hsicform10k20201226
false 2020 - - - - - - - 0.01 1000000 none - 0.01 480000000 FY 0001000228 --12-26 1.2633 315088 25888 94449 5 true false HENRY SCHEIN INC NASDAQ Yes No Yes Yes true 9/30/2027 January 20, 2012 January 20, 2022 January 20, 2012 January 20, 2024 December 24, 2012 December 24, 2024 June 2, 2014 June 2, 2021 June 16, 2017 June 16, 2027 September 15, 2017 September 15, 2029 January 2, 2018 January 2, 2028 September 2, 2020 September 2, 2030 August 31, 2012 August 1, 2017 October 30, 2017 May 29, 2018 September 30, 2019 0001000228 2017-12-31 2018-12-29 0001000228 2019-09-29 2019-12-28 0001000228 us-gaap:RetainedEarningsMember 2018-12-30 2019-12-28 0001000228 2019-12-29 2020-12-26 0001000228 2020-12-26 0001000228 hsic:HealthcareDistributionMember 2020-12-26 0001000228 us-gaap:OtherRestructuringMember 2018-12-30 2019-12-28 0001000228 hsic:LifetimeConsultingAgreementMember 2019-12-29 2020-12-26 0001000228 2018-12-30 2019-12-28 0001000228 us-gaap:CustomerRelatedIntangibleAssetsMember 2019-12-28 0001000228 us-gaap:NoncontrollingInterestMember 2017-12-31 2018-12-29 0001000228 us-gaap:OtherRestructuringMember 2019-12-28 0001000228 us-gaap:AdditionalPaidInCapitalMember 2018-12-30 2019-12-28 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-28 0001000228 us-gaap:FinanceReceivablesMember srt:MaximumMember 2020-12-26 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2020-12-26 0001000228 srt:MaximumMember hsic:ComputerEquipmentAndSoftwareMember 2019-12-29 2020-12-26 0001000228 hsic:TechnologyMember 2019-12-28 0001000228 us-gaap:RetainedEarningsMember 2017-12-31 2018-12-29 0001000228 us-gaap:NoncontrollingInterestMember 2018-12-30 2019-12-28 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 2018-12-29 0001000228 us-gaap:NoncompeteAgreementsMember 2020-12-26 0001000228 us-gaap:FacilityClosingMember 2019-12-29 2020-12-26 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2019-12-28 0001000228 2018-12-29 0001000228 us-gaap:OtherIntangibleAssetsMember 2019-12-28 0001000228 2019-06-30 2019-09-28 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2019-12-28 0001000228 2019-12-28 0001000228 us-gaap:EmployeeSeveranceMember 2018-12-30 2019-12-28 0001000228 hsic:HealthcareDistributionMember 2019-12-29 2020-12-26 0001000228 us-gaap:OtherRestructuringMember 2020-12-26 0001000228 us-gaap:NoncontrollingInterestMember 2018-12-29 0001000228 us-gaap:FairValueMeasurementsRecurringMember 2019-12-28 0001000228 hsic:TechnologyMember 2019-12-29 2020-12-26 0001000228 hsic:HealthcareDistributionMember 2018-12-30 2019-12-28 0001000228 hsic:PerformanceBasedRestrictedStockRestrictedUnitsMember 2019-12-29 2020-12-26 0001000228 hsic:TimeBasedRestrictedStockRestrictedUnitsMember 2019-12-29 2020-12-26 0001000228 hsic:AllowanceForDoubtfulAccountsAndOtherMember 2017-12-31 2018-12-29 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-30 2019-12-28 0001000228 hsic:AllowanceForDoubtfulAccountsAndOtherMember 2018-12-30 2019-12-28 0001000228 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 2018-12-29 0001000228 us-gaap:CommonStockMember 2017-12-31 2018-12-29 0001000228 us-gaap:TrademarksAndTradeNamesMember 2020-12-26 0001000228 hsic:EmploymentConsultingAndNoncompeteAgreementsMember 2020-12-26 0001000228 us-gaap:CommonStockMember 2017-12-30 0001000228 us-gaap:CommonStockMember 2018-12-30 2019-12-28 0001000228 2017-12-30 0001000228 2018-12-30 2019-03-30 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2019-12-28 0001000228 hsic:HealthcareDistributionMember 2018-12-29 0001000228 us-gaap:TrademarksAndTradeNamesMember 2019-12-28 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-29 0001000228 us-gaap:FurnitureAndFixturesMember srt:MaximumMember 2019-12-29 2020-12-26 0001000228 hsic:HealthcareDistributionMember 2019-12-28 0001000228 us-gaap:FacilityClosingMember 2018-12-30 2019-12-28 0001000228 us-gaap:OtherRestructuringMember 2017-12-30 0001000228 us-gaap:LandMember 2019-12-28 0001000228 us-gaap:AdditionalPaidInCapitalMember 2019-12-28 0001000228 hsic:HenryScheinOneLlcMember hsic:InternetBrandsIncMember hsic:InternetBrandsIncMember 2018-07-01 2018-09-29 0001000228 hsic:EmployeeAndDirectorsStockOptionsMember 2019-12-28 0001000228 srt:MaximumMember hsic:Qualified401kPlanMember 2019-12-29 2020-12-26 0001000228 us-gaap:LandMember 2020-12-26 0001000228 hsic:TechnologyMember 2020-12-26 0001000228 us-gaap:MachineryAndEquipmentMember 2019-12-28 0001000228 hsic:Qualified401kPlanMember 2019-12-29 2020-12-26 0001000228 us-gaap:MachineryAndEquipmentMember srt:MaximumMember 2019-12-29 2020-12-26 0001000228 srt:MinimumMember 2019-12-29 2020-12-26 0001000228 hsic:AllowanceForDoubtfulAccountsAndOtherMember 2020-12-26 0001000228 hsic:Qualified401kPlanMember 2018-12-30 2019-12-28 0001000228 hsic:PerformanceBasedRestrictedStockRestrictedUnitsMember 2020-12-26 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2020-12-26 0001000228 hsic:AllowanceForDoubtfulAccountsAndOtherMember 2019-12-29 2020-12-26 0001000228 hsic:PerformanceBasedRestrictedStockRestrictedUnitsMember 2019-12-28 0001000228 srt:MinimumMember hsic:ComputerEquipmentAndSoftwareMember 2019-12-29 2020-12-26 0001000228 us-gaap:AdditionalPaidInCapitalMember 2017-12-30 0001000228 us-gaap:FurnitureAndFixturesMember 2020-12-26 0001000228 us-gaap:NoncompeteAgreementsMember 2019-12-28 0001000228 us-gaap:InProcessResearchAndDevelopmentMember 2019-12-28 0001000228 us-gaap:EmployeeSeveranceMember 2019-12-29 2020-12-26 0001000228 country:US 2018-12-29 0001000228 hsic:Qualified401kPlanMember 2017-12-31 2018-12-29 0001000228 hsic:SupplementalExecutiveRetirementPlanMember 2017-12-31 2018-12-29 0001000228 hsic:LocationsOtherThanUnitedStatesMember 2020-12-26 0001000228 us-gaap:InProcessResearchAndDevelopmentMember 2020-12-26 0001000228 us-gaap:OtherRestructuringMember 2017-12-31 2018-12-29 0001000228 country:US 2019-12-28 0001000228 us-gaap:AdditionalPaidInCapitalMember 2018-12-29 0001000228 us-gaap:CustomerRelatedIntangibleAssetsMember 2020-12-26 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-30 0001000228 us-gaap:MachineryAndEquipmentMember 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember 2020-12-26 0001000228 us-gaap:NoncontrollingInterestMember 2017-12-30 0001000228 hsic:HenryScheinOneLlcMember hsic:HenryScheinOneLlcMember hsic:InternetBrandsIncMember hsic:AchievementOfCertainOperatingTargetsMember 2019-12-29 2020-12-26 0001000228 us-gaap:OtherIntangibleAssetsMember 2020-12-26 0001000228 us-gaap:CommonStockMember 2018-12-29 0001000228 us-gaap:NoncontrollingInterestMember 2019-12-28 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2020-12-26 0001000228 hsic:EmployeeAndDirectorsStockOptionsMember 2018-12-29 0001000228 us-gaap:FacilityClosingMember 2017-12-31 2018-12-29 0001000228 us-gaap:FairValueMeasurementsRecurringMember 2020-12-26 0001000228 hsic:HealthcareDistributionMember 2017-12-30 0001000228 hsic:TechnologyMember 2018-12-30 2019-12-28 0001000228 hsic:TimeBasedRestrictedStockRestrictedUnitsMember 2020-12-26 0001000228 2020-06-28 2020-09-26 0001000228 hsic:StockIncentivePlanMember 2020-12-26 0001000228 hsic:LocationsOtherThanUnitedStatesMember 2018-12-29 0001000228 2019-12-29 2020-03-28 0001000228 hsic:AllowanceForDoubtfulAccountsAndOtherMember 2019-12-28 0001000228 us-gaap:OtherRestructuringMember 2019-12-29 2020-12-26 0001000228 2020-03-29 2020-06-27 0001000228 us-gaap:FinanceReceivablesMember 2019-12-29 2020-12-26 0001000228 us-gaap:FacilityClosingMember 2020-12-26 0001000228 2019-03-31 2019-06-29 0001000228 us-gaap:FurnitureAndFixturesMember srt:MinimumMember 2019-12-29 2020-12-26 0001000228 us-gaap:EmployeeSeveranceMember 2020-12-26 0001000228 hsic:NonEmployeeDirectorStockIncentivePlanMember 2020-12-26 0001000228 hsic:TimeBasedRestrictedStockRestrictedUnitsMember 2019-12-28 0001000228 us-gaap:RetainedEarningsMember 2018-12-29 0001000228 us-gaap:MachineryAndEquipmentMember srt:MinimumMember 2019-12-29 2020-12-26 0001000228 hsic:EmployeeAndDirectorsStockOptionsMember 2020-12-26 0001000228 hsic:TechnologyMember 2017-12-30 0001000228 us-gaap:BuildingAndBuildingImprovementsMember 2019-12-28 0001000228 us-gaap:EmployeeSeveranceMember 2017-12-31 2018-12-29 0001000228 us-gaap:LeaseholdImprovementsMember 2019-12-28 0001000228 hsic:TechnologyMember 2017-12-31 2018-12-29 0001000228 us-gaap:RetainedEarningsMember 2019-12-28 0001000228 country:US 2020-12-26 0001000228 hsic:ComputerEquipmentAndSoftwareMember 2019-12-28 0001000228 us-gaap:GeographicConcentrationRiskMember us-gaap:SalesRevenueNetMember srt:MinimumMember country:US 2019-12-29 2020-12-26 0001000228 hsic:TechnologyMember 2018-12-29 0001000228 hsic:SupplementalExecutiveRetirementPlanMember 2019-12-29 2020-12-26 0001000228 us-gaap:EmployeeSeveranceMember 2017-12-30 0001000228 us-gaap:CommonStockMember 2019-12-28 0001000228 us-gaap:FinanceReceivablesMember srt:MinimumMember 2020-12-26 0001000228 hsic:SupplementalExecutiveRetirementPlanMember 2018-12-30 2019-12-28 0001000228 us-gaap:LeaseholdImprovementsMember 2020-12-26 0001000228 us-gaap:SupplierConcentrationRiskMember hsic:PurchasesMember hsic:SingleLargestSupplierMember 2019-12-29 2020-12-26 0001000228 srt:MaximumMember 2019-12-29 2020-12-26 0001000228 us-gaap:EmployeeSeveranceMember 2019-12-28 0001000228 hsic:ComputerEquipmentAndSoftwareMember 2020-12-26 0001000228 us-gaap:BuildingAndBuildingImprovementsMember 2020-12-26 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember 2020-12-26 0001000228 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-12-26 0001000228 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-12-28 0001000228 us-gaap:RetainedEarningsMember 2017-12-30 0001000228 us-gaap:FurnitureAndFixturesMember 2019-12-28 0001000228 hsic:HealthcareDistributionMember 2017-12-31 2018-12-29 0001000228 us-gaap:SupplierConcentrationRiskMember hsic:PurchasesMember hsic:TopTenHealthCareDistributionSuppliersMember 2019-12-29 2020-12-26 0001000228 us-gaap:BuildingAndBuildingImprovementsMember 2019-12-29 2020-12-26 0001000228 hsic:LocationsOtherThanUnitedStatesMember 2019-12-28 0001000228 us-gaap:FacilityClosingMember 2017-12-30 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember 2019-12-28 0001000228 us-gaap:FacilityClosingMember 2019-12-28 0001000228 2020-09-27 2020-12-26 0001000228 hsic:AnimalHealthMember 2019-02-07 0001000228 hsic:AnimalHealthMember 2019-12-28 0001000228 hsic:AnimalHealthMember hsic:CovetrusIncMember hsic:VetsFirstCorpMember 2019-02-07 2019-02-07 0001000228 hsic:AnimalHealthMember 2018-12-30 2019-12-28 0001000228 hsic:AnimalHealthMember hsic:CovetrusIncMember hsic:VetsFirstCorpMember 2019-02-07 0001000228 hsic:AnimalHealthMember hsic:CovetrusIncMember hsic:HenryScheinStockholdersAndTheShareSaleInvestorsMember 2019-02-07 0001000228 srt:NorthAmericaMember hsic:HealthcareDistributionMember hsic:DentalMember 2019-12-29 2020-12-26 0001000228 hsic:HealthcareDistributionMember hsic:DentalMember hsic:InternationalMember 2019-12-29 2020-12-26 0001000228 srt:NorthAmericaMember hsic:HealthcareDistributionMember hsic:MedicalMember 2019-12-29 2020-12-26 0001000228 hsic:HealthcareDistributionMember hsic:MedicalMember hsic:InternationalMember 2019-12-29 2020-12-26 0001000228 hsic:HealthcareDistributionMember hsic:DentalMember 2018-12-30 2019-12-28 0001000228 hsic:HealthcareDistributionMember hsic:MedicalMember 2018-12-30 2019-12-28 0001000228 srt:NorthAmericaMember hsic:HealthcareDistributionMember 2019-12-29 2020-12-26 0001000228 hsic:HealthcareDistributionMember hsic:InternationalMember 2019-12-29 2020-12-26 0001000228 srt:NorthAmericaMember hsic:HealthcareDistributionMember hsic:DentalMember 2018-12-30 2019-12-28 0001000228 hsic:HealthcareDistributionMember hsic:DentalMember hsic:InternationalMember 2018-12-30 2019-12-28 0001000228 srt:NorthAmericaMember hsic:HealthcareDistributionMember hsic:MedicalMember 2018-12-30 2019-12-28 0001000228 hsic:HealthcareDistributionMember hsic:MedicalMember hsic:InternationalMember 2018-12-30 2019-12-28 0001000228 srt:NorthAmericaMember hsic:TechnologyMember 2019-12-29 2020-12-26 0001000228 hsic:TechnologyMember hsic:InternationalMember 2019-12-29 2020-12-26 0001000228 srt:NorthAmericaMember 2018-12-30 2019-12-28 0001000228 hsic:InternationalMember 2018-12-30 2019-12-28 0001000228 hsic:HealthcareDistributionMember hsic:DentalMember 2019-12-29 2020-12-26 0001000228 hsic:HealthcareDistributionMember hsic:MedicalMember 2019-12-29 2020-12-26 0001000228 srt:NorthAmericaMember 2019-12-29 2020-12-26 0001000228 hsic:InternationalMember 2019-12-29 2020-12-26 0001000228 srt:NorthAmericaMember hsic:HealthcareDistributionMember 2018-12-30 2019-12-28 0001000228 hsic:HealthcareDistributionMember hsic:InternationalMember 2018-12-30 2019-12-28 0001000228 srt:NorthAmericaMember hsic:TechnologyMember 2018-12-30 2019-12-28 0001000228 hsic:TechnologyMember hsic:InternationalMember 2018-12-30 2019-12-28 0001000228 us-gaap:TrademarksAndTradeNamesMember srt:WeightedAverageMember 2019-12-29 2020-12-26 0001000228 us-gaap:ShippingAndHandlingMember 2017-12-31 2018-12-29 0001000228 us-gaap:CustomerRelatedIntangibleAssetsMember srt:WeightedAverageMember 2019-12-29 2020-12-26 0001000228 us-gaap:InProcessResearchAndDevelopmentMember srt:WeightedAverageMember 2019-12-29 2020-12-26 0001000228 us-gaap:ShippingAndHandlingMember 2019-12-29 2020-12-26 0001000228 hsic:AnimalHealthMember 2019-12-29 2020-12-26 0001000228 hsic:AnimalHealthMember 2017-12-31 2018-12-29 0001000228 hsic:HuFriedyMfgCoLlcMember 2019-09-29 2019-12-28 0001000228 hsic:AnimalHealthMember 2020-12-26 0001000228 us-gaap:NoncompeteAgreementsMember srt:WeightedAverageMember 2019-12-29 2020-12-26 0001000228 hsic:StrategicPlan2018To2020Member 2019-12-29 2020-12-26 0001000228 us-gaap:ShippingAndHandlingMember 2018-12-30 2019-12-28 0001000228 hsic:HuFriedyMfgCoLlcMember 2017-12-31 2018-12-29 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionAndTechnologyAndValueAddedServicesMember 2018-12-30 2019-12-28 0001000228 hsic:InternationalMember hsic:HealthCareDistributionAndTechnologyAndValueAddedServicesMember 2018-12-30 2019-12-28 0001000228 hsic:HealthCareDistributionAndTechnologyAndValueAddedServicesMember 2018-12-30 2019-12-28 0001000228 srt:NorthAmericaMember hsic:AnimalHealthMember hsic:CorporateTsaMember 2019-12-29 2020-12-26 0001000228 hsic:AnimalHealthMember hsic:InternationalMember hsic:CorporateTsaMember 2019-12-29 2020-12-26 0001000228 hsic:AnimalHealthMember hsic:CorporateTsaMember 2018-12-30 2019-12-28 0001000228 srt:ManagementMember hsic:DeferredCompensationBonusAndCommissionPlanMember 2018-12-30 2019-12-28 0001000228 hsic:RevolvingCreditFacilityApril2022Member 2019-12-28 0001000228 hsic:VariousBankCreditLinesMember 2020-12-26 0001000228 hsic:VariousBankCreditLinesMember 2019-12-28 0001000228 srt:NorthAmericaMember hsic:HealthCareDistributionAndTechnologyAndValueAddedServicesMember 2019-12-29 2020-12-26 0001000228 hsic:InternationalMember hsic:HealthCareDistributionAndTechnologyAndValueAddedServicesMember 2019-12-29 2020-12-26 0001000228 hsic:HealthCareDistributionAndTechnologyAndValueAddedServicesMember 2019-12-29 2020-12-26 0001000228 srt:NorthAmericaMember hsic:AnimalHealthMember hsic:CorporateTsaMember 2018-12-30 2019-12-28 0001000228 hsic:AnimalHealthMember hsic:InternationalMember hsic:CorporateTsaMember 2018-12-30 2019-12-28 0001000228 srt:ManagementMember hsic:DeferredCompensationBonusAndCommissionPlanMember 2019-12-29 2020-12-26 0001000228 srt:ManagementMember hsic:DeferredCompensationBonusAndCommissionPlanMember 2017-12-31 2018-12-29 0001000228 hsic:RevolvingCreditFacilityApril2022Member 2020-12-26 0001000228 hsic:AnimalHealthMember hsic:CorporateTsaMember 2019-12-29 2020-12-26 0001000228 hsic:HenryScheinOneLlcMember hsic:InternetBrandsIncMember 2018-07-01 2018-09-29 0001000228 2021-02-08 0001000228 2020-06-27 0001000228 us-gaap:AccountingStandardsUpdate201802Member 2019-12-29 2020-12-26 0001000228 hsic:HealthcareDistributionMember hsic:DentalMember 2017-12-31 2018-12-29 0001000228 hsic:HealthcareDistributionMember hsic:MedicalMember 2017-12-31 2018-12-29 0001000228 hsic:HealthCareDistributionAndTechnologyAndValueAddedServicesMember 2017-12-31 2018-12-29 0001000228 hsic:CorporateTsaMember 2019-12-29 2020-12-26 0001000228 hsic:CorporateTsaMember 2018-12-30 2019-12-28 0001000228 hsic:CorporateTsaMember 2017-12-31 2018-12-29 0001000228 country:US 2019-12-29 2020-12-26 0001000228 country:US 2018-12-30 2019-12-28 0001000228 country:US 2017-12-31 2018-12-29 0001000228 hsic:LocationsOtherThanUnitedStatesMember 2019-12-29 2020-12-26 0001000228 hsic:LocationsOtherThanUnitedStatesMember 2018-12-30 2019-12-28 0001000228 hsic:LocationsOtherThanUnitedStatesMember 2017-12-31 2018-12-29 0001000228 hsic:CovetrusIncMember 2020-12-26 0001000228 hsic:AnimalHealthMember hsic:RestrictedStockAndRestrictedStockUnitAwardsMember hsic:LongTermIncentiveProgramMember 2019-12-29 2020-12-26 0001000228 us-gaap:DiscontinuedOperationsDisposedOfByMeansOtherThanSaleSpinoffMember 2019-12-28 0001000228 us-gaap:DiscontinuedOperationsDisposedOfByMeansOtherThanSaleSpinoffMember 2018-12-29 0001000228 us-gaap:InternalRevenueServiceIRSMember 2018-12-29 0001000228 hsic:AnimalHealthMember hsic:EmployeeAndDirectorsStockOptionsMember hsic:LongTermIncentiveProgramMember 2019-12-28 0001000228 hsic:AnimalHealthMember hsic:EmployeeAndDirectorsStockOptionsMember hsic:LongTermIncentiveProgramMember 2019-12-29 2020-12-26 0001000228 hsic:AnimalHealthMember hsic:EmployeeAndDirectorsStockOptionsMember hsic:LongTermIncentiveProgramMember 2020-12-26 0001000228 hsic:HenryScheinOneLlcMember 2018-07-01 2018-09-29 0001000228 us-gaap:EquityMethodInvesteeMember 2019-12-29 2020-12-26 0001000228 us-gaap:EquityMethodInvesteeMember 2017-12-31 2018-12-29 0001000228 hsic:InternetBrandsIncMember 2019-12-28 0001000228 hsic:CovetrusIncMember 2018-12-30 2019-12-28 0001000228 us-gaap:DiscontinuedOperationsDisposedOfByMeansOtherThanSaleSpinoffMember 2020-12-26 0001000228 2017-10-01 2017-12-30 0001000228 us-gaap:AdditionalPaidInCapitalMember 2019-12-29 2020-12-26 0001000228 us-gaap:RetainedEarningsMember 2019-12-29 2020-12-26 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-29 2020-12-26 0001000228 us-gaap:NoncontrollingInterestMember 2019-12-29 2020-12-26 0001000228 us-gaap:CommonStockMember 2019-12-29 2020-12-26 0001000228 us-gaap:CommonStockMember 2020-12-26 0001000228 us-gaap:AdditionalPaidInCapitalMember 2020-12-26 0001000228 us-gaap:RetainedEarningsMember 2020-12-26 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-26 0001000228 us-gaap:NoncontrollingInterestMember 2020-12-26 0001000228 us-gaap:CommonStockMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-28 0001000228 us-gaap:AdditionalPaidInCapitalMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-28 0001000228 us-gaap:RetainedEarningsMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-28 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-28 0001000228 us-gaap:NoncontrollingInterestMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-28 0001000228 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-28 0001000228 us-gaap:SegmentContinuingOperationsMember 2019-12-29 2020-12-26 0001000228 us-gaap:SegmentContinuingOperationsMember 2017-12-31 2018-12-29 0001000228 us-gaap:SegmentContinuingOperationsMember 2018-12-30 2019-12-28 0001000228 us-gaap:SegmentDiscontinuedOperationsMember 2018-12-30 2019-12-28 0001000228 us-gaap:SegmentDiscontinuedOperationsMember 2019-12-29 2020-12-26 0001000228 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2020-12-26 0001000228 us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2019-12-28 0001000228 us-gaap:AccountingStandardsUpdate201613Member srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-28 0001000228 hsic:RevolvingCreditFacilityApril2022Member 2017-01-01 2017-04-18 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2019-12-29 2020-12-26 0001000228 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2020-12-26 0001000228 hsic:HuFriedyMfgCoLlcMember 2020-09-27 2020-12-26 0001000228 hsic:HuFriedyMfgCoLlcMember 2018-12-30 2019-12-28 0001000228 hsic:AnimalHealthMember 2018-12-29 0001000228 us-gaap:DomesticCountryMember 2020-12-26 0001000228 us-gaap:StateAndLocalJurisdictionMember 2020-12-26 0001000228 us-gaap:ForeignCountryMember 2020-12-26 0001000228 us-gaap:ForeignCountryMember srt:MinimumMember 2019-12-29 2020-12-26 0001000228 us-gaap:ForeignCountryMember srt:MaximumMember 2019-12-29 2020-12-26 0001000228 us-gaap:StateAndLocalJurisdictionMember srt:MinimumMember 2019-12-29 2020-12-26 0001000228 us-gaap:StateAndLocalJurisdictionMember srt:MaximumMember 2019-12-29 2020-12-26 0001000228 us-gaap:DomesticCountryMember srt:MinimumMember 2019-12-29 2020-12-26 0001000228 us-gaap:DomesticCountryMember srt:MaximumMember 2019-12-29 2020-12-26 0001000228 hsic:ThreeHundredSixtyFourDayCreditAgreementMember 2020-04-17 2020-04-17 0001000228 hsic:ThreeHundredSixtyFourDayCreditAgreementMember 2020-04-17 0001000228 hsic:RevolvingCreditFacilityApril2022Member 2017-04-18 0001000228 srt:MaximumMember hsic:PrivatePlacementFacilitiesMember 2019-12-29 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember 2019-12-29 2020-12-26 0001000228 srt:MaximumMember hsic:PrivatePlacementFacilitiesMember 2020-12-26 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember 2019-12-29 2020-12-26 0001000228 us-gaap:ExtendedMaturityMember hsic:USTradeAccountsReceivableSecuritizationMember 2019-12-29 2020-12-26 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember hsic:AssetBackedCommercialPaperRateMember 2020-12-26 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember hsic:AssetBackedCommercialPaperRateMember 2019-12-28 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember hsic:AssetBackedCommercialPaperRateMember 2019-12-29 2020-12-26 0001000228 hsic:USTradeAccountsReceivableSecuritizationMember hsic:AssetBackedCommercialPaperRateMember 2018-12-30 2019-12-28 0001000228 srt:MinimumMember 2020-12-26 0001000228 srt:MaximumMember 2020-12-26 0001000228 us-gaap:InternalRevenueServiceIRSMember 2020-12-26 0001000228 us-gaap:InternalRevenueServiceIRSMember 2019-12-28 0001000228 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember srt:MaximumMember hsic:AnySingleCustomerMember 2018-12-30 2019-12-28 0001000228 us-gaap:SupplierConcentrationRiskMember hsic:PurchasesMember hsic:TopTenHealthCareDistributionSuppliersMember 2018-12-30 2019-12-28 0001000228 us-gaap:ForwardContractsMember 2019-12-29 2020-12-26 0001000228 us-gaap:NetInvestmentHedgingMember 2019-12-29 2020-12-26 0001000228 us-gaap:NetInvestmentHedgingMember 2020-12-26 0001000228 us-gaap:NondesignatedMember us-gaap:TotalReturnSwapMember 2019-12-29 2020-12-26 0001000228 us-gaap:NondesignatedMember us-gaap:TotalReturnSwapMember 2020-03-20 0001000228 us-gaap:NondesignatedMember us-gaap:TotalReturnSwapMember 2020-12-26 0001000228 us-gaap:LondonInterbankOfferedRateLiborSwapRateMember us-gaap:NondesignatedMember us-gaap:TotalReturnSwapMember 2020-12-26 0001000228 us-gaap:BaseRateMember us-gaap:NondesignatedMember us-gaap:TotalReturnSwapMember 2020-12-26 0001000228 us-gaap:EmployeeSeveranceMember 2018-12-29 0001000228 us-gaap:FacilityClosingMember 2018-12-29 0001000228 us-gaap:OtherRestructuringMember 2018-12-29 0001000228 hsic:AllowanceForDoubtfulAccountsAndOtherMember 2018-12-29 0001000228 hsic:AnimalHealthMember hsic:RestrictedStockAndRestrictedStockUnitAwardsMember hsic:LongTermIncentiveProgramMember 2020-09-27 2020-12-26 0001000228 hsic:AnimalHealthMember hsic:EmployeeAndDirectorsStockOptionsMember hsic:LongTermIncentiveProgramMember 2018-12-29 0001000228 hsic:AnimalHealthMember hsic:EmployeeAndDirectorsStockOptionsMember hsic:LongTermIncentiveProgramMember 2018-12-30 2019-12-28 0001000228 hsic:EmployeeAndDirectorsStockOptionsMember 2018-12-30 2019-12-28 0001000228 hsic:EmployeeAndDirectorsStockOptionsMember 2017-12-30 0001000228 hsic:EmployeeAndDirectorsStockOptionsMember 2017-12-31 2018-12-29 0001000228 hsic:EmployeeAndDirectorsStockOptionsMember 2019-12-29 2020-12-26 0001000228 hsic:RestrictedStockAndRestrictedStockUnitAwardsMember 2020-12-26 0001000228 hsic:RestrictedStockAndRestrictedStockUnitAwardsMember 2019-12-28 0001000228 hsic:RestrictedStockAndRestrictedStockUnitAwardsMember 2018-12-29 0001000228 hsic:ArcherAndWhiteSalesIncVCollectivelyDanaherDefendantsMember 2019-12-29 2020-12-26 0001000228 hsic:ArcherFiledAmendedComplaintAddingPattersonAndBencoAsDefendantsMember 2019-12-29 2020-12-26 0001000228 hsic:ArcherFiledSecondAmendedComplaintUnderSealMember 2019-12-29 2020-12-26 0001000228 hsic:TheCountyOfSummitOhioEtAlVPurduePharmaLpEtAlMember 2019-12-29 2020-12-26 0001000228 hsic:ActionsConsolidatedInTheMultiDistrictLitigationMember 2019-12-29 2020-12-26 0001000228 hsic:TheCountyOfSummitOhioEtAlVPurduePharmaLpEtAlMember 2020-12-26 0001000228 hsic:CityOfHollywoodPoliceOfficersRetirementSystemVHenryScheinIncCovetrusIncAndBenjaminShawAndChristineKomolaMember 2019-12-29 2020-12-26 0001000228 srt:MaximumMember hsic:ActionsConsolidatedInTheMultiDistrictLitigationMember 2019-12-29 2020-12-26 0001000228 us-gaap:SegmentContinuingOperationsMember hsic:ActionsConsolidatedInTheMultiDistrictLitigationMember 2019-12-29 2020-12-26 0001000228 hsic:HenryScheinOneLlcMember hsic:InternetBrandsIncMember 2020-06-28 2020-09-26 0001000228 hsic:CovetrusIncMember 2019-12-29 2020-12-26 0001000228 hsic:InternetBrandsIncMember 2020-12-26 0001000228 us-gaap:EquityMethodInvesteeMember 2018-12-30 2019-12-28 0001000228 us-gaap:SupplierConcentrationRiskMember hsic:PurchasesMember hsic:SingleLargestSupplierMember 2018-12-30 2019-12-28 0001000228 hsic:NonEmployeeDirectorStockIncentivePlanMember hsic:RestrictedStockAndRestrictedStockUnitAwardsMember 2020-09-27 2020-12-26 0001000228 us-gaap:NetInvestmentHedgingMember 2018-12-30 2019-12-28 0001000228 hsic:SerpAndDcpMember 2019-12-29 2020-12-26 0001000228 hsic:FrankFinazzoAgainstVariousPresentAndFormerDirectorsAndOfficersOfHenryScheinMember 2019-12-29 2020-12-26 0001000228 us-gaap:CommonStockMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2017-12-30 0001000228 us-gaap:AdditionalPaidInCapitalMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2017-12-30 0001000228 us-gaap:RetainedEarningsMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2017-12-30 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2017-12-30 0001000228 us-gaap:NoncontrollingInterestMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2017-12-30 0001000228 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2017-12-30 0001000228 us-gaap:CommonStockMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-29 0001000228 us-gaap:AdditionalPaidInCapitalMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-29 0001000228 us-gaap:RetainedEarningsMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-29 0001000228 us-gaap:AccumulatedOtherComprehensiveIncomeMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-29 0001000228 us-gaap:NoncontrollingInterestMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-29 0001000228 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-29 0001000228 us-gaap:RecourseMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2020-12-26 0001000228 us-gaap:RecourseMember us-gaap:VariableInterestEntityPrimaryBeneficiaryMember 2019-12-28 0001000228 hsic:AccruedTaxesMember 2020-12-26 0001000228 hsic:AccruedTaxesMember 2019-12-28 0001000228 us-gaap:OtherLiabilitiesMember 2020-12-26 0001000228 us-gaap:OtherLiabilitiesMember 2019-12-28 0001000228 hsic:AllowanceForDoubtfulAccountsAndOtherMember 2017-12-30 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueDisclosureItemAmountsDomain 2020-12-26 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueDisclosureItemAmountsDomain 2020-12-26 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueDisclosureItemAmountsDomain 2020-12-26 0001000228 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueDisclosureItemAmountsDomain 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities2022Member 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities2024Member 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesDecember2024Member 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesJune2021Member 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesJune2027Member 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesSeptember2029Member 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesJanuary2028Member 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:Privateplacementfacilities2030memberMember 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities2022Member 2019-12-29 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities2024Member 2019-12-29 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesDecember2024Member 2019-12-29 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesJune2021Member 2019-12-29 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesJune2027Member 2019-12-29 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesSeptember2029Member 2019-12-29 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilitiesJanuary2028Member 2019-12-29 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:Privateplacementfacilities2030memberMember 2019-12-29 2020-12-26 0001000228 hsic:PrivatePlacementFacilitiesMember hsic:PrivatePlacementFacilities2022Member 2016-01-19 2016-01-20 0001000228 us-gaap:RevolvingCreditFacilityMember 2020-12-26 0001000228 us-gaap:RevolvingCreditFacilityMember 2019-12-28 0001000228 hsic:PrivatePlacementFacilitiesMember 2019-12-28 0001000228 us-gaap:NotesPayableOtherPayablesMember 2020-12-26 0001000228 us-gaap:NotesPayableOtherPayablesMember 2019-12-28 0001000228 us-gaap:LoansPayableMember 2020-12-26 0001000228 us-gaap:LoansPayableMember 2019-12-28 0001000228 us-gaap:LoansPayableMember srt:MinimumMember 2020-12-26 0001000228 us-gaap:LoansPayableMember srt:MinimumMember 2019-12-28 0001000228 us-gaap:LoansPayableMember srt:MaximumMember 2020-12-26 0001000228 us-gaap:LoansPayableMember srt:MaximumMember 2019-12-28 0001000228 us-gaap:NotesPayableOtherPayablesMember 2019-12-29 2020-12-26 0001000228 us-gaap:LoansPayableMember 2019-12-29 2020-12-26 0001000228 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember us-gaap:AccountingStandardsUpdate201602Member 2018-12-30 0001000228 srt:MinimumMember hsic:PrivatePlacementFacilitiesMember 2019-12-29 2020-12-26 0001000228 hsic:InternetBrandsIncMember us-gaap:RoyaltyAgreementsMember 2018-07-01 2018-07-01 0001000228 hsic:InternetBrandsIncMember us-gaap:RoyaltyAgreementsMember 2019-12-29 2020-12-26 0001000228 us-gaap:ScenarioPlanMember hsic:InternetBrandsIncMember us-gaap:RoyaltyAgreementsMember 2018-07-01 2018-07-01 0001000228 hsic:InternetBrandsIncMember us-gaap:RoyaltyAgreementsMember 2018-12-30 2019-12-28 0001000228 hsic:InternetBrandsIncMember us-gaap:RoyaltyAgreementsMember 2017-12-31 2018-12-29 0001000228 hsic:ThreeHundredSixtyFourDayCreditAgreementMember 2020-12-26 0001000228 srt:MaximumMember us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember hsic:AnyTwoCustomersMember 2019-12-29 2020-12-26 iso4217:EUR iso4217:USD xbrli:pure xbrli:shares iso4217:USD xbrli:shares hsic:number hsic:countries
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
 
D.C.
 
20549
 
FORM
10-K
(Mark One)
 
ANNUAL REPORT PURSUANT TO
 
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 26, 2020
 
 
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
 
Securities registered pursuant to Section
 
12(g) of the Act: None
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
YES
:
 
 
NO:
 
 
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES:
 
 
NO
:
 
 
 
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. YES:
 
 
NO:
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
 
of the Exchange Act).
YES:
 
 
NO:
 
 
 
The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant, computed by reference to the closing sales price as
quoted on the Nasdaq Global Select Market on June 27, 2020, was approximately $
7,932,914,000
.
 
 
As of February 8, 2021, there were
142,464,090
 
shares of registrant’s Common Stock, par value $.01 per share, outstanding.
 
Documents Incorporated by Reference:
 
Portions of the Registrant’s definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year
(December 26, 2020) are incorporated by reference in Part III hereof.
 
 
3
PART
 
I
 
ITEM 1.
 
Business
 
General
 
Henry Schein, Inc. is a solutions company for health care professionals powered
 
by a network of people and
technology. We
 
believe we are the world’s largest provider of health care products and services primarily to office-
based dental and medical practitioners, as well as alternate sites of care.
 
Our philosophy is grounded in our
commitment to help customers operate a more efficient and successful business so
 
the practitioner can provide
better clinical care.
 
With more than 88 years of experience distributing health care products, we have built a vast set of small,
 
mid-sized
and large customers in the dental and medical markets, serving more than one
 
million customers worldwide across
dental practices and laboratories and physician practices, as well as government,
 
institutional health care clinics and
other alternate care clinics.
 
 
We are headquartered in Melville, New York,
 
employ more than 19,000 people (of which approximately 9,800 are
based outside the United States) and have operations or affiliates in 31 countries and
 
territories, including the
United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China,
 
the Czech Republic, France, Germany,
Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, the Netherlands, New
Zealand, Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland,
 
Thailand, United Arab Emirates
and the United Kingdom.
 
This broad global footprint has evolved over time through our organic success as well
 
as
through contribution from strategic acquisitions.
 
Our business extends far beyond our supply chain capabilities across
 
the globe. We provide a wide breadth
of products, value-added solutions and support to customers, including
 
consumables and equipment. Through
Henry Schein One, we offer dental practice management, patient engagement
 
and demand creation software
solutions. We also offer a broad range of financial services for our customers to help them operate and expand their
business operations. We believe our hands-on consultative approach to support practice decision-making is a key
differentiator for our business.
 
We offer
 
a comprehensive selection of more than 120,000 branded products
 
and Henry Schein private brand
products in stock, as well as more than 180,000 additional products
 
available as special-order items.
 
As the market continues to evolve toward solutions that offer ease and convenience for
 
ordering products and
communicating with our solutions teams, we are investing in digital enhancements
 
to our e-commerce platforms
and our web capabilities.
 
We have established over 3.5 million square feet of space in 28 strategically located distribution centers around the
world to enable us to better serve our customers and increase our operating
 
efficiency.
 
Our infrastructure allows us
to provide rapid and accurate order fulfillment. Historically, approximately 99% of items have been shipped
without back ordering and were shipped on the same business day the order
 
is received.
 
Due to the significant
increase in demand for personal protective equipment (“PPE”), as a result
 
of the COVID-19 pandemic, during the
year ended December 26, 2020, approximately 93% of items ordered
 
were shipped without back ordering and 90%
were shipped on the same business day the order was received.
 
As the demand for PPE stabilizes, we expect our
percentage of items shipped without back ordering and shipped on the
 
same day to return to historic levels.
 
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.
 
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.
 
 
The health care distribution reportable segment aggregates our global
 
dental and medical operating segments.
 
This
combined dental and medical segment distributes consumable products,
 
small equipment, laboratory products, large
equipment, equipment repair services, branded and generic pharmaceuticals,
 
vaccines, surgical products, diagnostic
 
 
4
tests, infection-control products
 
and vitamins.
 
Our global dental group serves office-based dental practitioners,
dental laboratories, schools, government and other institutions.
 
Our global medical group serves physician offices,
urgent care centers, ambulatory care sites, emergency medical technicians, dialysis centers, home health,
 
federal
and state governments and large enterprises, such as group practices and integrated
 
delivery networks, among other
providers across a wide range of specialties.
 
While our primary go-to-market strategy is in our capacity as a
distributor, we also manufacture certain dental specialty products 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.
 
 
As an alternative to branded product options, we also market under our own
 
private label portfolio of cost-effective,
high-quality consumable merchandise products for our dental and medical customers.
 
Sales of our private label
products generally achieve gross profit margins that are higher than the average margin on the other
 
products we
sell.
 
 
Our global technology and value-added services group provides software,
 
technology and other value-added
services to health care practitioners.
 
Henry Schein One, the largest contributor of sales to this category, offers
software systems for dental practitioners. This segment also includes a
 
small medical software business known as
MicroMD. In addition, we offer physicians a broad suite of electronic health records,
 
integrated revenue cycle
management, and patient communication services. Finally, our value-added practice solutions include financial
service offerings, which include practice finance solutions such as credit card billing
 
and facilitation of customer
loans (on a non-recourse basis) to acquire equipment and technology, as well as solutions to broker dental practice
transitions. We do not take on the liability of such loans but instead receive an origination fee for coordinating
loans between practice customers and third-party banking groups.
 
Recent Developments
 
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent
Developments” herein for a discussion related to the COVID-19
 
pandemic and recent corporate transactions.
 
Industry
 
The global health care 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 mid-sized and large
group practices ranging in size from a few practitioners to several hundred
 
practices owned or operated by dental
support organizations (DSOs), hospital systems, or integrated delivery networks
 
(IDNs).
 
Due in part to the inability of office-based health care practitioners to store and manage
 
large quantities of supplies
in their offices, the distribution of health care supplies and small equipment to office-based health
 
care practitioners
has been characterized by frequent, small quantity orders, and a need for
 
rapid, reliable and substantially complete
order fulfillment.
 
The purchasing decisions within an office-based health care practice are typically
 
made by the
practitioner, hygienist or office manager.
 
Supplies and small equipment are generally purchased from
 
more than
one distributor, with one generally serving as the primary supplier.
 
The health care distribution industry continues to experience growth due
 
to demand driven by the aging population,
increased health care awareness and the importance of preventative care,
 
an increasing understanding of the
connection between good oral health and overall health, improved access
 
to care globally, 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 and technological improvements,
 
including
the advancement of software and services, prosthetic solutions and telemedicine.
 
In addition, the non-acute market
continues to benefit from the shift of procedures and diagnostic
 
testing from acute care settings to alternate-care
sites, particularly physicians’ offices and ambulatory surgery centers.
 
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
 
 
5
companies that can enhance their current product and service offerings or provide
 
opportunities to serve a broader
customer base.
 
 
In addition, customer consolidation will likely lead to multiple locations
 
under common management and the
movement of more procedures from the hospital setting to the physician
 
or alternate care setting as the health care
industry is increasingly focused on efficiency and 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.
 
Competition
 
 
The distribution and manufacture of health care supplies and equipment is
 
highly competitive.
 
Many of the health
care products we sell are available to our customers from a number of suppliers.
 
In addition, our competitors could
obtain exclusive rights from manufacturers to market particular products.
 
Manufacturers also could seek to sell
directly to end-users, and thereby eliminate or reduce our role and that of other
 
distributors. In certain parts of the
dental end market, such as those related to dental specialty products,
 
manufacturers already sell directly to end
customers.
 
In North America, we compete with other distributors, as well as several
 
manufacturers, of dental and medical
products, primarily on the basis of price, breadth of product line, e-commerce
 
capabilities, customer service and
value-added products and services.
 
In the dental market, our primary competitors in the U.S. are the Patterson
Dental division of Patterson Companies, Inc. and Benco Dental Supply
 
Company.
 
In addition, we compete against
a number of other distributors that operate on a national, regional and
 
local level. Our primary competitors in the
U.S. medical market, which accounts for the large majority of our global medical
 
sales, are McKesson Corporation
and Medline Industries, Inc., which are national distributors.
 
We also compete with a number of regional and local
medical distributors, as well as a number of manufacturers that
 
sell directly to physicians.
 
With regard to our dental
software, we compete against numerous companies, including the Patterson
 
Dental division of Patterson
Companies, Inc., Carestream Health, Inc., Open Dental Software, Inc., PlanetDDS
 
LLC, Good Methods Global Inc.
(d.b.a. CareStack) and Curve Dental, LLC.
 
In other software end markets, including revenue cycle
 
management,
patient relationship management and patient demand generation, we
 
compete with companies such as Vyne
Therapeutics Inc., EDI-Health Group, Inc. (d.b.a. Dental X Change, Inc.),
 
Weave Communications,
Inc., Solutionreach, Inc., ZocDoc, Inc., LocalMed Inc. and Prosites Inc.
 
The medical practice management and
electronic medical records market is very fragmented and we compete with
 
numerous companies such as the
NextGen division of Quality Systems, Inc., eClinicalWorks, Allscripts Healthcare Solutions, Inc., and Epic Systems
Corporation.
 
 
Outside of the U.S., we believe we are the only global distributor of supplies
 
and equipment to dental practices, and
our competitors are primarily local and regional companies.
 
We also face significant competition internationally,
where we compete on the basis of price and customer service against
 
several large competitors, including the
GACD Group, Proclinic SA, Lifco AB, Planmeca Oy and Billericay Dental
 
Supply Co. Ltd., as well as a large
number of other dental and medical product distributors and manufacturers
 
in international countries and territories
we serve.
 
Competitive Strengths
 
We have more than 88 years of experience in distributing products to health care practitioners resulting in strong
awareness of the Henry Schein
®
 
brand.
 
Our competitive strengths include:
 
A focus on meeting our customers’ unique needs
.
 
We are committed to providing customized solutions to our
customers that are driven by our understanding of the end markets we
 
serve and reflect the technology-driven
products and services best suited for their practice needs. We are committed to continuing to enhance these
 
 
6
offerings through organic investment in our products and our teams, as well through as
 
the acquisition of new
products and services that may help us better serve our customers.
 
Direct sales and marketing expertise.
 
Our sales and marketing efforts are designed to establish and solidify
customer relationships through personal or virtual visits by field sales representatives,
 
frequent direct marketing and
telesales contact, emphasizing our broad product lines, including exclusive
 
distribution agreements, competitive
prices and ease of order placement, particularly through our e-commerce
 
platforms.
 
The key elements of our direct
sales and marketing efforts are:
 
 
Field sales consultants.
 
We have over 3,450 field sales consultants, including equipment sales specialists,
covering major North American, European and other international
 
markets.
 
These consultants complement
our direct marketing and telesales efforts and enable us to better market, service
 
and support the sale of
more sophisticated products and equipment.
 
 
Marketing.
 
During 2020, we marketed to existing and prospective office-based health care
 
providers
through a combination of owned, earned and paid digital channels, as well
 
as through catalogs, flyers,
direct mail, and other promotional materials.
 
Our strategies included an emphasis on educational content
through webinars and content marketing initiatives.
 
We continue to enhance our marketing technology to
improve our targeting capability and the relevance of messaging and offers.
 
 
Telesales.
 
We support our direct marketing effort with approximately 2,250 inbound and outbound
telesales representatives, who facilitate order processing, generate new
 
sales through direct and frequent
contact with customers and stay abreast of market developments and
 
the hundreds of new products,
services and technologies introduced each year to educate practice personnel.
 
 
Electronic commerce solutions.
 
We provide our customers and sales teams with innovative and
competitive e-commerce solutions. We continue to invest in our e-commerce platform to offer enhanced
content management so customers can more easily find the products
 
they need and to enable an engaging
purchase experience, supported by excellent customer service.
 
 
 
Social media.
 
Our operating entities and employees engage our customers and
 
supplier partners through
various social media platforms, which are an important element of our
 
communications and marketing
efforts. We continue to expand our social media presence to raise awareness about issues, engage
customers beyond a sale and deliver services and solutions to specialized
 
audiences.
 
Broad product and service offerings at competitive prices.
 
We offer
 
a broad range of products and services to our
customers, at competitive prices, in the following categories:
 
 
Consumable supplies and equipment.
 
We offer over 120,000 Stock Keeping Units, or SKUs, to our
customers.
 
We offer over 180,000 additional SKUs to our customers in the form of special order items.
 
 
Technology and other value-added products and services.
 
We sell practice management, patient
engagement, and patient demand creation software solutions to our
 
dental customers.
 
Our practice
management solutions provide practitioners with electronic
 
medical records, patient treatment history,
billing, accounts receivable analyses and management, appointment
 
calendars, electronic claims processing
and word processing programs, network and hardware services, e-commerce
 
and electronic marketing
services, sourcing third party patient payment plans, transition services
 
and training and education
programs for practitioners. We also sell medical software for practice management, certified electronic
health records (“EHR”) and e-Prescribe medications and prescription solutions
 
through MicroMD®.
 
We
have approximately 800 technical representatives supporting customers
 
using our practice management
solutions and services.
 
As of December 26, 2020, we had an active user base of approximately
 
94,500
practices and 374,000 consumers, including users of AxiUm, Dentally®, Dentrix
 
Ascend®, Dental
Vision®, Dentrix® Dental Systems, Dentrix® Enterprise, Easy Dental®, EndoVision®, Evolution® and
EXACT®, Gesden®, Julie® Software, Oasis, OMSVision®,
 
Orisline®, PerioVision®,
 
Power Practice®
Px, PowerDent,
 
and Viive®
 
and subscriptions for Demandforce®, Sesame, and Lighthouse360®
 
for dental
practices and DentalPlans.com®
 
for dental patients; and MicroMD® for physician practices.
 
 
7
 
 
Repair services.
 
We have over 140 equipment sales and service centers worldwide that provide a variety of
repair, installation and technical services for our health care customers.
 
Our over 2,000 technicians provide
installation and repair services for: dental handpieces; dental and
 
medical small equipment; table top
sterilizers; and large dental equipment.
 
 
Financial services.
 
We offer our customers solutions in operating their practices more efficiently by
providing access to a number of financial services and products
 
provided by third party vendors (including
non-recourse financing for equipment, technology and software
 
products; non-recourse patient financing;
collection services and credit card processing) at rates that we believe are generally
 
lower than what our
customers would be able to secure independently.
 
We also provide consulting services, dental practice
valuation and brokerage services.
 
Commitment to superior customer service
.
 
We maintain a strong commitment to providing superior customer
service.
 
We frequently monitor our customer service through customer surveys, focus groups and statistical
reports.
 
Our customer service policy primarily focuses on:
 
 
Exceptional order fulfillment
.
 
We ship an average of approximately 128,000 cartons daily.
 
Historically,
approximately 99% of items have been shipped without back ordering and
 
were shipped on the same
business day the order is received.
 
Due to the significant increase in demand for PPE, as a result
 
of
COVID-19, during the year ended December 26, 2020, approximately
 
93% of items ordered were shipped
without back ordering and 90% were shipped on the same business day
 
the order was received.
 
As the
demand for PPE stabilizes, we expect our percentage of items shipped without
 
back ordering and shipped
on the same day to return to historical levels.
 
 
Comprehensive ordering process
.
 
Customers may place orders 24 hours a day, 7 days a week via e-
commerce solutions, telephone, fax, e-mail, and mail.
 
Integrated management information systems
.
 
Our information systems generally allow for centralized management
of key functions, including accounts receivable, inventory, accounts payable, payroll, purchasing, sales,
 
order
fulfillment and financial and operational reporting.
 
These systems allow us to manage our growth, deliver superior
customer service, properly target customers, manage financial performance and
 
monitor daily operational statistics.
 
Cost-effective purchasing
.
 
We believe that cost-effective purchasing is a key element to maintaining and enhancing
our position as a competitively priced provider of health care products.
 
We continuously evaluate our purchase
requirements and suppliers’ offerings and prices in order to obtain products at the
 
lowest possible cost.
 
In 2020,
our top 10 health care distribution suppliers and our single largest supplier accounted for approximately
 
30% and
4%, respectively, of our aggregate purchases.
 
Efficient distribution
.
 
We distribute our products from our strategically located distribution centers.
 
We strive to
maintain optimal inventory levels in order to satisfy customer demand
 
for prompt delivery and complete order
fulfillment.
 
These inventory levels are managed on a daily basis with
 
the aid of our management information
systems.
 
Once an order is entered, it is electronically transmitted to the distribution
 
center nearest the customer’s
location for order fulfillment.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
Products
 
The following table sets forth the percentage of consolidated net sales
 
by principal categories of products offered
through our health care distribution and technology reportable segments:
 
December 26,
December 28,
December 29,
2020
2019
2018
Health care distribution:
Dental products
(1)
58.4
%
64.2
%
67.4
%
Medical products
(2)
35.8
29.8
28.3
Total
 
health care distribution
 
94.2
94.0
95.7
Technology
 
and value-added services:
Software and related products and
 
other value-added products
(3)
5.1
5.2
4.3
Total
 
excluding Corporate TSA revenues
99.3
99.2
100.0
Corporate TSA revenues
(4)
0.7
0.8
-
Total
100.0
100.0
100.0
(1)
 
Includes infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, dental implants,
gypsum, acrylics, articulators, abrasives, dental chairs, delivery units and lights, X-ray supplies and equipment, personal protective
equipment, equipment repair and high-tech and digital restoration equipment.
(2)
 
Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, X-ray products,
equipment, personal protective equipment, and vitamins.
(3)
 
Consists of practice management software and other value-added products, which are distributed primarily to health care providers, and
financial services on a non-recourse basis, e-services, continuing education services for practitioners, consulting and other services.
(4)
 
Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in
connection with the Animal Health spin-off, which ended in December 2020.
 
Business Strategy
 
Our objective is to continue to expand as a global value-added provider
 
of health care products and services to
office-based dental and medical practitioners by increasing their efficiency and success.
 
To accomplish this, we
will apply our competitive strengths in executing the following strategies:
 
 
Increase penetration of our existing customer base.
 
We have over 1 million customers worldwide and we
intend to increase sales to our existing customer base and enhance our position
 
as their primary supplier.
We believe our offering of a broad range of products, services and support, including software solutions
that can help drive improved workflow efficiency and patient communications for
 
practices, coupled with
our full-service value proposition, helps us to retain and grow our customer
 
base.
 
 
Increase the number of customers we serve.
 
This strategy includes increasing the productivity of our field
sales consultants and telesales team, as well as using our customer
 
database to focus our marketing efforts
in all of our operating segments.
 
In the dental business, we provide products and services to
 
independent
practices, mid-market groups, and large DSOs as well as community health centers and government
 
sites of
care.
 
Leveraging our broad array of assets and capabilities, we offer solutions to address these
 
new
markets.
 
In the medical business, we have expanded to serve customers
 
located in settings outside of the
traditional office, such as urgent care clinics, retail, occupational health and home health settings.
 
As
settings of health care shift, we remain committed to serving these practitioners
 
and providing them with
the products and services they need.
 
 
Leverage our value-added products and services.
 
We continue to increase cross-selling efforts for key
product lines utilizing a consultative selling process.
 
In the dental business, we have significant cross-
selling opportunities between our dental software users and our dental distribution
 
customers.
 
In the
medical business, we have opportunities to expand our vaccine, injectables
 
and other pharmaceuticals sales
to health care practitioners, as well as cross-selling electronic health record
 
and software when we sell our
core products.
 
Our strategy extends to providing health systems, integrated
 
delivery networks and other
large group and multi-site health care organizations, including physician clinics, these same value
 
added
 
 
9
products and services.
 
As physicians and health systems closely align, we have increased
 
access to
opportunities for cross-marketing and selling our product and service portfolios.
 
 
Pursue strategic acquisitions and joint ventures.
 
Our acquisition strategy is focused on investments in
companies that add new customers and sales teams, increase our geographic
 
footprint (whether entering a
new country, such as emerging markets, or building scale where we have already invested in businesses),
and finally, those that enable us to access new products and technologies.
 
Markets Served
 
 
Demographic trends indicate that our markets are growing, as an
 
aging U.S. population is increasingly using health
care services.
 
Between 2020 and 2030, the 45 and older population is expected
 
to grow by approximately 11%.
 
Between 2020 and 2040,
 
this age group is expected to grow by approximately 22%.
 
This compares with expected
total U.S. population growth rates of approximately 7%
 
between 2020 and 2030 and approximately 12% between
2020 and 2040.
 
 
In the dental industry, there is predicted to be a rise in oral health care expenditures as the 45-and-older segment of
the population increases.
 
There is increasing demand for new technologies that allow
 
dentists to increase
productivity, and this is being driven in the U.S. by lower insurance reimbursement rates.
 
At the same time, there is
an expected increase in dental insurance coverage.
 
We support our dental professionals through the many SKUs that we offer, as well as through important value-
added services, including practice management software, electronic claims
 
processing, financial services and
continuing education, all designed to help maximize a practitioner’s efficiency.
 
 
In the medical market, there continues to be a migration of procedures from
 
acute-care settings to physicians’
offices and home health settings,
 
a trend that we believe provides additional opportunities for us.
 
There also is the
continuing use of vaccines, injectables and other pharmaceuticals in alternate-care
 
settings.
 
We believe we have
established a leading position as a vaccine supplier to the office-based physician
 
practitioner.
 
Additionally, we seek to expand our dental full-service model and our medical offerings in countries where
opportunities exist.
 
Through our “Schein Direct” program, we also have the
 
capability to provide door-to-door air
package delivery to practitioners in over 190 countries around the world.
 
 
For information on revenues and long-lived assets by geographic area, see
 
of “Notes to Consolidated Financial Statements.”
 
 
Seasonality and Other Factors Affecting Our Business and Quarterly Results
 
We experience fluctuations in quarterly earnings.
 
As a result, we may fail to meet or exceed the expectations of
securities analysts and investors, which could cause our stock price
 
to decline.
 
Our business is subject to seasonal and other quarterly fluctuations.
 
Revenues and profitability generally have been
higher in the third and fourth quarters due to the timing of sales of seasonal
 
products (including influenza vaccine,
equipment and software products), purchasing patterns of office-based health care practitioners
 
and year-end
promotions. Revenues and profitability may also be impacted by
 
the timing of certain annual and biennial dental
tradeshows where equipment promotions are offered. In addition, some dental practices
 
delay equipment purchases
in the U.S. until year-end due to tax incentives.
 
Revenues and profitability generally have been lower in the first
quarter, primarily due to increased sales in the prior two quarters.
 
We expect our historical seasonality of sales to
continue in the foreseeable future.
 
 
 
10
Governmental Regulations
 
We strive to be substantially compliant with the applicable laws, regulations and guidance described below, and
believe we have effective compliance programs and other controls in place to ensure substantial
 
compliance.
However, compliance is not guaranteed
 
either now or in the future, as certain laws, regulations and guidance
 
may
be subject to varying and evolving interpretations that could affect our ability to comply, as well as future changes,
additions, and enforcement approaches, including in light of political changes.
 
For example, President Biden’s
administration has authorized and encouraged a freeze on certain federal
 
regulations that have been published but
are not yet effective, as well as a review of all federal regulations issued during President Trump’s administration.
 
Changes with respect to the applicable laws, regulations and guidance described
 
below may require us to update or
revise our operations, services, marketing practices, and compliance programs
 
and controls, and may impose
additional and unforeseen costs on us, pose new or previously immaterial
 
risks to us, or may otherwise have a
material adverse effect on our business.
 
Government
 
Certain of our businesses involve the distribution, importation, exportation,
 
marketing and sale of, and third party
payment for, pharmaceuticals and 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, 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 prescribing, medical device regulation, and data
 
privacy and security standards.
 
 
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 also generally subject to numerous other laws and regulations
 
that could impact our financial
performance, including securities, antitrust, consumer protection, anti-bribery
 
and anti-kickback, customer
interaction transparency, data privacy,
 
data security, government contracting and other laws and regulations.
 
 
Failure to comply with law or regulations could have a material adverse effect on our business.
 
Operating, Security and Licensure Standards
 
 
Certain of our businesses involve the distribution, importation, exportation,
 
marketing
 
and sale of, and third party
payment for, pharmaceuticals and medical devices, and in this regard we are subject to various local,
 
state, federal
and foreign governmental laws and regulations, including as applicable
 
to our wholesale distribution and sale of
pharmaceuticals and medical devices, and, as part of our specialty home medical
 
supply business that distributes
and sells medical equipment and supplies directly to patients.
 
Among the United States federal laws applicable to
us are the Controlled Substances Act, the Federal Food, Drug, and Cosmetic
 
Act, as amended (“FDC Act”), and
Section 361 of the Public Health Service Act, as well as laws regulating the
 
billing of and reimbursement from
government programs, such as Medicare and Medicaid, and from commercial payers.
 
We are also subject to
comparable foreign regulations.
 
The FDC Act, the Controlled Substances Act, their implementing regulations,
 
and similar foreign laws generally
regulate the introduction, manufacture, advertising, marketing and promotion,
 
sampling, pricing and
reimbursement, labeling, packaging, storage, handling, returning or recalling,
 
reporting, and distribution of, and
record keeping for, pharmaceuticals and medical devices shipped in interstate commerce, and states
 
may similarly
regulate such activities within the state.
 
Furthermore, Section 361 of the Public Health Service Act, which
 
provides
authority to prevent the introduction, transmission or spread of communicable
 
diseases, serves as the legal basis for
 
 
11
the United States
 
Food and Drug Administration’s (“FDA”) regulation of human cells, tissues and cellular and
tissue-based products, also known as “HCT/P products.”
 
The Federal Drug Quality and Security Act of 2013 brought about significant
 
changes with respect to
pharmaceutical supply chain requirements.
 
Title II of this measure, known as the Drug Supply Chain Security Act
(“DSCSA”), is being phased in over a period of ten years, and is intended
 
to build a national electronic,
interoperable system to identify and trace certain prescription drugs as they
 
are distributed in the United States.
 
The law’s track and trace requirements applicable to manufacturers, wholesalers, repackagers and dispensers (e.g.,
pharmacies) of prescription drugs took effect in January 2015, and continues to be
 
implemented.
 
The DSCSA
product tracing requirements replace the former FDA drug pedigree requirements
 
and pre-empt certain state
requirements that are inconsistent with, more stringent than, or in addition
 
to, the DSCSA requirements.
 
The DSCSA also establishes certain requirements for the licensing and operation
 
of prescription drug wholesalers
and third-party logistics providers (“3PLs”), and includes the eventual
 
creation of national wholesaler and 3PL
licenses in cases where states do not
 
license such entities.
 
The DSCSA requires that wholesalers and 3PLs
distribute drugs in accordance with certain standards regarding the recordkeeping,
 
storage and handling of
prescription drugs.
 
The DSCSA requires wholesalers and 3PLs to submit annual reports
 
to the FDA, which include
information regarding each state where the wholesaler or 3PL is licensed, the
 
name and address of each facility and
contact information.
 
According to FDA guidance, states are pre-empted from imposing
 
any licensing requirements
that are inconsistent with, less stringent than, directly related to, or covered
 
by the standards established by federal
law in this area.
 
Current state licensing requirements concerning wholesalers will
 
remain in effect until the FDA
issues new regulations as directed by the DSCSA.
 
In addition, with respect to our specialty home medical supply
business, we are subject to certain state licensure laws (including state pharmacy
 
laws), and also certain
accreditation standards, including to qualify for reimbursement from
 
Medicare and other third-party payers.
 
The Food and Drug Administration Amendments Act of 2007 and
 
the Food and Drug Administration Safety and
Innovation Act of 2012 amended the FDC Act to require the FDA to promulgate
 
regulations to implement a unique
device identification (“UDI”) system.
 
The UDI rule phased in the implementation of the UDI
 
regulations,
generally beginning with the highest-risk devices (i.e., Class III medical devices)
 
and ending with the lowest-risk
devices.
 
Most compliance dates were reached as of September 24, 2018,
 
with a final set of requirements for low
risk devices being reached on September 24, 2022, which will complete
 
the phase in.
 
The UDI regulations require
“labelers” to include unique device identifiers (“UDIs”), with a content
 
and format prescribed by the FDA and
issued under a system operated by an FDA-accredited issuing agency, on the labels and packages of medical
devices (including, but not limited to, certain software that qualifies as a medical device
 
under FDA rules), and to
directly mark certain devices with UDIs.
 
The UDI regulations also require labelers to submit certain information
concerning UDI-labeled devices to the FDA, much of which information is publicly
 
available on an FDA database,
the Global Unique Device Identification Database.
 
The UDI regulations and subsequent FDA guidance regarding
the UDI requirements provide for certain exceptions, alternatives and time extensions.
 
For example, the UDI
regulations include a general exception for Class I devices exempt from the Quality
 
System Regulation (other than
record-keeping requirements and complaint files).
 
Regulated labelers include entities such as device
manufacturers, repackagers, reprocessors and relabelers that cause a device’s label to be applied or modified, with
the intent that the device will be commercially distributed without any subsequent
 
replacement or modification of
the label, and include certain of our businesses.
 
Under the Controlled Substances Act, as a distributor of controlled substances,
 
we are required to obtain and renew
annually registrations for our facilities from the United States Drug Enforcement
 
Administration (“DEA”)
permitting us to handle controlled substances.
 
We are also subject to other statutory and regulatory requirements
relating to the storage, sale, marketing, handling, reporting, record-keeping
 
and distribution of such drugs, in
accordance with the Controlled Substances Act and its implementing regulations,
 
and these requirements have been
subject to heightened enforcement activity in recent times.
 
We are subject to inspection by the DEA. Certain of our
businesses are also required to register for permits and/or licenses with, and
 
comply with operating and security
standards of, the DEA, the FDA, the United States Department of Health
 
and Human Services (“HHS”), and
various state boards of pharmacy, state health departments and/or comparable state agencies as well as comparable
foreign agencies, and certain accrediting bodies, depending on the type of
 
operations and location of product
distribution, manufacturing or sale.
 
These businesses include those that distribute, manufacture and/or repackage
 
 
12
prescription pharmaceuticals and/or medical devices and/or HCT/P products, or
 
own pharmacy operations, or
install, maintain or repair equipment.
 
 
In addition, Section 301 of the National Organ Transplant Act, and a number of comparable state laws, impose civil
and/or criminal penalties for the transfer of certain human tissue (for example,
 
human bone products) for valuable
consideration, while generally permitting payments for the reasonable costs
 
incurred in procuring, processing,
storing and distributing that tissue.
 
We are also subject to foreign government regulation of such products.
 
The
DEA, the FDA and state regulatory authorities have broad inspection and enforcement
 
powers, including the ability
to suspend or limit the distribution of products by our distribution centers,
 
seize or order the recall of products and
impose significant criminal, civil and administrative sanctions for violations of
 
these laws and regulations.
 
Foreign
regulations subject us to similar foreign enforcement powers.
 
EU Regulation of Medicinal and Dental Products
 
 
EU member states regulate their own healthcare systems, as does EU law.
 
The latter regulates certain matters,
most notably medicinal products and medical devices. Medicinal products are defined,
 
broadly, as substances or
combinations of substances having certain functionalities and may not include
 
medical devices. EU “regulations”
apply in all Member States, whereas “directives” are implemented by the
 
individual laws of member states.
 
 
On medicines for humans, we are regulated under Directive No. 2001/83/EC
 
of 6 November 2001 and EU
Regulation No. 726/2004 of 31 March 2004.
 
These rules provide for the authorization of products, and regulate
their manufacture, importation, marketing, and distribution.
 
It implements requirements which may be
implemented without warning, as well as a national pharmacovigilance
 
system under which marketing
authorizations may be withdrawn, and includes potential sanctions for breaches
 
of the rules, and on other bases
such as harmfulness or inefficiency.
 
 
EU Regulation No. 1223/2009 of 30 November 2009
on cosmetic products
 
requires that cosmetic products (which
includes dental products) be safe for human health when used under normal
 
or reasonably foreseeable conditions of
use and comply with certain obligations which apply to manufacturer, importer and distributor. It includes market
surveillance, and non-compliance may result in the recall or withdrawal of
 
products, along with other sanctions.
 
 
In the European Union, the EU Medical Device Regulation No. 2017/745
 
(“EU MDR”) covers a wide scope of our
activities, from dental material to X-ray machines, and certain software.
 
It was meant to become applicable three
years after publication (in May 2020). However, on April 23, 2020, to allow European Economic Area
 
(“EEA”)
national authorities, notified bodies, manufacturers and other actors to focus
 
fully on urgent priorities related to the
COVID-19 pandemic, the European Council and Parliament adopted Regulation
 
2020/561, postponing the date of
application of the EU MDR by one year (to May 2021).
 
In the meantime, rules provided for by Directive No.
90/385/EEC of 20 June 1990
on the approximation of the laws of the member states relating to active implantable
medical devices
 
remain applicable (in particular to certain software).
 
 
The EU MDR significantly modifies and intensifies the regulatory compliance
 
requirements for the medical device
industry as a whole.
 
Once applicable, the EU MDR will among other things:
 
 
 
Strengthen
 
the
 
rules
 
on
 
placing
 
devices
 
on
 
the
 
market
 
and
 
rein
force
 
surveillance
 
once
 
they
 
are
 
available;
 
 
 
Establish
 
explicit
 
provisions
 
on
 
manufacturers’
 
responsibilities
 
for
 
the
 
follow
-
up
 
of
 
the
 
quality,
 
performance and safety of devices placed on the market;
 
 
Improve
 
the
 
traceability
 
of
 
medical
 
devices
 
throughout
 
the
 
supply
 
chain
 
to
 
the
 
end
-
user
 
or
 
patient
 
through
 
a
 
unique identification number;
 
 
Se
t
 
up
 
a
 
central
 
database
 
to
 
provide
 
patients,
 
healthcare
 
professionals
 
and
 
the
 
public
 
with
 
comprehensive
 
information on products available in the EU;
 
 
 
Strengthen
 
rules
 
for
 
the
 
assessment
 
of
 
certain
 
high
-
risk
 
devices,
 
such
 
as
 
implants,
 
which
 
may
 
have
 
to
 
undergo an additional check by experts before they are placed on the market; and
 
 
Identify importers and distributors and medical device products through
 
registration in a database
(EudaMed not due until 2022 and after).
 
 
 
 
13
In particular, the EU MDR imposes stricter requirements for the confirmation that a product meets the regulatory
requirements, including regarding a product’s clinical evaluation and a company’s quality systems, and for the
distribution, marketing and sale of medical devices, including post-market surveillance.
 
Medical devices that have
been assessed and/or certified under the EU Medical Device Directive may
 
continue to be placed on the market
until 2024 (or until the expiry of their certificates, if applicable and earlier);
 
however, requirements regarding the
distribution, marketing and sale including quality systems and post-market surveillance
 
have to be observed by
manufacturers, importers and distributors as of the application date.
 
Other EU regulations that may apply under appropriate circumstances
 
include EU Regulation No. 1907/2006 of 18
December 2006
concerning the Registration, Evaluation, Authorisation and
 
Restriction of Chemicals
, which
requires importers to register substances or mixtures that they import
 
in the EU beyond certain quantities, and the
EU Regulation No. 1272/2008 of 16 December 2008 on classification, labelling
 
and packaging of substances and
mixtures (“CLP Regulation”), which sets various obligations with respect
 
to the labelling and packaging of
concerned substances and mixtures.
 
Furthermore, compliance with legal requirements has required and may in the future
 
require us to delay product
release, sale or distribution, or institute voluntary recalls of products we sell,
 
each of which could result in
regulatory and enforcement actions, financial losses and potential reputational
 
harm.
 
Our customers are also
subject to significant federal, state, local and foreign governmental regulation, which
 
may affect our interactions
with customers, including the design and functionality of our products.
 
Certain of our businesses are subject to various additional federal, state,
 
local and foreign laws and regulations,
including with respect to the sale, transportation, storage, handling and
 
disposal of hazardous or potentially
hazardous substances, and safe working conditions.
 
In addition, certain of our businesses must operate in
compliance with a variety of burdensome and complex billing and
 
record-keeping requirements in order to
substantiate claims for payment under federal, state and commercial healthcare
 
reimbursement programs.
 
Certain of our businesses also maintain contracts with governmental agencies
 
and are subject to certain regulatory
requirements specific to government contractors.
 
Antitrust and Consumer Protection
 
The federal government of the United States, most U.S. states and many
 
foreign countries have antitrust laws that
prohibit certain types of conduct deemed to be anti-competitive, as well as consumer
 
protection laws that seek to
protect consumers from improper business practices.
 
At the U.S. federal level, the Federal Trade Commission
oversees enforcement of these types of laws, and states have similar government
 
agencies. Violations of antitrust or
consumer protection laws may result in various sanctions, including criminal
 
and civil penalties.
 
Private plaintiffs
may also bring civil lawsuits against us in the United States for alleged
 
antitrust law violations, including claims for
treble damages.
 
EU law also regulates competition and provides for detailed rules
 
protecting consumers.
 
Health Care Fraud
 
Certain of our businesses are subject to federal and state (and similar
 
foreign) health care fraud and abuse, referral
and reimbursement laws and regulations with respect to their operations.
 
Some of these laws, referred to as “false
claims laws,” prohibit the submission or causing the submission of false or fraudulent
 
claims for reimbursement to
federal, state and other health care payers and programs.
 
Other laws, referred to as “anti-kickback laws,” prohibit
soliciting, offering, receiving or paying remuneration in order to induce the referral
 
of a patient or ordering,
purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing of, items or services
 
that are
paid for by federal, state and other health care payers and programs.
 
Certain additional state and federal laws, such
as the federal Physician Self-Referral Law, commonly known as the “Stark Law,” prohibit physicians and other
health professionals from referring a patient to an entity with which the physician
 
(or family member) has a
financial relationship, for the furnishing of certain designated health services
 
(for example, durable medical
equipment and medical supplies), unless an exception applies.
 
The fraud and abuse laws and regulations have been subject to heightened
 
enforcement activity over the past few
years, and significant enforcement activity has been the result of “relators” who
 
serve as whistleblowers by filing
 
 
14
complaints in the name of the United States (and if applicable, particular states)
 
under applicable false claims laws,
and who may receive up to 30% of total government recoveries.
 
Penalties under fraud and abuse laws may be
severe, and could result in significant civil and criminal penalties and costs,
 
including the loss of licenses and the
ability to participate in federal and state health care programs, and could
 
have a material adverse effect on our
business.
 
Also, these measures may be interpreted or applied by a prosecutorial,
 
regulatory or judicial authority in
a manner that could require us to make changes in our operations or incur substantial
 
defense and settlement
expenses.
 
Even unsuccessful challenges by regulatory authorities or private
 
relators could result in reputational
harm and the incurring of substantial costs.
 
Most states have adopted similar state false claims laws, and these
 
state
laws have their own penalties, which may be in addition to federal False Claims
 
Act penalties, as well as other
fraud and abuse laws.
 
 
With respect to measures of this type, the United States government (among others) has expressed concerns
 
about
financial relationships between suppliers on the one hand and physicians
 
and dentists on the other.
 
As a result, we
regularly review and revise our marketing practices as necessary to facilitate
 
compliance.
 
We also are subject to certain United States and foreign laws and regulations concerning the conduct of our foreign
operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery
 
Act, German anti-corruption laws
and other anti-bribery laws and laws pertaining to the accuracy of our internal
 
books and records, which have been
the focus of increasing enforcement activity globally in recent years.
 
While we believe that we are substantially compliant with applicable fraud and
 
abuse laws and regulations, and
have adequate compliance programs and controls in place to ensure substantial
 
compliance, we cannot predict
whether changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in
response to changes in applicable law or interpretation of laws, or failure
 
to comply with applicable law, could have
a material adverse effect on our business.
 
Affordable Care Act
 
The 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”),
 
increased federal oversight of private
health insurance plans and included a number of provisions designed
 
to reduce Medicare expenditures and the cost
of health care generally, to reduce fraud and abuse, and to provide access to increased health coverage.
 
The ACA
also materially expanded the number of individuals in the United States with health
 
insurance.
 
 
The ACA has faced ongoing legal challenges, including litigation seeking
 
to invalidate and Congressional action
seeking to repeal some of or all of the law or the manner in which it has been
 
implemented. In 2012, the United
States Supreme Court, in upholding the constitutionality of the
 
ACA and its individual mandate provision requiring
that people buy health insurance or else face a penalty, simultaneously limited ACA provisions requiring Medicaid
expansion, making such expansion a state-by-state decision. In addition, one of
 
the major political parties in the
United States remains committed to seeking the ACA’s legislative repeal, but legislative efforts to do so have
previously failed to pass both chambers of Congress.
 
Under President Trump’s administration, a number of
administrative actions were taken to materially weaken the ACA, including,
 
without limitation, by permitting the
use of less robust plans with lower coverage and eliminating “premium support”
 
for insurers providing policies
under the ACA. The Tax Cuts and Jobs Act enacted in 2017 (the “Tax Act”), which contains a broad range of tax
reform provisions that impact the individual and corporate tax rates, international
 
tax provisions, income tax add-
back provisions and deductions, also effectively repealed the ACA’s
 
individual mandate by zeroing out the penalty
for non-compliance.
 
In the most recent ACA litigation, the federal Fifth Circuit Court
 
of Appeals found the
individual mandate to be unconstitutional, and returned the case to the District Court
 
for the Northern District of
Texas for consideration of whether the remainder of the ACA could survive the excision of the individual
mandate.
 
The Fifth Circuit’s decision was appealed to the United States Supreme Court.
 
The Supreme Court heard
argument on the appeal on November 10, 2020, and a decision is anticipated soon.
 
Any outcome of this case that
changes the ACA, in addition to future legislation, regulation, guidance
 
and/or Executive Orders that do the same,
could have a significant impact on the U.S. healthcare industry.
 
An ACA provision, generally referred to as the Physician Payment Sunshine
 
Act or Open Payments Program (the
“Sunshine Act”),
 
imposes annual reporting and disclosure requirements for drug
 
and device manufacturers and
 
 
15
distributors with regard to payments or other transfers of value made to certain
 
covered recipients (including
physicians, dentists and teaching hospitals), and for such manufacturers and distributors
 
and for group purchasing
organizations, with regard to certain ownership interests held by physicians in the reporting
 
entity.
 
The Centers for
Medicare and Medicaid Services (“CMS”) publishes information from these
 
reports on a publicly available website,
including amounts transferred and physician, dentist and teaching hospital
 
identities.
 
Amendments expanded the
law to also require reporting, effective January
 
1, 2022, of payments or other transfers of value to physician
assistants, nurse practitioners, clinical nurse specialists, certified registered
 
nurse anesthetists, and certified nurse-
midwives, and this new requirement will be effective for data collected
 
beginning in calendar year 2021.
 
The
Sunshine Act pre-empts similar state reporting laws, although we or our subsidiaries
 
may be required to report
under certain state transparency laws that address circumstances not covered by
 
the Sunshine Act, and some of
these state laws, as well as the federal law, can be ambiguous.
 
We are also subject to foreign regulations requiring
transparency of certain interactions between suppliers and their customers.
 
 
In the United States, government actions to seek to increase health-related price
 
transparency may also affect our
business.
 
 
Another notable Medicare health care reform initiative, the Medicare Access
 
and CHIP Reauthorization Act of
2015 (“MACRA”), enacted on April 16, 2015, established a new payment framework,
 
which modified certain
Medicare payments to “eligible clinicians,” including physicians, dentists and
 
other practitioners.
 
Under MACRA,
certain eligible clinicians are required to participate in Medicare through the Merit-Based
 
Incentive Payment
System (“MIPS”) or Advanced Alternative Payment Models (“APMs”), through
 
which Medicare reimbursement to
eligible clinicians includes both positive and negative payment adjustments
 
that take into account quality,
promoting interoperability, cost, and improvement
 
activities.
 
Data collected in the first MIPS performance year
(2017) determined payment adjustments that began January 1, 2019.
 
MACRA standards continue to evolve, and
represent a fundamental change in physician reimbursement that is expected
 
to provide substantial financial
incentives for physicians to participate in risk contracts, and to increase physician
 
information technology and
reporting obligations.
 
The implications of the implementation of MACRA are uncertain
 
and will depend on future
regulatory activity and physician activity in the marketplace.
 
New payment and delivery system reform programs,
including those modeled after such federal program, are also increasingly being
 
rolled out at the state level through
Medicaid administrators, as well as through the private sector, which may further alter the marketplace
 
and impact
our business.
 
 
Recently, in addition to other government efforts to control health care costs, there has been increased scrutiny on
drug pricing and concurrent efforts to control or reduce drug costs by Congress, the
 
President, executive branch
agencies and various states. At the state level, several states have adopted
 
laws that require drug manufacturers to
provide advance notice of certain price increases and to report information
 
relating to those price increases, while
others have taken legislative or administrative action to establish prescription
 
drug affordability boards or multi-
payer purchasing pools to reduce the cost of prescription drugs.
 
At the federal level, several related bills have been
introduced and regulations proposed which, if enacted or finalized,
 
respectively, would impact drug pricing and
related costs.
 
As a result of political, economic and regulatory influences, the health care distribution
 
industry in the United
States is under intense scrutiny and subject to fundamental changes.
 
We cannot predict what further reform
proposals, if any, will be adopted, when they may be adopted, or what impact they may have on us.
 
EU Directive on the pricing and reimbursement of medicinal products
 
 
EU law provides for the regulation of the pricing of medicinal products which are
 
implemented by EU member
states (Directive No. 89/105/EC of 21 December 1988
relating to the transparency of measures regulating the
pricing of medicinal products for human use and their inclusion in the scope of national health insurance
 
systems
).
 
Member states may, subject notably to transparency conditions and to the statement of reasons based upon
objective and verifiable criteria, regulate the price charged (or its increases) for authorized
 
medicines and their level
of reimbursement, or they may freeze prices, place controls on the profitability
 
of persons responsible for placing
medicinal products on the market, and include or exclude the medicine on
 
the list of products covered by national
health insurance systems.
 
 
 
 
16
EU law does not expressly include provisions like those of the Sunshine Act in
 
the United States, but a growing
number of EU member states (such as France since 2011) have enacted laws to increase the transparency
 
of
relationships in the healthcare sector. The scope of these laws varies from on member state to another and may, for
example, include the relations between healthcare industry players and
 
physicians or their associations, students
preparing for medical professions or their associations, teachers, health
 
establishments or publishers of prescription
and dispensing assistance software.
 
Regulated Software; Electronic Health Records
 
The FDA has become increasingly active in addressing the regulation of
 
computer software and digital health
products intended for use in health care settings.
 
The 21st Century Cures Act (the “Cures Act”), signed into law on
December 13, 2016, among other things, amended the medical device definition
 
to exclude certain software from
FDA regulation, including clinical decision support software that meets certain
 
criteria.
 
On September 27, 2019,
the FDA issued a suite of guidance documents on digital health products, which
 
incorporated applicable Cures Act
standards, including
 
regarding the types of clinical decision support tools and other software that are
 
exempt from
regulation by the FDA as medical devices, and continues to issue new guidance
 
in this area.
 
Certain of our
businesses involve the development and sale of software and related products
 
to support physician and dental
practice management, and it is possible that the FDA or foreign government
 
authorities could determine that one or
more of our products is a medical device, which could subject us or one
 
or more of our businesses to substantial
additional requirements with respect to these products.
 
In addition, our businesses that involve physician and dental practice management
 
products, and our specialty home
medical supply business, include electronic information
 
technology systems that store and process personal health,
clinical, financial and other sensitive information of individuals.
 
These information technology systems may be
vulnerable to breakdown, wrongful intrusions, data breaches and malicious
 
attack, which could require us to
expend significant resources to eliminate these problems and address related
 
security concerns and could involve
claims against us by private parties and/or governmental agencies.
 
For example, we are directly or indirectly
subject to numerous and evolving federal, state, local and foreign laws and
 
regulations that protect the privacy and
security of personal information, such as the federal Health Insurance Portability
 
and Accountability Act of 1996,
as amended, and implementing regulations (“HIPAA”), the Controlling the Assault of Non-Solicited Pornography
and Marketing Act, the Telephone Protection and Electronic Protection Act of 1991, Section 5 of the Federal Trade
Commission Act, the California Privacy Act (“CCPA”), and the California Privacy Rights Act (“CPRA”) that
becomes effective on January 1, 2023.
 
Laws and regulations relating to privacy and data protection are
 
continually
evolving and subject to potentially differing interpretations. These requirements
 
may not be harmonized, may be
interpreted and applied in a manner that is inconsistent from one jurisdiction
 
to another or may conflict with other
rules or our practices.
 
Our businesses’ failure to comply with these laws and regulations could expose
 
us to breach
of contract claims, substantial fines, penalties and other liabilities and expenses,
 
costs for remediation and harm to
our reputation.
 
Also, evolving laws and regulations in this area could restrict
 
the ability of our customers to obtain,
use or disseminate patient information, or could require us to incur significant
 
additional costs to re-design our
products to reflect these legal requirements, which could have a material
 
adverse effect on our operations.
 
 
Also, the European Parliament and the Council of the European Union adopted
 
the pan-European General Data
Protection Regulation (“GDPR”), effective from May 25, 2018, which increased
 
privacy rights for individuals in
Europe (“Data Subjects”), including individuals who are our customers, suppliers
 
and employees.
 
The GDPR
extended the scope of responsibilities for data controllers and data processors,
 
and generally imposes increased
requirements and potential penalties on companies, such as us, that offer goods or
 
services to Data Subjects or
monitor their behavior (including by companies based outside of Europe).
 
Noncompliance can result in penalties of
up to the greater of EUR 20 million, or 4% of global company revenues, and
 
Data Subjects may seek damages. EU
member states may individually impose additional requirements and penalties
 
regarding certain matters, such as
employee personal data.
 
With respect to the personal data it protects, the GDPR requires, among other things,
company accountability, consents from Data Subjects or other acceptable legal basis to process the personal data,
breach notifications within 72 hours, data integrity and security, and fairness and transparency regarding the
storage, use or other processing of the personal data.
 
The GDPR also provides rights to Data Subjects relating
notably to information, access, modification, erasure and transporting
 
of the personal data.
 
 
 
 
17
In the United States, the CCPA, which increases the privacy protections afforded California residents, became
effective January 1, 2020.
 
The CCPA generally requires companies, such as us, to institute additional protections
regarding the collection, use and disclosure of certain personal information
 
of California residents.
 
Compliance
with the new obligations imposed by the CCPA depends in part on how particular regulators interpret and apply
them, and because the CCPA is relatively new,
 
and its implementing regulations were released in August of
 
2020,
there remains some uncertainty about how the CCPA will be interpreted by the courts and enforced by the
regulators. If we fail to comply with the CCPA or if regulators assert that we have failed to comply with the CCPA,
we may be subject to certain fines or other penalties and litigation,
 
any of which may negatively impact our
reputation, require us to expend significant resources, and harm our business.
 
Furthermore, California voters
approved the CPRA on November 3, 2020, which will amend and
 
expand the CCPA, including by providing
consumers with additional rights with respect to their personal information,
 
and creating a new state agency to
enforce the CCPA and the CPRA.
 
The CPRA will come into effect on January 1, 2023, applying to information
collected by businesses on or after January 1, 2022.
 
 
Other states, as well as the federal government, have increasingly
 
considered the adoption of similarly expansive
personal privacy laws, backed by significant civil penalties for non-compliance.
 
While we believe we have
substantially compliant programs and controls in place to comply with
 
the GDPR, CCPA and CPRA requirements,
our compliance with these measures is likely to impose additional costs on us,
 
and we cannot predict whether the
interpretations of the requirements, or changes in our practices in response
 
to new requirements or interpretations of
the requirements,
 
could have a material adverse effect on our business.
 
We also sell products and services that health care providers, such as physicians and dentists, use to store and
manage patient medical or dental records.
 
These customers, and we, are subject to laws, regulations and industry
standards, such as HIPAA and the Payment Card Industry Data Security Standards, which require the protection of
the privacy and security of those records, and our products may
 
also be used as part of these customers’
comprehensive data security programs, including in connection with their efforts to comply with
 
applicable privacy
and security laws.
 
Perceived or actual security vulnerabilities in our products or services,
 
or the perceived or actual
failure by us or our customers who use our products or services to comply
 
with applicable legal or contractual data
privacy and security requirements, may not only cause us significant reputational
 
harm, but may also lead to claims
against us by our customers and/or governmental agencies
 
and involve substantial fines, penalties and other
liabilities and expenses and costs for remediation.
 
Various
 
federal initiatives involve the adoption and use by health care
 
providers of certain electronic health care
records systems and processes.
 
The
 
initiatives include, among others, programs that incentivize physicians
 
and
dentists, through MIPS, to use EHR technology in accordance with certain
 
evolving requirements, including
regarding quality, promoting interoperability, cost and improvement activities.
 
Qualification for the MIPS
incentive payments requires the use of EHRs that are certified as having certain
 
capabilities designated in evolving
standards adopted by CMS and by the Office of the National Coordinator for Health
 
Information Technology
 
of
HHS (“ONC”).
 
Certain of our businesses involve the manufacture and sale
 
of such certified EHR systems and
other products linked to government supported incentive programs.
 
In order to maintain certification of our EHR
products, we must satisfy these changing governmental standards.
 
If any of our EHR systems do not meet these
standards, yet have been relied upon by health care providers to receive
 
federal incentive payments, we may be
exposed to risk, such as under federal health care fraud and abuse laws,
 
including the False Claims Act.
 
For
example, on May 31, 2017, the U.S. Department of Justice announced a $155
 
million settlement and 5-year
corporate integrity agreement involving a vendor of certified EHR systems, based
 
on allegations that the vendor, by
misrepresenting capabilities to the certifying body, caused its health care provider customers to submit false
Medicare and Medicaid claims for meaningful use incentive payments
 
in violation of the False Claims Act.
 
 
Moreover, in order to satisfy our customers, our products may need to incorporate increasingly complex
functionality, such as reporting functionality.
 
Although we believe we are positioned to accomplish this, the
 
effort
may involve increased costs, and our failure to implement product
 
modifications, or otherwise satisfy applicable
standards, could have a material adverse effect on our business.
 
Other health information standards, such as regulations under HIPAA, establish standards regarding electronic
health data transmissions and transaction code set rules for specific electronic
 
transactions, such as transactions
involving claims submissions to third party payers.
 
Failure to abide by these and other electronic health data
 
 
18
transmission standards could expose us to breach of contract claims,
 
substantial fines, penalties, and other liabilities
and expenses, costs for remediation and harm to our reputation.
 
Additionally, as electronic medical devices are increasingly connected to each other and to other technology, the
ability of these connected systems to safely and effectively exchange and use exchanged
 
information becomes
increasingly important.
 
For example, on September 6, 2017, the FDA issued final
 
guidance to assist industry in
identifying specific considerations related to the ability of electronic medical
 
devices to safely and effectively
exchange and use exchanged information.
 
As a medical device manufacturer, we must manage risks including
those associated with an electronic interface that is incorporated into a
 
medical device.
 
There may be additional legislative or regulatory initiatives in the future
 
impacting health care.
 
E-Commerce
 
Electronic commerce solutions have become an integral part of traditional health
 
care supply and distribution
relationships.
 
Our distribution business is characterized by rapid technological
 
developments and intense
competition.
 
The continuing advancement of online commerce requires
 
us to cost-effectively adapt to changing
technologies, to enhance existing services and to develop and introduce a
 
variety of new services to address the
changing demands of consumers and our customers on a timely basis, particularly
 
in response to competitive
offerings.
 
 
Through our proprietary, technologically-based suite of products, we offer customers a variety of competitive
alternatives.
 
We believe that our tradition of reliable service, our name recognition and large customer base built
on solid customer relationships, position us well to participate in
 
this significant aspect of the distribution business.
 
We continue to explore ways and means to improve and expand our Internet presence and capabilities, including
our online commerce offerings and our use of various social media outlets.
 
International Transactions
 
United States and foreign import and export laws and regulations require us to
 
abide by certain standards relating to
the importation and exportation of products.
 
We also are subject to certain laws and regulations concerning the
conduct of our foreign operations, including the U.S. Foreign Corrupt Practices
 
Act, the U.K. Bribery Act, German
anti-corruption laws and other anti-bribery laws and laws pertaining to
 
the accuracy of our internal books and
records, as well as other types of foreign requirements similar to those
 
imposed in the United States.
 
While we believe that we are substantially compliant with the foregoing laws
 
and regulations promulgated
thereunder and
 
possess all material permits and licenses required for the conduct
 
of our business, there can be no
assurance that regulations that impact our business or customers’ practices
 
will not have a material adverse effect
on our business.
 
 
See “
” for a discussion of additional burdens, risks and regulatory developments
 
that may
affect our results of operations and financial condition.
 
Proprietary Rights
 
 
We hold trademarks relating to the “Henry Schein
®
” name and logo, as well as certain other trademarks.
 
We intend
to protect our trademarks to the fullest extent practicable.
 
 
 
19
Employees and Human Capital
 
At Henry Schein, our employees are our greatest asset.
 
We employ more than 19,000 full-time equivalent
employees, including approximately 2,250 telesales representatives, over
 
3,450 field sales consultants, including
equipment sales specialists, 2,000 installation and repair technicians, 3,550 warehouse
 
employees, 800 computer
programmers and technicians, 675 management employees and 6,300 office, clerical
 
and administrative employees.
 
Approximately 49% of our workforce is based in the United States and
 
approximately 51% is based outside of the
United States.
 
Approximately 13% of our employees are subject to collective bargaining agreements.
 
We believe
that our relations with our employees are excellent.
 
We refer to our employees as Team
 
Schein Members, or “TSMs.”
 
Our TSMs are the cornerstone of the Company.
 
Our success is built on the engagement and commitment of our team, which
 
is dedicated to meeting the needs of
our customers, supplier partners, fellow TSMs, stockholders and society.
 
We are committed to supporting the
personal and professional development of our TSMs, as well as providing competitive
 
benefits and a safe, inclusive
workplace, and believe that these measures help us to retain our TSMs
 
and attract new TSMs.
 
As part of this
commitment, we have, among other things:
 
Developed a strong collaborative workplace culture.
 
We believe our TSMs’ ability to effectively
communicate and cooperate across functional and departmental teams positively
 
impacts our performance.
 
Each TSM’s performance is evaluated annually, based on a measure of Team Schein values, with a focus
on open communication.
 
Our team’s performance as a whole is evaluated via a culture survey, conducted
every two years, distributed to all TSMs, which, among other things,
 
addresses collaboration.
 
The results
from our culture surveys are reviewed by senior leaders, reported to the Board
 
of Directors and used to
implement programs and processes designed to further enhance our culture.
 
We are currently in the
process of further developing our collaborative culture by, among other things, strengthening our existing
commitment to diversity and inclusion, as further described below.
 
Committed to
 
enhance our
 
Diversity
 
and Inclusion
 
(“D&I”) initiatives.
 
We
 
believe
 
a
 
diverse workforce
fosters innovation and cultivates an environment filled with unique
 
perspectives.
 
As a result, D&I helps us
meet the needs of customers around the world.
 
We collect feedback through hosting roundtables where our
senior
 
leaders
 
actively
 
listen
 
to
 
our
 
TSMs
 
on
 
topics
 
related
 
to
 
D&I,
 
and
 
the
 
insights
 
learned
 
are
 
used
 
to
guide
 
our
 
efforts
 
to
 
support
 
a
 
diverse
 
and
 
inclusive
 
environment.
 
To
 
guide
 
our
 
efforts
 
and
 
education
related to
 
D&I, we
 
have established
 
an Executive
 
Diversity and
 
Inclusion Council
 
with engagement
 
from
our Board of Directors and Executive Management Committee. This
 
Council drives the Company’s overall
D&I strategy.
 
In 2020, we launched
 
a D&I learning
 
program to educate our
 
TSMs on critical
 
D&I related
topics, and management is incentivized to advance our D&I efforts.
 
Additionally, we promote engagement
by
 
utilizing
 
our
 
Employee
 
Resource
 
Groups
 
as
 
an
 
inclusive
 
and
 
diverse
 
vehicle
 
for
 
all
 
TSMs
 
to
 
share,
connect, learn, and develop both personally and professionally.
 
We believe that these efforts will serve as a
critical
 
stepping stone
 
as
 
we
 
continue to
 
strengthen our
 
D&I
 
initiatives in
 
an
 
effort
 
to
 
meet
 
the
 
evolving
needs of our customers, supplier partners, TSMs, stockholders and society.
 
Committed to the professional development of our TSMs.
 
We have invested in education and skill building,
and provide formal and informal learning opportunities to our TSMs.
 
All TSMs globally are offered a
broad suite of talent and professional development training programs
 
targeted to specific learning
opportunities based on their current and potential future role within
 
the Company.
 
We also offer
 
over 50
organizational and development training courses designed to aid in the overall development
 
and
advancement of skills and competencies to enable organizational success.
 
 
Supported talent development and succession planning.
 
Talent planning efforts are an integral part of our
commitment to ensure a strong leadership pipeline across the organization. We continuously identify a
group of potential management successors as part of our succession planning
 
process.
 
Our senior leaders
work to develop our TSMs’ talent and focus the team to execute our
 
long-term strategic plans.
 
Our Board
of Directors is provided with periodic updates regarding our
 
talent development and succession planning
efforts, participates in professional development activities with our TSMs and receives
 
formal
documentation on these topics annually.
 
 
 
 
20
 
Supported TSM health and safety.
 
We offer competitive health and wellness programs and other benefits to
eligible TSMs.
 
In addition to employee health, we are committed to providing
 
a safe and secure work
environment for all TSMs.
 
In response to the COVID-19 pandemic, in March 2020, we implemented
certain policy and procedure changes in an effort to protect our TSMs and customers,
 
and to support
appropriate health and safety protocols.
 
While TSMs at our manufacturing and distribution facilities, as
well as field sales consultants and equipment service technicians, have
 
continued to work onsite or in the
field to provide vital services to our customers, most TSMs in administrative
 
functions have effectively
worked remotely since mid-March.
 
To support the health and safety of our TSMs, we, among other things,
implemented extensive cleaning and sanitation processes and face
 
mask policies to protect TSMs at our
manufacturing and distribution facilities, instituted social distancing
 
and face mask policies for our field
sales consultants and equipment service technicians and adopted broad work-from-home
 
initiatives for
TSMs in administrative functions. In connection with this shift to remote working,
 
we made investments in
equipment, technology, and security upgrades to help protect our information and enhance our team’s
ability to work remotely.
 
Additionally, to help the team manage stress during the pandemic, we, among
other things, established a “COVID-19 Resource Center” to provide a central
 
location for all
communications to support the health of TSMs and their families, and hold
 
virtual Global Town Halls for
all TSMs.
 
Available Information
 
We make available free of charge through our Internet website,
www.henryschein.com
, our annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, statements
 
of beneficial ownership of
securities on Forms 3, 4 and 5 and amendments to these reports and statements
 
filed or furnished pursuant to
Section 13(a) and Section 16 of the Securities Exchange Act of 1934
 
as soon as reasonably practicable after such
materials are electronically filed with, or furnished to, the United States Securities
 
and Exchange Commission, or
SEC.
 
Our principal executive offices are located at 135 Duryea Road, Melville, New
 
York
 
11747, and our
telephone number is (631) 843-5500.
 
Unless the context specifically requires otherwise, the terms the
 
“Company,”
“Henry Schein,” “we,” “us” and “our” mean Henry Schein, Inc., a Delaware
 
corporation, and its consolidated
subsidiaries.
 
 
 
 
 
 
 
 
 
 
 
 
 
21
Information about our Executive Officers
 
The following table sets forth certain information regarding our executive officers:
 
Name
Age
Position
Stanley M. Bergman
 
71
Chairman, Chief Executive Officer, Director
Gerald A. Benjamin
 
68
Executive Vice President, Chief Administrative Officer, Director
James P.
 
Breslawski
 
67
Vice Chairman, President, Director
Michael S. Ettinger
 
59
Senior Vice President, Corporate & Legal Affairs and Chief of Staff, Secretary
Mark E. Mlotek
 
65
Executive Vice President, Chief Strategic Officer, Director
Steven Paladino
 
63
Executive Vice President, Chief Financial Officer, Director
Walter Siegel
 
61
Senior Vice President and General Counsel
 
Stanley M. Bergman
 
has been our Chairman and Chief Executive Officer since 1989 and a director
 
since 1982.
 
Mr. Bergman held the position of President from 1989 to 2005.
 
Mr. Bergman held the position of Executive Vice
President from 1985 to 1989 and Vice President of Finance and Administration from 1980 to 1985.
 
 
Gerald A. Benjamin
 
has been our Executive Vice President and Chief Administrative Officer since 2000 and a
director since 1994.
 
Prior to holding his current position, Mr. Benjamin was Senior Vice President of
Administration and Customer Satisfaction since 1993.
 
Mr. Benjamin was Vice
 
President of Distribution
Operations from 1990 to 1992 and Director of Materials Management
 
from 1988 to 1990.
 
Before joining us in
1988, Mr. Benjamin was employed for 12 years at Estée Lauder, Inc., in various management positions where his
last position was Director of Materials Planning and Control.
 
 
James P. Breslawski
 
has been our Vice Chairman since 2018, President since 2005 and a director since 1992.
 
Mr.
Breslawski was the Chief Executive Officer of our Henry Schein Global Dental
 
Group from 2005 to 2018.
 
Mr.
Breslawski held the position of Executive Vice President and President of U.S. Dental from 1990 to 2005, with
primary responsibility for the North American Dental Group.
 
Between 1980 and 1990, Mr. Breslawski held
various positions with us, including Chief Financial Officer, Vice President of Finance and Administration and
Corporate Controller.
 
Michael S. Ettinger
 
has been our Senior Vice President, Corporate & Legal Affairs, Chief of Staff and Secretary
since 2015.
 
Prior to his current position, Mr. Ettinger served as Senior Vice President, Corporate & Legal Affairs
and Secretary from 2013 to 2015, Corporate Senior Vice President, General Counsel & Secretary from 2006 to
2013, Vice President, General Counsel and Secretary from 2000 to 2006, Vice President and Associate General
Counsel from 1998 to 2000 and Associate General Counsel from 1994
 
to 1998.
 
Before joining us, Mr. Ettinger
served as a senior associate with Bower & Gardner and as a member of
 
the Tax Department at Arthur Andersen.
 
Mark E. Mlotek
 
has been our Executive Vice President and Chief Strategic Officer since 2012.
 
Mr. Mlotek was
Senior Vice President and subsequently Executive Vice President of the Corporate Business Development Group
between 2000 and 2012.
 
Prior to that, Mr. Mlotek was Vice President, General Counsel and Secretary from 1994 to
1999 and became a director in 1995.
 
Prior to joining us, Mr. Mlotek was a partner in the law firm of Proskauer
Rose LLP,
 
counsel to us, specializing in mergers and acquisitions, corporate reorganizations and tax law from
 
1989
to 1994.
 
Steven Paladino
 
has been our Executive Vice President and Chief Financial Officer since 2000.
 
Prior to holding
his current position, Mr. Paladino was Senior Vice President and Chief Financial Officer from 1993 to 2000 and
has been a director since 1992.
 
From 1990 to 1992, Mr. Paladino served as Vice President and Treasurer and from
1987 to 1990 served as Corporate Controller.
 
Before joining us, Mr. Paladino was employed in public accounting
for seven years, most recently with the international accounting
 
firm of BDO USA, LLP.
 
Mr. Paladino is a
certified public accountant.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22
Walter Siegel
 
has been our Senior Vice President and General Counsel since 2013.
 
Prior to joining us, Mr. Siegel
was employed with Standard Microsystems Corporation, a publicly
 
traded global semiconductor company from
2005 to 2012, holding positions of increasing responsibility, most recently as Senior Vice President, General
Counsel and Secretary.
 
 
Other Executive Management
 
The following table sets forth certain information regarding other Executive
 
Management:
 
Name
Age
Position
David Brous
52
President, Strategic Business Units Group and
 
Asia Pacific & Brazil Dental
Brad Connett
62
President, U.S. Medical Group
Jonathan Koch
 
46
Senior Vice President and Chief Executive Officer, Global Dental Group
Lorelei McGlynn
 
57
Senior Vice President, Chief Human Resources Officer
James Mullins
56
Senior Vice President, Global Services
Christopher Pendergast
58
Senior Vice President and Chief Technology Officer
Michael Racioppi
 
66
Senior Vice President, Chief Merchandising Officer
René Willi, Ph.D.
53
President, Global Dental Surgical Group
 
David Brous
 
has been our President, Strategic Business Units Group and Asia
 
Pacific & Brazil Dental since 2019.
 
Mr. Brous joined us in 2002 and has held many positions within the organization, including leading and managing
the Corporate Business Development Group and the International Healthcare Group
 
(managing our International
Animal Health business, International Medical business and Australia
 
/ New Zealand Dental business).
 
Brad Connett
 
has been our President of the U.S. Medical Group since 2018.
 
Mr. Connett joined us in 1997 and
has held a number of increasingly responsible positions at the Company.
 
Throughout his career, he has received
numerous industry honors, including the John F. Sasen Leadership Award from the Health Industry Distributors
Association (HIDA), in recognition of his service to the industry, and induction into the Medical Distribution Hall
of Fame by Repertoire Magazine.
 
Jonathan Koch
 
has been our Senior Vice President and Chief Executive Officer of our Global Dental Group since
2018.
 
Prior to joining us, for the years 2006 to 2018, Mr. Koch was a senior executive at Covance,
 
the drug
development services business of Laboratory Corporation of America.
 
In his last role at Covance, Mr. Koch was
the Executive Vice President and Group President of Covance Clinical Development & Commercialization
Services.
 
Prior to that, Mr. Koch was Executive Vice President and Group President of Covance Research and
Development Laboratories from 2015 to 2017.
 
Mr. Koch was also President of Covance Central Laboratory
Services from 2010 to 2015,
 
and Vice President at Covance, with various responsibilities, from 2006 to 2010.
 
Prior
to Covance, Mr. Koch held senior leadership roles of increasing responsibility while employed with Charles River
Laboratories from 1998 to 2006.
 
 
Lorelei McGlynn
 
has been our Senior Vice President, Global Human Resources Officer since 2013.
 
Since joining
us in 1999, Ms. McGlynn has served as Vice President, Global Human Resources and Financial Operations from
2008 to 2013, Chief Financial Officer, International Group and Vice President of Global Financial Operations from
2002 to 2008 and Vice President, Finance, North America from 1999 to 2002.
 
Prior to joining us, Ms. McGlynn
served as Assistant Vice President of Finance at Adecco Corporation.
 
James Mullins
 
has been our Senior Vice President of Global Services since 2018.
 
Mr. Mullins joined us in 1988
and has held a number of key positions with increasing responsibility, including Global Chief Customer Service
Officer.
 
 
 
23
Christopher Pendergast
 
has been our Senior Vice President and Chief Technology Officer since 2018.
 
Prior to
joining us, Mr. Pendergast was the employed by VSP Global from 2008 to 2018, most recently as the Chief
Technology Officer and Chief Information Officer.
 
Prior to VSP Global, Mr. Pendergast served in roles of
increasing responsibility at Natural Organics, Inc., from 2006 to 2008, IdeaSphere Inc./Twinlab Corporation from
2000 to 2006, IBM Corporation from 1987 to 1994 and 1998 to 2000
 
and Rohm and Haas from 1994 to 1998.
 
Michael Racioppi
 
has been our Senior Vice President, Chief Merchandising Officer since 2008. Prior to holding
his current position, Mr. Racioppi was President of the Medical Division from 2000 to 2008 and Interim President
from 1999 to 2000, and Corporate Vice President from 1994 to 2008, with primary responsibility for the Medical
Group, Marketing and Merchandising departments.
 
Mr. Racioppi served as Senior Director, Corporate
Merchandising from 1992 to 1994.
 
Before joining us in 1992, Mr. Racioppi was employed by Ketchum
Distributors, Inc. as the Vice President of Purchasing and Marketing.
 
He currently serves on the board of National
Distribution and Contracting and previously served on the board of Health
 
Distribution Management Association
and Health Industry Distributors Association (HIDA).
 
René Willi, Ph.D.
 
has been our President, Global Dental Surgical Group, Henry Schein Inc., since 2013.
 
Prior to
joining Henry Schein, Dr. Willi held senior level roles with Institut Straumann AG as Executive Vice President,
Surgical Business Unit from 2005 to 2013.
 
Prior to Straumann, he held roles of increasing responsibility
 
in
Medtronic Plc’s cardiovascular division from 2003
 
to 2005 and with McKinsey & Company as a management
consultant from 2000 to 2003.
 
 
24
ITEM 1A. Risk Factors
 
Our business operations could be affected by factors that are not presently known
 
to us or that we currently
consider not to be material to our operations, so you should not consider
 
the risks disclosed in this section to
necessarily represent a complete statement of all risks and uncertainties.
 
The Company believes that the following
risks could have a material adverse impact on our business, reputation, financial
 
results, financial condition and/or
the trading price of our common stock.
 
The order in which these factors appear does not necessarily reflect
 
their
relative importance or priority.
 
 
COMPANY RISKS
 
Our business, results of operations, cash flows, financial condition and
 
liquidity may be negatively impacted by
the effects of disease outbreaks, epidemics, pandemics, or similar wide-spread public
 
health concerns and other
natural disasters
.
The COVID-19 pandemic and the responses of governments
 
to it had, and may again have, a
material adverse effect on our business, results of operations and cash flows and may
 
result in a material
adverse effect on our financial condition and liquidity.
 
Our business, results of operations, cash flows, financial condition and
 
liquidity may be negatively impacted by the
effects of disease outbreaks, epidemics, pandemics, similar wide-spread public health concerns,
 
and other natural
disasters. The COVID-19 pandemic has had, and continues to have,
 
an unprecedented impact on society, worldwide
economic activity, and the health care sector (particularly, the dental market). As a global healthcare solutions
company, the COVID-19 pandemic and the governmental responses to it had, and may again have, a material
adverse effect on our business, results of operations and cash flows and may result in a
 
material adverse effect on
our financial condition and liquidity. In March and April 2020, the dental market was severely impacted by
COVID-19, with many, if not a majority, of practices being closed or open on a limited basis only. Although dental
practice openings and patient volume recovery in the United States and
 
many other countries have rebounded faster
than originally anticipated, patient volumes have remained below pre-COVID-19
 
levels.
 
Material uncertainty
remains and the potential for additional significant resurgences of COVID-19
 
could cause a significant reduction in
dental practice openings and patient volume recovery, or further delay the return to normal operations. Even
 
after
COVID-19 has subsided, we may again experience material adverse
 
impacts to our business, results of operations
and cash flows as a result of, among other things, its global economic
 
impact, including any recession that may
occur in the future, or a prolonged period of economic slowdown or the
 
reluctance of patients to return for elective
dental or medical care. The impacts and potential impacts from
 
the COVID-19 pandemic include, but are not
limited to:
 
Significant reductions in demand or significant volatility in demand for certain of our products.
 
For example, in
March and April 2020, many dental offices in the United States performed only emergency procedures,
 
and
rescheduled wellness exams and elective procedures. Dental offices in other countries
 
also experienced closures or
restricted operations, as did medical offices around the world. Such closures and restrictions
 
impacted our
customers’ spending with us and had, and if reinstated may again have, a material
 
adverse effect on our business,
results of operations and cash flows. Although dental practice openings and
 
patient volume recovery have
rebounded faster than originally anticipated, capacity constraints
 
in offices and demand-side factors may again lead
to reductions in demand or significant volatility in demand for our products. Additionally, significant reduction in
demand for certain of our products or customers’ decisions to delay
 
the purchase of large equipment may result in
us having increased inventory;
 
Shortage of Certain Personal Protective Equipment (PPE
). Supply chain disruptions for PPE and an increased
demand for these products has resulted, and may continue to result,
 
in backorders of certain PPE and a potential
scarcity in raw materials to make certain PPE. Prices for certain PPE have been
 
volatile. Although we believe that
most practices currently are able to access adequate supply, with some exceptions in certain markets depending on
a number of factors, including the progress of the virus and efforts to combat it, we
 
still may be unable to supply
our customers with the quantity of certain PPE products they demand,
 
which may lead to our customers seeking
alternative sources of supply. Furthermore, healthcare professionals’ inability to obtain a sufficient quantity of
certain PPE would
 
adversely impact our business, results of operations and cash flows,
 
and could materially
adversely affect our financial condition and liquidity. Conversely, we recorded significant charges throughout the
year beginning in the second quarter for PPE inventory due to volatility
 
of pricing for PPE, and, depending upon
 
 
25
the course of the pandemic, if PPE pricing or demand decreases, our
 
margins and the value of certain our PPE
inventory could be further negatively impacted in future periods, which
 
could result in a material adverse impact on
our business, results of operations and cash flows and our financial condition
 
and liquidity;
 
Reduction in Peoples’ Ability and Willingness to be in Public.
 
Restrictions recommended by several public health
organizations, and implemented by many local governments, to slow and limit the transmission
 
of COVID-19
(including business closures and restrictions, stay-at-home and similar measures)
 
were implemented and then lifted
or partially lifted in some locations and reinstituted in others. Ongoing
 
social distancing ordinances and similar
restrictions, and the actual and potential for additional resurgences of COVID-19
 
has in some locations and may in
other locations result in the re-imposition or tightening of governmental
 
social distancing and other restrictions,
and/or cause people to be less willing to go to elective medical and dental
 
appointments, which could again
materially adversely affect demand for our products. A lengthened period of materially
 
suppressed demand could
again cause material adverse impacts on our business, results of operations
 
and cash flows and could materially
adversely affect our financial condition and liquidity;
 
Potential delays in customer payments, or defaults on our customer credit arrangements.
 
We generally sell
products to customers with payment terms. If customers’ cash
 
flows or operating and financial performance
deteriorate due to the impact of COVID-19, or if they are unable to make scheduled
 
payments or obtain credit, they
may not be able to pay, or may delay payment to us. Likewise, for similar reasons, suppliers may restrict credit or
impose more stringent payment terms. The inability of current and/or
 
potential customers to pay us for our products
and/or services or any demands by suppliers for more stringent payment terms
 
may materially adversely affect our
business, results of operations, cash flows, financial condition and
 
liquidity and may limit the amounts we can
borrow under our trade accounts receivable securitization;
 
 
Impact on third parties’ ability to meet their obligations to us; impact on our ability to meet obligations
 
to third
parties.
 
Failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors,
contractors (including third-party shippers), banks, joint venture partners
 
and external business partners, to meet
their obligations to us, or significant disruptions in their ability to do
 
so, which may be caused by their own
financial or operational difficulties, or by travel restrictions and border closures, may materially
 
adversely affect
our business, results of operations, cash flows, financial condition and
 
liquidity. Certain of our contracts with
supply partners contain minimum purchase requirements or include rebate provisions
 
if we satisfy certain sales or
purchasing targets that, in certain cases we have not been able to satisfy and in other
 
cases we may not be able to
fully satisfy, due to the impact of the COVID-19 pandemic. Rebate income recognized in fiscal 2020 is less than
rebates earned over the prior fiscal year. Our failure to satisfy such contractual provisions or renegotiate
 
more
favorable terms could materially adversely affect our business, results of operations
 
and cash flows;
 
Negative impact on our workforce and impact of adapted business practices.
 
The spread of COVID-19 caused us
to implement temporary cost reduction measures (including a payroll
 
cost reduction plan centered around
furloughs, reduced pay and work hours, voluntary unpaid time off, suspension of Company
 
contributions to certain
retirement plans and job reductions), all of which have now ended (except
 
for a small number of TSMs who remain
on furlough), modify our business practices (including employee
 
travel, employee work locations, and cancellation
of physical participation in meetings, events and conferences), and
 
we may take further actions as may be required
by government authorities or that we determine are in the best interests
 
of our employees. As the COVID-19
pandemic continues to unfold, we will continue to evaluate appropriate actions
 
for our business. Many of our
employees shifted abruptly to working remotely and our non-essential workers
 
who are able to work from home
continue to do so. An extended period of modified business practices
 
and remote work arrangements could have a
negative impact on employee morale, strain our business continuity plans,
 
introduce operational risk (including but
not limited to cybersecurity risks), and impair our ability to efficiently operate our
 
business;
 
Significant changes in political conditions.
 
Significant changes in political conditions in markets in which
 
we
purchase and distribute our products have occurred and are expected to
 
continue at least during the pendency of the
pandemic, including quarantines, governmental or regulatory actions, closures
 
or other restrictions that limit or
close our operating facilities, restrict our employees’ ability to
 
travel or perform necessary business functions, or
otherwise constrain the operations of our business partners, suppliers, or
 
customers, which may materially
adversely affect our business, results of operations, cash flows, financial condition
 
and liquidity;
 
 
 
26
Potential impact on our ability to meet obligations under credit facilities.
 
Although in fiscal 2020 we entered into
amendments to our material credit facilities to, among other things,
 
extend the maturity dates and temporarily
provide additional flexibility under certain covenants, an extended negative
 
impact of COVID-19 on our business,
results of operations, cash flows, financial condition and liquidity could
 
impact our ability to meet our obligations
under credit facilities or outstanding long term debt, which contain
 
maximum leverage ratios, and customary
representations, warranties and affirmative covenants;
 
Volatility
 
in the financial markets.
 
Volatility
 
in the financial markets may materially adversely affect the
availability and cost of credit to us;
 
Refocusing management resources to mitigate effects of COVID-19
. Our management is focused on mitigating the
effects of COVID-19, which has required, and may continue to require for the duration of
 
the pandemic, a large
investment of time and resources across the Company, and may delay certain strategic and other plans, which could
materially adversely affect our business;
 
Potential
 
increased costs associated with our self-insured medical insurance programs.
We may incur significant
employee health care costs under our self-insurance medical insurance programs
 
if a large number of our
employees and/or their covered family members become ill from COVID-19;
 
and
 
Reputational risk associated with response to COVID-19.
 
If we do not respond appropriately to the COVID-19
pandemic, or if customers do not perceive our response to be adequate, we could
 
suffer damage to our reputation
and our brands, which could materially adversely affect our business.
 
The impact of COVID-19 may also exacerbate other risks discussed below, any of which could have a material
adverse effect on us.
 
We are dependent upon third parties for the manufacture and supply of substantially all of our products.
 
We obtain substantially all of the products we distribute from third parties, with whom we generally do not have
long-term contracts. While there is typically more than one source of
 
supply, some key suppliers, in the aggregate,
supply a significant portion of the products we sell.
 
In 2020, our top 10 health care distribution suppliers and
 
our
single largest supplier accounted for approximately 30%
 
and 4%, respectively, of our aggregate purchases.
 
Because of our dependence upon such suppliers, our operations are
 
subject to the suppliers’ ability and willingness
to supply products in the quantities that we require, and the risks include delays
 
caused by interruption in
production based on conditions outside of our control, including
 
a supplier’s failure to comply with applicable
government requirements (which may result in product recalls and/or
 
cessation of sales) or an interruption in the
suppliers’ manufacturing capabilities. In the event of any such
 
interruption in supply, we would need to identify and
obtain acceptable replacement sources on a timely basis. There is no guarantee
 
that we would be able to obtain such
alternative sources of supply on a timely basis, if at all, and an extended interruption
 
in supply, particularly of a
high sales volume product, could result in a significant disruption in our sales
 
and operations, as well as damage to
our relationships with customers and our reputation.
 
 
Our
 
future
 
growth
 
(especially
 
for
 
our
 
technology
 
and
 
value-added
 
services
 
segment)
 
is
 
dependent
 
upon
 
our
ability
 
to
 
develop
 
or
 
acquire
 
and
 
maintain
 
and
 
protect
 
new
 
products
 
and
 
technologies
 
that
 
achieve
 
market
acceptance with acceptable margins.
 
Our future success
 
depends on our ability
 
to timely develop (or
 
obtain the right
 
to sell) competitive
 
and innovative
(particularly
 
for
 
our
 
technology
 
and
 
value-added
 
services
 
segment),
 
products
 
and
 
services
 
and
 
to
 
market
 
them
quickly and
 
cost-effectively.
 
Our ability
 
to anticipate
 
customer needs
 
and emerging
 
trends and
 
develop or
 
acquire
new products,
 
services and
 
technologies at
 
competitive prices
 
requires significant
 
resources, including
 
employees
with the requisite skills, experience
 
and expertise, particularly in our
 
technology segment, including dental practice
management, patient engagement and demand creation software solutions.
 
The failure to successfully address these
challenges
 
could
 
materially
 
disrupt
 
our
 
sales
 
and
 
operations.
 
Additionally,
 
our
 
software
 
and
 
e-services
 
products,
like
 
software
 
products generally,
 
may
 
contain
 
undetected errors
 
or
 
bugs
 
when introduced
 
or
 
as
 
new
 
versions
 
are
released. Any such defective
 
software may result in
 
increased expenses related to the
 
software and could adversely
affect
 
our
 
relationships
 
with
 
customers
 
as
 
well
 
as
 
our
 
reputation.
 
While
 
certain
 
software
 
and
 
e-services
 
that
 
we
 
 
27
develop are protected
 
under patent law,
 
we rely primarily
 
upon copyright, trademark
 
and trade secret
 
laws, as well
as contractual and
 
common law protections and
 
confidentiality obligations. We
 
cannot provide assurance that
 
such
legal protections will be
 
available, adequate or enforceable in
 
a timely manner to protect
 
our software or e-services
products.
 
Our expansion through acquisitions and joint ventures involves
 
risks and may not result in the benefits and
revenue growth we expect.
 
One of our business strategies has been to expand our domestic and
 
international markets in part through
acquisitions and joint ventures, and we expect to continue to make acquisitions
 
and enter into joint ventures in the
future. Such transactions require significant management attention,
 
may place significant demands on our
operations, information systems and financial resources, and there
 
is risk that one or more may not succeed. We
cannot be sure, for example, that we will achieve the benefits of revenue
 
growth that we expect from these
acquisitions or joint ventures or that we will avoid unforeseen additional
 
costs or expenses.
 
Our ability to
successfully implement our acquisition and joint venture strategy depends
 
upon, among other things, the following:
 
 
the availability of suitable acquisition or joint venture candidates at
 
acceptable prices;
 
our ability to consummate such transactions, which could potentially
 
be prohibited due to U.S. or
foreign antitrust regulations;
 
the liquidity of our investments and the availability of financing on
 
acceptable terms;
 
our ability to retain customers or product lines of the acquired businesses or
 
joint ventures;
 
our ability to retain, recruit and incentivize the management of the companies
 
we acquire; and
 
our ability to successfully integrate these companies’ operations, services,
 
products and personnel with
our culture, management policies, internal procedures, working capital
 
management, financial and
operational controls and strategies.
 
Furthermore, some of our acquisitions and future acquisitions may give
 
rise to an obligation to make contingent
payments or to satisfy certain repurchase obligations, which payments
 
could have material adverse impacts on our
financial results individually or in the aggregate.
 
Certain provisions in our governing documents and other documents to
 
which we are a party may discourage
third parties from seeking to acquire us that might otherwise result in
 
our stockholders receiving a premium
over the market price of their shares.
 
The provisions of our certificate of incorporation and by-laws may
 
make it more difficult for a third-party to
acquire us, may discourage acquisition bids and may impact the price
 
that certain investors might be willing to pay
in the future for shares of our common stock.
 
These provisions, among other things require:
 
 
 
the affirmative vote of the holders of at least 60% of the shares of common stock
 
entitled to vote to
approve a merger, consolidation, or a sale, lease, transfer or exchange of all or substantially all of our
assets; and
 
 
the affirmative vote of the holders of at least 66 2/3% of our common stock entitled
 
to vote to (i)
remove a director; and (ii) to amend or repeal our by-laws, with certain limited
 
exceptions.
 
In addition, certain of our employee incentive plans provide for accelerated
 
vesting of stock options and other
awards upon termination without cause within two years following a change
 
in control, or grant the plan committee
discretion to accelerate awards upon a change of control.
 
Further, certain agreements between us and our executive
officers provide for increased severance payments and certain benefits if those
 
executive officers are terminated
without cause by us or if they terminate for good reason, in each case within
 
two years following a change in
control or within ninety days prior to the effective date of the change in control
 
or after the first public
announcement of the pendency of the change in control.
 
 
 
 
28
INDUSTRY RISKS
 
The health care products distribution industry is highly competitive
 
(including, without limitation, competition
from third-party online commerce sites) and consolidating, and we may not
 
be able to compete successfully.
 
 
We compete with numerous companies, including several major manufacturers and distributors. Some of our
competitors have greater financial and other resources than we do, which
 
could allow them to compete more
successfully. Most of our products are available from several sources and our customers tend to have relationships
with several distributors. Competitors could obtain exclusive rights
 
to market particular products, which we would
then be unable to market. Manufacturers also could increase their
 
efforts to sell directly to end-users and thereby
eliminate or reduce our role in distribution. Industry consolidation among health
 
care product distributors and
manufacturers, price competition, product unavailability, whether due to our inability to gain access to products or
to interruptions in manufacturing supply, or the emergence of new competitors, also could increase competition.
Consolidation has also increased among manufacturers of health care
 
products, which could have a material
adverse effect on our margins and product availability. We
 
could be subject to charges and financial losses in the
event we fail to satisfy minimum purchase commitments contained
 
in some of our contracts. Additionally,
traditional health care supply and distribution relationships are being challenged
 
by electronic online commerce
solutions. The continued advancement of online commerce by third
 
parties will require us to cost-effectively adapt
to changing technologies, to enhance existing services and to differentiate our business
 
(including with additional
value-added services) to address changing demands of consumers and
 
our customers on a timely basis. The
emergence of such potential competition and our inability to anticipate and
 
effectively respond to changes on a
timely basis could have a material adverse effect on our business.
 
 
The repeal or judicial prohibition on implementation of the Affordable Care Act
 
could materially adversely
affect our business.
 
The U.S. 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”), greatly expanded
 
health insurance coverage in the
United States and has been the target of litigation and Congressional reform efforts since its adoption.
 
The U.S.
Supreme Court, in upholding the constitutionality of the ACA and its
 
individual mandate provision in 2012,
simultaneously limited ACA provisions requiring Medicaid expansion,
 
making such expansion a state-by-state
decision.
 
In 2017, the U.S. Congress effectively repealed the ACA’s
 
individual mandate provision by eliminating
the financial penalty for non-compliance.
 
In the most recent ACA litigation, a federal appeals court found
 
the
individual mandate to be unconstitutional, and returned the case to a lower federal
 
court for consideration of
whether the remainder of the ACA could survive the excision of the individual
 
mandate.
 
This decision was
appealed to the U.S. Supreme Court, and a decision is expected soon.
 
Any outcome of this case that changes the
ACA, in addition to future legislation, regulation, guidance and/or Executive
 
Orders that do the same, could have a
significant impact on the U.S. healthcare industry and our operations.
 
The health care industry is experiencing changes due to political, economic and
 
regulatory influences that could
materially adversely affect our business.
 
The health care industry is highly regulated and subject to changing
 
political, economic and regulatory influences.
 
In recent years, the health care industry has undergone, and is in the process of undergoing, significant
 
changes
driven by various efforts to reduce costs, including, among other factors: trends
 
toward managed care; collective
purchasing arrangements and consolidation among office-based health care practitioners; and
 
changes in
reimbursements to customers, including increased attention to value-based payment
 
arrangements, as well as
growing enforcement activities (and related monetary recoveries) by governmental
 
officials. Both our profitability
and the profitability of our customers may be materially adversely affected by laws
 
and regulations reducing
reimbursement rates for pharmaceuticals, medical supplies and devices,
 
and/or medical treatments or services, or
changes to the methodology by which reimbursement levels are determined.
 
If we are unable to react effectively to
these and other changes in the health care industry, our business could be materially adversely affected.
 
 
 
 
29
Expansion of group purchasing organizations (“GPO”) or provider networks
 
and the multi-tiered costing
structure may place us at a competitive disadvantage.
 
The medical products industry is subject to a multi-tiered costing structure,
 
which can vary by manufacturer and/or
product. Under this structure, certain institutions can obtain more
 
favorable prices for medical products than we are
able to obtain. The multi-tiered costing structure continues to expand
 
as many large integrated health care providers
and others with significant purchasing power, such as GPOs, demand more favorable pricing terms.
 
Additionally,
the formation of provider networks and GPOs may shift purchasing decisions
 
to entities or persons with whom we
do not have a historical relationship and may threaten our ability to compete
 
effectively, which could in turn
negatively impact our financial results. Although we are seeking to obtain similar
 
terms from manufacturers to
access lower prices demanded by GPO contracts or other contracts, and to
 
develop relationships with existing and
emerging provider networks and GPOs, we cannot guarantee that such terms will
 
be obtained or contracts executed.
 
 
Increases in shipping costs or service issues with our third-party shippers
 
could harm our business.
 
Shipping is a significant expense in the operation of our business. We ship almost all of our orders through third-
party delivery services, and typically bear the cost of shipment. Accordingly, any significant increase in shipping
rates could have a material adverse effect on our business, financial condition or operating
 
results. Similarly, strikes
or other service interruptions by those shippers could cause our operating
 
expenses to rise and materially adversely
affect our ability to deliver products on a timely basis.
 
 
MACRO ECONOMIC AND POLITICAL RISKS
 
Uncertain global macro-economic and political conditions could
 
materially adversely affect our results of
operations and financial condition.
 
Uncertain global macro-economic and political conditions that affect the economy
 
and the economic outlook of the
United States, Europe, Asia and other parts of the world could materially adversely
 
affect our results of operations
and financial condition. These uncertainties, include, among other things:
 
 
election results;
 
changes to laws and policies governing foreign trade (including, without
 
limitation, the United States-
Mexico-Canada Agreement (USMCA), the EU-UK Trade and Cooperation Agreement of December
2020, and other international trade agreements);
 
greater restrictions on imports and exports;
 
supply chain disruptions due to social issues;
 
changes in laws and policies governing health care or data privacy;
 
tariffs and sanctions;
 
changes to the relationship between the United States and China;
 
sovereign debt levels;
 
the inability of political institutions to effectively resolve actual or perceived
 
economic, currency or
budgetary crises or issues;
 
consumer confidence;
 
unemployment levels (and a corresponding increase in the uninsured
 
and underinsured population);
 
changes in regulatory and tax regulations;
 
increases in interest rates;
 
availability of capital;
 
increases in fuel and energy costs;
 
the effect of inflation on our ability to procure products and our ability to increase
 
prices over time;
 
changes in tax rates and the availability of certain tax deductions;
 
increases in health care costs;
 
the threat or outbreak of war, terrorism or public unrest; and
 
changes in laws and policies governing manufacturing, development and
 
investment in territories and
countries where we do business.
 
 
 
 
30
Additionally, changes in government, government debt and/or budget crises may lead to reductions in government
spending in certain countries, which could reduce overall health care spending,
 
and/or higher income or corporate
taxes, which could depress spending overall. Recessionary conditions and depressed
 
levels of consumer and
commercial spending may also cause customers to reduce, modify, delay or cancel plans to purchase our products
and may cause suppliers to reduce their output or change their terms of sale.
 
We generally sell products to
customers with payment terms. If customers’ cash flow or operating and
 
financial performance deteriorate, or if
they are unable to make scheduled payments or obtain credit, they may not
 
be able to, or may delay, payment to us.
Likewise, for similar reasons suppliers may restrict credit or impose different payment
 
terms.
 
REGULATORY
 
AND LITIGATION RISKS
 
Failure to comply with existing and future regulatory requirements
 
could materially adversely affect our
business.
 
The laws and regulations that govern our business and operations are
 
subject to varying and evolving
interpretations, future changes, additions, and enforcement approaches
 
(including in light of political changes, such
as with respect to the new administration of President Biden) that
 
affect our ability to comply.
 
For example,
President Biden’s administration has authorized and encouraged a freeze on certain federal regulations
 
that have
been published but are not yet effective, as well as a review of all federal regulations
 
issued during President
Trump’s administration.
 
Changes with respect to the applicable laws and regulations may
 
require us to update or
revise our operations, services, marketing practices, and compliance programs
 
and controls, and may impose
additional and unforeseen costs on us, pose new or previously immaterial
 
risks to us, or may otherwise have a
material adverse effect on our business.
 
There can be no assurance that current and future government
 
regulations
will not adversely affect our business, and we cannot predict new regulatory priorities,
 
the form, content or timing
of regulatory actions, and their impact on the health care industry and on
 
our business and operations.
 
Global efforts toward healthcare cost containment continue to exert pressure on
 
product pricing.
 
In the United
States, in addition to other government efforts to control health care costs, there has been
 
increased scrutiny on drug
pricing and concurrent efforts to control or reduce drug costs by Congress, the President,
 
executive branch agencies
and various states. At the state level, several states have adopted
 
laws that require drug manufacturers to provide
advance notice of certain price increases and to report information
 
relating to those price increases, while others
have taken legislative or administrative action to establish prescription drug
 
affordability boards or multi-payer
purchasing pools to reduce the cost of prescription drugs.
 
At the federal level, several related bills have been
introduced and regulations proposed which, if enacted or finalized,
 
respectively, would impact drug pricing and
related costs.
 
Under the Physician Payment Sunshine Act, we are required to collect
 
and report detailed information regarding
certain financial relationships we have with covered recipients, such as
 
physicians, dentists and teaching hospitals.
 
We or our subsidiaries may be required to report information under certain state transparency laws that address
circumstances not covered by the Physician Payment Sunshine Act, and
 
some of these state laws, as well as the
federal law, can be ambiguous.
 
We are also subject to foreign regulations requiring transparency of certain
interactions between suppliers and their customers.
 
While we believe we have substantially compliant programs
and controls in place satisfying the above laws and requirements,
 
such compliance imposes additional costs on us
and the requirements are sometimes ambiguous.
 
In the United States, government actions to seek to increase
health-related price transparency may also affect our business.
 
 
 
31
Our business is subject to additional requirements under various local, state,
 
federal and international laws and
regulations applicable to the sale and distribution of, and third-party
 
payment for, pharmaceuticals and medical
devices, human cells, tissue and cellular and tissue-based products (“HCT/P products”).
 
Among the federal laws
with which we must comply are the Controlled Substances Act,
 
the U.S. Food, Drug, and Cosmetic Act, as
amended (“FDC Act”), the Federal Drug Quality and Security Act, including
 
Drug Supply Chain Security Act
(“DSCSA”), and Section 361 of the Public Health Services Act. Among
 
other things, such laws, and the regulations
promulgated thereunder:
 
 
 
regulate the storage and distribution, labeling, packaging, handling, reporting,
 
record keeping,
introduction, manufacturing and marketing of drugs, HCT/P products
 
and medical devices, including
requirements with respect to unique medical device identifiers;
 
subject us to inspection by the U.S. Food and Drug Administration (“FDA”)
 
and the U.S. Drug
Enforcement Administration (“DEA”), and similar state authorities;
 
regulate the storage, transportation and disposal of certain of our products
 
that are considered
hazardous materials;
 
require us to advertise and promote our drugs and devices in accordance
 
with applicable FDA
requirements;
 
require registration with the FDA and the DEA and various state agencies;
 
require record keeping and documentation of transactions involving drug products;
 
require us to design and operate a system to identify and report suspicious
 
orders of controlled
substances to the DEA;
 
require us to manage returns of products that have been recalled and subject
 
us to inspection of our
recall procedures and activities;
 
 
impose on us reporting requirements if a pharmaceutical, HCT/P product or
 
medical device causes
serious illness, injury or death;
 
require manufacturers, wholesalers, repackagers and dispensers of prescription
 
drugs to identify and
trace certain prescription drugs as they are distributed;
 
 
require the licensing of prescription drug wholesalers and third-party
 
logistics providers; and
 
 
mandate compliance with standards for the recordkeeping, storage
 
and handling of prescription drugs,
and associated reporting requirements.
 
The FDA has become increasingly active in addressing the regulation of
 
computer software and digital health
products intended for use in health care settings.
 
The 21st Century Cures Act (the “Cures Act”), signed into law on
December 13, 2016, among other things, amended the medical device definition
 
to exclude certain software from
FDA regulation, including certain clinical decision support software.
 
Certain of our businesses involve the
development and sale of software and related products to support physician
 
and dental practice management, and it
is possible that the FDA or foreign government authorities could determine
 
that one or more of our products is
subject to regulation as a medical device, which could subject us or one
 
or more of our businesses to substantial
additional requirements, costs, and potential enforcement actions or liabilities
 
for noncompliance with respect to
these products.
 
Applicable federal, state, local and foreign laws and regulations also may require
 
us to meet various standards
relating to, among other things, licensure or registration, program eligibility, procurement, third-party
reimbursement, sales and marketing practices, product integrity and
 
supply tracking to product manufacturers,
product labeling, personnel, privacy and security of health or other personal
 
information, installation, maintenance
and repair of equipment and the importation and exportation of products.
 
The FDA and DEA, as well as CMS
(including with respect to complex Medicare reimbursement requirements
 
applicable to our specialty home medical
supplies business), have recently increased their regulatory and enforcement
 
activities and, in particular, the DEA
has heightened enforcement activities due to the opioid crisis in the United States.
 
Our business is also subject to
requirements of similar and other foreign governmental laws and regulations
 
affecting our operations abroad.
 
The failure to comply with any of these laws and regulations, or new
 
interpretations of existing laws and
regulations, or the imposition of any additional laws and regulations,
 
could materially adversely affect our business.
 
The costs to us associated with complying with the various applicable
 
statutes and regulations, as they now exist
and as they may be modified, could be material.
 
Allegations by a governmental body that we have not complied
with these laws could have a material adverse effect on our businesses.
 
While we believe that we are substantially
 
 
32
compliant with applicable laws and regulations, and believe we have adequate
 
compliance programs and controls in
place to ensure substantial compliance, if it is determined that we have
 
not complied with these laws, we are
potentially subject to penalties, including warning letters, substantial civil and
 
criminal penalties, mandatory recall
of product, seizure of product and injunction, consent decrees and suspension
 
or limitation of product sale and
distribution.
 
If we enter into settlement agreements to resolve allegations of non-compliance,
 
we could be required
to make settlement payments or be subject to civil and criminal penalties, including
 
fines and the loss of licenses.
 
Non-compliance with government requirements could also adversely affect our ability
 
to participate in important
federal and state government health care programs, such as Medicare
 
and Medicaid, and damage our reputation.
 
The EU Medical Device Regulation may adversely affect our business.
 
 
The EU Medical Device Regulation No. 2017/745 (“EU MDR”) was meant
 
to become applicable three years after
publication (in May 2020). However, on April 23, 2020, to allow EEA national authorities, notified bodies,
manufacturers and other actors to focus fully on urgent priorities related to the COVID-19
 
pandemic, the European
Council and Parliament adopted Regulation 2020/561, postponing the date
 
of application of the EU MDR by one
year (to May 2021).
 
The EU MDR significantly modifies and intensifies the regulatory
 
compliance requirements
for the medical device industry as a whole.
 
Once applicable, the EU MDR will among other things:
 
 
Strengthen the rules on placing devices on the market and reinforce surveillance
 
once they are
available;
 
Establish explicit provisions on manufacturers’
 
responsibilities for the follow-up of the quality,
performance and safety of devices placed on the market;
 
Improve the traceability of medical devices throughout the supply chain
 
to the end-user or patient
through a unique identification number;
 
Set up a central database to provide patients, healthcare professionals and
 
the public with
comprehensive information on products available in the EU;
 
 
Strengthen rules for the assessment of certain high-risk devices, such as
 
implants, which may have to
undergo an additional check by experts before they are placed on the market; and
 
Identify importers and distributors and medical device products through
 
registration in a database
(EudaMed not due until 2022 and after).
 
 
In particular, the EU MDR imposes stricter requirements for the confirmation that a product meets the regulatory
requirements, including regarding a product’s clinical evaluation and a company’s quality systems, and for the
distribution, marketing and sale of medical devices, including post-market surveillance.
 
Medical devices that have
been assessed and/or certified under the EU Medical Device Directive may
 
continue to be placed on the market
until 2024 (or until the expiry of their certificates, if applicable and earlier);
 
however, requirements regarding the
distribution, marketing and sale including quality systems and post-market surveillance
 
have to be observed by
manufacturers, importers and distributors as of the application date.
 
The modifications created by the EU MDR may have an impact on the
 
way we design and manufacture products
and the way we conduct our business in the European Economic Area.
 
If we fail to comply with laws and regulations relating to health care
 
fraud or other laws and regulations, we
could suffer penalties or be required to make significant changes to our operations,
 
which could materially
adversely affect our business.
 
 
Certain of our businesses are subject to federal and state (and similar
 
foreign) health care fraud and abuse, referral
and reimbursement laws and regulations with respect to their operations.
 
Some of these laws, referred to as “false
claims laws,” prohibit the submission or causing the submission of false or fraudulent
 
claims for reimbursement to
federal, state and other health care payers and programs.
 
Other laws, referred to as “anti-kickback laws,” prohibit
soliciting, offering, receiving or paying remuneration in order to induce the referral
 
of a patient or ordering,
purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing of, items or services
 
that are
paid for by federal, state and other health care payers and programs.
 
Certain additional state and federal laws, such
as the federal Physician Self-Referral Law, commonly known as the “Stark Law,” prohibit physicians and other
health professionals from referring a patient to an entity with which the physician
 
(or family member) has a
 
 
33
financial relationship, for the furnishing of certain designated health services
 
(for example, durable medical
equipment and medical supplies), unless an exception applies.
 
The fraud and abuse laws and regulations have been subject to heightened
 
enforcement activity over the past few
years, and significant enforcement activity has been the result of “relators” who
 
serve as whistleblowers by filing
complaints in the name of the United States (and if applicable, particular states)
 
under applicable false claims laws,
and who may receive up to 30% of total government recoveries.
 
Penalties under fraud and abuse laws may be
severe, and could result in significant civil and criminal penalties and costs,
 
including the loss of licenses and the
ability to participate in federal and state health care programs, and could
 
have a material adverse effect on our
business.
 
Also, these measures may be interpreted or applied by a prosecutorial,
 
regulatory or judicial authority in
a manner that could require us to make changes in our operations or incur substantial
 
defense and settlement
expenses.
 
Even unsuccessful challenges by regulatory authorities or private
 
relators could result in reputational
harm and the incurring of substantial costs.
 
Most states have adopted similar state false claims laws, and these
 
state
laws have their own penalties which may be in addition to federal False Claims
 
Act penalties, as well as other fraud
and abuse laws.
 
 
With respect to measures of this type, the United States government (among others) has expressed concerns
 
about
financial relationships between suppliers on the one hand and physicians,
 
dentists and other health care providers,
on the other.
 
As a result, we regularly review and revise our marketing practices
 
as necessary to facilitate
compliance.
 
In the EU, the Directive No. 2019/1937 of 23 October 2019
on the protection of persons who report breaches of
Union law
 
which organizes the legal protection of whistleblowers must be implemented by EU
 
member states by
December 17, 2021. This Directive covers whistleblowers reporting breaches
 
of certain EU laws, in particular as
regards public health, the above-mentioned Directive No. 2001/83, Regulation
 
No. 726/2004 or, as regards data
protection, the GDPR. The Directive protects a wide range of people and
 
includes former employees.
 
All private
companies with 50 or more employees are required to create effective internal reporting
 
channels.
 
We also are subject to certain United States and foreign laws and regulations concerning the conduct of our foreign
operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery
 
Act, German anti-corruption laws
and other anti-bribery laws and laws pertaining to the accuracy of our internal
 
books and records, which have been
the focus of increasing enforcement activity globally in recent years.
 
Our businesses are generally subject to
numerous other laws and regulations that could impact our financial
 
results, including, without limitation,
securities, antitrust, consumer protection, and marketing laws and regulations.
 
In the EU, both active and passive bribery are criminalized. The EU Council
 
Framework Decision 2003/568/JHA
of 22 July 2003
 
on combating corruption in the private sector
establishes more detailed rules on the liability of
legal persons and deterrent sanctions. However, the liability of legal persons is regulated at a national
 
level.
 
Failure to comply with fraud and abuse laws and regulations, and other
 
laws and regulations, could result in
significant civil and criminal penalties and costs, including the loss of
 
licenses and the ability to participate in
federal and state health care programs, and could have a material adverse
 
effect on our business.
 
We may
determine to enter into settlements, make payments, agree to consent decrees
 
or enter into other arrangements to
resolve such matters.
 
Intentional or unintentional failure to comply with consent decrees could
 
materially adversely
affect our business.
 
While we believe that we are substantially compliant with applicable fraud and
 
abuse and other laws and
regulations, and believe we have adequate compliance programs and controls
 
in place to ensure substantial
compliance, we cannot predict whether changes in applicable law, or interpretation of laws, or changes in our
services or marketing practices in response to changes in applicable law or
 
interpretation of laws, could have a
material adverse effect on our business.
 
 
 
34
If we fail to comply with laws and regulations relating to the confidentiality
 
of sensitive personal information or
standards in electronic health records or transmissions, we could
 
be required to make significant changes to our
products, or incur substantial fines, penalties or other liabilities.
 
 
Our businesses that involve physician and dental practice management
 
products, and our specialty home medical
supply business, include electronic information technology systems that
 
store and process personal health, clinical,
financial and other sensitive information of individuals.
 
These information technology systems may be vulnerable
to breakdown, wrongful intrusions, data breaches and malicious attack, which
 
could require us to expend
significant resources to eliminate these problems and address related security
 
concerns, and could involve claims
against us by private parties and/or governmental agencies.
 
 
We are directly or indirectly subject to numerous and evolving federal, state, local and foreign laws and regulations
that protect the privacy and security of personal information, such as the
 
HIPAA, the Controlling the Assault of
Non-Solicited Pornography and Marketing Act, the Telephone Protection and Electronic Protection Act of 1991,
Section 5 of the Federal Trade Commission Act, the CCPA, and the CPRA that becomes effective on January 1,
2023.
 
Laws and regulations relating to privacy and data protection are continually
 
evolving and subject to
potentially differing interpretations. These requirements may not be harmonized,
 
may be interpreted and applied in
a manner that is inconsistent from one jurisdiction to another or may conflict
 
with other rules or our practices.
 
Our
businesses’ failure to comply with these laws and regulations could expose us
 
to breach of contract claims,
substantial fines, penalties and other liabilities and expenses, costs for remediation
 
and harm to our reputation.
 
Also, evolving laws and regulations in this area could restrict the ability
 
of our customers to obtain, use or
disseminate patient information, or could require us to incur significant
 
additional costs to re-design our products to
reflect these legal requirements, which could have a material adverse
 
effect on our operations.
 
In addition, the European Parliament and the Council of the European Union
 
have adopted the GDPR, which
increases privacy rights for individuals in Europe, or “Data Subjects”,
 
including individuals who are our customers,
suppliers and employees.
 
The GDPR extended the scope of responsibilities for data controllers
 
and data processors
and generally imposes increased requirements and potential penalties
 
on companies, such as us, that offer goods or
services to Data Subjects or monitor their behavior (including by
 
companies based outside of Europe).
 
Noncompliance can result in penalties of up to the greater of EUR 20
 
million, or 4% of global company revenues.
 
Data Subjects also have the right to seek compensation for damages.
 
EU member states may individually impose
additional requirements and penalties regarding certain matters,
 
such as employee personal data.
 
 
In the United States, the CCPA, which increases the privacy protections afforded California residents, became
effective January 1, 2020.
 
The CCPA generally requires companies, such as us, to institute additional protections
regarding the collection, use and disclosure of certain personal information
 
of California residents.
 
Compliance
with the new obligations imposed by the CCPA depends in part on how particular regulators interpret and apply
them, and because the CCPA is relatively new,
 
and its implementing regulations were released in August of
 
2020,
there remains some uncertainty about how the CCPA will be interpreted by the courts and enforced by the
regulators. If we fail to comply with the CCPA or if regulators assert that we have failed to comply with the CCPA,
we may be subject to certain fines or other penalties and litigation,
 
any of which may negatively impact our
reputation, require us to expend significant resources, and harm our business.
 
Furthermore, California voters
approved the CPRA on November 3, 2020, which will amend and
 
expand the CCPA, including by providing
consumers with additional rights with respect to their personal information,
 
and creating a new state agency to
enforce CCPA and CPRA.
 
The CPRA will come into effect on January 1, 2023, applying to information collected
by businesses on or after January 1, 2022.
 
Other states, as well as the federal government, have increasingly
 
considered the adoption of similarly expansive
personal privacy laws, backed by significant civil penalties for non-compliance.
 
While we believe we have
substantially compliant programs and controls in place to comply with
 
the GDPR, CCPA and CPRA requirements,
our compliance with these measures is likely to impose additional costs
 
on us, and we cannot predict whether the
interpretations of the requirements, or changes in our practices in response
 
to new requirements or interpretations of
the requirements, could have a material adverse effect on our business.
 
We also sell products and services that health care providers, such as physicians and dentists, use to store and
manage patient medical or dental records.
 
These customers and we are subject to laws, regulations and
 
industry
 
 
35
standards, such as HIPAA and the Payment Card Industry Data Security Standards, which require the protection of
the privacy and security of those records. Our products or services
 
may be used as part of these customers’
comprehensive data security programs, including in connection with their
 
efforts to comply with applicable data
privacy and security laws and contractual requirements.
 
Perceived or actual security vulnerabilities in our products
or services, or the perceived or actual failure by us or our customers who
 
use our products or services to comply
with applicable legal or contractual data privacy and security requirements,
 
may not only cause us significant
reputational harm, but may also lead to claims against us by our customers
 
and/or governmental agencies and
involve substantial fines, penalties and other liabilities and expenses
 
and costs for remediation.
 
Under the EU GDPR, health data belong to the category of “sensitive data”
 
and benefit from specific protections.
Processing of such data is generally prohibited, except for specific exceptions.
 
Certain of our businesses involve the manufacture and sale of electronic
 
health record (“EHR”) systems and other
products linked to government supported incentive programs, where
 
the EHR systems must be certified as having
certain capabilities designated in evolving standards, such as those adopted
 
by CMS and by the Office of the
National Coordinator for Health Information
 
Technology of HHS (“ONC”).
 
In order to maintain certification of
our EHR products, we must satisfy the changing governmental standards.
 
If any of our EHR systems do not meet
these standards, yet have been relied upon by health care providers to receive
 
federal incentive payments, we may
be exposed to risk, such as under federal health care fraud and abuse laws,
 
including the False Claims Act.
 
While
we believe we are substantially in compliance with such certifications
 
and with applicable fraud and abuse laws and
regulations and that we have adequate compliance programs and controls
 
in place to ensure substantial compliance,
we cannot predict whether changes in applicable law, or interpretation of laws, or resulting changes in our, could
have a material adverse effect on our business.
 
 
Moreover, in order to satisfy our customers, our products may need to incorporate increasingly complex
 
reporting
functionality.
 
Although we believe we are positioned to accomplish this, the effort may involve
 
increased costs,
and our failure to implement product modifications, or otherwise satisfy
 
applicable standards, could have a material
adverse effect on our business.
 
Additionally, as electronic medical devices are increasingly connected to each other and to other technology, the
ability of these connected systems to safely and effectively exchange and use exchanged
 
information becomes
increasingly important.
 
As a medical device manufacturer, we must manage risks including those associated with
an electronic interface that is incorporated into a medical device.
 
Tax legislation could materially adversely affect our financial results and tax liabilities.
 
 
We are subject to the tax laws and regulations of the United States federal, state and local governments, as well as
foreign jurisdictions. From time to time, various legislative initiatives
 
may be proposed that could materially
adversely affect our tax positions. There can be no assurance that our effective tax rate will not
 
be materially
adversely affected by legislation resulting from these initiatives. In addition, tax
 
laws and regulations are extremely
complex and subject to varying interpretations. Although we believe that our
 
historical tax positions are sound and
consistent with applicable laws, regulations and existing precedent,
 
there can be no assurance that our tax positions
will not be challenged by relevant tax authorities or that we would be
 
successful in any such challenge.
 
We face inherent risk of exposure to product liability, intellectual property infringement and other claims in the
event that the use of the products we sell results in injury.
 
Our business involves a risk of product liability, intellectual property infringement and other claims in the ordinary
course of business, and from time to time we are named as a defendant
 
in cases as a result of our distribution of
products. Additionally, we own interests in companies that manufacture certain dental products. As a result, we
could be subject to the potential risk of product liability, intellectual property infringement or other claims relating
to the manufacture and distribution of products by those entities. In addition,
 
as our private-label business continues
to grow, purchasers of such products may increasingly seek recourse directly from us, rather than the ultimate
product manufacturer, for product-related claims. Another potential risk we face in the distribution of our products
is liability resulting from counterfeit or tainted products infiltrating the supply
 
chain.
 
In addition, some of the
products that we transport and sell are considered hazardous
 
materials. The improper handling of such materials or
 
 
36
accidents involving the transportation of such materials could subject us
 
to liability or at least legal action that
could harm our reputation.
 
 
GENERAL RISKS
 
Security risks generally associated with our information systems and our
 
technology products and services could
materially adversely affect our business, and our results of operations could be
 
materially adversely affected if
such products, services or systems (or third-party systems we rely on) are interrupted,
 
damaged by unforeseen
events, are subject to cyberattacks or fail for any extended period of
 
time.
 
We rely on information systems (IS) in our business to obtain, rapidly process, analyze, manage and store customer,
product, supplier and employee data to, among other things:
 
 
maintain and manage worldwide systems to facilitate the purchase and
 
distribution of thousands of
inventory items from numerous distribution centers;
 
receive, process and ship orders on a timely basis;
 
manage the accurate billing and collections for thousands of
 
customers;
 
process payments to suppliers; and
 
provide products and services that maintain certain of our customers’ electronic
 
medical or dental
records (including protected health information of their patients).
 
Information security risks have generally increased in recent years, and a
 
cyberattack that bypasses our IS security
systems (including third-party systems we rely on) causing an IS security breach
 
may lead to a material disruption
of our IS business systems (including third-party systems we rely on) and/or
 
the loss of business information, as
well as claims against us by affected parties and/or governmental agencies, and involve
 
fines and penalties, costs
for remediation, and substantial defense and settlement expenses. In addition,
 
we develop products and provide
services to our customers that are technology-based, and a cyberattack
 
that bypasses the IS security systems of our
products or services causing a security breach and/or perceived security
 
vulnerabilities in our products or services
could also cause significant loss of business and reputational harm, and actual
 
or perceived vulnerabilities may lead
to claims against us by our customers and/or governmental agencies.
 
In particular, certain of our practice
management products and services purchased by health care providers, such
 
as physicians and dentists, are used to
store and manage patient medical or dental records.
 
These customers are subject to laws and regulations which
require that they protect the privacy and security of those records, and our
 
products may be used as part of these
customers’ comprehensive data security programs, including in connection
 
with their efforts to comply with
applicable privacy and security laws. Perceived or actual security vulnerabilities
 
in our products or services, or the
perceived or actual failure by us or our customers who use our products
 
to comply with applicable legal
requirements, may not only cause reputational harm and loss of business,
 
but may also lead to claims against us by
our customers and/or governmental agencies and involve damages, fines and
 
penalties, costs for remediation, and
substantial defense and settlement expenses. In addition, a cyberattack
 
on a third-party that we use to manage a
portion of our information systems could result in the same effects.
 
Additionally, legislative or regulatory action
related to cybersecurity may increase our costs to develop or implement
 
new technology products and services.
 
 
Furthermore, procedures and safeguards must continually evolve to meet new
 
IS challenges, and enhancing
protections, and conducting investigations and remediation, may impose additional
 
costs on us.
 
Finally, our business may be interrupted by shortfalls of IS systems providers engaged by our customers, such
 
as
Internet-based services upon which our customers depend to access certain of
 
our products.
 
 
Our global operations are subject to inherent risks that could materially
 
adversely affect our business.
 
Our global operations are subject to risks that may materially adversely affect our business. The
 
risks that our
global operations are subject to include, among other things:
 
 
 
difficulties and costs relating to staffing and managing foreign operations;
 
difficulties and delays inherent in sourcing products, establishing channels of distribution and
 
contract
manufacturing in foreign markets;
 
 
37
 
fluctuations in the value of foreign currencies (including, without limitation,
 
in connection with
Brexit);
 
uncertainties relating to the EU-UK Trade and Cooperation Agreement of December 2020, including
for example potential implementation problems such as border delays, as
 
well as potential changes to
the U.K. regulatory scheme to replace EU requirements;
 
 
longer payment cycles of foreign customers and difficulty of collecting receivables
 
in foreign
jurisdictions;
 
repatriation of cash from our foreign operations to the United States;
 
regulatory requirements, including without limitation, anti-bribery, anti-corruption and laws pertaining
to the accuracy of our internal books and records;
 
unexpected difficulties in importing or exporting our products and import/export
 
tariffs, quotas,
sanctions or penalties;
 
limitations on our ability under local laws to protect our intellectual
 
property;
 
unexpected regulatory, legal, economic and political changes in foreign markets;
 
changes in tax regulations that influence purchases of capital equipment;
 
civil disturbances, geopolitical turmoil, including terrorism, war or political
 
or military coups; and
 
public health emergencies, including COVID-19.
 
Our future success is substantially dependent upon our senior
 
management, and our revenues and profitability
depend on our relationships with capable sales personnel as well as
 
customers, suppliers and manufacturers of
the products that we distribute.
 
Our future success is substantially dependent upon the efforts and abilities of
 
members of our existing senior
management, particularly Stanley M. Bergman, Chairman and Chief Executive Officer. The loss of the services of
Mr. Bergman could have a material adverse effect on our business. We have an employment agreement with Mr.
Bergman. We do not currently have “key man” life insurance policies on any of our employees. Competition for
senior management is intense and we may not be successful in attracting
 
and retaining key personnel. Additionally,
our future revenues and profitability depend on our ability to
 
maintain satisfactory relationships with qualified sales
personnel as well as customers, suppliers and manufacturers. If we
 
fail to maintain our existing relationships with
such persons or fail to acquire relationships with such key persons in the
 
future, our business may be materially
adversely affected.
 
Disruptions in the financial markets may materially adversely
 
affect the availability and cost of credit to us.
 
Our ability to make scheduled payments or refinance our obligations with
 
respect to indebtedness will depend on
our operating and financial performance, which in turn is subject to prevailing
 
economic conditions and financial,
business and other factors beyond our control. Disruptions in the financial
 
markets may materially adversely affect
the availability and cost of credit to us.
 
Item 1B.
 
Unresolved Staff Comments
 
 
We have no unresolved comments from the staff of the SEC that were issued 180 days or more preceding the end of
our 2020 fiscal year.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
38
ITEM 2.
 
Properties
 
 
We own or lease the following properties with more than 100,000 square feet:
 
 
Own or
Approximate
Lease Expiration
Property
Location
Lease
Square Footage
Date
Corporate Headquarters
 
Melville, NY
Lease
185,000
July 2036
Corporate Headquarters
 
Melville, NY
Own
105,000
N/A
Office and Distribution Center
 
Fiumana-Predappio, Italy
Own
183,000
N/A
Office and Distribution Center
 
Tours, France
Own
166,000
N/A
Office and Distribution Center
 
Gillingham, United Kingdom
Lease/Own
165,000
June 2033
Office and Distribution Center
 
Eastern Creek, New South Wales, Australia
Lease
161,000
July 2030
Office and Distribution Center
 
Niagara on the Lake, Canada
Lease
128,000
September 2021
Office and Distribution Center
 
Bastian, VA
Own
108,000
N/A
Office and Distribution Center
 
West Allis, WI
Lease
106,000
October 2027
Office and Distribution Center
 
Greer, SC
Lease
102,000
December 2028
Distribution Center
 
Denver, PA
Lease
624,000
December 2032
Distribution Center
 
Indianapolis, IN
Lease
380,000
March 2022
Distribution Center
 
Sparks, NV
Lease
370,000
December 2021
Distribution Center
 
Indianapolis, IN
Own
287,000
N/A
Distribution Center
 
Grapevine, TX
Lease
242,000
July 2023
Distribution Center
 
Gallin, Germany
Own
215,000
N/A
Distribution Center
 
Jacksonville, FL
Lease
212,000
February 2026
Distribution Center
 
Heppenheim, Germany
Lease
194,000
March 2030
 
The properties listed in the table above are our principal properties primarily
 
used by our health care distribution
segment.
 
In addition, we lease numerous other distribution, office, showroom, manufacturing
 
and sales space in
locations including the United States, Australia, Austria, Belgium, Brazil,
 
Canada, Chile, China, the Czech
Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia,
the Netherlands, New Zealand, Poland, Portugal, Singapore, South Africa,
 
Spain, Sweden, Switzerland, Thailand,
United Arab Emirates and the United Kingdom.
 
We believe that our properties are in good condition, are well maintained and are suitable and adequate to carry on
our business.
 
We have additional operating capacity at certain distribution center facilities.
 
ITEM 3.
 
Legal Proceedings
 
 
For a discussion of Legal Proceedings, see
 
of the Notes to the
Consolidated Financial Statements included under Item 8.
 
ITEM 4.
 
Mine Safety Disclosures
 
Not applicable.
 
 
39
PART
 
II
 
 
ITEM 5.
 
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 
 
Our common stock is traded on the Nasdaq Global Select Market tier of
 
the Nasdaq Stock Market, or Nasdaq,
under the symbol HSIC.
 
 
On February 8, 2021, there were approximately 235 holders of record of our common
 
stock and the last reported
sales price was $70.78.
 
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 $3.7 billion, authorized by our Board of Directors,
 
to the repurchase program provide for a total
of $3.8 billion of shares of our common stock to be repurchased under this program.
 
As of December 26, 2020,
 
we had repurchased approximately $3.6 billion of common stock (75,563,289
 
shares)
under these initiatives, with $201.2 million available for future common stock
 
share repurchases.
 
As a result of the COVID-19 pandemic, as previously announced, we have
 
temporarily suspended our share
repurchase program in an effort to preserve cash and exercise caution in this uncertain
 
period and due to certain
restrictions related to financial covenants in our credit facilities.
 
During the fiscal quarter ended December 26, 2020, we did not make any
 
repurchases of our common stock.
 
The
maximum number of shares that could 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.
 
The maximum number of shares that could be
repurchased as of October 31, 2020, November 28, 2020, and December
 
26, 2020 were 3,164,694, 3,159,724 and
3,056,528, respectively.
 
Dividend Policy
 
 
We have not declared any cash or stock dividends on our common stock during fiscal years 2020 or 2019.
 
We
currently do not anticipate declaring any cash or stock dividends on our common
 
stock in the foreseeable future.
 
We intend to retain earnings to finance the expansion of our business and for general corporate purposes, including
our share repurchase program.
 
Any declaration of dividends will be at the discretion of our Board of
 
Directors and
will depend upon the earnings, financial condition, capital requirements,
 
level of indebtedness, contractual
restrictions with respect to payment of dividends and other factors.
 
Stock Performance Graph
 
The graph below compares the cumulative total stockholder return
 
on $100 invested, assuming the reinvestment of
all dividends, on December 26, 2015, the last trading day before the
 
beginning of our 2016 fiscal year, through the
end of our 2020 fiscal year with the cumulative total return on $100
 
invested for the same period in the Dow Jones
U.S. Health Care Index and the Nasdaq Stock Market Composite Index.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
https://cdn.kscope.io/7b67c04291d0e020719a4977626b82d2-hsicform10k20201226p40i0.gif
 
 
40
COMPARISON OF 5-YEAR CUMULATIVE TOTAL
 
RETURN
 
 
 
ASSUMES $100 INVESTED ON DECEMBER 26, 2015
ASSUMES DIVIDENDS REINVESTED
December 26,
December 31,
December 30,
December 29,
December 28,
December 26,
2015
2016
2017
2018
2019
2020
Henry Schein, Inc.
 
$
100.00
$
96.58
$
88.97
$
99.20
$
109.44
$
108.21
Dow Jones U.S. Health
 
Care Index
 
100.00
97.04
119.21
124.84
154.14
175.81
NASDAQ Stock Market
 
Composite Index
 
100.00
108.00
140.01
134.97
186.63
267.70
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
41
ITEM 6.
 
Selected Financial Data
 
The following selected financial data, with respect to our financial position
 
and results of operations for each of the
five fiscal years in the period ended December 26, 2020, set forth below, has been derived from, should be read in
conjunction with and is qualified in its entirety by reference to, our consolidated
 
financial statements and notes
thereto.
 
The selected financial data presented below should also be read
 
in conjunction with
,
 
” and
,
.”
 
Years ended
December 26,
December 28,
December 29,
December 30,
December 31,
2020
2019
2018
2017
2016
(in thousands, except per share data)
Income Statement Data:
Net sales
 
$
10,119,141
$
9,985,803
$
9,417,603
$
8,883,438
$
8,218,885
Gross profit
 
2,814,343
3,090,886
2,910,747
2,746,662
2,605,907
Selling, general and administrative expenses
2,246,947
2,357,920
2,217,273
2,071,576
1,975,445
Litigation settlements
-
-
38,488
5,325
-
Restructuring costs (1)
 
32,093
14,705
54,367
-
38,621
Operating income
 
535,303
718,261
600,619
669,761
591,841
Other expense, net
(35,408)
(37,954)
(63,783)
(39,967)
(18,705)
Income from continuing operations before taxes, equity
 
in earnings of affiliates and noncontrolling interests
499,895
680,307
536,836
629,794
573,136
Income taxes (2)
 
(95,374)
(159,515)
(107,432)
(308,975)
(169,311)
Equity in earnings of affiliates
 
12,344
17,900
21,037
15,293
17,110
Net gain (loss) on sale of equity investments (3)
1,572
186,769
-
(17,636)
-
Net income from continuing operations
 
418,437
725,461
450,441
318,476
420,935
Income (loss) from discontinued operations
986
(6,323)
111,685
140,817
135,460
Net income
 
419,423
719,138
562,126
459,293
556,395
Less: Net income attributable to noncontrolling interests
(15,629)
(24,770)
(19,724)
(25,304)
(19,651)
Less: Net (income) loss attributable to noncontrolling
 
interests from discontinued operations
-
366
(6,521)
(27,690)
(29,966)
Net income attributable to Henry Schein, Inc.
 
$
403,794
$
694,734
$
535,881
$
406,299
$
506,778
Amounts attributable to Henry Schein, Inc.:
 
Continuing operations
 
402,808
700,691
430,717
293,172
401,284
Discontinued operations
986
(5,957)
105,164
113,127
105,494
Net income attributable to Henry Schein, Inc.
 
$
403,794
$
694,734
$
535,881
$
406,299
$
506,778
Earnings (loss) per share attributable to
 
Henry Schein, Inc.:
From continuing operations:
 
Basic
 
$
2.83
$
4.74
$
2.82
$
1.87
$
2.48
 
Diluted
 
2.81
4.69
2.80
1.85
2.45
From discontinued operations:
 
Basic
$
0.01
$
(0.04)
$
0.69
$
0.72
$
0.65
 
Diluted
0.01
(0.04)
0.68
0.72
0.64
Earnings per share attributable to Henry Schein, Inc.:
 
Basic
 
$
2.83
$
4.70
$
3.51
$
2.59
$
3.14
 
Diluted
 
2.82
4.65
3.49
2.57
3.10
Weighted-average common shares outstanding:
 
Basic
 
142,504
147,817
152,656
156,787
161,641
 
Diluted
 
143,404
149,257
153,707
158,208
163,723
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42
Years ended
December 26,