes.
4
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
|
|
|
| Three Months Ended |
| Six Months Ended | |||||||||
|
|
|
|
| June 26, |
| June 27, |
| June 26, |
| June 27, | ||||
|
|
|
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 163,977 |
| $ | (13,267) |
| $ | 338,905 |
| $ | 120,298 | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
| |||
| Foreign currency translation gain (loss) |
|
| 38,138 |
|
| 34,408 |
|
| (343) |
|
| (54,904) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized gain (loss) from foreign currency hedging |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| activities |
|
| (1,751) |
|
| (4,989) |
|
| 1,610 |
|
| 10,154 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized investment gain (loss) |
|
| 3 |
|
| 2 |
|
| (3) |
|
| (7) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Pension adjustment gain (loss) |
|
| 35 |
|
| (225) |
|
| 842 |
|
| 499 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax |
|
| 36,425 |
|
| 29,196 |
|
| 2,106 |
|
| (44,258) | |||
Comprehensive income |
|
| 200,402 |
|
| 15,929 |
|
| 341,011 |
|
| 76,040 | |||
| Comprehensive income attributable to noncontrolling |
|
|
|
|
|
|
|
|
|
|
|
| ||
| interests: |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Net (income) loss |
|
| (8,261) |
|
| 2,470 |
|
| (17,192) |
|
| (834) | |
|
| Foreign currency translation (gain) loss |
|
| (6,899) |
|
| (799) |
|
| (801) |
|
| 12,380 | |
|
|
| Comprehensive (income) loss attributable to noncontrolling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| interests |
|
| (15,160) |
|
| 1,671 |
|
| (17,993) |
|
| 11,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Henry Schein, Inc. |
| $ | 185,242 |
| $ | 17,600 |
| $ | 323,018 |
| $ | 87,586 | |||
See accompanying notes.
5
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTOF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share and per share data)
(unaudited)
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||
|
| Common Stock | Additional |
|
| Other |
|
| Total | |||||
|
| $.01 Par Value | Paid-in | Retained | Comprehensive | Noncontrolling | Stockholders' | |||||||
|
| Shares |
| Amount | Capital | Earnings | Income / (Loss) | Interests | Equity | |||||
Balance, March 27, 2021 | 141,310,113 | $ | 1,413 | $ | 0 | $ | 3,493,060 | $ | (136,305) | $ | 638,562 | $ | 3,996,730 | |
Net income (excluding $6,980 attributable to Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| noncontrolling interests from continuing operations) | - |
| 0 |
| 0 |
| 155,716 |
| 0 |
| 1,281 |
| 156,997 |
Foreign currency translation gain (excluding gain of $6,743 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| attributable to Redeemable noncontrolling interests) | - |
| 0 |
| 0 |
| 0 |
| 31,239 |
| 156 |
| 31,395 |
Unrealized loss from foreign currency hedging activities, |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| net of tax benefit of $687 | - |
| 0 |
| 0 |
| 0 |
| (1,751) |
| 0 |
| (1,751) |
Unrealized investment gain, net of tax of $1 | - |
| 0 |
| 0 |
| 0 |
| 3 |
| 0 |
| 3 | |
Pension adjustment gain, net of tax benefit of $38 | - |
| 0 |
| 0 |
| 0 |
| 35 |
| 0 |
| 35 | |
Dividends paid | - |
| 0 |
| 0 |
| 0 |
| 0 |
| (77) |
| (77) | |
Change in fair value of redeemable securities | - |
| 0 |
| (87,188) |
| 0 |
| 0 |
| 0 |
| (87,188) | |
Initial noncontrolling interests and adjustments related to |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| business acquisitions | - |
| 0 |
| 0 |
| 0 |
| 0 |
| 6,493 |
| 6,493 |
Repurchase and retirement of common stock | (1,542,315) |
| (15) |
| (14,992) |
| (97,545) |
| 0 |
| 0 |
| (112,552) | |
Stock-based compensation expense | 17,916 |
| 0 |
| 17,364 |
| 0 |
| 0 |
| 0 |
| 17,364 | |
Shares withheld for payroll taxes | (4,873) |
| 0 |
| (369) |
| 0 |
| 0 |
| 0 |
| (369) | |
Settlement of stock-based compensation awards | - |
| 0 |
| (399) |
| 0 |
| 0 |
| 0 |
| (399) | |
Transfer of charges in excess of capital | - |
| 0 |
| 85,584 |
| (85,584) |
| 0 |
| 0 |
| 0 | |
Balance, June 26, 2021 | 139,780,841 | $ | 1,398 | $ | 0 | $ | 3,465,647 | $ | (106,779) | $ | 646,415 | $ | 4,006,681 | |
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| |
|
| Common Stock | Additional |
|
| Other |
|
| Total | |||||
|
| $.01 Par Value | Paid-in | Retained | Comprehensive | Noncontrolling | Stockholders' | |||||||
|
| Shares |
| Amount | Capital | Earnings | Income / (Loss) | Interests | Equity | |||||
Balance, March 28, 2020 | 142,433,360 | $ | 1,424 | $ | 17,565 | $ | 3,183,236 | $ | (227,648) | $ | 631,215 | $ | 3,605,792 | |
Net loss (excluding loss of $1,678 attributable to Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| noncontrolling interests from continuing operations) | - |
| 0 |
| 0 |
| (10,797) |
| 0 |
| (792) |
| (11,589) |
Foreign currency translation gain (excluding gain of $751 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| attributable to Redeemable noncontrolling interests) | - |
| 0 |
| 0 |
| 0 |
| 33,609 |
| 48 |
| 33,657 |
Unrealized loss from foreign currency hedging activities, |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| net of tax benefit of $1,744 | - |
| 0 |
| 0 |
| 0 |
| (4,989) |
| 0 |
| (4,989) |
Unrealized investment gain, net of tax of $1 | - |
| 0 |
| 0 |
| 0 |
| 2 |
| 0 |
| 2 | |
Pension adjustment loss, net of tax benefit of $125 | - |
| 0 |
| 0 |
| 0 |
| (225) |
| 0 |
| (225) | |
Dividends paid | - |
| 0 |
| 0 |
| 0 |
| 0 |
| (8) |
| (8) | |
Purchase of noncontrolling interests | - |
| 0 |
| 0 |
| 0 |
| 0 |
| (9) |
| (9) | |
Change in fair value of redeemable securities | - |
| 0 |
| (7,489) |
| 0 |
| 0 |
| 0 |
| (7,489) | |
Initial noncontrolling interests and adjustments related to |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| business acquisitions | - |
| 0 |
| 0 |
| 0 |
| 0 |
| 4 |
| 4 |
Stock-based compensation expense | 7,033 |
| 0 |
| 5,156 |
| 0 |
| 0 |
| 0 |
| 5,156 | |
Shares withheld for payroll taxes | (2,266) |
| 0 |
| (132) |
| 0 |
| 0 |
| 0 |
| (132) | |
Settlement of stock-based compensation awards | - |
| 0 |
| (273) |
| 0 |
| 0 |
| 0 |
| (273) | |
Separation of Animal Health business | - |
| 0 |
| 1,648 |
| 0 |
| 0 |
| 0 |
| 1,648 | |
Balance, June 27, 2020 | 142,438,127 | $ | 1,424 | $ | 16,475 | $ | 3,172,439 | $ | (199,251) | $ | 630,458 | $ | 3,621,545 | |
See accompanying notes.
6
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share and per share data)
(unaudited)
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||
|
| Common Stock | Additional |
|
| Other |
|
| Total | |||||
|
| $.01 Par Value | Paid-in | Retained | Comprehensive | Noncontrolling | Stockholders' | |||||||
|
| Shares |
| Amount | Capital | Earnings | Income / (Loss) | Interests | Equity | |||||
Balance, December 26, 2020 | 142,462,571 | $ | 1,425 | $ | 0 | $ | 3,454,831 | $ | (108,084) | $ | 636,213 | $ | 3,984,385 | |
Net income (excluding $14,033 attributable to Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| noncontrolling interests from continuing operations) | - |
| 0 |
| 0 |
| 321,713 |
| 0 |
| 3,159 |
| 324,872 |
Foreign currency translation gain (loss) (excluding gain of $570 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| attributable to Redeemable noncontrolling interests) | - |
| 0 |
| 0 |
| 0 |
| (1,144) |
| 231 |
| (913) |
Unrealized gain from foreign currency hedging activities, |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| net of tax of $647 | - |
| 0 |
| 0 |
| 0 |
| 1,610 |
| 0 |
| 1,610 |
Unrealized investment loss, net of tax benefit of $1 | - |
| 0 |
| 0 |
| 0 |
| (3) |
| 0 |
| (3) | |
Pension adjustment gain, net of tax of $181 | - |
| 0 |
| 0 |
| 0 |
| 842 |
| 0 |
| 842 | |
Dividends paid | - |
| 0 |
| 0 |
| 0 |
| 0 |
| (154) |
| (154) | |
Change in fair value of redeemable securities | - |
| 0 |
| (132,708) |
| 0 |
| 0 |
| 0 |
| (132,708) | |
Initial noncontrolling interests and adjustments related to |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| business acquisitions | - |
| 0 |
| 0 |
| 0 |
| 0 |
| 6,966 |
| 6,966 |
Repurchase and retirement of common stock | (2,867,557) |
| (29) |
| (27,241) |
| (173,941) |
| 0 |
| 0 |
| (201,211) | |
Stock-based compensation expense | 299,561 |
| 3 |
| 30,151 |
| 0 |
| 0 |
| 0 |
| 30,154 | |
Shares withheld for payroll taxes | (113,734) |
| (1) |
| (7,546) |
| 0 |
| 0 |
| 0 |
| (7,547) | |
Settlement of stock-based compensation awards | 0 |
| 0 |
| 388 |
| 0 |
| 0 |
| 0 |
| 388 | |
Transfer of charges in excess of capital | - |
| 0 |
| 136,956 |
| (136,956) |
| 0 |
| 0 |
| 0 | |
Balance, June 26, 2021 | 139,780,841 | $ | 1,398 | $ | 0 | $ | 3,465,647 | $ | (106,779) | $ | 646,415 | $ | 4,006,681 | |
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| |
|
| Common Stock | Additional |
|
| Other |
|
| Total | |||||
|
| $.01 Par Value | Paid-in | Retained | Comprehensive | Noncontrolling | Stockholders' | |||||||
|
| Shares |
| Amount | Capital | Earnings | Income / (Loss) | Interests | Equity | |||||
Balance, December 28, 2019 | 143,353,459 | $ | 1,434 | $ | 47,768 | $ | 3,116,215 | $ | (167,373) | $ | 632,093 | $ | 3,630,137 | |
Cumulative impact of adopting new accounting standards | - |
| 0 |
| 0 |
| (412) |
| 0 |
| 0 |
| (412) | |
Net income (excluding $1,161 attributable to Redeemable |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| noncontrolling interests from continuing operations) | - |
| 0 |
| 0 |
| 119,464 |
| 0 |
| (327) |
| 119,137 |
Foreign currency translation loss (excluding loss of $12,276 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| attributable to Redeemable noncontrolling interests) | - |
| 0 |
| 0 |
| 0 |
| (42,524) |
| (104) |
| (42,628) |
Unrealized gain from foreign currency hedging activities, |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| net of tax of $3,346 | - |
| 0 |
| 0 |
| 0 |
| 10,154 |
| 0 |
| 10,154 |
Unrealized investment loss, net of tax benefit of $1 | - |
| 0 |
| 0 |
| 0 |
| (7) |
| 0 |
| (7) | |
Pension adjustment gain, net of tax of $199 | - |
| 0 |
| 0 |
| 0 |
| 499 |
| 0 |
| 499 | |
Dividends paid | - |
| 0 |
| 0 |
| 0 |
| 0 |
| (507) |
| (507) | |
Purchase of noncontrolling interests | - |
| 0 |
| (1,597) |
| 0 |
| 0 |
| (701) |
| (2,298) | |
Change in fair value of redeemable securities | - |
| 0 |
| 5,583 |
| 0 |
| 0 |
| 0 |
| 5,583 | |
Initial noncontrolling interests and adjustments related to |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| business acquisitions | - |
| 0 |
| 0 |
| 0 |
| 0 |
| 4 |
| 4 |
Repurchase and retirement of common stock | (1,200,000) |
| (12) |
| (10,949) |
| (62,828) |
| 0 |
| 0 |
| (73,789) | |
Stock-based compensation expense (credit) | 514,443 |
| 5 |
| (12,363) |
| 0 |
| 0 |
| 0 |
| (12,358) | |
Shares withheld for payroll taxes | (229,775) |
| (3) |
| (14,003) |
| 0 |
| 0 |
| 0 |
| (14,006) | |
Settlement of stock-based compensation awards | 0 |
| 0 |
| 387 |
| 0 |
| 0 |
| 0 |
| 387 | |
Separation of Animal Health business | - |
| 0 |
| 1,649 |
| 0 |
| 0 |
| 0 |
| 1,649 | |
Balance, June 27, 2020 | 142,438,127 | $ | 1,424 | $ | 16,475 | $ | 3,172,439 | $ | (199,251) | $ | 630,458 | $ | 3,621,545 | |
See accompanying notes.
7
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTSOF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
| Six Months Ended | |||||
|
|
|
|
|
| June 26, |
| June 27, | ||
|
|
|
|
|
| 2021 |
| 2020 | ||
Cash flows from operating activities: |
|
|
|
|
|
| ||||
| Net income |
| $ | 338,905 |
| $ | 120,298 | |||
| Income from discontinued operations |
|
| 0 |
|
| 303 | |||
| Income from continuing operations |
|
| 338,905 |
|
| 119,995 | |||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
| |||
|
|
| Depreciation and amortization |
|
| 99,278 |
|
| 93,946 | |
|
|
| Impairment charge on intangible assets |
|
| 0 |
|
| 2,149 | |
|
|
| Stock-based compensation expense (credit) |
|
| 30,154 |
|
| (12,358) | |
|
|
| Provision for (benefit from) losses on trade and other accounts receivable |
|
| (4,072) |
|
| 28,758 | |
|
|
| Provision (benefit from) for deferred income taxes |
|
| 5,705 |
|
| (32,871) | |
|
|
| Equity in earnings of affiliates |
|
| (12,201) |
|
| (4,145) | |
|
|
| Distributions from equity affiliates |
|
| 10,747 |
|
| 4,220 | |
|
|
| Changes in unrecognized tax benefits |
|
| (6,286) |
|
| 1,380 | |
|
|
| Other |
|
| 3,429 |
|
| 227 | |
|
|
| Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
| |
|
|
|
| Accounts receivable |
|
| 101,619 |
|
| 99,672 |
|
|
|
| Inventories |
|
| (123,758) |
|
| 13,700 |
|
|
|
| Other current assets |
|
| (85,979) |
|
| (188,616) |
|
|
|
| Accounts payable and accrued expenses |
|
| (135,815) |
|
| (138,900) |
Net cash provided by (used in) operating activities from continuing operations |
|
| 221,726 |
|
| (12,843) | ||||
Net cash provided by operating activities from discontinued operations |
|
| 0 |
|
| 573 | ||||
Net cash provided by (used in) operating activities |
|
| 221,726 |
|
| (12,270) | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
| ||||
| Purchases of fixed assets |
|
| (31,812) |
|
| (30,588) | |||
| Payments related to equity investments and business |
|
|
|
|
|
| |||
|
| acquisitions, net of cash acquired |
|
| (295,652) |
|
| (37,725) | ||
| Proceeds from sale of equity investment |
|
| 0 |
|
| 12,000 | |||
| Payments for loan to affiliate |
|
| (2,021) |
|
| (1,729) | |||
| Other |
|
| (11,634) |
|
| (11,599) | |||
Net cash used in investing activities from continuing operations |
|
| (341,119) |
|
| (69,641) | ||||
Net cash used in investing activities from discontinued operations |
|
| 0 |
|
| 0 | ||||
Net cash used in investing activities |
|
| (341,119) |
|
| (69,641) | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
| ||||
| Net change in bank borrowings |
|
| (5,381) |
|
| 479,702 | |||
| Proceeds from issuance of long-term debt |
|
| 200,000 |
|
| 501,421 | |||
| Principal payments for long-term debt |
|
| (120,326) |
|
| (609,580) | |||
| Debt issuance costs |
|
| (199) |
|
| (3,655) | |||
| Payments for repurchases of common stock |
|
| (201,211) |
|
| (73,789) | |||
| Payments for taxes related to shares withheld for employee taxes |
|
| (7,359) |
|
| (13,713) | |||
| Distributions to noncontrolling shareholders |
|
| (3,789) |
|
| (3,466) | |||
| Acquisitions of noncontrolling interests in subsidiaries |
|
| (1,130) |
|
| (14,934) | |||
| Proceeds from Henry Schein Animal Health Business |
|
| 0 |
|
| 64 | |||
Net cash provided by (used in) financing activities from continuing operations |
|
| (139,395) |
|
| 262,050 | ||||
Net cash used in financing activities from discontinued operations |
|
| 0 |
|
| (573) | ||||
Net cash provided by (used in) financing activities |
|
| (139,395) |
|
| 261,477 | ||||
Effect of exchange rate changes on cash and cash equivalents from continuing operations |
|
| 4,831 |
|
| 10,447 | ||||
Effect of exchange rate changes on cash and cash equivalents from discontinued operations |
|
| 0 |
|
| 0 | ||||
Net change in cash and cash equivalents from continuing operations |
|
| (253,957) |
|
| 190,013 | ||||
Net change in cash and cash equivalents from discontinued operations |
|
| 0 |
|
| 0 | ||||
Cash and cash equivalents, beginning of period |
|
| 421,185 |
|
| 106,097 | ||||
Cash and cash equivalents, end of period |
| $ | 167,228 |
| $ | 296,110 | ||||
See accompanying notes.
8
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 1
Our consolidated financial statements include our accounts, as wellas those of our wholly-owned and majority-
Our accompanying unaudited consolidated financial statements have beenprepared in accordance with accounting
We consolidate a Variable Interest Entity (“VIE”) where we hold a variable interest and are the primary
For the consolidated VIE, the trade accounts receivable transferredto the VIE are pledged as collateral to the
The consolidated financial statements reflect all adjustments considerednecessary for a fair presentation of the
The preparation of financial statements in conformity with accounting principlesgenerally accepted in the United
In March 2020, the World Health Organization declared the Novel Coronavirus Disease 2019 (“COVID-19”) a
9
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Our consolidated financial statements reflect estimates and assumptionsmade by us that affect, among other things,
Note 2 – Critical Accounting Policies, Accounting Pronouncements Adopted and Recently Issued Accounting
Critical Accounting Policies
There have been no material changes in our critical accounting policies duringthe threesix months ended March 27,
Accounting Pronouncements Adopted
In
Recently Issued Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options” (Subtopic
10
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 3 – Revenue from Contracts with Customers
Revenue is recognized in accordance with policies disclosed in Item 8 of ourAnnual Report on Form 10-K for
Disaggregation of Revenue
The following table disaggregates our revenue by segment and geography:
|
|
|
| Three Months Ended |
| Six Months Ended | ||||||||||||||
|
|
|
| June 26, 2021 |
| June 26, 2021 | ||||||||||||||
|
|
|
| North America |
| International |
| Global |
| North America |
| International |
| Global | ||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Health care distribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| Dental | $ | 1,127,607 |
| $ | 782,737 |
| $ | 1,910,344 |
| $ | 2,172,390 |
| $ | 1,526,882 |
| $ | 3,699,272 | ||
| Medical |
| 877,773 |
|
| 27,055 |
|
| 904,828 |
|
| 1,842,900 |
|
| 54,965 |
|
| 1,897,865 | ||
|
| Total health care distribution |
| 2,005,380 |
|
| 809,792 |
|
| 2,815,172 |
|
| 4,015,290 |
|
| 1,581,847 |
|
| 5,597,137 | |
Technology and value-added services |
| 129,897 |
|
| 22,154 |
|
| 152,051 |
|
| 251,834 |
|
| 43,213 |
|
| 295,047 | |||
|
| Total revenues | $ | 2,135,277 |
| $ | 831,946 |
| $ | 2,967,223 |
| $ | 4,267,124 |
| $ | 1,625,060 |
| $ | 5,892,184 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended | ||||||||||||||
|
|
|
| June 27, 2020 |
| June 27, 2020 | ||||||||||||||
|
|
|
| North America |
| International |
| Global |
| North America |
| International |
| Global | ||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Health care distribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| Dental | $ | 515,946 |
| $ | 425,346 |
| $ | 941,292 |
| $ | 1,404,318 |
| $ | 1,012,050 |
| $ | 2,416,368 | ||
| Medical |
| 596,588 |
|
| 21,222 |
|
| 617,810 |
|
| 1,374,616 |
|
| 43,882 |
|
| 1,418,498 | ||
|
| Total health care distribution |
| 1,112,534 |
|
| 446,568 |
|
| 1,559,102 |
|
| 2,778,934 |
|
| 1,055,932 |
|
| 3,834,866 | |
Technology and value-added services |
| 92,927 |
|
| 12,300 |
|
| 105,227 |
|
| 206,425 |
|
| 30,767 |
|
| 237,192 | |||
Total excluding Corporate TSA revenues (1) |
| 1,205,461 |
|
| 458,868 |
|
| 1,664,329 |
|
| 2,985,359 |
|
| 1,086,699 |
|
| 4,072,058 | |||
Corporate TSA revenues (1) |
| 0 |
|
| 20,070 |
|
| 20,070 |
|
| 0 |
|
| 41,212 |
|
| 41,212 | |||
|
| Total revenues | $ | 1,205,461 |
| $ | 478,938 |
| $ | 1,684,399 |
| $ | 2,985,359 |
| $ | 1,127,911 |
| $ | 4,113,270 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
At December 26, 2020, the current portion of contract liabilities of $
11
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 4
We conduct our business through
The health care distribution reportable segment aggregates our global dentaland medical operating segments.This
Our global technology and value-added services group provides software,technology and other value-added
The following tables present information about our reportable and operating segments:
|
|
|
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
|
|
|
| June 26, |
| June 27, |
| June 26, |
| June 27, | ||||
|
|
|
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
| |||
| Health care distribution (1) |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Dental |
| $ | 1,910,344 |
| $ | 941,292 |
| $ | 3,699,272 |
| $ | 2,416,368 | |
|
| Medical |
|
| 904,828 |
|
| 617,810 |
|
| 1,897,865 |
|
| 1,418,498 | |
|
| Total health care distribution |
|
| 2,815,172 |
|
| 1,559,102 |
|
| 5,597,137 |
|
| 3,834,866 | |
| Technology and value-added services (2) |
|
| 152,051 |
|
| 105,227 |
|
| 295,047 |
|
| 237,192 | ||
|
| Total excluding Corporate TSA revenue |
|
| 2,967,223 |
|
| 1,664,329 |
|
| 5,892,184 |
|
| 4,072,058 | |
| Corporate TSA revenues (3) |
|
| 0 |
|
| 20,070 |
|
| 0 |
|
| 41,212 | ||
|
| Total |
| $ | 2,967,223 |
| $ | 1,684,399 |
| $ | 5,892,184 |
| $ | 4,113,270 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
(2)
(3)
|
|
|
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
|
|
|
| June 26, |
| June 27, |
| June 26, |
| June 27, | ||||
|
|
|
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Operating Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
| |||
| Health care distribution |
| $ | 181,761 |
| $ | (25,348) |
| $ | 379,693 |
| $ | 122,819 | ||
| Technology and value-added services |
|
| 28,585 |
|
| 17,915 |
|
| 60,581 |
|
| 43,613 | ||
|
| Total |
| $ | 210,346 |
| $ | (7,433) |
| $ | 440,274 |
| $ | 166,432 | |
12
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 5 – Debt
Bank Credit Lines
Bank credit lines consisted of the following:
|
|
| June 26, |
| December 26, | ||
|
|
| 2021 |
| 2020 | ||
Revolving credit agreement |
| $ | 0 |
| $ | 0 | |
Other short-term bank credit lines |
|
| 72,105 |
|
| 73,366 | |
Total |
| $ | 72,105 |
| $ | 73,366 | |
Revolving Credit Agreement
On
On April 17, 2020, we amended the Credit Agreement to, among otherthings, (i) modify the financial covenant
364-Day Credit Agreement
On March 4, 2021, we repaid the outstanding obligations and terminatedthe lender commitments under our $
Other Short-Term CreditLines
As of March 27,June 26, 2021 and December 26, 2020, we had various other short-termbank credit lines available, of
13
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Long-term debt
Long-term debt consisted of the following:
|
|
| June 26, |
| December 26, | ||
|
|
| 2021 |
| 2020 | ||
Private placement facilities |
| $ | 706,332 |
| $ | 613,498 | |
Note payable |
|
| 0 |
|
| 1,554 | |
Various collateralized and uncollateralized loans payable with interest, |
|
|
|
|
|
| |
| in varying installments through 2023 at interest rates |
|
|
|
|
|
|
| ranging from 2.45% to 4.27% at June 26, 2021 and |
|
|
|
|
|
|
| ranging from 2.62% to 4.27% at December 26, 2020 |
|
| 4,293 |
|
| 4,596 |
Finance lease obligations (see Note 6) |
|
| 5,701 |
|
| 5,961 | |
| Total |
|
| 716,326 |
|
| 625,609 |
Less current maturities |
|
| (9,839) |
|
| (109,836) | |
| Total long-term debt |
| $ | 706,487 |
| $ | 515,773 |
Private Placement Facilities
Our private placement facilities, with
On March 5, 2021, we amended the private placement facilities to, among other things, (a) modify the financial
14
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
The components of our private placement facility borrowings asof March 27,June 26, 2021 are presented in the following
|
|
|
|
|
|
|
|
|
|
| Amount of |
|
|
|
|
| |
|
| Borrowing |
| Borrowing |
|
| ||
Date of Borrowing |
| Outstanding |
| Rate |
| Due Date | ||
January 20, 2012 (1) |
| $ | 7,143 |
| 3.09 | % |
| January 20, 2022 |
January 20, 2012 |
|
| 50,000 |
| 3.45 |
|
| January 20, 2024 |
December 24, 2012 |
|
| 50,000 |
| 3.00 |
|
| December 24, 2024 |
June 16, 2017 |
|
| 100,000 |
| 3.42 |
|
| June 16, 2027 |
September 15, 2017 |
|
| 100,000 |
| 3.52 |
|
| September 15, 2029 |
January 2, 2018 |
|
| 100,000 |
| 3.32 |
|
| January 2, 2028 |
September 2, 2020 |
|
| 100,000 |
| 2.35 |
|
| September 2, 2030 |
June 2, 2021 |
|
| 100,000 |
| 2.48 |
|
| June 2, 2031 |
June 2, 2021 |
|
| 100,000 |
| 2.58 |
|
| June 2, 2033 |
Less: Deferred debt issuance costs |
|
| (811) |
|
|
|
|
|
|
| $ | 706,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Annual repayments of approximately $7.1 million for this borrowing commenced on January 20, 2016. | ||||||||
U.S. Trade Accounts Receivable Securitization
We have a facility agreement with a bank, as agent, based on the securitization of our U.S. trade accounts
If our accounts receivable collection pattern changes due to customers eitherpaying late or not making payments,
We are required to pay a commitment fee of
15
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 6 – Leases
Leases
We have operating and finance leases for corporate offices, office space, distribution and other facilities, vehicles,
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
|
|
|
| June 26, |
| June 27, |
| June 26, |
| June 27, |
| ||||
|
|
|
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
Operating lease cost: (1) |
| $ | 25,840 |
| $ | 21,991 |
| $ | 48,946 |
| $ | 44,070 |
| |||
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Amortization of right-of-use assets |
|
| 516 |
|
| 282 |
|
| 1,120 |
|
| 714 |
| |||
Interest on lease liabilities |
|
| 27 |
|
| 20 |
|
| 53 |
|
| 57 |
| |||
Total finance lease cost |
| $ | 543 |
| $ | 302 |
| $ | 1,173 |
| $ | 771 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Includes variable lease expenses. |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Supplemental balance sheet information related to leases is as follows: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 26, |
| December 26, |
| ||
|
|
|
|
| 2021 |
| 2020 |
| ||
Operating Leases: |
|
|
|
|
|
|
| |||
Operating lease right-of-use assets |
| $ | 301,440 |
| $ | 288,847 |
| |||
|
|
|
|
|
|
|
|
|
|
|
Current operating lease liabilities |
|
| 75,008 |
|
| 64,716 |
| |||
Non-current operating lease liabilities |
|
| 243,232 |
|
| 238,727 |
| |||
| Total operating lease liabilities |
| $ | 318,240 |
| $ | 303,443 |
| ||
|
|
|
|
|
|
|
|
|
|
|
Finance Leases: |
|
|
|
|
|
|
| |||
Property and equipment, at cost |
| $ | 11,443 |
| $ | 10,683 |
| |||
Accumulated depreciation |
|
| (5,170) |
|
| (4,277) |
| |||
Property and equipment, net of accumulated depreciation |
| $ | 6,273 |
| $ | 6,406 |
| |||
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
| $ | 2,420 |
| $ | 2,420 |
| |||
Long-term debt |
|
| 3,281 |
|
| 3,541 |
| |||
| Total finance lease liabilities |
| $ | 5,701 |
| $ | 5,961 |
| ||
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term in Years: |
|
|
|
|
|
|
| |||
| Operating leases |
|
| 7.1 |
|
| 7.5 |
| ||
| Finance leases |
|
| 4.0 |
|
| 4.3 |
| ||
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Discount Rate: |
|
|
|
|
|
|
| |||
| Operating leases |
|
| 2.6 | % |
| 2.8 | % | ||
| Finance leases |
|
| 1.8 | % |
| 1.9 | % | ||
16
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Supplemental cash flow information related to leases is as follows: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| |||
|
|
|
|
| June 26, |
| June 27, |
| ||
|
|
|
|
| 2021 |
| 2020 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
| |||
| Operating cash flows for operating leases |
| $ | 39,988 |
| $ | 38,579 |
| ||
| Operating cash flows for finance leases |
|
| 47 |
|
| 50 |
| ||
| Financing cash flows for finance leases |
|
| 1,407 |
|
| 947 |
| ||
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
| |||
| Operating leases |
| $ | 49,226 |
| $ | 14,926 |
| ||
| Finance leases |
|
| 1,244 |
|
| 1,814 |
| ||
Maturities of lease liabilities are as follows: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 26, 2021 |
| |||
|
|
|
|
|
| Operating |
|
| Finance |
|
|
|
|
|
|
| Leases |
|
| Leases |
|
2021 |
| $ | 42,284 |
| $ | 1,384 |
| |||
2022 |
|
| 72,260 |
|
| 1,930 |
| |||
2023 |
|
| 49,569 |
|
| 963 |
| |||
2024 |
|
| 35,148 |
|
| 393 |
| |||
2025 |
|
| 30,519 |
|
| 337 |
| |||
Thereafter |
|
| 118,761 |
|
| 895 |
| |||
Total future lease payments |
|
| 348,541 |
|
| 5,902 |
| |||
Less: imputed interest |
|
| (30,301) |
|
| (201) |
| |||
Total |
| $ | 318,240 |
| $ | 5,701 |
| |||
As of March 27,June 26, 2021, we have additional operating leases with total lease paymentsof $
17
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 7 – Redeemable Noncontrolling Interests
Some minority stockholders in certain of our subsidiaries have the right, atcertain times, to require us to acquire
|
|
| June 26, |
| December 26, | ||
|
|
| 2021 |
| 2020 | ||
Balance, beginning of period |
| $ | 327,699 |
| $ | 287,258 | |
Decrease in redeemable noncontrolling interests due to |
|
|
|
|
|
| |
| redemptions |
|
| (1,130) |
|
| (17,241) |
Increase in redeemable noncontrolling interests due to business |
|
|
|
|
|
| |
| acquisitions |
|
| 140,155 |
|
| 28,387 |
Net income attributable to redeemable noncontrolling interests |
|
| 14,033 |
|
| 13,363 | |
Dividends declared |
|
| (9,954) |
|
| (12,631) | |
Effect of foreign currency translation gain (loss) attributable to |
|
|
|
|
|
| |
| redeemable noncontrolling interests |
|
| 570 |
|
| (4,279) |
Change in fair value of redeemable securities |
|
| 132,708 |
|
| 32,842 | |
Balance, end of period |
| $ | 604,081 |
| $ | 327,699 | |
Note 8 – Comprehensive Income
Comprehensive income includes certain gains and losses that, under U.S.GAAP,are excluded from net income as
The following table summarizes our Accumulated other comprehensive loss, net ofapplicable taxes as of:
|
|
|
| June 26, |
| December 26, | ||
|
|
|
| 2021 |
| 2020 | ||
Attributable to Redeemable noncontrolling interests: |
|
|
|
|
|
| ||
|
| Foreign currency translation adjustment |
| $ | (24,047) |
| $ | (24,617) |
|
|
|
|
|
|
|
|
|
Attributable to noncontrolling interests: |
|
|
|
|
|
| ||
|
| Foreign currency translation adjustment |
| $ | 466 |
| $ | 235 |
|
|
|
|
|
|
|
|
|
Attributable to Henry Schein, Inc.: |
|
|
|
|
|
| ||
| Foreign currency translation adjustment |
| $ | (77,709) |
| $ | (76,565) | |
| Unrealized loss from foreign currency hedging activities |
|
| (9,878) |
|
| (11,488) | |
| Unrealized investment gain (loss) |
|
| (2) |
|
| 1 | |
| Pension adjustment loss |
|
| (19,190) |
|
| (20,032) | |
|
| Accumulated other comprehensive loss |
| $ | (106,779) |
| $ | (108,084) |
|
|
|
|
|
|
|
|
|
Total Accumulated other comprehensive loss |
| $ | (130,360) |
| $ | (132,466) | ||
18
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
The following table summarizes the components of comprehensive income, netof applicable taxes as follows:
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
| June 26, |
| June 27, |
| June 26, |
| June 27, | ||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Net income (loss) |
| $ | 163,977 |
| $ | (13,267) |
| $ | 338,905 |
| $ | 120,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss) |
|
| 38,138 |
|
| 34,408 |
|
| (343) |
|
| (54,904) |
Tax effect |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
Foreign currency translation gain (loss) |
|
| 38,138 |
|
| 34,408 |
|
| (343) |
|
| (54,904) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) from foreign currency hedging |
|
|
|
|
|
|
|
|
|
|
|
|
activities |
|
| (2,438) |
|
| (6,733) |
|
| 2,257 |
|
| 13,500 |
Tax effect |
|
| 687 |
|
| 1,744 |
|
| (647) |
|
| (3,346) |
Unrealized gain (loss) from foreign currency hedging |
|
|
|
|
|
|
|
|
|
|
|
|
activities |
|
| (1,751) |
|
| (4,989) |
|
| 1,610 |
|
| 10,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized investment gain (loss) |
|
| 4 |
|
| 3 |
|
| (4) |
|
| (8) |
Tax effect |
|
| (1) |
|
| (1) |
|
| 1 |
|
| 1 |
Unrealized investment gain (loss) |
|
| 3 |
|
| 2 |
|
| (3) |
|
| (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension adjustment gain (loss) |
|
| (3) |
|
| (350) |
|
| 1,023 |
|
| 698 |
Tax effect |
|
| 38 |
|
| 125 |
|
| (181) |
|
| (199) |
Pension adjustment gain (loss) |
|
| 35 |
|
| (225) |
|
| 842 |
|
| 499 |
Comprehensive income |
| $ | 200,402 |
| $ | 15,929 |
| $ | 341,011 |
| $ | 76,040 |
The change in the unrealized gain (loss) from foreign currency hedging activities
for further information.
Our financial statements are denominated in the U.S. Dollar currency.Fluctuations in the value of foreign
The following table summarizes our total comprehensive income, net ofapplicable taxes, as follows:
|
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
|
| June 26, |
| June 27, |
| June 26, |
| June 27, | ||||
|
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Comprehensive income attributable to |
|
|
|
|
|
|
|
|
|
|
|
| |
| Henry Schein, Inc. |
| $ | 185,242 |
| $ | 17,600 |
| $ | 323,018 |
| $ | 87,586 |
Comprehensive income (loss) attributable to |
|
|
|
|
|
|
|
|
|
|
|
| |
| noncontrolling interests |
|
| 1,437 |
|
| (744) |
|
| 3,390 |
|
| (431) |
Comprehensive income (loss) attributable to |
|
|
|
|
|
|
|
|
|
|
|
| |
| Redeemable noncontrolling interests |
|
| 13,723 |
|
| (927) |
|
| 14,603 |
|
| (11,115) |
Comprehensive income |
| $ | 200,402 |
| $ | 15,929 |
| $ | 341,011 |
| $ | 76,040 | |
19
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 9 – Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset orpaid to transfer a liability in an orderly
The fair value hierarchy consists of three broad levels, which gives thehighest priority to unadjusted quoted prices
•Level 1— Unadjusted quoted prices in active markets for identical assetsor liabilities that are accessible at the
•Level 2— Inputs other than quoted prices included within Level 1 that are observablefor the asset or liability,
•Level 3— Inputs that are unobservable for the asset or liability.
The following section describes the fair values of our financial instrumentsand the methodologies that we used to
Investments and notes receivable
There are no quoted market prices available for investments in unconsolidatedaffiliates and notes receivable;
Debt
The fair value of our debt (including bank credit lines) is classified asLevel 3 within the fair value hierarchy as of
Derivative contracts
Derivative contracts are valued using quoted market prices andsignificant other observable and unobservable
20
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
The fair values for the majority of our foreign currency derivative contracts areobtained by comparing our contract
for further information.
Redeemable noncontrolling interests
The values for Redeemable noncontrolling interests are classified withinLevel 3 of the fair value hierarchy and are
for additional information.
The following table presents our assets and liabilities that are measured andrecognized at fair value on a recurring
|
|
|
| June 26, 2021 | ||||||||||
|
|
|
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Derivative contracts |
| $ | 0 |
| $ | 1,471 |
| $ | 0 |
| $ | 1,471 | |
| Total return swaps |
|
| 0 |
|
| 1,317 |
|
| 0 |
|
| 1,317 | |
|
| Total assets |
| $ | 0 |
| $ | 2,788 |
| $ | 0 |
| $ | 2,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Derivative contracts |
| $ | 0 |
| $ | 9,542 |
| $ | 0 |
| $ | 9,542 | |
|
| Total liabilities |
| $ | 0 |
| $ | 9,542 |
| $ | 0 |
| $ | 9,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests |
| $ | 0 |
| $ | 0 |
| $ | 604,081 |
| $ | 604,081 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 26, 2020 | ||||||||||
|
|
|
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Derivative contracts |
| $ | 0 |
| $ | 1,868 |
| $ | 0 |
| $ | 1,868 | |
| Total return swaps |
|
| 0 |
|
| 1,565 |
|
| 0 |
|
| 1,565 | |
|
| Total assets |
| $ | 0 |
| $ | 3,433 |
| $ | 0 |
| $ | 3,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Derivative contracts |
| $ | 0 |
| $ | 11,765 |
| $ | 0 |
| $ | 11,765 | |
|
| Total liabilities |
| $ | 0 |
| $ | 11,765 |
| $ | 0 |
| $ | 11,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests |
| $ | 0 |
| $ | 0 |
| $ | 327,699 |
| $ | 327,699 | ||
21
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 10
Acquisitions
We completed acquisitions during the threesix months ended March 27,June 26, 2021 which were immaterial to our financial
The following table summarizes the estimated fair value, as of the dateof acquisition, of consideration paid and net
Acquisition consideration: |
|
|
Cash | $ | 310,523 |
Redeemable noncontrolling interests |
| 129,319 |
Total consideration |
| 439,842 |
|
|
|
Identifiable assets acquired and liabilities assumed: |
|
|
Current assets |
| 107,197 |
Intangible assets |
| 183,796 |
Other noncurrent assets |
| 33,959 |
Current liabilities |
| (43,781) |
Deferred income taxes |
| (17,442) |
Other noncurrent liabilities |
| (37,462) |
Total identifiable net assets |
| 226,267 |
Goodwill |
| 213,575 |
Total net assets acquired | $ | 439,842 |
The major classes of assets and liabilities that we generally allocate purchaseprice to, excluding goodwill, include
Some prior owners of acquired subsidiaries are eligible to receive additionalpurchase price cash consideration if
22
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 11 – Plans of Restructuring
On November 20, 2019, we committed to a contemplated initiative, intendedto mitigate stranded costs associated
During the three months ended March 27,June 26, 2021 and March 28,June 27, 2020, werecorded restructuring costs of $
We are currently unable in good faith to make a determination of an estimate of the amount or range of
The following table shows the net amounts expensed and paid for restructuringcosts that were incurred during the
|
|
|
|
|
| Facility |
|
|
|
|
|
| |
|
|
| Severance |
| Closing |
|
|
|
|
|
| ||
|
|
| Costs |
| Costs |
| Other |
| Total | ||||
Balance, December 28, 2019 |
| $ | 12,911 |
| $ | 826 |
| $ | 73 |
| $ | 13,810 | |
Provision |
|
| 25,855 |
|
| 5,878 |
|
| 360 |
|
| 32,093 | |
Payments and other adjustments |
|
| (26,152) |
|
| (6,309) |
|
| (329) |
|
| (32,790) | |
Balance, December 26, 2020 |
| $ | 12,614 |
| $ | 395 |
| $ | 104 |
| $ | 13,113 | |
Provision |
|
| 3,436 |
|
| (122) |
|
| 221 |
|
| 3,535 | |
Payments and other adjustments |
|
| (12,736) |
|
| 50 |
|
| (321) |
|
| (13,007) | |
Balance, June 26, 2021 |
| $ | 3,314 |
| $ | 323 |
| $ | 4 |
| $ | 3,641 | |
The following table shows, by reportable segment, the net amountsexpensed and paid for restructuring costs that
|
|
|
|
|
| Technology and |
|
| ||
|
|
| Health Care |
| Value-Added |
|
|
| ||
|
|
| Distribution |
| Services |
| Total | |||
Balance, December 28, 2019 |
| $ | 13,373 |
| $ | 437 |
| $ | 13,810 | |
Provision |
|
| 30,935 |
|
| 1,158 |
|
| 32,093 | |
Payments and other adjustments |
|
| (31,484) |
|
| (1,306) |
|
| (32,790) | |
Balance, December 26, 2020 |
| $ | 12,824 |
| $ | 289 |
| $ | 13,113 | |
Provision |
|
| 3,082 |
|
| 453 |
|
| 3,535 | |
Payments and other adjustments |
|
| (12,561) |
|
| (446) |
|
| (13,007) | |
Balance, June 26, 2021 |
| $ | 3,345 |
| $ | 296 |
| $ | 3,641 | |
23
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 12
Basic earnings per share is computed by dividing net income attributableto Henry Schein, Inc. by the weighted-
A reconciliation of shares used in calculating earnings per basic anddiluted share follows:
|
|
| Three Months Ended |
| Six Months Ended | ||||
|
|
| June 26, |
| June 27, |
| June 26, |
| June 27, |
|
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
Basic |
| 140,358 |
| 142,350 |
| 141,316 |
| 142,654 | |
Effect of dilutive securities: |
|
|
|
|
|
|
|
| |
| Stock options, restricted stock and restricted stock units |
| 1,299 |
| 0 |
| 1,222 |
| 0 |
| Diluted |
| 141,657 |
| 142,350 |
| 142,538 |
| 142,654 |
24
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 13 – Income Taxes
For the threesix months ended March 27,June 26, 2021 our effective tax rate was
The American Rescue Plan Act of 2021 (“ARPA”) was signed into law on March 11, 2021.The ARPA included a
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act(“ (“CARES Act”) was enacted in
The total amount of unrecognized tax benefits, which are included in “Otherliabilities” within our consolidated
The tax years subject to examination by major tax jurisdictions include years 2012, 2013, 2017 and forward by the
The total amounts of interest and penalties are classified as a component ofthe provision for income taxes. The
25
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 14
We are exposed to market risks as well as changes in foreign currency exchange rates as measured against the U.S.
During 2019
On
Fluctuations in the value of certain foreign currencies as comparedto the U.S. dollar may positively or negatively
26
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 15 – Stock-Based Compensation
Our accompanying consolidated statements of income reflect pre-tax share-basedcompensation expense of $
Our accompanying consolidated statements of cash flows present ourstock-based compensation expense (credit) as
Stock-based compensation represents the cost related to stock-based awards grantedto employees and non-
Stock-based awards are provided to certain employees and non-employee directorsunder the terms of our 2020
Grants of RSUs are stock-based awards granted to recipients with specifiedvesting provisions.In the case of
During the three months ended March 27, 2021, as a result of the continuingeconomic risk and uncertainty
27
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
In addition to equity-based awards under the 2021 long-term incentiveprogram under the 2020 Stock Incentive
With respect to time-based RSUs, we estimate the fair value on the date of grant based on our closingstock price at
The Plans provide for adjustments to the performance-based restrictedstock units targets for significant events,
Total unrecognized compensation cost related to unvested awards as of March 27,June 26, 2021 was $
The following weighted-average assumptions were used in determiningthe most recent fair values of stock options using the
Expected dividend yield | 0.0 | % | |
Expected stock price volatility | 26.60 | % | |
Risk-free interest rate | 0.94 | % | |
Expected life of options (years) | 6.00 | ||
We have not declared cash dividends on our stock in the past and we do not anticipate declaring cash dividends in
28
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
The following table summarizes stock option activity under the Plans duringthe threesix months ended March 27,
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
| Weighted |
| Remaining |
|
|
| |
|
|
|
| Average |
| Contractual |
| Aggregate | ||
|
|
|
| Exercise |
| Life in |
| Intrinsic | ||
|
| Shares |
| Price |
| Years |
| Value | ||
Outstanding at beginning of period |
| 0 |
| $ | 0 |
|
|
|
|
|
Granted |
| 794 |
|
| 62.82 |
|
|
|
|
|
Exercised |
| 0 |
|
| 0 |
|
|
|
|
|
Forfeited |
| (2) |
|
| 62.71 |
|
|
|
|
|
Outstanding at end of period |
| 792 |
| $ | 62.82 |
| 9.7 |
| $ | 12.21 |
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at end of period |
| 1 |
| $ | 0 |
| - |
| $ | 0 |
The following tables summarize the activity of our unvested RSUs forthe threesix months ended March 27,June 26, 2021:
|
| Time-Based Restricted Stock Units | |||||||
|
|
|
| Weighted Average |
|
|
| ||
|
|
|
| Grant Date Fair |
|
| Intrinsic Value | ||
|
| Shares/Units |
| Value Per Share |
|
| Per Share | ||
Outstanding at beginning of period |
| 1,459 |
| $ | 57.61 |
|
|
|
|
Granted |
| 821 |
|
| 63.02 |
|
|
|
|
Vested |
| (266) |
|
| 66.85 |
|
|
|
|
Forfeited |
| (19) |
|
| 60.47 |
|
|
|
|
Outstanding at end of period |
| 1,995 |
| $ | 58.64 |
|
| $ | 75.01 |
|
|
|
|
|
|
|
|
|
|
|
| Performance-Based Restricted Stock Units | |||||||
|
|
|
| Weighted Average |
|
|
| ||
|
|
|
| Grant Date Fair |
|
| Intrinsic Value | ||
|
| Shares/Units |
| Value Per Share |
|
| Per Share | ||
Outstanding at beginning of period |
| 136 |
| $ | 53.52 |
|
|
|
|
Granted |
| 286 |
|
| 58.60 |
|
|
|
|
Vested |
| (83) |
|
| 52.30 |
|
|
|
|
Forfeited |
| (9) |
|
| 59.46 |
|
|
|
|
Outstanding at end of period |
| 330 |
| $ | 59.50 |
|
| $ | 75.01 |
Note 16 – Supplemental Cash Flow Information
Cash paid for interest and income taxes was:
|
| Six Months Ended | ||||
|
| June 26, |
| June 27, | ||
|
| 2021 |
| 2020 | ||
Interest |
| $ | 13,605 |
| $ | 16,925 |
Income taxes |
|
| 134,232 |
|
| 31,553 |
During the threesix months ended March 27,June 26, 2021 and March 28,June 27, 2020, wehad a $
29
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Note 17 – Legal Proceedings
On
On October 1, 2012, we filed a motion for an order: (i) compelling Archerto arbitrate its claims against us; (2)
30
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
the case with the plaintiff. Henry Schein and the
On
In addition to the County of Summit Action,
On
31
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Securities Exchange Act of 1934, as amended, and Securities and Exchange Commission
On
From time to time, we may become a party to other legal proceedings,including, without limitation, product
As of March 27,June 26, 2021, we had accrued our best estimate of potential losses relating to claims that were probable to
Note 18 – Related Party Transactions
On February 7, 2019 (the “Distribution Date”), we completed the separation(the (the “Separation”) and subsequent
32
HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
prior to the Distribution Date, and HS Merger Sub, Inc., a wholly owned subsidiaryof Covetrus (“Merger Sub”).Covetrus. In
In connection with the completion of the Animal Health Spin-off during our 2019 fiscal year, we entered into a
In connection with the formation of Henry Schein One, LLC, our joint venture with Internet Brands, which was
During our normal course of business, we have interests in entities that we account for under the equity accounting
33
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Cautionary Note Regarding Forward-Looking Statements
In accordance with the “Safe Harbor” provisions of the Private SecuritiesLitigation Reform Act of 1995, we
Risk factors and uncertainties that could cause actual results to differ materially fromcurrent and historical results
34
We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control
Where YouCan Find Important Information
We may disclose important information through one or more of the following channels: SEC filings, public
Recent Developments
COVID-19 Pandemic
In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic
Our consolidated financial statements reflect estimates and assumptionsmade by us that affect, among other things,
35
Executive-Level Overview
Henry Schein, Inc. is a solutions company for health care professionals poweredby a network of people and
We are headquartered in Melville, New York,employ more than 20,000approximately 21,000 people (of which more than 9,50010,200 are
We have established strategically located distribution centers around the world to enable us to better serve our
We conduct our businessthrough two reportable segments: (i) health care distribution and(ii) technology and
The health care distribution reportable segment aggregates our global dentaland medical operating segments.This
Our global technology and value-added services group provides software,technology and other value-added
Industry Overview
In recent years, the health care industry has increasingly focused on cost containment.This trend has benefited
Our operating results in recent years have been significantly affected by strategiesand transactions that we
Our current and future results have been and could be impacted by the COVID-19pandemic, the current economic
36
to minimize the risk to our employees. We have seen and continue to see changes in demand trends for some of our
Industry Consolidation
The health care products distribution industry, as it relates to office-based health care practitioners, is fragmented
Due in part to the inability of office-based health care practitioners to store and managelarge quantities of supplies
The trend of consolidation extends to our customer base.Health care practitioners are increasingly seeking to
We believe that consolidation within the industry will continue to result in a number of distributors, particularly
Our trend with regard to acquisitions and joint ventures has been to expandour role as a provider of products and
As industry consolidation continues, we believe that we are positionedto capitalize on this trend, as we believe we
As the health care industry continues to change, we continually evaluate possiblecandidates for merger and joint
37
Aging Population and Other Market Influences
The health care products distribution industry continues to experience growthdue to the aging population,
According to the U.S. Census Bureau’s International Data Base, in 20202021 there were more than six and a half million
As a result of these market dynamics, annual expenditures for healthcare services continue to increase in the
Government
Certain of our businesses involve the distribution, importation, exportation,marketing and sale of, and third party
Government and private insurance programs fund a large portion of the total cost of medical care,and there have
Our businesses are also generally subject to numerous other laws and regulationsthat could impact our financial
Failure to comply with law or regulations could have a material adverse effect on our business.A more detailed
38
Results of Operations
The following table summarizes the significant components of our operatingresults for the three and six months ended June 26, 2021 and June 27, 2020 and cash flows for the three
|
|
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
|
|
| June 26, |
| June 27, |
| June 26, |
| June 27, | ||||
|
|
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Operating results: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Net sales |
| $ | 2,967,223 |
| $ | 1,684,399 |
| $ | 5,892,184 |
| $ | 4,113,270 | ||
Cost of sales |
|
| 2,077,472 |
|
| 1,230,133 |
|
| 4,111,582 |
|
| 2,912,990 | ||
| Gross profit |
|
| 889,751 |
|
| 454,266 |
|
| 1,780,602 |
|
| 1,200,280 | |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Selling, general and administrative |
|
| 678,801 |
|
| 445,765 |
|
| 1,336,793 |
|
| 1,013,127 | |
| Restructuring costs |
|
| 604 |
|
| 15,934 |
|
| 3,535 |
|
| 20,721 | |
|
| Operating income (loss) |
| $ | 210,346 |
| $ | (7,433) |
| $ | 440,274 |
| $ | 166,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net |
| $ | (4,665) |
| $ | (8,780) |
| $ | (8,858) |
| $ | (13,622) | ||
Net income (loss) from continuing operations |
|
| 163,977 |
|
| (13,852) |
|
| 338,905 |
|
| 119,995 | ||
Income from discontinued operations |
|
| - |
|
| 585 |
|
| - |
|
| 303 | ||
Net income (loss) attributable to Henry Schein, Inc. |
|
| 155,716 |
|
| (10,797) |
|
| 321,713 |
|
| 119,464 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended | ||||
|
|
|
|
|
|
|
|
|
| June 26, |
| June 27, | ||
|
|
|
|
|
|
|
|
|
| 2021 |
| 2020 | ||
Cash flows: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Net cash provided by (used in) operating activities from continuing operations |
| $ | 221,726 |
| $ | (12,843) | ||||||||
Net cash used in investing activities from continuing operations |
|
| (341,119) |
|
| (69,641) | ||||||||
Net cash provided by (used in) financing activities from continuing operations |
|
| (139,395) |
|
| 262,050 | ||||||||
Plans of Restructuring
On November 20, 2019, we committed to a contemplated initiative, intendedto mitigate stranded costs associated
During the three months ended March 27,June 26, 2021 and March 28,June 27, 2020, werecorded restructuring costs of $2.9
We are currently unable in good faith to make a determination of an estimate of the amount or range of
39
Three Months Ended March 27,June 26, 2021 Compared to Three Months Ended March 28,June 27, 2020
Net Sales
Net sales for the three months ended March 27,June 26, 2021 and March 28,June 27, 2020 wereas follows (in thousands):
|
|
|
| June 26, |
| % of |
| June 27, |
| % of |
| Increase / (Decrease) | ||||||||
|
|
|
| 2021 |
| Total |
| 2020 |
| Total |
| $ |
| % | ||||||
Health care distribution (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Dental |
| $ | 1,910,344 |
| 64.4 | % |
| $ | 941,292 |
| 55.9 | % |
| $ | 969,052 |
| 102.9 | % | |
| Medical |
|
| 904,828 |
| 30.5 |
|
|
| 617,810 |
| 36.7 |
|
|
| 287,018 |
| 46.5 |
| |
|
| Total health care distribution |
|
| 2,815,172 |
| 94.9 |
|
|
| 1,559,102 |
| 92.6 |
|
|
| 1,256,070 |
| 80.6 |
|
Technology and value-added services (2) |
|
| 152,051 |
| 5.1 |
|
|
| 105,227 |
| 6.2 |
|
|
| 46,824 |
| 44.5 |
| ||
|
| Total excluding Corporate TSA revenue |
|
| 2,967,223 |
| 100.0 |
|
|
| 1,664,329 |
| 98.8 |
|
|
| 1,302,894 |
| 78.3 |
|
Corporate TSA revenue (3) |
|
| - |
| - |
|
|
| 20,070 |
| 1.2 |
|
|
| (20,070) |
| - |
| ||
|
| Total |
| $ | 2,967,223 |
| 100.0 | % |
| $ | 1,684,399 |
| 100.0 | % |
| $ | 1,282,824 |
| 76.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
(2)
(3)
The 20.4%76.2% increase in net sales for the three months ended March 27,June 26, 2021includes an increase of 18.2%71.0% in local
The 21.3%102.9% increase in dental net sales for the three months endedMarch 27, June 26, 2021 includes an increase of 17.9%94.3% in
40
The 24.0%46.5% increase in medical net sales for the three months endedMarch 27, June 26, 2021 includes an increase of 23.7%
The 8.4%44.5% increase in technology and value-added services net sales for thethree months ended March 27,June 26, 2021
Gross Profit
Gross profit and gross margin percentages by segment and in total for the three monthsended March 27,June 26, 2021 and
|
|
| June 26, |
| Gross |
| June 27, |
| Gross |
| Increase / (Decrease) | ||||||||
|
|
| 2021 |
| Margin % |
| 2020 |
| Margin % |
| $ |
| % | ||||||
Health care distribution |
| $ | 784,841 |
| 27.9 | % |
| $ | 381,042 |
| 24.4 | % |
| $ | 403,799 |
| 106.0 | % | |
Technology and value-added services |
|
| 104,910 |
| 69.0 |
|
|
| 72,683 |
| 69.1 |
|
|
| 32,227 |
| 44.3 |
| |
| Total excluding Corporate TSA revenues |
|
| 889,751 |
| 30.0 |
|
|
| 453,725 |
| 27.3 |
|
|
| 436,026 |
| 96.1 |
|
Corporate TSA revenues |
|
| - |
| - |
|
|
| 541 |
| 2.7 |
|
|
| (541) |
| - |
| |
| Total |
| $ | 889,751 |
| 30.0 |
|
| $ | 454,266 |
| 27.0 |
|
| $ | 435,485 |
| 95.9 |
|
As a result of different practices of categorizing costs associated with distribution networksthroughout our
During December 2020, our previous transition services agreement withCovetrus, in connection with the
Within our health care distribution segment, gross profit margins may vary from one period to the next. Changes in
41
Health care distribution gross profit increased $136.7$403.8 million, or 20.9%106.0%, forthe three months ended March 27,June 26, 2021
Technology and value-added services gross profit increased $8.8$32.2 million, or 9.5%44.3%, for the three months ended
Selling, General and Administrative
Selling, general and administrative expenses by segment and intotal for the three months ended MarchJune 26, 2021 and June 27, 2021
|
|
|
|
|
| % of |
|
|
|
| % of |
|
|
|
|
|
| ||
|
|
| June 26, |
| Respective |
| June 27, |
| Respective |
| Increase | ||||||||
|
|
| 2021 |
| Net Sales |
| 2020 |
| Net Sales |
| $ |
| % | ||||||
Health care distribution |
| $ | 603,080 |
| 21.4 | % |
| $ | 406,931 |
| 26.1 | % |
| $ | 196,149 |
| 48.2 | % | |
Technology and value-added services |
|
| 76,325 |
| 50.2 |
|
|
| 54,768 |
| 52.0 |
|
|
| 21,557 |
| 39.4 |
| |
| Total |
| $ | 679,405 |
| 22.9 |
|
| $ | 461,699 |
| 27.4 |
|
| $ | 217,706 |
| 47.2 |
|
Selling, general and administrative expenses (including restructuring costsin the three months ended March 27,
The $86.3$196.1 million increase in selling, general and administrative expenseswithin our
As a component of total selling, general and administrative expenses, sellingexpenses increased $12.9$151.3 million, or
42
As a component of total selling, general and administrative expenses, for the three monthsended March 28, 2020 were affected by
Other Expense, Net
Other expense, net, for the three months ended March 27,June 26, 2021 and March28,June 27, 2020 was as follows (in thousands):
|
|
| June 26, |
| June 27, |
| Variance | ||||||
|
|
| 2021 |
| 2020 |
| $ |
| % | ||||
Interest income |
| $ | 1,357 |
| $ | 1,997 |
| $ | (640) |
| (32.0) | % | |
Interest expense |
|
| (6,376) |
|
| (10,486) |
|
| 4,110 |
| 39.2 |
| |
Other, net |
|
| 354 |
|
| (291) |
|
| 645 |
| 221.6 |
| |
| Other expense, net |
| $ | (4,665) |
| $ | (8,780) |
| $ | 4,115 |
| 46.9 |
|
Interest income decreased $1.2$0.6 million primarily due to lower investmentinterest rates and reduced late fee income.Interest expense
Income Taxes
For the three months ended March 27,June 26, 2021, our effective tax rate was 25.1%23.4% comparedto 22.4%5.9% for the prior year
43
Six Months Ended June 26, 2021 Compared to Six Months Ended June 27, 2020
Net Sales
Net sales for the six months ended June 26, 2021 and June 27, 2020 were as follows (in thousands):
|
|
|
| June 26, |
| % of |
| June 27, |
| % of |
| Increase/(Decrease) | ||||||||
|
|
|
| 2021 |
| Total |
| 2020 |
| Total |
| $ |
| % | ||||||
Health care distribution (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Dental |
| $ | 3,699,272 |
| 62.8 | % |
| $ | 2,416,368 |
| 58.7 | % |
| $ | 1,282,904 |
| 53.1 | % | |
| Medical |
|
| 1,897,865 |
| 32.2 |
|
|
| 1,418,498 |
| 34.5 |
|
|
| 479,367 |
| 33.8 |
| |
|
| Total health care distribution |
|
| 5,597,137 |
| 95.0 |
|
|
| 3,834,866 |
| 93.2 |
|
|
| 1,762,271 |
| 46.0 |
|
Technology and value-added services (2) |
|
| 295,047 |
| 5.0 |
|
|
| 237,192 |
| 5.8 |
|
|
| 57,855 |
| 24.4 |
| ||
|
| Total excluding Corporate TSA revenue |
|
| 5,892,184 |
| 100.0 |
|
|
| 4,072,058 |
| 99.0 |
|
|
| 1,820,126 |
| 44.7 |
|
Corporate TSA revenue (3) |
|
| - |
| - |
|
|
| 41,212 |
| 1.0 |
|
|
| (41,212) |
| - |
| ||
|
| Total |
| $ | 5,892,184 |
| 100.0 | % |
| $ | 4,113,270 |
| 100.0 | % |
| $ | 1,778,914 |
| 43.2 |
|
(1)Consists of consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, personal protective equipment and vitamins.
(2)Consists of practice management software and other value-added products, which are distributed primarily to health care providers, and financial services on a non-recourse basis, e-services, continuing education services for practitioners, consulting and other services.
(3)Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in connection with the Animal Health Spin-off, which ended in December 2020. See Note-18 Related Party Transactions for further information.
The 43.2% increase in net sales for the six months ended June 26, 2021 includes an increase of 39.8% in local currency revenue (35.6% increase in internally generated revenue and 4.2% growth from acquisitions) and an increase of 3.4% related to foreign currency exchange. Excluding sales of products under the transition services agreement with Covetrus, our net sales increased 44.7%, including an increase in local currency revenue of 41.2% (37.0% increase in internally generated revenue and 4.2% growth from acquisitions) and an increase of 3.5% related to foreign currency exchange. Sales for the six months ended June 26, 2021 benefited from sales of PPE and COVID-19 related products of approximately $811.7 million, an increase of 125.9% versus the prior year. Excluding PPE and COVID-19 related products, the increase in internally generated local currency sales was 28.8%. Net sales in the prior year were adversely affected by the COVID-19 pandemic, which significantly impacted global business and dramatically reduced demand for dental products and certain medical products in the second quarter of 2020. On a comparable basis to the six months ended June 29, 2019, our net sales for the six months ended June 26, 2021 increased by 16.3% in local currency.
The 53.1% increase in dental net sales for the six months ended June 26, 2021 includes an increase of 47.6% local currency revenue (42.2% increase in internally generated revenue and 5.4% growth from acquisitions) and an increase of 5.5% related to foreign currency exchange. The 47.6% increase in local currency sales was attributable to an increase in dental consumable merchandise revenue of 49.4% (42.7% increase in internally generated revenue and 6.7% growth from acquisitions), and an increase in dental equipment sales and service revenues of 41.1% (40.4% increase in internally generated revenue and 0.7% growth from acquisitions). The COVID-19 pandemic began to adversely impact our worldwide dental revenue beginning in mid-March of 2020 as many dental offices progressively closed or began seeing a limited number of patients. However, in the second half of the quarter ended June 27, 2020 and continuing through the second quarter of 2021 patient traffic levels returned to levels approaching pre-pandemic levels, thus contributing to growth in worldwide dental revenues. Additionally, global dental sales for the six months ended June 26, 2021 benefited from sales of PPE and COVID-19 related products of approximately $351.1 million, an increase of 80.0% versus the prior year. Excluding PPE and COVID-19 related products, the increase in internally generated local currency dental sales was 41.9%. On a comparable basis to the six months ended June 29, 2019, our dental net sales for the six months ended June 26, 2021 increased by 10.7% in local currency.
44
The 33.8% increase in medical net sales for the six months ended June 26, 2021 is attributable to an increase of 33.5% local currency growth (31.4% increase in internally generated revenue and 2.1% growth from acquisitions) and an increase of 0.3% related to foreign currency exchange. Economic conditions relating to the COVID-19 pandemic have had less of an impact on the performance of our medical group versus dental, in part due to continued strong sales of PPE, such as masks, gowns and face shields, and other COVID-19 related products, such as diagnostic test kits. Globally, our medical business recorded sales of $460.6 million sales of such PPE and other COVID-19 related products for the six months ended June 26, 2021, an increase of approximately 180.5% compared to the prior year. Excluding sales of PPE and other COVID-19 related products, medical internal sales in local currencies increased by 12.0%. On a comparable basis to the six months ended June 29, 2019, our medical net sales for the six months ended June 26, 2021 increased by 33.3% in local currency.
The 24.4% increase in technology and value-added services net sales for the six months ended June 26, 2021 is attributable to an increase of 22.5% in local currency revenue (16.7% increase in internally generated revenue and 5.8% growth from acquisitions) and 1.9% related to foreign currency exchange. Sales growth was driven by our practice management business, as well as strong financial services revenue, which benefitted from dental equipment sales growth. Net sales in the prior year were adversely affected by the COVID-19 pandemic, which significantly impacted transactional software revenues. On a comparable basis to the six months ended June 29, 2019, our technology and value-added services net sales for the six months ended June 26, 2021 increased by 10.4% in local currency.
Gross Profit
Gross profit and gross margin percentages by segment and in total for the six months ended June 26, 2021 and June 27, 2020 were as follows (in thousands):
|
|
| June 26, |
| Gross |
| June 27, |
| Gross |
| Increase/(Decrease) | ||||||||
|
|
| 2021 |
| Margin % |
| 2020 |
| Margin % |
| $ |
| % | ||||||
Health care distribution |
| $ | 1,574,825 |
| 28.1 | % |
| $ | 1,034,358 |
| 27.0 | % |
| $ | 540,467 |
| 52.3 | % | |
Technology and value-added services |
|
| 205,777 |
| 69.7 |
|
|
| 164,768 |
| 69.5 |
|
|
| 41,009 |
| 24.9 |
| |
| Total excluding Corporate TSA revenues |
|
| 1,780,602 |
| 30.2 |
|
|
| 1,199,126 |
| 29.4 |
|
|
| 581,476 |
| 48.5 |
|
Corporate TSA revenues |
|
| - |
| - |
|
|
| 1,154 |
| 2.8 |
|
|
| (1,154) |
| - |
| |
| Total |
| $ | 1,780,602 |
| 30.2 |
|
| $ | 1,200,280 |
| 29.2 |
|
| $ | 580,322 |
| 48.3 |
|
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. Additionally, we realize substantially higher gross margin percentages in our technology and value-added services segment than in our health care distribution segment. These higher gross margins result from being both the developer and seller of software products and services, as well as certain financial services. The software industry typically realizes higher gross margins to recover investments in research and development.
During December 2020, our previous transition services agreement with Covetrus, in connection with the completion of the Animal-Health Spin-off, concluded. Under this agreement, Covetrus had agreed to purchase certain products from us at a mark-up that ranged from 3% to 6% of our product cost to cover handling costs.
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. For example, sales of our private label products achieve gross profit margins that are higher than average. 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 at greater frequencies.
45
Health care distribution gross profit increased $540.5 million, or 52.3%, for the six months ended June 26, 2021 compared to the prior year period. Health care distribution gross profit margin increased to 28.1% for the six months ended June 26, 2021 from 27.0% for the comparable prior year period, primarily due to lower adjustments recorded for PPE inventory. Such adjustments to inventory may recur and adversely impact gross profit margins in future periods, although we do not expect further material inventory adjustments in 2021. The increase in the health care distribution gross profit margin is also attributable to an increase in vendor rebates during the first six months of 2021 due to increased purchase volumes. The overall increase in our health care distribution gross profit is attributable to a $445.6 million increase in internally generated revenue, $53.9 million additional gross profit from acquisitions and an increase of $41.0 million in gross profit due to the increase in the gross margin rates.
Technology and value-added services gross profit increased $41.0 million, or 24.9%, for the six months ended June 26, 2021 compared to the prior year period. The overall increase in our Technology and value-added services gross profit is attributable to an increase of $30.4 million in internally generated revenue and $11.0 million additional gross profit from acquisitions, partially offset by a $0.4 million decline in gross profit. Technology and value-added services gross profit margin increased to 69.7% for the six months ended June 26, 2021 from 69.5% for the comparable prior year period.
Selling, General and Administrative
Selling, general and administrative expenses by segment and in total for the six months ended June 26, 2021 and June 27, 2020 were as follows (in thousands):
|
|
|
|
|
| % of |
|
|
|
| % of |
|
|
|
|
|
| ||
|
|
| June 26, |
| Respective |
| June 27, |
| Respective |
| Increase | ||||||||
|
|
| 2021 |
| Net Sales |
| 2020 |
| Net Sales |
| $ |
| % | ||||||
Health care distribution |
| $ | 1,195,132 |
| 21.4 | % |
| $ | 912,693 |
| 23.8 | % |
| $ | 282,439 |
| 30.9 | % | |
Technology and value-added services |
|
| 145,196 |
| 49.2 |
|
|
| 121,155 |
| 51.1 |
|
|
| 24,041 |
| 19.8 |
| |
| Total |
| $ | 1,340,328 |
| 22.7 |
|
| $ | 1,033,848 |
| 25.1 |
|
| $ | 306,480 |
| 29.6 |
|
Selling, general and administrative expenses (including restructuring costs in the six months ended June 26, 2021 and June 27, 2020) increased $306.5 million, or 29.6%, for the six months ended June 26, 2021 from the comparable prior year period. In the prior year, there were significant cost-saving measures taken in response to the COVID-19 pandemic. These cost-saving measures were temporary and substantially ended during the second half of 2020.
The $282.4 million increase in selling, general and administrative expenses within our health care distribution segment for the six months ended June 26, 2021 as compared to the prior year period was attributable to an increase of $251.5 million of operating costs and an increase of $47.8 million of additional costs from acquired companies, partially offset by a decrease of $16.9 million in restructuring costs. The $24.0million increase in selling, general and administrative expenses within our technology and value-added services segment for the six months ended June 26, 2021 as compared to the prior year period was attributable to an increase of $15.1 million of operating costs and an increase of $9.2 million of additional costs from acquired companies, partially offset by a decrease of $0.3 million in restructuring costs. As a percentage of net sales, selling, general and administrative expenses decreased to 22.7% from 25.1% for the comparable prior year period, primarily due to the increased sales base.
As a component of total selling, general and administrative expenses, selling expenses increased $164.2 million, or 26.0% to $794.5 million, for the six months ended June 26, 2021 from the comparable prior year period, primarily due to an increase in payroll and payroll related costs. As a percentage of net sales, selling expenses decreased to 13.5% from 15.3% for the comparable prior year period, primarily due to the increased sales base.
As a component of total selling, general and administrative expenses, general and administrative expenses increased $142.3 million, or 35.3% to $545.8 million, for the six months ended June 26, 2021 from the comparable prior year period, primarily due to an increase in payroll and payroll related costs. As a percentage of net sales, general and administrative expenses decreased to 9.2% from 9.8% for the comparable prior year period, primarily due to the increased sales base.
46
Other Expense, Net
Other expense, net, for the six months ended June 26, 2021 and June 27, 2020 was as follows (in thousands):
|
|
| June 26, |
| June 27, |
| Variance | ||||||
|
|
| 2021 |
| 2020 |
| $ |
| % | ||||
Interest income |
| $ | 3,340 |
| $ | 5,187 |
| $ | (1,847) |
| (35.6) | % | |
Interest expense |
|
| (12,861) |
|
| (18,298) |
|
| 5,437 |
| 29.7 |
| |
Other, net |
|
| 663 |
|
| (511) |
|
| 1,174 |
| 229.7 |
| |
| Other expense, net |
| $ | (8,858) |
| $ | (13,622) |
| $ | 4,764 |
| 35.0 |
|
Interest income decreased $1.8 million primarily due to lower interest rates and reduced late fee income. Interest expense decreased $5.4 million primarily due to reduced credit line borrowings and lower interest rates on certain of our private placement borrowings.
Income Taxes
For the six months ended June 26, 2021, our effective tax rate was 24.3% compared to 24.2% for the prior year period. The difference between our effective tax rate and the federal statutory tax rate for the six months ended June 26, 2021, was primarily due to state and foreign income taxes, interest expense and tax charges and credits associatedwith legal entity
47
Liquidity and Capital Resources
Our principal capital requirements have included funding of acquisitions, purchasesof additional noncontrolling
The pandemic and the governmental responses to it had a material adverseeffect on our cash flows in the second
We finance our business primarily through cash generated from our operations, revolving credit facilities and debt
Our business requires a substantial investment in working capital, whichis susceptible to fluctuations during the
We finance our business to provide adequate funding for at least 12 months.Funding requirements are based on
We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,
Net cash from continuing operations provided by operating activities was$63.3 $221.7 million for the threesix months ended
Net cash from continuing operations used in investing activities was$223.2 $341.1 million for the threesix months ended
Net cash from continuing operations used in financing activities was $119.4$139.4 million for the threesix months ended
48
The following table summarizes selected measures of liquidity and capitalresources (in thousands):
|
|
|
| June 26, |
| December 26, | ||
|
|
|
| 2021 |
| 2020 | ||
Cash and cash equivalents |
| $ | 167,228 |
| $ | 421,185 | ||
Working capital (1) |
|
| 1,648,607 |
|
| 1,508,313 | ||
|
|
|
|
|
|
|
|
|
Debt: |
|
|
|
|
|
| ||
| Bank credit lines |
| $ | 72,105 |
| $ | 73,366 | |
| Current maturities of long-term debt |
|
| 9,839 |
|
| 109,836 | |
| Long-term debt |
|
| 706,487 |
|
| 515,773 | |
|
| Total debt |
| $ | 788,431 |
| $ | 698,975 |
|
|
|
|
|
|
|
|
|
Leases: |
|
|
|
|
|
| ||
| Current operating lease liabilities |
| $ | 75,008 |
| $ | 64,716 | |
| Non-current operating lease liabilities |
|
| 243,232 |
|
| 238,727 | |
|
|
|
|
|
|
|
|
|
(1) | At June 26, 2021 and December 26, 2020, there were no trade accounts receivable that were restricted to settle obligations of this VIE, nor were there liabilities of the VIE where the creditors have recourse to us. | |||||||
Our cash and cash equivalents consist of bank balances and investmentsin money market funds representing
Accounts receivable days sales outstanding and inventory turns
Our accounts receivable days sales outstanding from operations decreasedto 42.842.3 days as of March 27,June 26, 2021 from
Bank Credit Lines
Bank credit lines consisted of the following:
|
|
| June 26, |
| December 26, | ||
|
|
| 2021 |
| 2020 | ||
Revolving credit agreement |
| $ | - |
| $ | - | |
Other short-term bank credit lines |
|
| 72,105 |
|
| 73,366 | |
Total |
| $ | 72,105 |
| $ | 73,366 | |
Revolving Credit Agreement
On April 18, 2017, we entered into a $750 million revolving credit agreement(the (the “Credit Agreement”), which
49
On April 17, 2020, we amended the Credit Agreement to, among otherthings, (i) modify the financial covenant
364-Day Credit Agreement
On March 4, 2021, we repaid the outstanding obligations and terminatedthe lender commitments under our $700
Other Short-Term CreditLines
As of March 27,June 26, 2021 and December 26, 2020, we had various other short-termbank credit lines available, of
Long-term debt
Long-term debt consisted of the following:
|
|
| June 26, |
| December 26, | ||
|
|
| 2021 |
| 2020 | ||
Private placement facilities |
| $ | 706,332 |
| $ | 613,498 | |
Note payable |
|
| - |
|
| 1,554 | |
Various collateralized and uncollateralized loans payable with interest, |
|
|
|
|
|
| |
| in varying installments through 2023 at interest rates |
|
|
|
|
|
|
| ranging from 2.45% to 4.27% at June 26, 2021 and |
|
|
|
|
|
|
| ranging from 2.62% to 4.27% at December 26, 2020 |
|
| 4,293 |
|
| 4,596 |
Finance lease obligations (see Note 6) |
|
| 5,701 |
|
| 5,961 | |
| Total |
|
| 716,326 |
|
| 625,609 |
Less current maturities |
|
| (9,839) |
|
| (109,836) | |
| Total long-term debt |
| $ | 706,487 |
| $ | 515,773 |
50
Private Placement Facilities
Our private placement facilities, with three insurance companies,have a total facility amount of $1 billion, and are
On March 5, 2021, we amended the private placement facilitiesto, among other things, (a) modify the financial
The components of our private placement facility borrowings asof March 27,June 26, 2021 are presented in the following
|
|
|
|
|
|
|
|
|
|
| Amount of |
|
|
|
|
| |
|
| Borrowing |
| Borrowing |
|
| ||
Date of Borrowing |
| Outstanding |
| Rate |
| Due Date | ||
January 20, 2012 (1) |
| $ | 7,143 |
| 3.09 | % |
| January 20, 2022 |
January 20, 2012 |
|
| 50,000 |
| 3.45 |
|
| January 20, 2024 |
December 24, 2012 |
|
| 50,000 |
| 3.00 |
|
| December 24, 2024 |
June 16, 2017 |
|
| 100,000 |
| 3.42 |
|
| June 16, 2027 |
September 15, 2017 |
|
| 100,000 |
| 3.52 |
|
| September 15, 2029 |
January 2, 2018 |
|
| 100,000 |
| 3.32 |
|
| January 2, 2028 |
September 2, 2020 |
|
| 100,000 |
| 2.35 |
|
| September 2, 2030 |
June 2, 2021 |
|
| 100,000 |
| 2.48 |
|
| June 2, 2031 |
June 2, 2021 |
|
| 100,000 |
| 2.58 |
|
| June 2, 2033 |
Less: Deferred debt issuance costs |
|
| (811) |
|
|
|
|
|
|
| $ | 706,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Annual repayments of approximately $7.1 million for this borrowing commenced on January 20, 2016. | ||||||||
U.S. Trade Accounts Receivable Securitization
We have a facility agreement with a bank, as agent, based on the securitization of our U.S. trade accounts
If our accounts receivable collection pattern changes due to customers eitherpaying late or not making payments,
We are required to pay a commitment fee of 25 to 45 basis points depending upon program utilization.
51
Leases
We have operating and finance leases for corporate offices, office space, distribution and other facilities, vehicles,
Stock Repurchases
On March 8, 2021, we announced the reinstatement of our share repurchaseprogram.
From March 3, 2003 through March 27,June 26, 2021, we repurchased $3.7$3.8 billion,or 76,888,53178,430,846 shares, under our
Redeemable Noncontrolling Interests
Some minority stockholders in certain of our subsidiaries have the right,at certain times, to require us to acquire
|
|
| June 26, |
| December 26, | ||
|
|
| 2021 |
| 2020 | ||
Balance, beginning of period |
| $ | 327,699 |
| $ | 287,258 | |
Decrease in redeemable noncontrolling interests due to |
|
|
|
|
|
| |
| redemptions |
|
| (1,130) |
|
| (17,241) |
Increase in redeemable noncontrolling interests due to business |
|
|
|
|
|
| |
| acquisitions |
|
| 140,155 |
|
| 28,387 |
Net income attributable to redeemable noncontrolling interests |
|
| 14,033 |
|
| 13,363 | |
Dividends declared |
|
| (9,954) |
|
| (12,631) | |
Effect of foreign currency translation gain (loss) attributable to |
|
|
|
|
|
| |
| redeemable noncontrolling interests |
|
| 570 |
|
| (4,279) |
Change in fair value of redeemable securities |
|
| 132,708 |
|
| 32,842 | |
Balance, end of period |
| $ | 604,081 |
| $ | 327,699 | |
Changes in the estimated redemption amounts of the noncontrollinginterests subject to put options are adjusted at
Additionally, some prior owners of such acquired subsidiaries are eligible to receive additional purchase price cash
Noncontrolling Interests
Noncontrolling interests represent our less than 50% ownership interestin an acquired subsidiary. Our net income
52
Critical Accounting Policies and Estimates
There have been no material changes in our critical accounting policies andestimates from those disclosed in Item
Our financial results for the threesix months ended MarchJune 27, 20212020 wereaffected by certain estimates we made due to
Accounting Standards Update
For a discussion of accounting standards updates that have been adoptedor will be adopted, see
ITEM 3.QUANTITATIVEAND QUALITATIVEDISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market riskfrom that disclosed in Item 7A of our Annual
53
ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, includingour principal executive officer and
Changes in Internal Control over Financial Reporting
The combination of acquisitions, and continued acquisition integrations and system implementation undertaken
During the quarter ended March 27,June 26, 2021, we completed the acquisitionacquisitions of a technology and value added-services business and a dental and medical businesses in North
Also, during the quarter ended June 26, 2021, we completed systems implementation activities to upgrade the equipment system for our U.S. dental and medical businesses representing aggregate projected annual revenues of approximately $960 million.
All acquisitions, and continued acquisition integrations and system implementation involve necessaryand appropriate change-management
In addition, as a result of a combination of continued governmental imposedand Company directed closures of
Limitations of the Effectiveness of Internal Control
A control system, no matter how well conceived and operated, can provideonly reasonable, not absolute, assurance
54
PARTII.OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
For a discussion of Legal Proceedings, see
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed inPart 1, Item 1A, of our Annual Report on
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIESAND USE OF PROCEEDS
Purchases of equity securities by the issuer
Our share repurchase program announced on March 3, 2003
On March 8, 2021, we announced the reinstatement of our share repurchaseprogram.
As of March 27,June 26, 2021, we had repurchased approximately $3.7$3.8 billion of commonstock (76,888,531(78,430,846 shares) under
The following table summarizes repurchases of our common stockunder our stock repurchase program during the
|
|
|
|
|
|
|
| Total Number |
| Maximum Number |
|
|
| Total |
|
|
|
| of Shares |
| of Shares |
|
|
| Number |
| Average |
| Purchased as Part |
| that May Yet | |
|
|
| of Shares |
| Price Paid |
| of Our Publicly |
| Be Purchased Under | |
Fiscal Month |
| Purchased (1) |
| Per Share |
| Announced Program |
| Our Program (2) | ||
3/28/21 through 4/24/2021 |
| 744,696 |
| $ | 69.25 |
| 744,696 |
| 6,210,991 | |
4/25/21 through 5/29/2021 |
| 528,823 |
|
| 75.98 |
| 528,823 |
| 5,533,921 | |
5/30/21 through 6/26/2021 |
| 268,796 |
|
| 77.38 |
| 268,796 |
| 5,332,623 | |
|
| 1,542,315 |
|
|
|
| 1,542,315 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) All repurchases were executed in the open market under our existing publicly announced authorized program. | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
(2) The maximum number of shares that may yet be purchased under this program is determined at the end of each month based on the closing price of our common stock at that time. This table excludes shares withheld from employees to satisfy minimum tax withholding requirements for equity-based transactions. | ||||||||||
55
ITEM 6.EXHIBITS
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+ | ||
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+ | ||
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+ | ||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document+ | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document+ | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document+ | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document+ | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document+ | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document+ | |
104 | The cover page of Henry Schein, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 26, 2021, formatted in Inline XBRL (included within Exhibit 101 attachments).+ |
8,
56
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, theRegistrant has duly caused this Report to
Henry Schein, Inc. | |
(Registrant) | |
By: /s/ Steven Paladino | |
Steven Paladino | |
Executive Vice President and | |
Chief Financial Officer | |
(Authorized Signatory and Principal Financial | |
and Accounting Officer) |
Dated: August 3, 2021
57