UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
☒
 
QUARTERLY
 
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the
quarterly
 
period ended
June 25,September 24, 2022
or
☐
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
ACT
 
OF 1934
For the transition period from ____________ to ____________
Commission File Number:
 
0-27078
HENRY SCHEIN, INC.
(Exact name of registrant as specified in its charter)
Delaware
11-3136595
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
135 Duryea Road
Melville
,
New York
(Address of principal executive offices)
11747
(Zip Code)
(
631
)
843-5500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $.01 per share
HSIC
The Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required
 
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
 
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
 
past 90 days.
Yes
☒
 
No
 
☐
Indicate by
 
check mark
 
whether the registrant
 
has submitted
 
electronically every Interactive
 
Data File
 
required to
 
be submitted
pursuant
 
to
 
Rule
 
405
 
of
 
Regulation
 
S-T
 
during
 
the
 
preceding
 
12
 
months
 
(or
 
for
 
such
 
shorter
 
period
 
that
 
the
 
registrant
 
was
required to submit such files).
Yes
☒
 
No
 
☐
Indicate by
 
check mark
 
whether the
 
registrant is
 
a large
 
accelerated filer,
 
an accelerated
 
filer,
 
a non-accelerated
 
filer,
 
a smaller
reporting
 
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer,”
“smaller reporting company,” and “emerging growth company”
 
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
 
☐
 
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
 
for
complying with any new or revised financial accounting standards provided
 
pursuant to Section 13(a) of the Exchange Act.
 
☐
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
☐
 
No
☒
As of July 25,October 24, 2022,
there were
136,114,744135,547,575
 
shares of the registrant’s common stock outstanding.
 
HENRY SCHEIN, INC.
INDEX
Page
3
4
5
6
7
8
9
9
10
11
12
13
15
17
19
20
21
24
24
26
2627
2728
2728
2829
4346
4346
4447
4447
44
4447
4548
4649
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
3
PART
 
I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions,
 
except share data)
June 25,September 24,
December 25,
2022
2021
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
 
$
108123
$
118
Accounts receivable, net of reserves of $
63
 
and $
67
1,4091,507
1,452
Inventories, net
1,8231,818
1,861
Prepaid expenses and other
 
449509
413
Total current assets
 
3,7893,957
3,844
Property and equipment, net
 
356354
366
Operating lease right-of-use assets
327319
325
Goodwill
 
2,8332,870
2,854
Other intangibles, net
 
603635
668
Investments and other
416399
424
Total assets
 
$
8,3248,534
$
8,481
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
 
$
901957
$
1,054
Bank credit lines
 
85107
51
Current maturities of long-term debt
 
4
11
Operating lease liabilities
7472
76
Accrued expenses:
Payroll and related
 
328330
385
Taxes
 
124127
137
Other
 
560549
593
Total current liabilities
 
2,0762,146
2,307
Long-term debt
 
769934
811
Deferred income taxes
 
3337
42
Operating lease liabilities
276271
268
Other liabilities
 
357338
377
Total liabilities
 
3,5113,726
3,805
Redeemable noncontrolling interests
 
586563
613
Commitments and contingencies
 
(nil)
(nil)
Stockholders' equity:
Preferred stock, $
0.01
 
par value,
1,000,000
 
shares authorized,
NaNnone
 
outstanding
0-
0-
Common stock, $
0.01
 
par value,
480,000,000
 
shares authorized,
136,439,560135,258,887
 
outstanding on June 25,September 24, 2022 and
137,145,558
 
outstanding on December 25, 2021
1
1
Additional paid-in capital
0-
0-
Retained earnings
 
3,8343,922
3,595
Accumulated other comprehensive loss
 
(241)(312)
(171)
Total Henry Schein, Inc. stockholders' equity
3,5943,611
3,425
Noncontrolling interests
633634
638
Total stockholders' equity
 
4,2274,245
4,063
Total liabilities, redeemable noncontrolling
 
interests and stockholders' equity
$
8,3248,534
$
8,481
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
4
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENTS
 
OF INCOME
(unaudited, in millions, except share and per share data)
Three Months Ended
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,September 24,
JuneSeptember 25,
June 26,
2022
2021
2022
2021
Net sales
 
$
3,0303,067
$
2,9673,178
$
6,2099,276
$
5,8929,070
Cost of sales
 
2,0852,153
2,0762,266
4,2916,444
4,1106,376
Gross profit
 
945914
891912
1,9182,832
1,7822,694
Operating expenses:
Selling, general and administrative
 
680648
635657
1,3622,010
1,2491,906
Depreciation and amortization
45
4544
92137
89133
Restructuring and integration costs
010
1-
010
4
Operating income
220211
210211
464675
440651
Other income (expense):
Interest income
 
34
12
9
5
3
Interest expense
 
(9)(11)
(7)
(16)(27)
(13)(20)
Other, net
 
01
-
1
0
1
Income before taxes, equity in earnings of affiliates
and noncontrolling interests
214
205
453206
431658
637
Income taxes
(52)(46)
(47)(50)
(109)(155)
(104)(154)
Equity in earnings of affiliates
 
53
6
912
1218
Gain on sale of equity investment
-
7
-
7
Net income
167162
164169
353515
339508
Less: Net income attributable to noncontrolling interests
(12)
(7)
(8)(24)
(12)
(17)(24)
Net income attributable to Henry Schein, Inc.
$
160150
$
156162
$
341491
$
322484
Earnings per share attributable to Henry Schein, Inc.:
Basic
 
$
1.171.10
$
1.111.16
$
2.493.59
$
2.283.44
Diluted
 
$
1.161.09
$
1.101.15
$
2.463.55
$
2.263.40
Weighted-average common
 
shares outstanding:
Basic
 
137,350,488135,608,678
140,358,428139,377,237
137,323,076136,731,413
141,316,258140,661,182
Diluted
 
138,869,064137,084,049
141,656,883141,079,337
139,055,205138,488,254
142,537,906142,178,702
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
5
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENTS
 
OF COMPREHENSIVE INCOME
(unaudited, in millions)
Three Months Ended
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,September 24,
JuneSeptember 25,
June 26,
2022
2021
2022
2021
Net income
$
167162
$
164169
$
353515
$
339508
Other comprehensive income (loss),loss, net of tax:
Foreign currency translation gain (loss)loss
(90)(89)
38(40)
(87)(176)
0(40)
Unrealized gain (loss) from foreign currency hedging
activities
 
811
(2)4
920
15
Pension adjustment gain
01
0-
01
1
Other comprehensive income (loss),loss, net of tax
(82)(77)
36(36)
(78)(155)
2(34)
Comprehensive income
 
85
200133
275360
341474
Comprehensive income attributable to noncontrolling
 
interests:
 
Net income
(12)
(7)
(8)(24)
(12)
(17)(24)
Foreign currency translation (gain) loss
96
(7)5
814
(1)4
Comprehensive (income) lossincome attributable to noncontrolling
interests
 
2(6)
(15)(2)
(4)(10)
(18)(20)
Comprehensive income attributable to Henry Schein, Inc.
 
$
8779
$
185131
$
271350
$
323454
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
��
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
6
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENT
 
OF CHANGES IN
 
STOCKHOLDERS’ EQUITY
(unaudited, in millions, except share and per share data)
Accumulated
Common Stock
Additional
Other
Total
$0.01 Par Value
Paid-in
Retained
Comprehensive
Noncontrolling
Stockholders'
Shares
Amount
Capital
Earnings
Income / (Loss)
 
Interests
Equity
Balance, March 26,June 25, 2022
137,708,809136,439,560
$
1
$
0-
$
3,7593,834
$
(168)(241)
$
632633
$
4,2244,227
Net income (excluding $
510
 
attributable to Redeemable
noncontrolling interests)
-
0-
0-
160150
0-
2
162152
Foreign currency translation loss (excluding loss of $
86
attributable to Redeemable noncontrolling interests)
-
0-
0-
0-
(81)(83)
(1)-
(82)(83)
Unrealized gain from foreign currency hedging activities,
net of tax of $
24
-
0-
0-
0-
811
0-
811
Pension adjustment gain, net of tax of $
1
-
-
-
-
1
-
1
Dividends paid
-
-
-
-
-
(1)
(1)
Change in fair value of redeemable securities
-
0-
1011
0-
0-
0-
1011
RepurchaseRepurchases and retirement of common stock
(1,345,397)(1,183,729)
0-
(16)(12)
(94)(78)
0-
0-
(110)(90)
Stock-based compensation expense
78,7383,640
0-
1517
0-
0-
0-
1517
Stock issued upon exercise of stock options
3,594597
0-
0-
0-
0-
0-
0-
Shares withheld for payroll taxes
(6,016)(1,194)
0-
(1)
0-
0-
0-
(1)
Settlement of stock-based compensation awards
(168)13
0-
1
0-
0-
0-
1
Transfer of charges in excess of
 
capital
-
0-
(9)(16)
916
0-
0-
0-
Balance, June 25,September 24, 2022
136,439,560135,258,887
$
1
$
0-
$
3,8343,922
$
(241)(312)
$
633634
$
4,2274,245
Accumulated
Common Stock
Additional
Other
Total
$0.01 Par Value
Paid-in
Retained
Comprehensive
Noncontrolling
Stockholders'
Shares
Amount
Capital
Earnings
Income / (Loss)
 
Interests
Equity
Balance, March 27, 2021
141,310,113
$
1
$
0
$
3,493
$
(136)
$
639
$
3,997
Net income (excluding $
7
attributable to Redeemable
noncontrolling interests)
-
0
0
156
0
1
157
Foreign currency translation gain (excluding gain of $
7
attributable to Redeemable noncontrolling interests)
-
0
0
0
31
0
31
Unrealized loss from foreign currency hedging activities,
net of tax of $
0
-
0
0
0
(2)
0
(2)
Change in fair value of redeemable securities
-
0
(87)
0
0
0
(87)
Initial noncontrolling interests and adjustments related to
business acquisitions
-
0
0
0
0
6
6
Repurchase and retirement of common stock
(1,542,315)
0
(15)
(97)
0
0
(112)
Stock-based compensation expense
-
0
17
0
0
0
17
Stock issued upon exercise of stock options
17,916
0
0
0
0
0
0
Shares withheld for payroll taxes
(4,873)
0
0
0
0
0
0
Settlement of stock-based compensation awards
-
0
(1)
0
0
0
(1)
Transfer of charges in excess of
capital
-
0
86
(86)
0
0
0
Balance, June 26, 2021
139,780,841
$
1
$
0-
$
3,466
$
(107)
$
646
$
4,006
Net income (excluding $
5
attributable to Redeemable
noncontrolling interests)
-
-
-
162
-
2
164
Foreign currency translation loss (excluding loss of $
5
attributable to Redeemable noncontrolling interests)
-
-
-
-
(35)
-
(35)
Unrealized gain from foreign currency hedging activities,
net of tax of $
1
-
-
-
-
4
-
4
Change in fair value of redeemable securities
-
-
(11)
-
-
-
(11)
Repurchases and retirement of common stock
(651,289)
-
(7)
(43)
-
-
(50)
Stock-based compensation expense
11
-
28
-
-
-
28
Shares withheld for payroll taxes
(20)
-
-
-
-
-
-
Transfer of charges in excess of
capital
-
-
(10)
10
-
-
-
Balance, September 25, 2021
139,129,543
$
1
$
-
$
3,595
$
(138)
$
648
$
4,106
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
7
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENT
 
OF CHANGES IN
 
STOCKHOLDERS' EQUITY
(unaudited, in millions, except share and per share data)
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 25, 2021
137,145,558
$
1
$
0-
$
3,595
$
(171)
$
638
$
4,063
Net income (excluding $
919
 
attributable to Redeemable
noncontrolling interests)
 
-
0-
0-
341491
0-
35
344496
Foreign currency translation loss (excluding loss of $
713
attributable to Redeemable noncontrolling interests)
-
0-
0-
0-
(79)(162)
(1)
(80)(163)
Unrealized gain from foreign currency hedging activities,
net of tax of $
37
-
0-
0-
0-
920
0-
920
Pension adjustment gain, net of tax of $
1
-
-
-
-
1
-
1
Dividends paid
-
-
-
-
-
(1)
(1)
Purchase of noncontrolling interests
-
0-
0-
0-
0-
(7)
(7)
Change in fair value of redeemable securities
 
-
0-
718
0-
0-
0-
718
RepurchaseRepurchases and retirement of common stock
 
(1,345,397)(2,529,126)
0-
(16)(28)
(94)(172)
0-
0-
(110)(200)
Stock-based compensation expense
954,899958,539
0-
2744
0-
0-
0-
2744
Stock issued upon exercise of stock options
 
29,82730,424
0-
2
0-
0-
0-
2
Shares withheld for payroll taxes
 
(342,347)(343,541)
0-
(29)(30)
0-
0-
0-
(29)(30)
Settlement of stock-based compensation awards
(2,980)(2,967)
0-
12
0-
0-
0-
12
Transfer of charges in excess of
 
capital
-
0-
(8)
8
(8)-
0-
0
0-
Balance, June 25,September 24, 2022
136,439,560135,258,887
$
1
$
0-
$
3,8343,922
$
(241)(312)
$
633634
$
4,2274,245
Accumulated
Common Stock
Additional
Other
Total
$0.01 Par Value
Paid-in
Retained
Comprehensive
Noncontrolling
Stockholders'
Shares
Amount
Capital
Earnings
Income / (Loss)
 
Interests
Equity
Balance, December 26, 2020
142,462,571
$
1
$
0-
$
3,455
$
(108)
$
636
$
3,984
Net income (excluding $
1419
 
attributable to Redeemable
noncontrolling interests)
 
-
0-
0-
322484
0-
35
325489
Foreign currency translation loss (excluding gainloss of $
14
attributable to Redeemable noncontrolling interests)
-
0-
0-
0-
(1)(36)
0-
(1)(36)
Unrealized gain from foreign currency hedging activities,
net of tax of $
12
-
0-
0-
0-
15
0-
15
Pension adjustment gain, net of tax of $
0
-
0-
0-
0-
1
0-
1
Change in fair value of redeemable securities
 
-
0-
(133)(144)
0-
0-
0-
(133)(144)
Initial noncontrolling interests and adjustments related to
business acquisitions
-
0-
0-
0-
0-
7
7
RepurchaseRepurchases and retirement of common stock
 
(2,867,557)(3,518,846)
0-
(27)(34)
(174)(217)
0-
0-
(201)(251)
Stock-based compensation expense
299,561299,572
0-
3058
0-
0-
0-
3058
Shares withheld for payroll taxes
 
(113,734)(113,754)
0-
(7)
0-
0-
0-
(7)
Transfer of charges in excess of
 
capital
-
0-
137127
(137)(127)
0-
0-
0-
Balance, June 26,September 25, 2021
139,780,841139,129,543
$
1
$
0-
$
3,4663,595
$
(107)(138)
$
646648
$
4,0064,106
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes.
8
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENTS
 
OF CASH FLOWS
(unaudited, in millions)
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,
2022
2021
Cash flows from operating activities:
Net income
 
$
353515
$
339508
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
 
108160
99151
Gain on sale of equity investment
-
(10)
Stock-based compensation expense
2744
3058
Benefit fromProvision for (benefit from) losses on trade and other accounts receivable
 
02
(4)(9)
Provision for (benefit from)Benefit from deferred income taxes
(15)(20)
6(1)
Equity in earnings of affiliates
(9)(12)
(12)(18)
Distributions from equity affiliates
 
1012
1115
Changes in unrecognized tax benefits
 
(1)1
(6)
Other
 
(13)(25)
3-
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
 
21(93)
102(83)
Inventories
 
4(9)
(124)(208)
Other current assets
 
(37)(96)
(86)(41)
Accounts payable and accrued expenses
 
(198)(131)
(136)77
Net cash provided by operating activities
250348
222433
Cash flows from investing activities:
Purchases of fixed assets
 
(43)(67)
(32)(49)
Payments related to equity investments and business
acquisitions, net of cash acquired
 
(7)(127)
(296)(415)
Proceeds from sale of equity investments
-
10
Proceeds from (payments for) loan to affiliate
69
(2)(6)
Other
 
(15)(26)
(11)(19)
Net cash used in investing activities
 
(59)(211)
(341)(479)
Cash flows from financing activities:
Net change in bank borrowings
 
3051
(5)(13)
Proceeds from issuance of long-term debt
 
0165
200
Principal payments for long-term debt
 
(57)(58)
(120)(122)
Debt issuance costs
-
(2)
Proceeds from issuance of stock upon exercise of stock options
 
2
0-
Payments for repurchases and retirement of common stock
 
(110)(200)
(201)(251)
Payments for taxes related to shares withheld for employee taxes
(29)(30)
(8)(7)
Distributions to noncontrolling shareholders
(12)(18)
(4)(9)
Acquisitions of noncontrolling interests in subsidiaries
 
(19)(33)
(1)(50)
Net cash used in financing activities
(195)(121)
(139)(254)
Effect of exchange rate changes on cash and cash equivalents
(6)(11)
4(2)
Net change in cash and cash equivalents
(10)5
(254)(302)
Cash and cash equivalents, beginning of period
 
118
421
Cash and cash equivalents, end of period
 
$
108123
$
167119
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
9
Note 1 – Basis of Presentation
Our condensed consolidated financial statements include the accounts of Henry
 
Schein, Inc. and all of our
controlled subsidiaries (“we”, “us” or “our”).
 
All intercompany accounts and transactions are eliminated
 
in
consolidation.
 
Investments in unconsolidated affiliates in which we have the ability to
 
influence the operating or
financial decisions are accounted for under the equity method.
 
Certain prior period amounts have been reclassified
to conform to the current period presentation.
Our accompanying unaudited condensed consolidated financial statements
 
have been prepared in accordance with
accounting principles generally accepted in the United States
 
(“U.S. GAAP”) for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
 
Accordingly, they do not include all of the
information and footnote disclosures required by U.S. GAAP for complete
 
financial statements.
The unaudited interim condensed consolidated financial statements should be
 
read in conjunction with the audited
consolidated financial statements and notes to the consolidated financial
 
statements contained in our Annual Report
on Form 10-K for the year ended December 25, 2021 and with the information
 
contained in our other publicly-
available filings with the Securities and Exchange Commission.
 
The condensed consolidated financial statements
reflect all adjustments considered necessary for a fair presentation of
 
the consolidated results of operations and
financial position for the interim periods presented.
 
All such adjustments are of a normal recurring nature.
 
The preparation of financial statements in conformity with accounting principles
 
generally accepted in the United
States requires us to make estimates and assumptions that affect the reported amounts of
 
assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
 
statements and the reported amounts of
revenues and expenses during the reporting period.
 
Actual results could differ from those estimates.
 
The results of
operations for the sixnine months ended June 25,September 24, 2022 are not necessarily indicative
 
indicative of the results to be expected for
for any other interim period or for the year ending December 31, 2022.
We consolidate the results of operations and financial position of a trade accounts receivable securitization which
we consider a Variable Interest Entity (“VIE”) because we are the primary beneficiary, and we have the power to
direct activities that most significantly affect the economic performance and have
 
the obligation to absorb the
majority of the losses or benefits.
 
For this VIE, the trade accounts receivable transferred to the VIE
 
are pledged as
collateral to the related debt.
 
The creditors have recourse to us for losses on these trade accounts
 
receivable.
 
At
June 25,September 24, 2022 and December 25, 2021, certain trade accounts receivable
 
that can only be used to settle obligations
obligations of this VIE were $
76313
 
million and $
138
 
million, respectively, and the liabilities of this VIE where the
creditors have
recourse to us were $
60225
 
million and $
105
 
million, respectively.
Our condensed consolidated financial statements reflect estimates and
 
assumptions made by us that affect, among
other things, our goodwill, long-lived asset and definite-lived intangible
 
asset valuation; inventory valuation; equity
investment valuation; assessment of the annual effective tax rate; valuation of
 
deferred income taxes and income
tax contingencies; the allowance for doubtful accounts; hedging activity;
 
supplier rebates; measurement of
compensation cost for certain share-based performance awards and cash bonus
 
plans; and pension plan
assumptions.
 
Due to the significant uncertainty surrounding the future impact of
 
COVID-19, our judgments
regarding estimates and impairments could change in the future.
 
There is an ongoing risk that the COVID-19
pandemic may again have a material adverse effect on our business, results of operations
 
and cash flows and may
result in a material adverse effect on our financial condition and liquidity.
 
However, the extent of the potential
impact cannot be reasonably estimated at this time
.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
10
Note 2 – Critical Accounting Policies, Accounting Pronouncements Adopted
 
and Recently Issued Accounting
Standards
Critical Accounting Policies
 
There have been no material changes in our critical accounting policies
 
during the sixnine months ended June 25,September
24, 2022,
as compared to the critical accounting policies described in Item 7
of our Annual
Report on Form 10-K
for the year
ended December 25, 2021.
Accounting Pronouncements Adopted
On
December 26, 2021
 
we adopted Accounting Standards Update (“ASU”) No. 2021 – 08, “Accounting
 
for
Contract Assets and Contract Liabilities from Contracts with Customers”
 
(Subtopic 805), as early adoption of this
ASU was permitted..
 
ASU 2021 – 08 requires
an acquirer to recognize and measure
contract assets and contract
liabilities acquired
in a business combination in
accordance with Topic 606.
 
At the acquisition date, an acquirer
should account for the related revenue
contracts in
accordance with Topic 606 as if it had originated the contracts.
 
To achieve this, an acquirer may assess how the
acquiree applied Topic 606 to determine what to record for the
acquired revenue contracts.
 
Generally, this should
result in an acquirer recognizing and measuring the acquired
contract assets
and contract liabilities consistent with
how
they were recognized and measured in the acquiree’s
financial statements.
 
Our
adoption
 
of ASU 2021 - 08 did
not have a material impact on our consolidated
financial
statements.
Recently Issued Accounting Standards
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, “Reference Rate
Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides
optional expedients and exceptions for applying U.S. GAAP to contracts,
 
hedging relationships and other
transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or
 
by another
reference rate expected to be discontinued because of reference rate reform.
 
The guidance was effective beginning
March 12, 2020 and can be applied prospectively through December 31,
 
2022.
 
In January 2021, the FASB issued
ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”).
 
ASU 2021-01 provides temporary
optional expedients and exceptions to certain guidance in U.S. GAAP
to ease
the financial reporting burdens related
to the expected market transition from LIBOR and other interbank offered rates
 
to alternative reference rates, such
as the Secured Overnight Financing Rate.
 
The guidance is effective upon issuance, on January 7, 2021, and can be
applied through December 31, 2022.
 
We do not expect that the requirements of this guidance will have a material
impact on our consolidated financial statements.
In March 2022, the FASB issued ASU No. 2022-01, “Derivatives and Hedging (Topic 815): Fair Value
 
Hedging –
Portfolio Layer Method,” which will expand companies' abilities
 
to hedge the benchmark interest rate risk of
portfolios of financial assets (or beneficial interests) in a fair value hedge.
 
This ASU expands the use of the
portfolio layer method (previously referred to as the last-of-layer
 
method) to allow multiple hedges of a single
closed portfolio of assets using spot starting, forward starting and amortizing-notional
 
swaps.
 
It also permits both
prepayable and non-prepayable financial assets to be included in the closed
 
portfolio of assets hedged in a portfolio
layer hedge.
 
This ASU further requires that basis adjustments not be allocated
 
to individual assets for active
portfolio layer method hedges, but rather be maintained on the closed portfolio
 
of assets as a whole.
 
ASU 2022 –
01 is effective for fiscal years beginning after December 15, 2022, including interim periods
 
within those fiscal
years.
 
Early adoption is permitted for any entity that has adopted the amendments
 
in ASU 2017-12.
 
We do not
expect that the requirements of this guidance will have a material impact
 
on our consolidated financial statements.
In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled
Debt Restructuring and Vintage Disclosures”.
The amendments in this ASU eliminate the accounting guidance
for
troubled debt restructurings by creditors that have adopted the Current Expected
Credit Losses model and enhance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
11
the disclosure requirements for loan refinancings and restructurings
made with borrowers experiencing financial
difficulty.
In addition, the amendments require a public business entity
to disclose current-period gross write-offs
for financing receivables and net investment in leases by year of origination
in the vintage disclosures.
ASU 2022
– 02 is effective for fiscal years beginning after December 15, 2022, including
interim periods within those fiscal
years.
Early adoption is permitted for any entity that has adopted the amendments
in ASU No. 2016-13, “Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.
We do not
expect that the requirements of this guidance will have a material impact
on our consolidated financial statements.
Note 3 – Revenue from Contracts with Customers
Revenue is recognized in accordance with policies disclosed in Item 8 of our
 
Annual Report on Form 10-K for
the year ended December 25, 2021.
Disaggregation of Net Sales
The following table disaggregates our Net sales by reportable segment and geographic
 
area:
Three Months Ended
 
SixNine Months Ended
June 25,September 24, 2022
June 25,September 24, 2022
North
America
International
Global
North
America
International
Global
Net Sales:
Health care distribution
 
Dental
 
$
1,1241,131
$
729654
$
1,8531,785
$
2,2293,360
$
1,4522,106
$
3,6815,466
Medical
 
9771,088
1918
9961,106
2,1273,215
4159
2,1683,274
Total health care distribution
2,1012,219
748672
2,8492,891
4,3566,575
1,4932,165
5,8498,740
Technology
 
and value-added services
 
158155
2321
181176
314469
4667
360536
Total revenues
$
2,2592,374
$
771693
$
3,0303,067
$
4,6707,044
$
1,5392,232
$
6,2099,276
Three Months Ended
 
SixNine Months Ended
June 26,September 25, 2021
June 26,September 25, 2021
North
America
International
Global
North
America
International
Global
Net Sales:
Health care distribution
 
Dental
 
$
1,1291,115
$
783708
$
1,9121,823
$
2,1743,289
$
1,5272,235
$
3,7015,524
Medical
 
8751,162
2723
9021,185
1,8383,000
5578
1,8933,078
Total health care distribution
2,0042,277
810731
2,8143,008
4,0126,289
1,5822,313
5,5948,602
Technology
 
and value-added services
 
131149
2221
153170
255404
4364
298468
Total revenues
$
2,1352,426
$
832752
$
2,9673,178
$
4,2676,693
$
1,6252,377
$
5,8929,070
At December 25, 2021, the current portion of contract liabilities of $
89
 
million was reported in Accrued expenses:
Other, and $
10
 
million related to non-current contract liabilities was reported
 
in Other liabilities.
 
During the sixnine
months ended June 25,September 24, 2022, we recognized in net sales $
5670
 
million of the amounts that were previously
deferred at
December 25, 2021.
 
At June 25,September 24, 2022, the current and non-current portion of contract
 
liabilities
were $
8776
 
million
and $
9
 
million, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
12
Note 4
 
–
Segment Data
We conduct our business through
2two
 
reportable segments: (i) health care distribution and (ii) technology
 
and
value-added services.
These segments offer different products and services to the same customer base. Our
 
base. Our global
dental businesses serve office-based dental practitioners, dental laboratories, schools and
 
other institutions.
Our
global medical businesses serve office-based medical practitioners, ambulatory
 
surgery centers, other alternate-care
settings and other institutions.
Our global dental and medical groups serve
practitioners in
32
 
countries worldwide.
The health care distribution reportable segment aggregates our global
 
dental and medical operating segments.
This
segment distributes consumable products, dental specialty products,
 
small equipment, laboratory products, large
equipment, equipment repair services, branded and generic pharmaceuticals,
 
vaccines, surgical products, diagnostic
tests, infection-control products, personal protective equipment (“PPE”)
 
and vitamins.
Our global technology and value-added services reportable segment provides
 
software, technology and other value-
added services to health care practitioners.
Our technology offerings include practice
management software systems
systems for dental and medical practitioners.
Our value-added practice solutions
include practice consultancy, education,
education, revenue cycle management and financial services on a non-recourse basis,
 
basis, e-services, practice
technology, network
and hardware services, as well as continuing education services for practitioners.
The following tables present information about our reportable and operating
segments:
Three Months Ended
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,September 24,
JuneSeptember 25,
June 26,
2022
2021
2022
2021
Net Sales:
Health care distribution
 
Dental
 
$
1,8531,785
$
1,9121,823
$
3,6815,466
$
3,7015,524
Medical
 
9961,106
9021,185
2,1683,274
1,8933,078
Total health care distribution
2,8492,891
2,8143,008
5,8498,740
5,5948,602
Technology
 
and value-added services
 
181176
153170
360536
298468
Total
 
$
3,0303,067
$
2,9673,178
$
6,2099,276
$
5,8929,070
Three Months Ended
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,September 24,
JuneSeptember 25,
June 26,
2022
2021
2022
2021
Operating Income:
Health care distribution
 
$
189179
$
182179
$
400579
$
379558
Technology
 
and value-added services
 
3132
2832
6496
6193
Total
$
220211
$
210211
$
464675
$
440651
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
13
Note 5
 
–
Business Acquisitions
2022 Acquisitions
During the six months ended June 25, 2022, we made several acquisitions
within the technology and value-added
services segments.
The impact of these acquisitions
was not considered material to our condensed consolidated
financial statements.
2021 Acquisitions
We completed several acquisitions during the sixnine months ended June 26, 2021 September 24, 2022,
which were immaterial to our
our condensed consolidated financial statements.
 
Our acquired ownership interest ranged between approximately
5180
% to
100
%.
 
Acquisitions
Acquisitions within our health carehealthcare distribution segment included
 
companies that specialize in the distribution of
dental products, a
provider of home medical supplies, and product kitting and sterile packaging.products.
 
Within our technology and value-
addedvalue-added services segment, we acquired companiesa company that focus oneducates
and connects dental office managers, practice administrators and dental business
 
marketing and website solutions, practiceleaders across North America.
transition services, and business analytics and intelligence software.
The following table aggregates
the estimated fair value, as of the
date of acquisition, of consideration
paid and net
assets acquired for acquisitions during the sixnine months ended June 26, 2021.September 24,
2022.
 
While we use our best
estimates and
assumptions to accurately value those assets acquired and liabilities
 
liabilities assumed at the acquisition date
as well as
contingent consideration, where applicable, our estimates are
inherently uncertain
and subject to
refinement.
 
As a
result, during the measurement period we may record adjustments
 
to the assets acquired and
liabilities assumed
with the corresponding offset to goodwill within our condensed consolidated balance
sheets.
Approximately half of the acquired goodwill is deductible for tax purposes.
2022
Acquisition consideration:
Cash
$
303132
Deferred consideration
81
Fair value of previously held equity method investment
16
Redeemable noncontrolling interests
1294
Total consideration
$
440153
Identifiable assets acquired and liabilities assumed:
Current assets
10736
Intangible assets
18470
Other noncurrent assets
347
Current liabilities
(44)(23)
Deferred income taxes
(17)(5)
Other noncurrent liabilities
(37)(5)
Total identifiable
 
net assets
22780
Goodwill
21373
Total net assets acquired
$
440153
The following table summarizes the identifiable intangible assets acquired
during the nine months ended September
24, 2022 and their estimated useful lives as of the date of the acquisition:
2022
Estimated Useful Lives (in years)
Customer relationships and lists
$
56
10
Trademarks/ Tradenames
10
5
Non-compete agreements
2
2
-
5
Other
2
10
Total
$
70
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
14
2021 Acquisitions
We completed several acquisitions during the nine months ended September 25, 2021 which were immaterial to our
financial statements.
Our acquired ownership interest ranged between approximately
51
% to
100
%.
Acquisitions
within our health care distribution segment included
companies that specialize in the distribution and
manufacturing of dental and medical products, a provider of home
medical supplies, and product kitting and sterile
packaging.
Within our technology and value-added services segment, we acquired companies that focus on dental
marketing and website solutions, practice transition services, and business
analytics and intelligence software.
The following table aggregates
the estimated fair value, as of the date of acquisition, of consideration paid
and net
assets acquired for acquisitions during the nine months ended September 25,
2021.
While we use our best
estimates and assumptions to accurately value those assets acquired
and liabilities assumed at the acquisition date
as well as contingent consideration, where applicable, our estimates are
inherently uncertain and subject to
refinement.
As a result, during the measurement period we may record adjustments
to the assets acquired and
liabilities assumed with the corresponding offset to goodwill within our condensed consolidated
balance sheets.
Approximately half of the acquired goodwill is deductible for tax purposes.
2021
Acquisition consideration:
Cash
$
424
Deferred consideration
11
Fair value of previously held equity method investment
8
Redeemable noncontrolling interests
179
Total consideration
$
622
Identifiable assets acquired and liabilities assumed:
Current assets
159
Intangible assets
259
Other noncurrent assets
39
Current liabilities
(62)
Deferred income taxes
(18)
Other noncurrent liabilities
(39)
Total identifiable
net assets
338
Goodwill
284
Total net assets acquired
$
622
The following table summarizes the identifiable intangible assets acquired
 
during the sixnine months ended June 26,September
25, 2021 and their estimated useful lives as of the date of the acquisition:
Estimated2021
Estimated Useful Lives
(in (in years)
Customer relationships and lists
$
124175
6
-
12
Trademarks / Tradenames
42
5
-
12
Trademark / Tradename
33
5
-
710
Non-compete agreements
6
5
Product development
21
5
-
710
Other
15
18
Total
$
184259
The major classes of assets and liabilities that we generally allocate purchase
 
price to, excluding goodwill, include
identifiable intangible assets (i.e., customer relationships and lists, trademarks
 
and trade names, product
development and non-compete agreements), inventory and accounts
 
receivable, property, plant and equipment,
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
15
deferred taxes and other current and long-term assets and liabilities.
 
The estimated fair value of identifiable
intangible assets is based on critical estimates, judgments and assumptions
 
derived from analysis of market
conditions, discount rates, discounted cash flows, customer retention rates
 
and estimated useful lives.
Some prior owners of acquired subsidiaries are eligible to receive additional
 
purchase price cash consideration if
certain financial targets are met.
 
We have accrued liabilities for the estimated fair value of additional purchase
price consideration at the time of the acquisition.
 
Any adjustments to these accrual amounts are recorded in our
condensed consolidated statements of income.
 
For the sixnine months ended June 25,September 24, 2022 and June 26, September 25,
2021, there
were no material adjustments recorded in our condensed consolidated statements
 
statements of income relating to
changes in
estimated contingent purchase price liabilities.
During the sixnine months ended June 25,September 24, 2022 and June 26,September 25, 2021 we
 
incurred $
36
 
million and $
46
 
million, respectively,
respectively, in acquisition costs.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
15
Note 6 – Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or
 
paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
 
The fair value hierarchy distinguishes between
(1) market participant assumptions developed based on market data obtained
 
from independent sources (observable
inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best
information available in the circumstances (unobservable inputs).
The fair value hierarchy consists of three broad levels, which gives the
 
highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1) and the lowest priority
 
to unobservable inputs (Level 3).
 
The three levels of the fair value hierarchy are described as follows:
•
 
Level 1— Unadjusted quoted prices in active markets for identical assets or
 
or liabilities that are accessible at the
measurement date.
•
 
Level 2— Inputs other than quoted prices included within Level 1 that are
 
observable for the asset or liability,
either directly or indirectly.
 
Level 2 inputs include: quoted prices for similar assets or liabilities
 
in active markets;
quoted prices for identical or similar assets or liabilities in markets
 
that are not active; inputs other than quoted
prices that are observable for the asset or liability; and inputs that are derived
 
derived principally from or corroborated by
observable market data by correlation or other means.
•
 
Level 3— Inputs that are unobservable for the asset or liability.
The following section describes the fair values of our financial instruments
 
and the methodologies that we used to
measure their fair values.
Investments and notes receivable
There are no quoted market prices available for investments in unconsolidated
 
affiliates and notes receivable;
however, we believe the carrying amounts are a reasonable estimate of fair value based on the interest rates
 
rates in the
applicable markets.
Debt
The fair value of our debt (including bank credit lines) is classified as
 
Level 3 within the fair value hierarchy, and
as of June 25,September 24, 2022 and December 25, 2021 was estimated at
$
8581,045
 
million and $
873
 
million, respectively.
 
Factors
Factors that we considered when estimating the fair value of our debt included
 
included market conditions, such as interest
rates and
credit spreads.
Derivative contracts
Derivative contracts are valued using quoted market prices and significant
other observable inputs.
We use
derivative instruments to minimize our exposure to fluctuations in foreign
currency exchange rates.
Our derivative
instruments primarily include foreign currency forward agreements related
to certain intercompany loans, certain
forecasted inventory purchase commitments with foreign suppliers,
foreign currency forward contracts to hedge a
portion of our euro-denominated foreign operations which are designated
as net investment hedges and a total
return swap for the purpose of economically hedging our unfunded non-qualified
supplemental executive retirement
plan and our deferred compensation plan.
The fair values for the majority of our foreign currency derivative contracts
are obtained by comparing our contract
rate to a published forward price of the underlying market rates, which
is based on market rates for comparable
transactions and are classified within Level 2 of the fair value hierarchy.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
16
Derivative contracts
Derivative contracts are valued using quoted market prices and
significant other observable inputs.
We use
derivative instruments to minimize our exposure to fluctuations in foreign
currency exchange rates.
Our derivative
instruments primarily include foreign currency forward agreements related
to certain intercompany loans, certain
forecasted inventory purchase commitments with foreign suppliers,
foreign currency forward contracts to hedge a
portion of our euro-denominated foreign operations which are designated as net
investment hedges and a total
return swap for the purpose of economically hedging our unfunded
non-qualified supplemental executive retirement
plan and our deferred compensation plan.
The fair values for the majority of our foreign currency derivative contracts are
obtained by comparing our contract
rate to a published forward price of the underlying market rates, which
is based on market rates for comparable
transactions and are classified within Level 2 of the fair value hierarchy.
Redeemable noncontrolling interests
The values for Redeemable noncontrolling interests are classified within
 
Level 3 of the fair value hierarchy and are
based on recent transactions and/or implied multiples of earnings.
 
See
for additional information.
The following table presents our assets and liabilities that are measured and
 
recognized at fair value on a recurring
basis classified under the appropriate level of the fair value hierarchy as of September
 
June 25,24, 2022 and December 25,
2021:
June 25,September 24, 2022
Level 1
Level 2
Level 3
Total
Assets:
Derivative contracts designated as hedges
$
0-
$
2340
$
0-
$
2340
Derivative contracts undesignated
0-
24
0-
24
Total assets
 
$
0-
$
2544
$
0-
$
2544
Liabilities:
Derivative contracts designated as hedges
$
0-
$
13
$
0-
$
13
Derivative contracts undesignated
0-
57
0-
57
Total return
 
swaps
0-
57
0-
57
Total liabilities
 
$
0-
$
1117
$
0-
$
1117
Redeemable noncontrolling interests
 
$
0-
$
0-
$
586563
$
586563
December 25, 2021
Level 1
Level 2
Level 3
Total
Assets:
Derivative contracts designated as hedges
$
0-
$
8
$
0-
$
8
Derivative contracts undesignated
0-
1
0-
1
Total return
 
swaps
0-
1
0-
1
Total assets
 
$
0-
$
10
$
0-
$
10
Liabilities:
Derivative contracts designated as hedges
$
0-
$
1
$
0-
$
1
Derivative contracts undesignated
0-
2
0-
2
Total liabilities
 
$
0-
$
3
$
0-
$
3
Redeemable noncontrolling interests
 
$
0-
$
0-
$
613
$
613
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
17
Note 7 – Debt
Bank Credit Lines
Bank credit lines consisted of the following:
June 25,September 24,
December 25,
2022
2021
Revolving credit agreement
$
0-
$
0-
Other short-term bank credit lines
85107
51
Total
 
$
85107
$
51
Revolving Credit Agreement
On
August 20, 2021
, we entered into a new $
1
 
billion revolving credit agreement (the “Credit Agreement”).
 
This
facility which matures on
August 20, 2026
 
replaced our $
750
 
million revolving credit facility which was scheduled
to mature in April 2022.
 
The interest rate is based on the USD LIBOR plus a spread based on our
 
leverage ratio at
the end of each financial reporting quarter.
 
Most LIBOR rates have been discontinued after December 31,
 
2021,
while the remaining LIBOR rates will be discontinued immediately
 
after June 30, 2023.
 
We do not expect the
discontinuation of LIBOR as a reference rate in our debt agreements
 
to have a material adverse effect on our
financial position or to materially affect our interest expense.
 
The Credit Agreement also requires, among other
things, that we maintain certain maximum leverage ratios.
 
Additionally, the Credit Agreement contains customary
representations, warranties and affirmative covenants as well as customary negative
 
covenants, subject to
negotiated exceptions, on liens, indebtedness, significant corporate changes
 
(including mergers), dispositions and
certain restrictive agreements.
 
As of June 25,September 24, 2022 and December 25, 2021, we
had
0no
 
borrowings under this
revolving credit facility.
 
As of June 25,September 24, 2022 and December 25, 2021, there were
 
were $
9
 
million and $
9
 
million of
of letters of credit, respectively, provided to third parties under the credit facility.
Other Short-Term Bank Credit
 
Lines
As of June 25,September 24, 2022 and December 25, 2021, we had various other short-term
 
short-term bank credit lines available, of which
which $
85107
 
million and $
51
 
million, respectively, were outstanding.
 
At June 25,September 24, 2022 and December 25,
2021, borrowings
under all of these credit lines had a weighted average
interest rate
of
9.909.35
% and
10.44
%,
respectively.
Long-term debt
Long-term debt consisted of the following:
September 24,
December 25,
2022
2021
Private placement facilities
$
699
$
706
U.S. trade accounts receivable securitization
225
105
Various
collateralized and uncollateralized loans payable with interest,
in varying installments through 2023 at interest rates
ranging from
0.00
% to
3.50
% at September 24, 2022 and
ranging from
2.62
% to
4.27
% at December 25, 2021
7
4
Finance lease obligations
7
7
Total
938
822
Less current maturities
(4)
(11)
Total long-term debt
$
934
$
811
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
18
Long-term debt
Long-term debt consisted of the following:
June 25,
December 25,
2022
2021
Private placement facilities
$
699
$
706
U.S. trade accounts receivable securitization
60
105
Various
collateralized and uncollateralized loans payable with interest,
in varying installments through 2023 at interest rates
ranging from
0.00
% to
3.50
% at June 25, 2022 and
ranging from
2.62
% to
4.27
% at December 25, 2021
7
4
Finance lease obligations
7
7
Total
773
822
Less current maturities
(4)
(11)
Total long-term debt
$
769
$
811
Private Placement Facilities
Our private placement facilities were amended on
October 20, 2021
 
to include
4four
 
(previously
3three
) insurance
companies, have a total facility amount of $
1.5
 
billion (previously $
1.0
 
billion), and are available on an
uncommitted basis at fixed rate economic terms to be agreed upon at
 
the time of issuance, from time to time
through
October 20, 2026
 
(previously
June 23, 2023
).
 
The facilities allow us to issue senior promissory notes to
the lenders at a fixed rate based on an agreed upon spread over applicable
 
treasury notes at the time of
issuance.
 
The term of each possible issuance will be selected by us and
 
can range from
five
 
to
15 years
 
(with an
average life no longer than
12 years
).
 
The proceeds of any issuances under the facilities will be used for
 
general
corporate purposes, including working capital and capital expenditures,
 
to refinance existing indebtedness, and/or
to fund potential acquisitions.
 
The agreements provide, among other things, that we maintain
 
certain maximum
leverage ratios, and contain restrictions relating to subsidiary indebtedness,
 
liens, affiliate transactions, disposal of
assets and certain changes in ownership.
 
These facilities contain make-whole provisions in the event that we
 
pay
off the facilities prior to the applicable due dates.
The components of our private placement facility borrowings as
 
of June 25,September 24, 2022 are presented in the following
following table:
Amount of
Borrowing
Borrowing
 
Date of Borrowing
Outstanding
Rate
Due Date
January 20, 2012
$
50
3.45
%
January 20, 2024
December 24, 2012
50
3.00
December 24, 2024
June 16, 2017
100
3.42
June 16, 2027
September 15, 2017
100
3.52
September 15, 2029
January 2, 2018
100
3.32
January 2, 2028
September 2, 2020
100
2.35
September 2, 2030
June 2, 2021
100
2.48
June 2, 2031
June 2, 2021
100
2.58
June 2, 2033
Less: Deferred debt issuance costs
(1)
Total
$
699
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
19
U.S. Trade Accounts Receivable Securitization
We have a facility agreement based on the securitization of our U.S. trade accounts receivable that is structured as
an asset-backed securitization program with pricing committed for up
 
to
three years
.
 
Our currentOn October 20, 2021, we
extended the expiration date of this facility whichagreement to
had aOctober 18, 2024
and increased the purchase limit ofunder
the facility from $
350
 
million was scheduled to expire on
April 29, 2022
.
On October 20, 2021, we
amended our U.S. trade accounts receivable securitization facility to
increase the purchase limit to $
450
 
million
with
2two
 
banks as agents and extend the expiration date to
October 18, 2024
.agents.
 
As of June 25,September 24, 2022 and December
25, 2021, the borrowings outstanding under this securitization facility were
 
$
60225
 
million and $
105
 
million,
respectively.
 
At June 25,September 24, 2022, the interest rate on borrowings
under this facility
was based on the asset-backedasset-
backed commercial paper rate of
1.432.89
% plus
0.75
%, for a combined rate of
2.183.64
%.
 
At December 25, 2021, the
interest rate
on borrowings under this facility was based on the asset-backed commercial
 
commercial paper rate of
0.19
% plus
0.75
%, for a
combined rate of
0.94
%.
If our accounts receivable collection pattern changes due to customers either
 
either paying late or not making payments,
our ability to borrow under this facility may be reduced.
We are required to pay a commitment fee of
30
 
to
35
 
basis points depending upon program utilization.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
19
Note 8 – Income Taxes
For the sixnine months ended June 25,September 24, 2022 our effective tax rate was
23.923.5
% compared to
24.324.2
% for the prior year
year period.
 
The difference between our effective tax rate and the federal statutory tax rate for the sixnine
 
months ended
June 25,ended September 24, 2022 primarily relates to state and foreign income taxes and
 
and interest expense as well as share-basedshare-
based compensation.
 
The difference between our effective tax rate and the federal statutory tax rate for the six monthsnine
months ended June 26,September 25, 2021 primarily relates to state and foreign
income taxes,
interest expense and tax
charges and
credits associated with legal entity reorganizations.
On August 16, 2022, the Inflation Reduction Act (H.R. 5376) (“IRA”) was signed
into law in the United States.
Among other things, the IRA imposes a 15% corporate alternative
minimum tax for tax years beginning after
December 31, 2022 and levies a 1% excise tax on net stock repurchases after
December 31, 2022.
We are still in
the process of analyzing the provisions of the IRA.
The total amount of unrecognized tax benefits, which are included in “Other
 
“Other liabilities” within our condensed
consolidated balance sheets, as of June 25,September 24, 2022 and December 25, 2021
 
2021 was $
8384
 
million and $
84
 
million,
respectively, of which $
6971
 
million and $
69
 
million, respectively, would affect the effective tax rate if recognized.
 
It
It is possible that the amount of unrecognized tax benefits will change
 
change in the next 12 months, which may result in a
material impact on our condensed consolidated statements of income.
All tax returns audited by the IRS are officially closed through 2016.
 
The tax years subject to examination by the
IRS include years 2017 and forward.
 
During the quarteryear ended December 25, 2021, we were notified by
 
by the IRS that
that tax year 2019 was selected for examination.
During the quarter ended September 26, 2020 we reached an agreement
 
with the Advanced Pricing Division on an
appropriate transfer pricing methodology for the years 2014-2025.
 
The objective of this resolution was to mitigate
future transfer pricing audit adjustments.
The total amounts of interest and penalties are classified as a component
 
of the provision for income taxes.
 
The
amount of tax interest expense/(credit) was $
01
 
million for the sixnine months ended June 25,September 24, 2022, and
$
(3)(2)
 
million for
the sixnine months ended June 26,September 25, 2021.
 
The total amount of accrued interest is included in “Other
“Other liabilities,” and was
$
1314
 
million as of June 25,September 24, 2022 and $
12
 
million as of December 25, 2021.
 
NaNNo
penalties were accrued for the
periods presented.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
20
Note 9 – Legal Proceedings
Henry Schein, Inc. has been named as a defendant in multiple lawsuits
 
(currently less than one-hundred and fifty
(
150
); in less than half of those cases one or more of Henry Schein,
 
Inc.’s subsidiaries is also named as a
defendant).
 
Generally, the lawsuits allege that the manufacturers of prescription opioid drugs engaged in a false
advertising campaign to expand the market for such drugs and their own market
 
market share and that the entities in the
supply chain (including Henry Schein, IncInc. and its affiliated companies) reaped financial
 
financial rewards by refusing or
otherwise failing to monitor appropriately and restrict the improper distribution
 
of those drugs.
 
These actions
consist of some that have been consolidated within the MultiDistrict Litigation
 
(“MDL”) proceeding In Re National
Prescription Opiate Litigation (MDL No. 2804; Case No. 17-md-2804)
 
and are currently stayed, and others which
remain pending in state courts and are proceeding independently and outside
 
of the MDL.
 
At this time, the
following cases are set for trial: the action filed by Mobile County Board
 
of Health, et al., in Alabama state court,
which is currently stayed but remains set for a jury trial on January 9, 2023;
the action filed
by DCH Health Care
Authority, et al. in
Alabama state court, which is currently scheduledhas been designated a bellwether with
eight
of
thirty-eight
plaintiffs
set for a jury trial on July 24, 2023;
and the action filed by Florida Health
Health Sciences Center, Inc. (and
38
 
other
hospitals located throughout the State of Florida) in
Florida state court,
which is currently scheduled for a jury trial
in October 2024.
 
In June 2022, we settled
NaNtwenty-six
 
cases filed by
hospitals in West Virginia,
 
and settled with
1one
additional hospital, for a total amount of
three-hundred thousand
dollars.
 
The
NaNtwenty-six
 
cases have been
dismissed.
 
Of Henry Schein’s 2021 net sales of approximately $
12.4
 
billion,
sales of opioids represented less than
two-tenths
 
of 1 percent.
 
Opioids represent a negligible part of our business.
 
We intend to defend ourselves
vigorously against these actions.
In August 2022, Henry Schein received a Grand Jury Subpoena from the United
States Attorney’s Office for the
Western District of Virginia,
seeking documents in connection with an investigation of possible
violations of the
Federal Food, Drug & Cosmetic Act by Butler Animal Health Supply, LLC (“Butler”), a former subsidiary of
Henry Schein.
The investigation relates to the sale of veterinary prescription drugs
to certain customers.
In
October 2022, Henry Schein received a second Grand Jury Subpoena
from the United States Attorney’s Office for
the Western District of Virginia.
The October Subpoena seeks documents relating to payments Henry
Schein
received from Butler or Covetrus, Inc. (“Covetrus”).
Butler was spun off into a separate company and became a
subsidiary of Covetrus in 2019 and is no longer owned by Henry Schein.
We are cooperating with the
investigation.
From time to time, we may become a party to other legal proceedings,
 
including, without limitation, product
liability claims, employment matters, commercial disputes, governmental
 
inquiries and investigations (which may
in some cases involve our entering into settlement arrangements or consent
 
decrees), and other matters arising out
of the ordinary course of our business.
 
While the results of any legal proceeding cannot be predicted with certainty,
in our opinion none of these other pending matters are currently anticipated
 
anticipated to have a material adverse effect on our
consolidated financial position, liquidity or results of operations.
As of June 25,September 24, 2022, we had accrued our best estimate of potential losses
 
losses relating to claims that were
probable to
result in liability and for which we were able to reasonably
estimate a
loss.
 
This accrued amount, as
well as related
expenses, was not material to our financial position,
results of operations
or cash flows.
 
Our method for
for determining estimated losses considers currently available facts, presently
 
facts, presently enacted laws and regulations and other
other factors, including probable recoveries from third parties.
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
21
Note 10 – Stock-Based Compensation
Stock-based awards are provided to certain employees under the terms of our
 
our 2020 Stock Incentive Plan and to
non-employee directors under the terms of our 2015 Non-Employee Director
 
Stock Incentive Plan (together, the
“Plans”).
 
The Plans are administered by the Compensation Committee of the Board
 
of Directors (the
“Compensation Committee”).
 
Historically, equity-based awards to our employees have been granted solely in the
form of time-based and performance-based restricted stock units (“RSUs”).
 
However, for our 2021 fiscal year, in
light of the COVID-19 pandemic, the Compensation Committee determined
 
it would be difficult for management
to set a meaningful three-year cumulative earnings per share target as the goal applicable
 
to performance-based
restricted stock unitRSU awards as it had done in prior years.
 
Instead, the Compensation Committee set our equity-equity-based awards
to
based awards to employees for fiscal 2021 in the form of time-based RSUs and non-qualified
 
and non-qualified stock options which
focus on stock
value appreciation and retention instead of pre-established
performance goals.
 
Our non-employee directors
directors continued to receive equity-based awards for fiscal 2021
solely in the form of time-based
RSUs.
 
In March 2022,
2022, the Compensation Committee reinstated performance-based RSUs
 
RSUs for equity-based awards to employees for fiscal
fiscal 2022 and awarded grants in the form of time-based RSUs, performance-based
 
RSUs and non-qualified stock
options.
 
RSUs are stock-based awards granted to recipients with specified vesting provisions.
 
In the case of RSUs, common
stock is generally delivered on or following satisfaction of vesting conditions.
 
We issue RSUs to employees that
vest (i) solely based on the recipient’s continued service over time, primarily with
four
-year cliff vesting and/or (ii)
based on achieving specified performance measurements and the recipient’s continued service over time, primarily
with
three
-year cliff vesting.
 
RSUs granted under the 2015 Non-Employee Director Stock Incentive
 
Plan primarily
are granted with
12
-month cliff vesting.
 
For these RSUs, we recognize the cost as compensation expense on
 
a
straight-line basis.
With respect to time-based RSUs, we estimate the fair value on the date of grant based on our closing
 
stock price at
the time of grant.
 
With respect to performance-based RSUs, the number of shares that ultimately vest
 
and are
received by the recipient is based upon our performance as measured against
 
specified targets over a specified
period, as determined by the Compensation Committee.
 
Although there is no guarantee that performance targets
will be achieved, we estimate the fair value of performance-based RSUs
 
based on our closing stock price at time of
grant.
Each of the Plans provide for certain adjustments to the performance
 
measurement in connection with awards under
the Plans.
 
With respect to the performance-based RSUs granted under our 2020 Stock Incentive Plan, such
performance measurement adjustments relate to significant events, including, without
 
without limitation, acquisitions,
divestitures, new business ventures, certain capital transactions (including share
 
repurchases), differences in
budgeted average outstanding shares (other than those resulting from capital
 
transactions referred to above),
restructuring costs, if any, certain litigation settlements or payments, if any, changes in accounting principles or in
applicable laws or regulations, changes in income tax rates in certain markets,
 
markets, foreign exchange fluctuations, the
financial impact, either positive or negative, of the differences in projected earnings
 
generated by sales of COVID-
19 test kits (solely with respect to performance-based RSUs
 
granted in the 2022 plan year) and unforeseen events or
circumstances affecting us.
 
Over the performance period, the number of shares of common stock that will
 
ultimately vest and be issued and the
related compensation expense is adjusted upward or downward based upon
 
our estimation of achieving such
performance targets.
 
The ultimate number of shares delivered to recipients and the
 
the related compensation cost
recognized as an expense will be based on our actual performance metrics
 
as defined under the Plans.
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
22
Stock options are awards that allow the recipient to purchase shares of our common
 
common stock at a fixed price following
vesting of the stock options.
 
Stock options are granted at an exercise price equal to our closing stock
 
price on the
date of grant.
 
Stock options issued beginning in 2021 vest
one-third
 
per year based on the recipient’s continued
service, subject to the terms and conditions of the 2020 Stock Incentive Plan,
 
are fully vested
three years
 
from the
grant date and have a contractual term of
ten years
 
from the grant date, subject to earlier termination of the term
upon certain events.
 
Compensation expense for these stock options is recognized
 
using a graded vesting method.
 
We estimate the fair value of stock options using the Black-Scholes valuation model.
 
In addition to equity-based awards granted in fiscal 2021 under the our long-term
 
incentive program, the Compensation
Compensation Committee granted a Special Pandemic Recognition Award under the 2020 Stock Incentive Plan to
recipients of
performance-based RSUs under the 2018 long-term
incentive program.
 
The payout under the performance-based
performance-based restricted stock units granted under the fiscal 2018 long-term incentive program
 
incentive program (the(the “2018
LTIP”) was negatively
impacted by the global COVID-19 pandemic.
 
Given the significance of the impact of the
pandemic on our
three-yearthree
-
year EPS goal under such equity awards and the contributions made by our employees
 
employees
(including those who
received such awards), on March 3, 2021, the Compensation Committee granted
 
Committee granted a Special
Pandemic Recognition
Award to recipients of performance-based restricted stock units under the 2018 LTIP who
were employed by us on
the grant date of the Special Pandemic
Recognition Award.
 
These time-based RSU
awards vest
50
% on the first
anniversary of the grant date and
50
% on the second anniversary of the grant date,
based on the recipient’s
continued service and subject to the terms and conditions of the 2020 Stock Incentive
 
Plan,
and are recorded as
compensation expense using a graded vesting
method.
 
The combination of the
20
% payout
based on actual
performance of the 2018 LTIP and the one-time Special Pandemic Recognition Award granted in
2021 will
generate a cumulative payout of
75
% of each recipient’s original number of performance-based restricted stock
stock units awarded in 2018 if the recipient satisfies the
two-yeartwo
-year vesting schedule commencing on the grant date.
Our accompanying condensed consolidated statements of income reflect
 
pre-tax share-based compensation expense
of $
15
million ($
12
million after-tax) and $
27
million ($
21
million after-tax) for the three and six months ended
June 25, 2022, respectively.
For the three and six months ended June 26, 2021, we recorded pre-tax share-based
compensation expense of $
17
 
million ($
13
 
million after-tax) and $
3044
 
million ($
2334
million after-tax) for the three and nine months ended
September 24, 2022, respectively.
For the three and nine months ended September 25, 2021, we
recorded pre-tax
share-based compensation expense of $
28
million ($
21
million after-tax) and $
58
million ($
44
 
million after-tax),
respectively.
Total unrecognized compensation cost related to unvested awards as of June 25,September 24, 2022 was $
116104
 
million,
which is
expected to be recognized over a weighted-average period of
approximately
2.42.2
 
years.
Our accompanying condensed consolidated statements of cash flows present
our stock-based compensation expense
as an adjustment to reconcile net income to net cash provided by operating
activities for all periods presented.
In
the accompanying condensed consolidated statements of cash flows, there were
0
benefits associated with tax
deductions in excess of recognized compensation as a cash inflow from
financing activities for the six months
ended June 25, 2022 and June 26, 2021, respectively.
The following weighted-average assumptions were used in determining
 
the most recent fair values of stock options
granted using the Black-Scholes valuation model:
 
2022
Expected dividend yield
 
0.0
%
Expected stock price volatility
 
27.4027.70
%
Risk-free interest rate
 
3.253.42
%
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
the foreseeable future.
 
The expected stock price volatility is based on implied volatilities
 
from traded options on
our stock, historical volatility of our stock, and other factors.
 
The risk-free interest rate is based on the U.S.
Treasury yield curve in effect at the time of grant in conjunction with considering the expected life of options.
 
The
six-yearsix
-year expected life of the options was determined using the simplified
 
method for estimating the expected term
as permitted under SAB Topic 14.
Estimates of fair value are not intended to predict actual future events or
the
value ultimately realized by recipients of stock options, and subsequent events
are not indicative of the
reasonableness of the original estimates of fair value made by us.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
23
as permitted under SAB Topic 14.
Estimates of fair value are not intended to predict actual future events or
the
value ultimately realized by recipients of stock options, and subsequent
events are not indicative of the
reasonableness of the original estimates of fair value made by us.
The following table summarizes stock option activity under the Plans
 
during the sixnine months ended June 25, September 24,
2022:
Stock Options
Weighted
Average
Weighted
 
Remaining
Average
 
Contractual
 
Aggregate
Exercise
Life in
 
 
Intrinsic
Shares
Price
Years
 
Value
Outstanding at beginning of period
 
767,717
$
63.24
 
Granted
 
406,443418,425
86.1685.82
 
Exercised
 
(29,892)(30,554)
62.71
 
Forfeited
 
(9,656)(17,850)
71.7272.96
 
Outstanding at end of period
 
1,134,6121,137,738
$
71.3971.41
 
9.18.8
 
$
103
Options exercisable at end of period
 
219,642223,198
$
62.9263.19
 
Weighted
Weighted
Average
Average
Remaining
Aggregate
Number of
Exercise
Contractual
Intrinsic
Options
Price
Life (in years)
Value
Vested
 
or expected to vest
894,356898,310
$
73.6873.60
9.28.9
$
72
The following tables summarize the activity of our unvested RSUs for the sixnine
 
months ended June 25,September 24, 2022:
Time-Based Restricted Stock Units
Weighted Average
 
Grant Date Fair
Intrinsic Value
Shares/Units
Value Per Share
Per Share
Outstanding at beginning of period
 
1,945,862
$
58.79
Granted
 
455,169466,473
86.1385.67
Vested
 
(501,944)(505,004)
54.7654.74
Forfeited
 
(28,807)(54,618)
65.8867.23
Outstanding at end of period
 
1,870,2801,852,713
$
66.4766.39
$
77.2967.34
Performance-Based Restricted Stock Units
Weighted Average
 
Grant Date Fair
Intrinsic Value
Shares/Units
Value Per Share
Per Share
Outstanding at beginning of period
 
674,753
$
59.63
Granted
 
390,975442,871
75.7076.68
Vested
 
(392,001)(392,646)
59.2459.18
Forfeited
 
(7,724)(13,631)
66.1867.17
Outstanding at end of period
 
666,003711,347
$
62.3963.27
$
77.2967.34
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
24
Note 11 – Redeemable Noncontrolling Interests
Some minority stockholders in certain of our subsidiaries have the right,
 
at certain times, to require us to acquire
their ownership interest in those entities at fair value.
 
Accounting Standards Codification Topic 480-10 is
applicable for noncontrolling interests where we are or may be required
 
to purchase all or a portion of the
outstanding interest in a consolidated subsidiary from the noncontrolling
 
interest holder under the terms of a put
option contained in contractual agreements.
 
The components of the change in the redeemable noncontrolling
interests for the sixnine months ended June 25,September 24, 2022 and the year
ended December
25, 2021 are presented in the
following table:
 
June 25,September 24,
December 25,
2022
2021
Balance, beginning of period
 
$
613
$
328
Decrease in redeemable noncontrolling interests due to acquisitions of
noncontrolling interests in subsidiaries
(11)(26)
(60)
Increase in redeemable noncontrolling interests due to business
acquisitions
04
189
Net income attributable to redeemable noncontrolling interests
 
919
23
Dividends declared
 
(11)(16)
(21)
Effect of foreign currency translation loss attributable to
redeemable noncontrolling interests
 
(7)(13)
(6)
Change in fair value of redeemable securities
 
(7)(18)
160
Balance, end of period
 
$
586563
$
613
Note 12 – Comprehensive Income
Comprehensive income includes certain gains and losses that, under U.S.
 
GAAP,
 
are excluded from net income as
such amounts are recorded directly as an adjustment to stockholders’
 
equity.
 
The following table summarizes our Accumulated other comprehensive loss, net of
 
applicable taxes as of:
June 25,September 24,
December 25,
2022
2021
Attributable to Redeemable noncontrolling interests:
Foreign currency translation adjustment
 
$
(38)(44)
$
(31)
Attributable to noncontrolling interests:
Foreign currency translation adjustment
 
$
(1)
$
0-
Attributable to Henry Schein, Inc.:
Foreign currency translation adjustment
$
(234)(317)
$
(155)
Unrealized gain (loss) from foreign currency hedging activities
 
718
(2)
Pension adjustment loss
 
(14)(13)
(14)
Accumulated other comprehensive loss
 
$
(241)(312)
$
(171)
Total Accumulated
 
other comprehensive loss
 
$
(280)(357)
$
(202)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
25
The following table summarizes the components of comprehensive income, net
 
of applicable taxes as follows:
Three Months Ended
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,September 24,
JuneSeptember 25,
June 26,
2022
2021
2022
2021
Net income
$
167162
$
164169
$
353515
$
339508
Foreign currency translation gain (loss)loss
(90)(89)
38(40)
(87)(176)
0(40)
Tax effect
 
0-
0-
0-
0-
Foreign currency translation gain (loss)loss
(90)(89)
38(40)
(87)(176)
0(40)
Unrealized gain (loss) from foreign currency hedging
 
activities
 
1015
(2)5
1227
27
Tax effect
 
(2)
0
(3)(4)
(1)
(7)
(2)
Unrealized gain (loss) from foreign currency hedging
 
activities
 
811
(2)4
920
15
Pension adjustment gain
02
0-
02
1
Tax effect
 
0(1)
0-
0(1)
0-
Pension adjustment gain
01
0-
01
1
Comprehensive income
 
$
85
$
200133
$
275360
$
341474
The change in the unrealized gain (loss) from foreign currency hedging activities
 
during the three and sixnine months ended
ended June 25,September 24, 2022 and June 26,September 25, 2021 was primarily attributable to
 
to a net investment hedge that was entered into
into during 2019.
Our financial statements are denominated in the U.S. Dollar currency.
 
Fluctuations in the value of foreign
currencies as compared to the U.S. Dollar may have a significant impact
 
on our comprehensive income.
 
The
foreign currency translation gain (loss)loss during the sixnine months ended September
 
June 25,24, 2022 and six months ended June 26,
2021 was primarily impacted by changes in foreign currency exchange ratesdue to
strengthening of the U.S. Dollar as compared to the Euro, British Pound, BrazilianAustralian
Real, Australian Dollar and Canadian Dollar.
 
The following table summarizes our total comprehensive income, net of
 
applicable taxes, as follows:
Three Months Ended
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,September 24,
JuneSeptember 25,
June 26,
2022
2021
2022
2021
Comprehensive income attributable to
Henry Schein, Inc.
 
$
8779
$
185131
$
271350
$
323454
Comprehensive income attributable to
noncontrolling interests
 
1
12
2
34
5
Comprehensive income (loss) attributable to
Redeemable noncontrolling interests
 
(3)4
14-
26
15
Comprehensive income
 
$
85
$
200133
$
275360
$
341474
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
26
Note 13 – Plans of Restructuring
and Integration Costs
On August 1, 2022, we committed to a restructuring plan focused on
funding the priorities of the strategic plan and
streamlining operations and other initiatives to increase efficiency.
This plan also includes the rationalization of the
Company’s office space in North America as a result of transitioning to a partial and full remote work model for
certain employees.
We recorded restructuring charges of $
9
million primarily related to severance and employee-
related costs and lease right-of-use and other long-lived asset accelerated depreciation
and amortization and lease
exit costs.
We expect this initiative to extend through 2023.
We are currently unable in good faith to make a
determination of an estimate of the amount or range of amounts expected to
be incurred in connection with these
activities, both with respect to each major type of cost associated
therewith and with respect to the total cost, or an
estimate of the amount or range of amounts that will
result in future cash expenditures.
On August 26,
2022, we acquired Midway Dental Supply.
In connection with this acquisition, during the three
months ended September 24, 2022, we recorded integration costs of $
1
million related to one-time employee and
other costs, as well as restructuring charges of $
2
million, which are included in the $
9
million of restructuring
charges discussed above.
On November 20, 2019, we committed to a contemplated restructuring
 
initiative intended to mitigate stranded costs
associated with the spin-off of our animal health business and to rationalize operations
 
and to provide expense
efficiencies.
 
These activities were originally expected to be completed by
the end of 2020 but we extended them to
the end of 2021 in light of the changes to the business environment brought
on by the COVID-19 pandemic.
The
restructuring activities under this prior initiative were completed in
2021.
DuringRestructuring and integration costs recorded for the three and six nine
months ended June 26,September 24, 2022 and nine
months ended September 25, 2021 we recorded(there were
no
restructuring costs for the three months ended September 25,
2021) consisted of the following:
Three and Nine Months Ended September 24, 2022
Health-Care Distribution
Technology
and Value-Added
Services
Restructuring
Costs
Integration
Costs
Restructuring
Costs
Integration
Costs
Total
Severance and employee-related costs
$
6
$
-
$
-
$
-
$
6
Accelerated depreciation and amortization
2
-
-
-
2
Exit and other related costs
1
-
-
-
1
Integration employee-related and other
costs
-
1
-
-
1
Total restructuring
 
and integration costs of
$
9
$
1
$
-
$
-
$
10
Nine Months Ended September 25, 2021
Health-Care Distribution
Technology
 
million and Value-Added
Services
Restructuring
Costs
Integration
Costs
Restructuring
Costs
Integration
Costs
Total
Severance and employee-related costs
$
3
$
-
$
1
$
-
$
4
Total restructuring
 
million,and integration costs
respectively.$
3
$
-
$
1
$
-
$
4
 
As
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(in millions, except share and per share data)
(unaudited
)
27
The following table summarizes,
by reportable segment, the activity related to the liabilities associated
with our
restructuring initiatives
for the period ended September 24, 2022.
The remaining accrued balance of restructuring
costs as of September 24, 2022 is included in accrued expenses: other within
our condensed consolidated balance
sheet.
Technology
and
Health Care
Value-Added
Distribution
Services
Total
Balance, December 25, 2021 the remaining
 
accrued balance for restructuring costs
was $
3
$
1
million and $
4
million, respectively.Restructuring charges
On August 1, 2022, we committed to a restructuring plan focused on funding
the priorities of the strategic plan and9
streamlining operations-
9
Non-cash charges
(2)
-
(2)
Cash payments and other initiatives to increase efficiency.adjustments
 
We expect to record restructuring charges in
(5)
(1)
(6)
Balance, September 24, 2022 and 2023, however an estimate of the amount of these charges has not yet been
 
determined.
Any restructuring
charges are expected primarily to include severance pay and facility-related costs.$
5
$
-
$
5
Note 14
 
–
Earnings Per Share
Basic earnings per share is computed by dividing net income attributable
 
to Henry Schein, Inc. by the weighted-
average number of common shares outstanding for the period.
 
Our diluted earnings per share is computed similarly
to basic earnings per share, except that it reflects the effect of common shares issuable
 
for presently unvested RSUs
restricted stock and RSUs and upon exercise of stock options using
the treasury stock method
in periods in which
they have a dilutive effect.
A reconciliation of shares used in calculating earnings per basic and diluted
 
diluted share follows:
Three Months Ended
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,September 24,
JuneSeptember 25,
June 26,
2022
2021
2022
2021
Basic
 
137,350,488135,608,678
140,358,428139,377,237
137,323,076136,731,413
141,316,258140,661,182
Effect of dilutive securities:
Stock options restricted stock and restricted stock units
 
1,518,5761,475,371
1,298,4551,702,100
1,732,1291,756,841
1,221,6481,517,520
Diluted
 
138,869,064137,084,049
141,656,883141,079,337
139,055,205138,488,254
142,537,906142,178,702
The number of antidilutive securities that were excluded from the calculation
 
of diluted weighted average common
shares outstanding are as follows:
Three Months Ended
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,September 24,
JuneSeptember 25,
June 26,
2022
2021
2022
2021
Stock options
423,786482,497
786,691789,130
250,226310,565
501,648595,798
Restricted stock units
51,453445,494
2,621-
226,203261,718
1,6535,716
Total anti-dilutive
 
securities excluded from EPS
computation
475,239927,991
789,312789,130
476,429572,283
503,301601,514
 
 
 
 
 
 
 
 
HENRY SCHEIN, INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(in millions, except share and per share data)
 
(unaudited
)
2728
Note 15 – Supplemental Cash Flow Information
 
Cash paid for interest and income taxes was:
 
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,
2022
2021
Interest
$
1729
$
1422
Income taxes
165235
134179
During the sixnine months ended June 25,September 24, 2022 and June 26,September 25, 2021,
we had a
$
1227
 
million and $
27
 
million,
respectively of non-cash net
unrealized gains related to foreign currency
hedging activities, respectively.activities.
 
Note 16 – Related Party Transactions
In connection with the formation of Henry Schein One, LLC, our joint venture
 
with Internet Brands, which was
formed on July 1, 2018, we entered into a
ten-year
 
royalty agreement with Internet Brands whereby we will pay
Internet Brands approximately $
31
 
million annually for the use of their intellectual property.
 
During the three and
sixnine months ended June 25,September 24, 2022, we recorded $
8
 
million and $
1623
 
million, respectively in connection with costs
costs related to this royalty agreement.
 
During the three and sixnine months ended June 26,September 25, 2021, we recorded
$
8
 
million
and $
1623
 
million, respectively, in connection with costs related to this royalty agreement.
 
As of June 25,
September 24, 2022 and
December 25, 2021,
Henry Schein One, LLC had
a net (payable) receivable balance due
(to) from Internet Brands
of $
(6)(14)
 
million and $
9
 
million, respectively, comprised of amounts related to results of
operations and the royalty
agreement.
During our normal course of business, we have interests in entities that we account for under the equity accounting
method.
 
During the three and sixnine months ended June 25,September 24, 2022, we recorded
 
recorded net sales of $
16
 
million and
$
32
million, respectively, to such entities.
During the three and six months ended June 26, 2021, we recorded net
sales
of $
18
million and $
3349
 
million, respectively, to such entities.
 
During the three and sixnine months ended JuneSeptember 25, 2022,2021, we
we purchasedrecorded net sales of $
518
 
million and $
1051
million, respectively, to such entities.
During the three and nine months
ended September 24, 2022, we purchased $
4
million and $
14
 
million, respectively, from such entities.
 
During the
three and sixnine months ended
June 26, September 25, 2021, we purchased $
5
 
million and $
914
 
million, respectively, from
such entities.
 
At June 25,September 24, 2022 and
December 25, 2021, in the aggregate we
had $
4039
 
million and $
45
 
million
due from our equity affiliates, and $
9
million and $
9
 
million due to our equity affiliates, respectively.
Certain of our facilities related to our acquisitions are leased from employees
 
and minority shareholders.
 
These
leases are classified as operating leases and have a remaining lease term
 
ranging from
6 monthsone year
 
to
109 years
.
 
As of
June 25,September 24, 2022, current and non-current liabilities associated with related
 
party operating leases were $
4
million and
$
1716
 
million, respectively.
 
Related party leases represented
5.45.2
% and
6.15.8
% of the total current and non-currentnon-
current operating lease liabilities.
 
2829
ITEM 2.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONSOPERATI
ONS
Cautionary Note Regarding Forward-Looking Statements
In accordance with the “Safe Harbor” provisions of the Private Securities
 
Litigation Reform Act of 1995, we
provide the following cautionary remarks regarding important factors
 
that, among others, could cause future results
to differ materially from the forward-looking statements, expectations and assumptions
 
expressed or implied
herein.
 
All forward-looking statements made by us are subject to risks
 
risks and uncertainties and are not guarantees of
future performance.
 
These forward-looking statements involve known and unknown risks, uncertainties
 
risks, uncertainties and other
factors that may cause our actual results, performance and achievements
 
or industry results to be materially
different from any future results, performance or achievements expressed or implied by such
 
forward-looking
statements.
 
These statements are generally identified by the use of such
 
terms as “may,” “could,” “expect,”
“intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,”
 
“to be,” “to make” or other comparable
terms.
 
Factors that could cause or contribute to such differences include, but are not limited
 
to, those discussed in
the documents we file with the Securities and Exchange Commission (SEC),
 
(SEC), including our Annual Report on Form
10-K. Forward looking statements include the overall impact of the Novel
 
Coronavirus Disease 2019 (COVID-19)
on us, our results of operations, liquidity and financial condition (including
 
any estimates of the impact on these
items), the rate and consistency with which dental and other practices
 
resume or maintain normal operations in the
United States and internationally, expectations regarding personal protective equipment (“PPE”) and COVID-19
related product sales and inventory levels, whether additional resurgences or variants
 
of the virus will adversely
impact the resumption of normal operations, whether vaccine mandates will
adversely impact us (by disrupting our
workforce and/or business), whether supply chain disruptions
will adversely
impact our business,
the impact of
integration and restructuring programs as well as of any
future acquisitions, general economic
conditions including exchange rates, inflation and recession, and more generally
 
current expectations regarding
performance in current and future periods.
 
Forward looking statements also include the (i) our ability to have
continued access to a variety of COVID-19 test types, expectations regarding
 
COVID-19 test sales, demand and
inventory levels, as well as the efficacy or relative efficacy of the test results given that the test
 
test efficacy has not
been, or will not have been, independently verified under normal FDA procedures
 
and (ii) potential for us to
distribute the COVID-19 vaccines and ancillary supplies.
Risk factors and uncertainties that could cause actual results to differ materially from current
 
current and historical results
include, but are not limited to: risks associated with COVID-19
 
and any variants thereof, as well as other disease
outbreaks, epidemics, pandemics, or similar wide-spread public health concerns
 
and other natural disasters; our
dependence on third parties for the manufacture and supply of our products;
 
our ability to develop or acquire and
maintain and protect new products (particularly technology products) and
 
technologies that achieve market
acceptance with acceptable margins; transitional challenges associated with acquisitions,
 
dispositions and joint
ventures, including the failure to achieve anticipated synergies/benefits; financial
 
and tax risks associated with
acquisitions, dispositions and joint ventures; certain provisions
in our governing
documents that may discourage
third-party acquisitions of us; effects of a highly competitive (including, without limitation,
 
limitation, competition from third-
party online commerce sites) and consolidating market; the repeal or judicial
 
judicial prohibition on implementation of the
Affordable Care Act; changes in the health care industry; risks from expansion of customer
 
customer purchasing power and
multi-tiered costing structures; increases in shipping costs for our products
 
or other service issues with our third-
party shippers; general global and domestic macro-economic and political
 
conditions, including inflation, deflation,
recession, fluctuations in energy pricing and the value of the U.S. dollar as compared
to foreign currencies, and
and changes to other economic
indicators, international trade agreements, potential
trade barriers and terrorism; failure
to comply with existing and future regulatory requirements; risks associated
 
terrorism;with the EU Medical Device
Regulation; failure to comply with existing and
future regulatory requirements; risks associated with the EU Medical
Device Regulation; failure to comply with
laws and regulations relating to health
care fraud or other laws and regulations;
failure to comply with laws and
regulations relating to the collection, storage
and processing of sensitive personal
personal information or standards in
electronic health records or transmissions;
changes in tax legislation;
risks related to
product liability, intellectual
property and other claims; litigation risks; new or unanticipated litigation
developments and the status of litigation
matters; risks associated with
customs policies or legislative import
restrictions;
cyberattacks or other privacy or
data security breaches;
risks associated with our global operations; our
our dependence on our senior management,
employee hiring and retention,
and our relationships with customers,
suppliers and manufacturers; and disruptions
in financial markets.
 
The order in which these factors appear should
not be construed
to indicate their relative
importance or priority.
2930
We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control
or predict.
 
Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction
of actual results.
 
We undertake no duty and have no obligation to update forward-looking statements except as
required by law.
Where You
 
Can Find Important Information
We may disclose important information through one or more of the following channels: SEC filings, public
conference calls and webcasts, press releases, the investor relations
 
page of our website (www.henryschein.com)
and the social media channels identified on the Newsroom page of our website.
Recent Developments
COVID-19 Pandemic
The COVID-19 pandemic negatively impacted the global economy, disrupted global supply chains and created
significant volatility and disruption of global financial markets in
 
2020 and 2021.
 
The impact of COVID-19 had a
material adverse effect on our business, results of operations and cash flows in 2020.
 
During the year ended
December 25, 2021, patient traffic levels returned to levels approaching pre-pandemic
levels.
 
Demand for dental
products and certain medical products throughout 2021 was driven
 
by sales of PPE and COVID-19 test kits and other
COVID-19 related products.kits.
 
During the threesix months ended March 26, 2022, with the exception ofJune 25,
 
COVID-19 test
kits,2022 we experienced a decrease in the sales volume of PPE and COVID-19
 
related products.COVID-19
test kits.
 
During the three
months ended June 25,September 24, 2022, we continued
 
we continued to experience a decrease in the sales
volume of PPE
and COVID-19
related products and additionally we began to experience declining demand
for COVID-19 test kits.kits compared with the same period
 
We expectin the prior year.
continuedThe volatility in sales of
COVID-19 test kits has moderated, albeit at a significantly
lower level of sales compared with 2021,
resulting in us
recording an inventory obsolescence reserve of $12 million for COVID-19
test kits during the remainderquarter ended
September 24, 2022.
While the U.S. economy has recently experienced inflationary
pressures and strengthening of the year.U.S dollar, their
During the three months ended June 25, 2022,
as a result of an increase in COVID-19 variants, we experienced a
modest decline in dental patient traffic which we believe is related to an increase in
patient appointment
cancellations and staff shortages.
We are continuing to monitor these trends closely and expect patient traffic to
increase again once cases of COVID-19 moderate.
In contrastimpacts have not been material to our dental business, duringresults of operations, and
we currently expect moderating of inflation and
foreign currency fluctuations.
Though inflation impacts both our revenues and costs, the three months
ended June 25, 2022, our medical business benefited from strong salesdepth and
 
in point-of-care diagnostic tests includingbreadth of our
flu test kits, as well as generic pharmaceuticals and equipment.product portfolio often allows us to offer lower-cost national brand solutions
or corporate brand alternatives to our
more price-sensitive customers who are unable to absorb price
increases, thus positioning us to protect our gross
profit.
Our condensed consolidated financial statements reflect estimates and assumptions
 
assumptions made by us that affect, among
other things, our goodwill, long-lived asset and definite-lived intangible
 
asset valuation; inventory valuation; equity
investment valuation; assessment of the annual effective tax rate; valuation of deferred
 
deferred income taxes and income
tax contingencies; the allowance for doubtful accounts; hedging activity;
 
supplier rebates; measurement of
compensation cost for certain share-based performance awards and cash bonus
 
plans; and pension plan
assumptions.
 
Due to the significant uncertainty surrounding the future impact
 
of COVID-19, our judgments
regarding estimates and impairments could change in the future.
 
There is an ongoing risk that the COVID-19
pandemic may again have a material adverse effect on our business, results of operations
 
and cash flows and may
result in a material adverse effect on our financial condition and liquidity.
 
However, the extent of the potential
impact cannot be reasonably estimated at this time.
3031
Executive-Level Overview
Henry Schein, Inc. is a solutions company for health care professionals powered
 
by a network of people and
technology.
 
We believe we are the world’s largest
 
largest provider of health care products and services primarily to
office-
based dental and medical practitioners, as well as alternate sites of care.
 
We serve more than one million customers
worldwide including dental practitioners, laboratories, physician practices, and
 
and ambulatory surgery centers, as well
as government, institutional health care clinics and other alternate care
clinics.
 
We believe that we have a strong
brand identity due to our more than 90 years of experience distributing health
 
care products.
We are headquartered in Melville, New York,
 
employ more thanapproximately 22,000 people (of which approximately 10,600
are
10,300 are based outside of the United States) and have operations or
affiliates in 32 countries
and territories.
 
Our broad
broad global footprint has evolved over time through our organic success as well as through
 
through contribution from strategic
strategic acquisitions.
 
We have established strategically located distribution centers around the world to enable us to better serve our
customers and increase our operating efficiency.
 
This infrastructure, together with broad product and service
offerings at competitive prices, and a strong commitment to customer service,
 
enables us to be a single source of
supply for our customers’ needs.
While our primary go-to-market strategy is in our capacity as a distributor, we also manufacture certain dental
specialty products and solutions in the areas of implants, orthodontics
 
and endodontics.
 
We have achieved scale in
these global businesses primarily through acquisitions as manufacturers
 
of these products typically do not utilize a
distribution channel to serve customers.
We conduct our business through two reportable segments: (i) health care distribution and (ii) technology and
value-added services.
 
These segments offer different products and services to the same customer base.
 
Our global
dental businesses serve office-based dental practitioners, dental laboratories, schools and
 
other institutions.
 
Our
global medical businesses serve office-based medical practitioners, ambulatory
 
surgery centers, other alternate-care
settings and other institutions.
The health care distribution reportable segment aggregates our global
 
dental and medical operating segments.
 
This
segment distributes consumable products, small equipment, laboratory products,
 
large equipment, equipment repair
services, branded and generic pharmaceuticals, vaccines, surgical products, dental
 
specialty products (including
implant, orthodontic and endodontic products), diagnostic tests, infection-control
 
products,
PPE and vitamins.
 
Our global technology and value-added services business provides software,
 
technology and other value-added
services to health care practitioners.
 
Our technology business offerings include practice management software
systems for dental and medical practitioners.
 
Our value-added practice solutions include practice consultancy,
education, revenue cycle management and financial services on a non-recourse
 
basis, e-services, practice
technology, network and hardware services, as well as consulting, and continuing education services for
practitioners.
A key element to grow closer to our customers is our One Schein
 
initiative, which is a unified go-to-market
approach that enables practitioners to work synergistically with our supply chain,
 
equipment sales and service and
other value-added services, allowing our customers to leverage
 
the combined value that we offer through a single
program.
 
Specifically, One Schein provides customers with streamlined access to our comprehensive offering of
national brand products, our private labelcorporate brand products and proprietary specialty
 
products and solutions (including
implant, orthodontic and endodontic products).
 
In addition, customers have access to a wide range of services,
including software and other value-added services.
3132
Industry Overview
In recent years, the health care industry has increasingly focused on cost containment.
 
This trend has benefited
distributors capable of providing a broad array of products and services at
 
low prices.
 
It also has accelerated the
growth of HMOs, group practices, other managed care accounts and collective
 
buying groups, which, in addition to
their emphasis on obtaining products at competitive prices, tend to
 
favor distributors capable of providing
specialized management information support.
 
We believe that the trend towards cost containment has the potential
to favorably affect demand for technology solutions, including software, which
 
can enhance the efficiency and
facilitation of practice management.
Our operating results in recent years have been significantly affected by strategies
 
and transactions that we
undertook to expand our business, domestically and internationally, in part to address significant changes
 
in the
health care industry, including consolidation of health care distribution companies, health care reform, trends
toward managed care, cuts in Medicare and collective purchasing arrangements.
Our current and future results have been and could be impacted by
 
the COVID-19 pandemic, the current economic
environment and continued economic and public health uncertainty.
 
Since the onset of the COVID-19 pandemic in
early 2020, we have been carefully monitoring its impact on our global
 
operations and have taken appropriate steps
to minimize the risk to our employees.
 
We have seen and expect to continue to see changes in demand trends for
some of our products and services, supply chain challenges and labor
 
challenges, as rates of infection fluctuate, new
strains or variants of COVID-19 emerge and spread, vaccine uptake and mandates increase
and change,
governments adapt their approaches
to combatting the virus, (including,
without limitation, vaccine mandates), and
and local conditions change across geographies.
 
For example, vaccine mandates affecting our workforce, whether
imposed through government regulations or contracts with governmental authorities
or other customers, could
potentially cause staffing shortages if employees choose not to comply as well as
other consequences to our
business or operations, and managing and tracking vaccination status and
ongoing testing for exempt employees
could potentially increase our costs, as could addressing inconsistent COVID-19
vaccination mandates.
As a result,
we expect to see continued volatility through at
least
the duration of the pandemic.
Industry Consolidation
The health care products distribution industry, as it relates to office-based health care practitioners, is fragmented
and diverse.
 
The industry ranges from sole practitioners working out
 
of relatively small offices to group practices
or service organizations ranging in size from a few practitioners to a large number of practitioners who
have
combined or otherwise associated their practices.
Due in part to the inability of office-based health care practitioners to store and manage
 
large quantities of supplies
in their offices, the distribution of health care supplies and small
equipment to office-based health
care practitioners
has been characterized by frequent, small quantity orders, and a need for rapid,
 
rapid, reliable and substantially complete
order fulfillment.
 
The purchasing decisions within an office-based health care practice are typically
 
typically made by the
practitioner or an administrative assistant.
 
Supplies and small equipment are generally purchased from more
 
than
one distributor, with one generally serving as the primary supplier.
The trend of consolidation extends to our customer base.
 
Health care practitioners are increasingly seeking to
partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician
hospital organizations.
 
In many cases, purchasing decisions for consolidated groups
 
are made at a centralized or
professional staff level; however, orders are delivered to the practitioners’ offices.
We believe that consolidation within the industry will continue to result in a number of distributors, particularly
those with limited financial, operating and marketing resources, seeking
 
to combine with larger companies that can
provide growth opportunities.
 
This consolidation also may continue to result in distributors seeking
 
to acquire
companies that can enhance their current product and service offerings or provide
 
opportunities to serve a broader
customer base.
32
Our trend with regard to acquisitions and joint ventures has been to expand
 
our role as a provider of products and
services to the health care industry.
 
This trend has resulted in our expansion into service areas that complement
 
our
existing operations and provide opportunities for us to develop synergies with, and
 
thus strengthen, the acquired
businesses.
33
As industry consolidation continues, we believe that we are positioned
 
to capitalize on this trend, as we believe we
have the ability to support increased sales through our existing infrastructure, although
 
although there can be no assurances
that we will be able to successfully accomplish this.
 
We also have invested in expanding our sales/marketing
infrastructure to include a focus on building relationships with decision
 
makers who do not reside in the office-
based practitioner setting.
As the health care industry continues to change, we continually evaluate
 
possible candidates for joint venture or
acquisition and intend to continue to seek opportunities to expand our
 
role as a provider of products and services to
the health care industry.
 
There can be no assurance that we will be able to successfully pursue
 
any such
opportunity or consummate any such transaction, if pursued.
 
If additional transactions are entered into or
consummated, we would incur merger and/or acquisition-related costs, and
 
there can be no assurance that the
integration efforts associated with any such transaction would be successful.
Aging Population and Other Market Influences
The health care products distribution industry continues to experience growth
 
due to the aging population,
increased health care awareness, the proliferation of medical technology
 
and testing, new pharmacology treatments,
and expanded third-party insurance coverage, partially offset by the effects of unemployment on insurance
coverage.
 
In addition, the physician market continues to benefit from
 
the shift of procedures and diagnostic testing
from acute care settings to alternate-care sites, particularly physicians’
 
offices.
According to the U.S. Census Bureau’s International Database, in 2022 there are approximately seven million
Americans aged 85 years or older, the segment of the population most in need of long-term care
 
and elder-care
services.
 
By the year 2050, that number is projected to nearly triple to approximately
 
19 million.
 
The population
aged 65 to 84 years is projected to increase by approximately 27% during
 
the same period.
As a result of these market dynamics, annual expenditures for health
 
care services continue to increase in the
United States.
 
We believe that demand for our products and services will grow while continuing to be impacted by
current and future operating, economic, and industry conditions.
 
The Centers for Medicare and Medicaid Services,
or CMS, published “National Health Expenditure Data” indicating
 
that total national health care spending reached
approximately $4.1 trillion in 2020, or 19.7% of the nation’s gross domestic product, the benchmark measure
 
measure for
annual production of goods and services in the United
States.
 
Health care spending is projected to reach
approximately $6.2 trillion in 2028, approximately 19.7% of the
 
nation’s projected gross domestic product.
 
The
latest projections begin after the latest historical year (2020) and go through
 
2030.
Government
Certain of our businesses involve the distribution, manufacturing,
 
importation, exportation, marketing and sale of,
and/or third party payment for, pharmaceuticals and/or medical devices, and in this regard, we
 
are subject to
extensive local, state, federal and foreign governmental laws and regulations,
 
including as applicable to our
wholesale distribution of pharmaceuticals and medical devices, manufacturing
 
activities, and as part of our
specialty home medical supply business that distributes and sells
medical equipment
and supplies directly to
patients.
 
The federal government and state governments have also increased
 
enforcement activity in the health care
sector, particularly in areas of fraud and abuse, anti-bribery and corruption, controlled substances handling,
 
medical
device regulations and data privacy and security standards.
In addition, certain of our businesses must operate in compliance with
 
a variety of burdensome and complex billing
and record-keeping requirements in order to substantiate claims for payment under
 
federal, state and commercial
healthcare reimbursement programs.
 
One of these businesses was recently suspended in October 2021 by CMS from
 
receivingfrom
receiving payments from Medicare, although it iswas permitted to continue
to perform
and bill for Medicare services.
 
The
On September 30, 2022, CMS terminated the suspension of Medicare payments.
As a result of the termination of
the suspension, we recognized $13 million of previously deferred revenue
during the quarter ended September 24,
2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33
amounts billed are being deposited in an escrow account pending resolution
of an audit.
We have not recognized
revenue for these services and have currently deferred $13 million in revenue
(including $8 million deferred during
the six months ended June 25, 2022 and $5 million deferred during
the three months ended December 25, 2021).34
Government and private insurance programs fund a large portion of the total cost of medical
 
care, and there have
been efforts to limit such private and government insurance programs, including efforts,
 
thus far unsuccessful, to
seek repeal of the entire United States Patient Protection and Affordable Care Act,
 
as amended by the Health Care
and Education Reconciliation Act, each enacted in March 2010 (as amended,
 
the “ACA”).
 
In addition, activities to
control medical costs, including laws and regulations lowering reimbursement
 
rates for pharmaceuticals, medical
devices and/or medical treatments or services, are ongoing.
 
Many of these laws and regulations are subject to
change and their evolving implementation may impact our operations and
 
our financial performance.
Our businesses are generally subject to numerous laws and regulations that could
 
impact our financial performance,
and failure to comply with such laws or regulations could have a
 
material adverse effect on our business.
A more detailed discussion of governmental laws and regulations
 
is included in Management’s Discussion &
Analysis of Financial Condition and Results of Operations, contained
in our
Annual Report on Form 10-K for the
fiscal year ended December 25, 2021, filed with the SEC on February
 
15, 2022.
Results of Operations
The following table summarizes the significant components of our operating
 
results for the three and sixnine months
ended June 25,September 24, 2022 and June 26,September 25, 2021 and cash flows for the six
 
the nine months ended JuneSeptember 24, 2022
and September 25, 2022 and June 26, 2021:
Three
Months Ended
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,September 24,
JuneSeptember 25,
June 26,
2022
2021
2022
2021
Operating results:
Net sales
 
$
3,0303,067
$
2,9673,178
$
6,2099,276
$
5,8929,070
Cost of sales
 
2,0852,153
2,0762,266
4,2916,444
4,1106,376
Gross profit
 
945914
891912
1,9182,832
1,7822,694
Operating expenses:
Selling, general and administrative
 
680648
635657
1,3622,010
1,2491,906
Depreciation and amortization
45
4544
92137
89133
Restructuring and integration costs
10
-
1
-10
4
Operating income
$
220211
$
210211
$
464675
$
440651
Other expense, net
 
$
(6)
$
(5)
$
(11)(17)
$
(9)(14)
Gain on sale of equity investment
-
7
-
7
Net income
167162
164169
353515
339508
Net income attributable to Henry Schein, Inc.
160150
156162
341491
322484
SixNine Months Ended
JuneSeptember 24,
September 25,
June 26,
2022
2021
Cash flows:
 
Net cash provided by operating activities
$
250348
$
222433
Net cash used in investing activities
(59)(211)
(341)(479)
Net cash used in financing activities
(195)(121)
(139)(254)
3435
Plans of Restructuring and Integration Costs
On August 1, 2022, we committed to a restructuring plan focused on
funding the priorities of the strategic plan and
streamlining operations and other initiatives to increase efficiency.
This plan also includes the rationalization of the
Company’s office space in North America as a result of transitioning to a partial and full remote work model for
certain employees.
We recorded restructuring charges of $9 million primarily related to severance and employee-
related costs and lease right-of-use and other long-lived asset accelerated depreciation
and amortization and lease
exit costs.
We expect this initiative to extend through 2023.
We are currently unable in good faith to make a
determination of an estimate of the amount or range of amounts expected to
be incurred in connection with these
activities, both with respect to each major type of cost associated
therewith and with respect to the total cost, or an
estimate of the amount or range of amounts that will result in future
cash expenditures.
The expense savings
realized from this plan are expected to mainly affect 2023 and beyond.
On August 26, 2022, we acquired Midway Dental Supply.
In connection with this acquisition, during the three
months ended September 24, 2022 we recorded integration costs
of $1 million related to one-time employee and
other costs, as well as restructuring charges of $2 million, which are included
in the $9 million of restructuring
charges discussed above.
On November 20, 2019, we committed to a contemplated restructuring
 
initiative intended to mitigate stranded costs
associated with the spin-off of our animal health business and to rationalize operations
 
and to provide expense
efficiencies.
 
These activities were originally expected to be completed by
the end of 2020 but we extended them to
the end of 2021 in light of the changes to the business environment brought
on by the COVID-19 pandemic.
The
restructuring activities under this prior initiative were completed
in 2021.
During the three and six months ended June 26, 2021, we recorded
restructuring costs of $1 million and $4 million,
respectively.
As of June 25, 2022 and December 25, 2021, the remaining
accrued balance for restructuring costs
was $1 million and $4 million, respectively.
On August 1, 2022, we committed to a restructuring plan focused on
funding the priorities of the strategic plan and
streamlining operations and other initiatives to increase efficiency.
We expect to record restructuring charges in
2022 and 2023, however an estimate of the amount of these charges has not yet been
determined.
Any restructuring
charges are expected primarily to include severance pay and facility-related costs.
The expense savings realized
from this plan are expected to mainly affect 2023 and beyond.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3536
Three Months Ended June 25,September 24, 2022 Compared to Three
Months Ended June 26,September 25, 2021
Net Sales
Net sales were as follows:
June 25,September 24,
% of
June 26,September 25,
% of
Increase / (Decrease)
2022
Total
2021
Total
$
%
Health care distribution
(1)
Dental
 
$
1,8531,785
61.158.2
%
$
1,9121,823
64.457.3
%
$
(59)(38)
(3.1)(2.1)
%
Medical
 
9961,106
32.936.0
9021,185
30.437.3
94(79)
10.3(6.7)
 
Total health care distribution
 
2,8492,891
94.094.2
2,8143,008
94.894.6
35(117)
1.2(3.9)
Technology and value-added services
(2)
181176
6.05.8
153170
5.25.4
286
18.13.8
Total
 
$
3,0303,067
100.0
%
$
2,9673,178
100.0
%
$
63(111)
2.1(3.5)
(1)
Consists of consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and
generic pharmaceuticals, vaccines, surgical products, dental specialty products (including implant, orthodontic and endodontic
products), diagnostic tests, infection-control products, PPE and vitamins.
(2)
Consists of practice management software and other value-added products, which are distributed primarily to health care providers,
practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, continuing
education services for practitioners, consulting and other services.
Note: Percentages for Net Sales; Gross Profit; Selling, General and Administrative; Other Expense, Net; and Income Taxes are based on
actual values and may not recalculate due to rounding.
The 2.1% increase3.5% decrease in net sales includes an increasea decrease of 4.5%0.6% in local currency
 
currency sales (2.4% increasedecrease in internally
generated sales and 2.1%partially offset by 1.8% growth from acquisitions) partially offset byand a decrease of
 
of 2.4%2.9% related to foreign
currency exchange.
 
We estimate that sales of PPE and COVID-19 related productstest kits were approximately $259
$244 million, a
decrease of 28.8%51.6%
 
versus the prior year.
 
Excluding PPE and COVID-19 related products,test kits, the estimated
increase in
internally generated local currency sales was 6.7%6.8%.
The 3.1%2.1% decrease in dental net sales includes an increase of 0.4%2.6% in local
 
currency sales (0.3% decrease(1.2% increase in
internally generated sales and 0.7%1.4% growth from acquisitions) offset by a decrease
 
of 3.5%4.7% related to foreign
currency exchange.
 
The 0.4%2.6% increase in local currency sales was attributable to a decreasean increase in dental
 
consumable
merchandise sales of 1.3% (2.2%1.0% (1.8% growth from acquisitions and 0.8% decrease
in internally generated sales)
 
sales and 0.9% growth from acquisitions) and an
increase in dental equipment and service
sales of 7.0%,
all of which was attributable to8.3% (8.0% growth in internally generated sales
and 0.3% growth
generated sales.from acquisitions).
 
Our sales growth in dental merchandise was lower than our sales growth
 
growth in dental equipment
during the three months ended June 25,September 24, 2022 primarily due to lower patient traffic related toa decrease
 
an increase in patient
appointment cancellations compared to the comparable prior-year period as well as
a decrease in PPE sales.
 
Dental equipment
equipment sales increased in both our North American and international markets,
 
markets, which is primarily attributable to
increased demand and strong order backlog.demand.
 
We estimate that our dental business recorded sales of approximately
$114 $94 million of PPE, and COVID-19 related products, an estimated decrease of 37.2%
44.9% versus the prior year.
 
Excluding PPE, and COVID-19 related products, the estimated increase in
internally generated local currency
dental
sales was 3.5%5.8%.
The 10.3% increase6.7% decrease in medical net sales includes an increasea decrease of 10.6%6.4% in local
 
in local currency sales (6.7% increase(8.8% decrease in
internally generated sales and 3.9% partially offset by 2.4%
growth from acquisitions), partially offset by
and a decrease of 0.3% related to
foreign currency exchange.
Our medical business was impacted by a continuing decrease in sales of PPE
and
COVID-19 test kits, partially offset by strong growth in sales of pharmaceutical,
medical equipment and point-of-
care diagnostic products.
 
We estimate that our medical business recorded sales of approximately $145$150 million of
PPE and COVID-19 related productstest kits for the three months ended June 25, 2022,September
 
24, 2022, an estimated decrease of 20.4%55.0%
compared to the prior year.
 
Excluding sales of PPE and COVID-19 related products,test kits, the estimated
 
the estimated increase in internally
internally generated local currency medical sales was 13.6%9.3%.
The 18.1% increase in technology and value-added services net sales includes
an increase of 19.6%
in local
currency sales (10.8% increase in internally generated sales and 8.8%
growth from acquisitions) partially offset by
a decrease of 1.5% related to foreign currency exchange.
During the quarter ended June 25, 2022, the trend for
transactional software sales improved compared to the prior year, as we increased the number of users,
generating
demand for our sales cycle management solutions, and also
from cloud-based solutions that drive practice
efficiency and patient engagement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3637
The 3.8% increase in technology and value-added services net sales includes
an increase of 5.6% in local currency
sales (4.2% increase in internally generated sales and 1.4% growth
from acquisitions) partially offset by a decrease
of 1.8% related to foreign currency exchange.
During the quarter ended September 24, 2022, the trend for
transactional software sales improved compared to the prior year, as we increased the number of users, generating
demand for our sales cycle management solutions, and also
from cloud-based solutions that drive practice
efficiency and patient engagement.
The increase in sales during the quarter ended September 24,
2022, was
partially offset by the expiration of a modestly profitable government contract
in one of our value-added services
businesses.
Gross Profit
Gross profit and gross margin percentages by segment and in total were as follows:
June 25,September 24,
Gross
June 26,September 25,
Gross
Increase
2022
Margin %
2021
Margin %
$
%
Health care distribution
 
$
826799
29.027.7
%
$
786799
27.926.6
%
$
40-
5.2-
%
Technology and value-added services
119115
65.965.0
105113
68.966.1
142
13.02.0
Total
 
$
945914
31.229.8
$
891912
30.028.7
$
542
6.20.2
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 development.
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 labelcorporate brand products achieve
 
gross profit margins that are
higher than average total gross profit margins of all products.
 
With respect to customer mix, sales to our large-
group customers are typically completed at lower gross margins due to the higher
 
volumes sold as opposed to the
gross margin on sales to office-based practitioners, who normally purchase lower volumes at
 
greater frequencies.
HealthOur health care distribution gross profit increased $40 million, or 5.2%, primarily
due to the increase in net sales
discussed above.
The overall increase in our health care distribution gross profit
includes a $34$21 million increase
in
the gross margin rates due to product mix
and supplier rebates and $18 million additional
gross profit from
acquisitions, partially offset by a decrease of $12 million from internally generated
operations.
Technology and value-added services gross profit increased $14 million, or 13.0%, due to an $11 million increase
in internally generated sales and $5$19 million additional gross profit from acquisitions,
 
partially offset by a decrease of $40 million in gross profit
from internally generated sales.
Technology and value-added services gross profit increased $2 million, or 2.0%, due to a $2 million increase in
gross profit from internally generated sales and $2 million additional
gross profit from acquisitions,
partially offset
by a decrease of $2 million from gross margin rates due to product mix.
 
Technology and value-added services
gross profit
margin decreased
to 65.9%65.0% from 68.9%66.1% primarily due to our continued investment
 
in product
development and
customer service.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3738
Selling, General and Administrative
Selling, general and administrative expenses by segment and in
 
total were as follows:
% of
% of
June 25,September 24,
Respective
June 26,September 25,
Respective
Increase
2022
Net Sales
2021
Net Sales
$
%
Health care distribution
 
$
637620
22.421.5
%
$
604620
21.420.6
%
$
33-
5.6-
%
Technology and value-added services
 
8883
48.547.2
7781
50.147.4
112
14.43.2
Total
 
$
725
23.9
$
681703
22.9
$
44701
6.622.1
$
2
0.3
Selling, general and administrative expenses (including restructuring costsdepreciation and
 
amortization; and restructuring and
integration costs in the three months ended June 26,September 24, 2022) increased
2021) increased $44$2 million, or 6.6%0.3%.
The $33 million increase in selling,Selling, general and administrative expenses within
our health care distribution
segment had an increase of $18
million of additional
costs from acquired companies and an increase of $10 million in restructuring
and integration
costs, offset by a decrease of $28 million in internally generated operating costs.
The $2 million increase in selling,
general and administrative expenses within our technology and value-added services
segment was attributable to an
increase of $18$2 million of operating costs and an increase
of $17$1 million of additional
costs
from acquired companies,
partially offset by a decrease of $1 million in restructuring costs.
The $11 million
increase in selling, general and administrative expenses within our technology
and value-added services segment
was attributable to an increase of $6 million of operating costs and an
increase of $5 million of additional costs
from acquired companies.integration costs.
As a component of total selling, general and administrative expenses, selling
 
selling expenses increased $22$12 million, or
5.4%3.0% to $433$424 million primarily due to an increase in payroll and payroll
 
related costs and travel and convention
expenses.
 
As a percentage of net sales, selling expenses increased to 14.3%13.8%
 
from 13.8%13.0%.
As a component of total selling, general and administrative expenses, general
 
and administrative expenses
increased $22decreased $10 million, or 8.5%3.6% to $292$279 million primarily due to an increasea decrease
 
in payroll and payroll related costs, and
partially offset by an increase in travel and convention expenses.
 
As a percentage of net sales, general and administrative expenses
increased to
9.6% fromremained consistent at 9.1%.
Other Expense, Net
Other expense, net, was as follows:
JuneSeptember 24,
September 25,
June 26,
Variance
2022
2021
$
%
Interest income
 
$
3
$
14
$
2
120.8$
2
191.5
%
Interest expense
 
(9)(11)
(7)
(2)(4)
(30.4)(67.1)
Other, net
 
1
-
1
(1)
(90.3)127.6
Other expense, net
 
$
(6)
$
(5)
$
(1)
(13.3)(25.0)
Interest income increased $2 million and interest expense increased
 
$24 million primarily due to increased interest
rates.
Income Taxes
For the three months ended June 25,September 24, 2022 our effective tax rate was 23.8% compared22.7%
 
compared to 23.4%
23.9% for the prior year
year period.
 
The difference between our effective tax ratesrate and the federal statutory tax rate for
 
the three months ended
June 25,ended September 24, 2022 primarily relates to state and foreign income taxes
and interest
expense.
 
The difference
between our
effective tax rate and the federal statutory tax rate for the three
months ended June
26,September 25, 2021 was
primarily due to
state and foreign income taxes, interest expense and tax
charges and credits associated with legal
entity reorganizations.
39
Gain on Sale of Equity Investment
In the third quarter of 2021 we received contingent proceeds of $10 million
 
legal entityfrom the 2019 sale of Hu-Friedy
reorganizations.resulting in the recognition of an additional after-tax gain of $7
million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3840
SixNine Months Ended June 25,September 24, 2022 Compared to SixNine Months Ended June 26,September
25, 2021
Net Sales
Net sales were as follows:
June 25,September 24,
% of
June 26,September 25,
% of
Increase/(Decrease)
2022
Total
2021
Total
$
%
Health care distribution
(1)
Dental
 
$
3,6815,466
59.358.9
%
$
3,7015,524
62.860.9
%
$
(20)(58)
(0.5)(1.1)
%
Medical
 
2,1683,274
34.935.3
1,8933,078
32.133.9
275196
14.56.3
Total health care distribution
 
5,8498,740
94.2
5,5948,602
94.994.8
255138
4.61.6
Technology and value-added services
(2)
360536
5.8
298468
5.15.2
6268
20.714.5
Total
 
$
6,2099,276
100.0
%
$
5,8929,070
100.0
%
$
317206
5.42.3
(1)
Consists of consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and
generic pharmaceuticals, vaccines, surgical products, dental specialty products (including implant, orthodontic and endodontic
products), diagnostic tests, infection-control products, PPE and vitamins.
(2)
Consists of practice management software and other value-added products, which are distributed primarily to health care providers,
practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, continuing
education services for practitioners, consulting and other services.
Note: Percentages for Net Sales; Gross Profit; Selling, General and Administrative; Other Expense, Net; and Income Taxes are based on
actual values and may not recalculate due to rounding.
The 5.4%2.3% increase in net sales includes an increase of 7.3%4.5% in local currency
 
revenue (5.0%sales (2.4% increase in internally
generated revenuesales and 2.3%2.1% growth from acquisitions) partially offset by a decrease of
 
1.9%of 2.2% related to foreign
currency exchange.
 
We estimate that sales for the sixnine months ended June 25,September 24, 2022 of PPE and COVID-19 related
productstest kits were approximately $747$991 million, an estimated decrease of 10.1%25.8% versus
 
versus the prior year.
 
Excluding PPE
and COVID-19 related products, test kits,
the estimated increase in internally generated
local
currency sales was 7.5%7.3%.
The 0.5%1.1% decrease in dental net sales includes an increase of 2.3%2.4% in
 
local currency revenue (1.6%sales (1.4% increase in
internally generated revenuesales and 0.7%1.0% growth from acquisitions) partially
offset by a decrease
of 2.8%3.5% related to foreign
foreign currency exchange.
 
The 2.3%2.4% increase in local currency sales was attributable to an increase in dental
consumable
consumable merchandise revenuesales of 0.5% (0.5%0.6% (1.2% growth from acquisitions partially
offset by 0.6% decrease in internally generated
revenue and 1.0% growth from
acquisitions)sales), and an increase in dental equipment sales and service revenuessales of
 
of 9.4% (9.3%9.0% (8.9% increase in internally generated
generated revenuesales and 0.1% growth from acquisitions).
 
Our sales growth in dental merchandise was lower than our sales
growth
sales growth in dental equipment during the threenine months ended June 25,September 24,
 
2022 primarily due to lower patient traffic
compared to the comparable prior-year period as well as a decrease in PPE sales.
 
Dental equipment sales increased
in both our North American and international markets, which
 
ismarkets, primarily attributabledue to increased demand and
strong order backlog.demand.
 
We estimate that global dental sales for the sixnine months ended June 25,September 24, 2022 of PPE andwere
COVID-19 related products were approximately $258$352 million,
an estimated decrease of 26.6%32.5% versus
the prior
year.
 
Excluding PPE, and COVID-19 related products, the estimated
increase in internally generated local currency
dental sales was 4.4%4.9%.
The 14.5%6.3% increase in medical net sales iswas attributable to an increase of 6.6%
 
14.7% in local currency growth (10.9%sales (3.3%
increase in internally generated revenuesales and 3.8%3.3% growth from acquisitions)
 
partially offset by a decrease of 0.2%0.3%
related to foreign currency exchange.
 
Globally, we estimate our medical business recorded sales of approximately
$489639 million sales of such PPE and other COVID-19 related products
test kits for the sixnine months ended June 25,September
24, 2022, ana decrease of
increase of approximately 1.9%
21.4% compared to the prior year.
 
Excluding PPE and COVID-19 related products,test kits, the
estimated increase
in
internally generated local currency medical sales
was 14.1%12.3%.
The 20.7%14.5% increase in technology and value-added services net sales
 
iswas attributable to an increase of 21.8%15.9% in local
local currency revenue (11.0%sales (8.5% increase in internally generated revenuesales and 10.8% 7.4%
growth from acquisitions) partially offset
offset by a decrease of 1.1%1.4% related to foreign currency exchange.
 
During the sixnine months ended June 25,September 24, 2022, the
the trend for transactional software sales improved as we increased the number of
 
of users, generating demand for our
sales cycle management solutions, and also from cloud-based solutions that
 
drive practice efficiency and patient
engagement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3941
Gross Profit
Gross profit and gross margin percentages by segment and in total were as follows:
June 25,September 24,
Gross
June 26,September 25,
Gross
Increase
2022
Margin %
2021
Margin %
$
%
Health care distribution
 
$
1,6832,482
28.828.4
%
$
1,5752,374
28.127.6
%
$
108
6.94.6
%
Technology and value-added services
235350
65.465.3
207320
69.668.3
2830
13.49.4
Total
 
$
1,9182,832
30.930.5
$
1,7822,694
30.229.7
$
136138
7.75.1
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.
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
 
been the most significant drivers affecting
our gross profit margin.
 
For example, sales of our private labelcorporate brand products achieve
 
gross profit margins that are
higher than average total gross profit margins of all products.
 
With respect to customer mix, sales to our large-
group customers are typically completed at lower gross margins due to the higher
 
volumes sold as opposed to the
gross margin on sales to office-based practitioners, who normally purchase lower volumes at
 
greater frequencies.
Health care distribution gross profit increased $108 million, or 6.9%4.6% primarily
 
due to the increase in net sales
discussed above.
 
In addition, health care distribution gross profit margin benefitted from supplier
 
rebates due to
increased purchase volumes compared to the comparable prior-year period.
 
The overall increase in our health care
distribution gross profit iswas attributable to a $46$68 million increase in gross profit
 
profit due to the increase in the gross
margin rates $37and $57 million additional gross profit from acquisitions, and $25 million
 
increasepartially offset by $17 million decrease in
gross profit from internally generated
revenue. sales.
Technology and value-added services gross profit increased $28$30 million, or 13.4%9.4%, attributable to an increase of $23
$20 million in gross profit from internally generated revenuesales and $14 $15
million additional
gross profit from acquisitions,
partially
partially offset by a $6$8 million decrease in gross margin rates.
 
Technology and value-added services gross profit margin
margin decreased to 65.4%65.3% from 69.6%68.3% primarily due to lower gross margins of recently acquired companies
 
acquired companies in the
business services sector and our continued investment in product
 
development and customer service.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4042
Selling, General and Administrative
Selling, general and administrative expenses by segment and in
 
total were as follows:
% of
% of
June 25,September 24,
Respective
June 26,September 25,
Respective
Increase
2022
Net Sales
2021
Net Sales
$
%
Health care distribution
 
$
1,2831,903
21.921.8
%
$
1,1961,816
21.421.1
%
$
87
7.44.8
%
Technology and value-added services
 
171254
47.547.4
146227
49.148.5
2527
16.711.9
Total
 
$
1,4542,157
23.423.3
$
1,3422,043
22.822.5
$
112114
8.45.6
Selling, general and administrative expenses (including restructuring costs)depreciation and
 
amortization; and restructuring and
integration costs) increased $112$114 million, or 8.4%5.6%.
The $87 million increase in selling, general and administrative expenses within
 
our health care distribution segment
was attributable to an increase of $53$24 million in internally generated operating
costs, an increase of operating$56 million of
additional costs from acquired companies,
and an increase
of $38 million of additional costs
from acquired companies, partially offset by a decrease of $4$7 million in restructuring and integration costs.
 
The $25
$27 million
increase in selling, general and administrative expenses
within our technology
and value-added services segment
segment was attributable to an increase of $13$15 million of in internally generated
operating costs and an increase
of $12 $13
million of additional costs
from acquired companies.companies,
partially offset by a decrease in restructuring costs of $1
million.
 
As a component of total selling, general and administrative expenses, selling
 
expenses increased $79$91 million, or
10.0%7.6% to $875$1,299 million, primarily due to an increase in payroll and payroll related
 
costs and travel and convention
expenses.
 
As a percentage of net sales, selling expenses increased to 14.1%14.0%
 
from 13.5%13.3%.
As a component of total selling, general and administrative expenses, general
 
and administrative expenses
increased $33$23 million, or 6.1%2.7% to $579$858 million, primarily due to an increase
 
in payroll and payroll related costs and
travel and convention expenses.
 
As a percentage of net sales, general and administrative expenses
 
remainedincreased to
consistent at 9.3% from 9.2%.
Other Expense, Net
Other expense, net, was as follows:
JuneSeptember 24,
September 25,
June 26,
Variance
2022
2021
$
%
Interest income
 
$
9
$
5
$
34
$
2
47.690.3
%
Interest expense
 
(16)(27)
(13)(20)
(3)(7)
(23.0)(37.9)
Other, net
 
-1
1
(1)-
(110.0)(20.2)
Other expense, net
 
$
(11)(17)
$
(9)(14)
$
(2)(3)
(23.6)(24.1)
Interest income increased $2$4 million and interest expense increased
 
$37 million primarily due to increased interest
rates.
Income Taxes
For the sixnine months ended June 25,September 24, 2022, our effective tax rate was 23.9%23.5% compared to
 
to 24.3%24.2% for the prior year
year period.
 
The difference between our effective tax rate and the federal statutory tax rate for the nine
 
the six months ended
June 25,ended September 24, 2022 primarily relates to state and foreign income taxes
and interest
expense as well as share-basedshare-
based compensation.
 
The difference between our effective tax rate and the federal statutory tax rate for the six monthsnine
months ended June 26,September 25, 2021 was primarily due to state and
foreign income taxes,
interest expense and tax
charges and
credits associated with legal entity reorganizations.
4143
Gain on Sale of Equity Investment
In the third quarter of 2021 we received contingent proceeds of $10 million
from the 2019 sale of Hu-Friedy
resulting in the recognition of an additional after-tax gain of $7
million.
44
Liquidity and Capital Resources
 
Our principal capital requirements have included funding of acquisitions, purchases
 
of additional noncontrolling
interests, repayments of debt principal, the funding of working capital needs,
 
purchases of fixed assets and
repurchases of common stock (which had been temporarily suspended
in April 2020, but were resumed in early
March 2021).stock.
 
Working capital requirements generally result from increased sales, special
inventory forward buy-in
opportunities and payment terms for receivables
and payables.
 
Historically, sales have
tended to be stronger during
the second half of the year and special inventory
forward buy-in opportunities have
have been most prevalent just before
the end of the year, and have caused our working capital requirements
to be higher
from the end of the
third quarter
to the end of the first quarter of
the following year.
We finance our business primarily through cash generated from our operations, revolving credit facilities and debt
placements.
 
Please see
Note 7 – Debt
 
for further information.
 
Our ability to generate sufficient cash flows from
operations is dependent on the continued demand of our customers for
 
for our products and services, and access to
products and services from our suppliers.
Our business requires a substantial investment in working capital, which
 
is susceptible to fluctuations during the
year as a result of inventory purchase patterns and seasonal demands.
 
Inventory purchase activity is a function of
sales activity, special inventory forward buy-in opportunities and our desired level of inventory.
 
We anticipate
future increases in our working capital requirements.
We finance our business to provide adequate funding for at least 12 months.
 
Funding requirements are based on
forecasted profitability and working capital needs, which, on occasion, may
 
change.
 
Consequently, we may change
our funding structure to reflect any new requirements.
We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,
and our available funds under existing credit facilities provide us with
 
sufficient liquidity to meet our currently
foreseeable short-term and long-term capital needs.
 
Net cash provided by operating activities was $250$348 million for the nine
 
six months ended June 25,September 24, 2022,
compared to
net cash provided by operating activities of $222$433 million for the comparable
 
comparable prior year period.
 
The net
change of
$28 $85 million was primarily attributable to higher net income and increaseda relative increase
 
in working capital, specificallydriven by an increase in
other current assets and a decrease in
inventory levels of PPE and COVID-19 related products.
These working capital increases were inventories, partially offset by a decrease in
reduced accounts payable and accrued expenses.payable.
Net cash used in investing activities was $59$211 million for the six
nine months ended June 25, September 24,
2022, compared to $341
$479 million for the comparable prior year period.
 
The net change of $282$268 million was primarily attributable to
decreased payments for equity investments and business acquisitions.
Net cash used in financing activities was $195$121 million for the nine
 
six months ended June 25,September 24, 2022, compared to net
net cash used in financing activities of $139$254 million for the comparable
 
prior year period.
 
The net change of $56$133
million was primarily due to reducedincreased net borrowings from debt partiallyand decreased
 
offset by decreased repurchases of
common stock.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4245
The following table summarizes selected measures of liquidity and capital
 
resources:
June 25,September 24,
December 25,
2022
2021
Cash and cash equivalents
 
$
108123
$
118
Working
 
capital
 
(1)
1,7131,811
1,537
Debt:
Bank credit lines
 
$
85107
$
51
Current maturities of long-term debt
 
4
11
Long-term debt
 
769934
811
Total debt
 
$
8581,045
$
873
Leases:
Current operating lease liabilities
$
7472
$
76
Non-current operating lease liabilities
276271
268
(1)
 
Includes $76$313 million and $138 million of certain accounts receivable which serve as security for U.S. trade accounts receivable
securitization at June 25,September 24, 2022 and December 25, 2021, respectively.
Our cash and cash equivalents consist of bank balances and investments
 
in money market funds representing
overnight investments with a high degree of liquidity.
Accounts receivable days sales outstanding and inventory turns
Our accounts receivable days sales outstanding from operations decreased
 
increased to 42.242.9 days as of June 25,September 24, 2022 from
42.3from 42.6 days as of June 26,September 25, 2021.
 
During the sixnine months ended June 25,September 24, 2022, we wrote off approximately $4
 
millionoff
approximately $7 million of fully reserved accounts receivable against our
trade receivable reserve.
 
Our inventory
turns from operations
decreased to 4.64.7 as of June 25,September 24, 2022 from 5.1
as of June 26,September 25, 2021.
 
Our working
capital accounts may be impacted
by current and future economic conditions.
Leases
We have operating and finance leases for corporate offices, office space, distribution and other facilities, vehicles,
and certain equipment.
 
Our leases have remaining terms of less than one year to approximately
 
approximately 19 years, some of
which may include options to extend the leases for up to 10ten years.
 
As of June 25,September 24, 2022, our right-of-use assets
assets related to operating leases were $327$319 million and our current and non-current
 
operating lease liabilities were $74
$72 million and $276$271 million, respectively.
Stock Repurchases
From March 3, 2003 through June 25,September 24, 2022, we repurchased $4.1 billion,$4.2
 
billion, or 82,414,39083,598,119 shares, under our common
common stock repurchase programs, with $90$400 million available
as of June 25,September 24, 2022
for future common
stock share
repurchases.
43
Critical Accounting Policies and Estimates
There have been no material changes in our critical accounting policies and
 
estimates from those disclosed in Item
7 of our Annual Report on Form 10-K for the year ended December 25, 2021,
 
except accounting policies adopted
as of December 26, 2021, which are discussed in
 
of the Notes to the Condensed Consolidated Financial
Statements included under Item 1.
46
Accounting Standards Update
For a discussion of accounting standards updates that have been adopted
 
or will be adopted, see
 
and Recently Issued Accounting Standards of the Notes
to the Condensed Consolidated Financial Statements included under Item 1.
ITEM 3.
 
QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk
 
from that disclosed in Item 7A of our Annual
Report on Form 10-K for the year ended December 25, 2021.
ITEM 4.
 
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including
 
our principal executive officer and
principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this quarterly report
as such
term is defined in Rules 13a-15(e)
and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as
 
amended (the “Exchange Act”).
 
Based
on this evaluation, our management, including our principal executive
officer and principal
financial officer,
concluded that our disclosure controls and procedures were effective as of June 25, 2022,September 24,
 
2022, to ensure that all material
material information required to be disclosed by us in reports that we file
or submit
under the Exchange Act is accumulated
accumulated and communicated to them as appropriate to allow timely decisions
 
decisions regarding required disclosure and
that all such
information is recorded, processed, summarized and reported
within the
time periods specified in the
SEC’s rules
and forms.
Changes in Internal Control over Financial Reporting
The combination of acquisitions, continued acquisition integrations and systems
implementation activity
undertaken during the quarter and carried over from prior quarters when considered
considered in the aggregate, represents a
material change in our
internal control over financial reporting.
During the quarter ended June 25,September 24, 2022, we completed the acquisition
of dental businesses in North America
and Europe.
Also, post-acquisition integration
related activities continued
for our dental and
medical businesses
acquired during prior quarters.
 
These acquisitions, the majority of which utilize separate
information and financial
accounting systems, have been included
in our condensed consolidated
financial
statements since their respective
dates of acquisition.
 
Additionally,In addition, we continuedcompleted systems implementation activities
in North America related to a
new ERP system for a dental business as well as the upgradeintegration of the warehouse management systema
 
for our Australian dental business.business onto an existing ERP system.
All acquisitions, continued acquisition integrations and systems implementation activity
 
activity involve necessary and appropriate
appropriate change-management controls that are considered in our quarterly
assessment of
the design and operating
operating effectiveness of our internal control over financial reporting.
Limitations of the Effectiveness of Internal Control
A control system, no matter how well conceived and operated, can provide
 
only reasonable, not absolute, assurance
that the objectives of the internal control system are met.
 
Because of the inherent limitations of any internal control
system, no evaluation of controls can provide absolute assurance that
 
all control issues, if any, within a company
have been detected.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4447
PART
 
II.
 
OTHER INFORMATION
 
ITEM 1.
 
LEGAL PROCEEDINGS
 
For a discussion of Legal Proceedings, see
 
of the Notes to the Condensed Consolidated
Financial Statements included under Item 1.
ITEM 1A. RISK FACTORS
 
There have been no material changes from the risk factors disclosed in
 
Part
1, Item 1A, of our Annual Report on
Form 10-K for the year ended December 25, 2021.
ITEM 2.
 
UNREGISTERED SALES OF EQUITY SECURITIES
 
AND USE OF PROCEEDS
Purchases of equity securities by the issuer
 
Our share repurchase program announced on March 3, 2003
, originally allowed us to repurchase up to two million
shares pre-stock splits (eight million shares post-stock splits) of our common
 
stock, which represented
approximately 2.3% of the shares outstanding at the commencement of
 
the program.
 
Subsequent additional
increases totaling $4.1$4.5 billion, authorized by our Board of Directors,
 
to the repurchase program provide for a total
of $4.2$4.6 billion of shares of our common stock to be repurchased under this
 
program.
On August 17, 2022, our Board of Directors authorized the repurchase
of up to an additional $400 million in shares
of our common stock.
As of June 25,September 24, 2022, we had repurchased approximately $4.1$4.2 billion
 
of common stock (82,414,390(83,598,119 shares) under
under these initiatives, with $90$400 million available for future common stock
 
stock share repurchases.
The following table summarizes repurchases of our common stock
 
under our stock repurchase program during the
fiscal quarter ended June 25,September 24, 2022.
Total Number
Maximum Number
Total
of Shares
of Shares
Number
Average
Purchased as Part
that May Yet
of Shares
Price Paid
of Our Publicly
Be Purchased Under
Fiscal Month
Purchased (1)
Per Share
Announced Program
Our Program (2)
3/27/6/26/2022 through 4/23/7/30/2022
-745,762
$
76.71
745,762
421,839
8/1/2022 through 8/27/2022
437,967
75.93
437,967
5,450,334
8/28/2022 through 9/24/2022
-
-
2,291,215-
4/24/2022 through 5/28/20225,940,006
613,2651,183,729
84.12
613,265
1,726,511
5/29/2022 through 6/25/2022
732,132
79.16
732,132
1,170,369
1,345,397
1,345,3971,183,729
(1)
 
All repurchases were executed in the open market under our existing publicly announced authorized program.
(2)
 
The maximum number of shares that may yet be purchased under this program is determined at the end of each month based on the
closing price of our common stock at that time.
 
This table excludes shares withheld from employees to satisfy minimum tax withholding
requirements for equity-based transactions.
ITEM 5.
OTHER INFORMATION
On August 1, 2022, we committed to a restructuring plan focused on
funding the priorities of the strategic plan and
streamlining operations and other initiatives to increase efficiency.
We expect to record restructuring charges in
2022 and 2023, however an estimate of the amount of these charges has not yet been
determined.
Any restructuring
charges
are expected primarily to include severance pay and facility-related
costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4548
ITEM 6.
 
EXHIBITS
101.INS
Inline XBRL Instance Document - the instance document does not appear
 
in the
Interactive Data File because its XBRL tags are embedded within the
 
Inline
XBRL document+
101.SCH
Inline XBRL Taxonomy Extension Schema Document+
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document+
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document+
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document+
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document+
104
The cover page of Henry Schein, Inc.’s Quarterly Report on Form 10-Q for the
quarter ended June 25,September 24, 2022, formatted in Inline XBRL (included
within
Exhibit 101 attachments).+
+ Filed or furnished herewith.
 
4649
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant
 
Registrant has duly caused this Report to
be signed on its behalf by the undersigned thereunto duly authorized.
Henry Schein, Inc.
(Registrant)
By: /s/ Ronald N. South
Ronald N. South
Senior Vice President and
Chief Financial Officer
(Authorized Signatory and Principal Financial
and Accounting Officer)
Dated: August 2,November 1, 2022