Henry Schein (HSIC) risk factors, FY2024 10-K

Other

1. 01We intend to protect our trademarks and patents to the fullest extent practicable
2. 02Employees and Human Capital At Henry Schein, we understand that our long-term growth is enhanced by creating shared value for our business and the communities we serve, while engaging our key stakeholders that make up our Mosaic of Success - Team Schein Members (TSMs), customers, suppliers, stockholders, and society
3. 03TSM experience strategy is centered around our Team Schein Values under the pillars of Community, Caring, and Career
4. 04We recognize the changes in how and where we work, and that a continued connection to our long-standing values is important for our team members as we evolve our culture
5. 05Our recent annual Pulse survey indicates that although there are heightened stress levels caused by the 2023 cyber incident and restructuring initiatives, TSMs generally remain satisfied with their work experience, feel connected to their colleagues and intend to stay with Henry Schein
6. 06Provide opportunities for TSMs to have fun while contributing to an inclusive team respects and supports one another
7. 07We continue to publish our United States Equal Employment Opportunity Commission (“EEOC”) EEO-1 data for the U.S
8. 08Expanded our global and highly rated Steps for Suicide Prevention campaign, which brings TSMs together to walk for a cause and provide education, partnering with the American Foundation for Suicide Prevention, Suicide Awareness and Remembrance (for Veterans) and other local organizations
9. 09Provide opportunities for TSMs to develop personally and professionally with an emphasis on embodying our values to achieve our collective goals with excellence and integrity
10. 10Continued roll-out of talent planning efforts designed to ensure a strong leadership pipeline across the organization by strategically identifying and developing talent through targeted development opportunities and intentional succession plans
11. 11The CLCs are a common language and foundational step to developing and refining the tools, processes and programs which support the evolution of a TSM’s career including enhancing skills and career development, leading to enhanced career pathing and internal mobility
12. 12Unless 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
13. 13Position Stanley M. Bergman Chairman, Chief Executive Officer, Director Andrea Albertini Chief Executive Officer, Global Distribution and Technology James P
14. 14In this role, Mr. Albertini is responsible for our Global Distribution and Value-Added Services segment and our Global Technology segment
15. 15Mr. Connett joined us in 1997 and has held a number of roles of increasing responsibility at the Company
16. 16Michael S. Ettinger has been our Executive Vice President and Chief Operating Officer since 2022
17. 17Siegel was our Senior Vice President and General Counsel from 2013 until 2021
18. 18Prior to holding his current position, Mr. South was our Vice President Corporate Finance since 2008, and Chief Accounting Officer from 2013 until 2022
19. 19Mr. South is a Certified Public Accountant
20. 20Prior to joining us, Mr. Pendergast was employed by VSP Global from 2008 to 2018, most recently as the Chief Technology Officer and Chief Information Officer
21. 21Christine Sheehy has been our Senior Vice President, Chief Human Resources Officer since November 2024
22. 22Prior to joining Henry Schein, Ms. Wilson was CFO of a public Swiss medical communication technology company and before that an Advisory Partner in KPMG's consulting practice, following her initial career in public accounting

COMPANY RISKS

1. 23In 2024, our top 10 Global Distribution and Value- Added Services suppliers and our single largest supplier accounted for approximately 25% and 4%, respectively, of our aggregate purchases
2. 24Additionally, where we are the manufacturer of certain dental specialty products we sell in the areas of oral surgery, implants, orthodontics and endodontics, we are dependent upon third parties for raw materials and purchased components
3. 25In the event of any such interruption in supply, we would need to timely identify and obtain acceptable replacement sources
4. 26We expect to continue to execute the BOLD+1 strategic priorities with the next evolution of our strategic plan
5. 27Our business could be affected by the recently signed Strategic Partnership Agreement
6. 28Under the Partnership Agreement, two representatives of KKR (the “Investor Designees”) will join our Board of Directors
7. 29Consummation of the transactions contemplated by the Partnership Agreement is subject to customary closing conditions, including the expiration or termination of any waiting period under the Hart-Scott-Rodino Act and certain foreign regulatory approvals
8. 30Our future growth (especially for our Global Technology and Global Specialty Products segments) is dependent upon our ability to develop or acquire and maintain and protect new products and services and utilize new technologies that achieve market acceptance with acceptable margins
9. 31While these innovations can present benefits to the Company, they also create risks and challenges
10. 32We cannot be sure, for example, that we will achieve the benefits of revenue growth that we expect from these transactions or that we will avoid unforeseen additional costs, taxes, or expenses
11. 33Furthermore, 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
12. 34The 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
13. 35In addition, certain of our employee incentive plans provide accelerated vesting of equity 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
14. 36The terms on which we purchase or sell products from many suppliers may entitle us to receive a rebate or other purchasing incentive based on the attainment of certain growth goals
15. 37Increased competition either from generic or equivalent branded products could result in us failing to earn rebates or incentives that are conditioned upon achievement of growth goals
16. 38Our ability to locate qualified, economically stable suppliers who satisfy our requirements, and to acquire sufficient products in a timely and effective manner, is critical to ensuring, among other things, that customer confidence is not diminished
17. 39Additionally, it could cause uncertainty about our management, operations or future strategic direction, which could result in the loss of future business opportunities or negatively impact our ability to attract and retain qualified talent

INDUSTRY RISKS

1. 40Our IS are susceptible to, among other things, natural disasters, power losses, telecommunication failures, cybersecurity threats and other criminal activity
2. 41We utilize security technologies designed to protect and maintain the integrity of our IS and data, and our defenses are monitored and routinely tested internally and by external parties
3. 42We have incurred and may in the future incur substantial costs as we update our cybersecurity defense systems and our general computer controls to meet evolving challenges, and legislative or regulatory action related to cybersecurity may increase our costs to develop or implement new technology products and services
4. 43A successful cyberattack has, and may again in the future, disrupt our business operations, adversely impact our financial accounting and reporting of results of operations, divert the attention of management, and adversely impact our results of operations
5. 44In addition, certain of our practice management products and services purchased by health care providers, such as physicians and dentists, are used to store and manage patient medical or dental records, and when cloud-based approaches are used, we may be responsible for hosting those records
6. 45Henry Schein One, our practice management software, revenue cycle management and patient relationship management solutions business was not affected, and our manufacturing businesses were mostly unaffected
7. 46We also may be perceived as a more vulnerable target of the cyber hackers as a result of the October 2023 incident
8. 47Manufacturers also could increase their efforts to sell directly to end-users and thereby eliminate or reduce our role in distribution
9. 48Additionally, traditional health care supply and distribution relationships are being challenged by online commerce solutions
10. 49The health care industry is highly regulated and subject to changing political, economic and regulatory influences
11. 50The multi-tiered costing structure continues to expand as many large integrated health care providers and others with significant purchasing power, such as GPOs, DSOs and MSOs, demand favorable pricing terms
12. 51In addition, such organizations may establish direct relationships with manufacturers, thereby either eliminating or reducing the services historically provided by distributors
13. 52While we have recently experienced increases in shipping costs, we do not expect these additional expenses to be material to our results now, however, they could be material in the future

MACRO-ECONOMIC AND POLITICAL RISKS

1. 53Uncertain global and domestic macro-economic and political conditions could materially adversely affect our results of operations and financial condition
2. 54Uncertain global and domestic 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 have a material adverse effect our business, financial condition or operating results
3. 55Recessionary or inflationary 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

AND LITIGATION RISKS

1. 56Failure to comply with existing and future regulatory requirements could materially adversely affect our business
2. 57However, compliance is not guaranteed either now or in the future as certain laws, regulations 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
3. 58We may be required to report drug pricing data under federal laws and regulations
4. 59These various evolving efforts create uncertainty and may adversely affect our business
5. 60Among the federal laws with which we must comply are the Controlled Substances Act, the FDC Act, the Federal Drug Quality and Security Act, including DSCSA, and Section 361 of the Public Health Services Act
6. 61The FDA regulates certain computer software and digital health products intended for use in health care settings, including, for example, AI and machine learning-enabled medical devices and the cybersecurity of medical devices
7. 62Allegations by a governmental body that we have not complied with these laws could have a material adverse effect on our businesses
8. 63If 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
9. 64The EU MDR significantly modified the regulatory compliance requirements for the medical device industry as a whole
10. 65The EU MDR imposes strict 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
11. 66Some 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
12. 67Most states have adopted similar state false claims acts, and these state laws have their own penalties which may be in addition to federal False Claims Act penalties, and other fraud and abuse laws
13. 68As a result, we regularly review and revise our marketing practices as necessary to facilitate compliance
14. 69We also are subject to the requirements of Directive No. 2022/2464 on corporate sustainability reporting (“CSRD”) that became effective on January 5, 2023
15. 70CSRD has not yet been fully implemented by all EU Member States
16. 71However, the liability of legal persons is regulated at a national level
17. 72Intentional or unintentional failure to comply with settlement agreements or consent decrees could materially adversely affect our business
18. 73If we fail to comply with laws and regulations relating to the collection, storage and processing of sensitive personal information or standards in electronic health records or transmissions, we could be required to make significant changes to our products, or incur substantial fines, penalties, or other liabilities
19. 74These IT 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
20. 75These 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
21. 76In addition, the European Parliament and the Council of the EU adopted the GDPR effective from May 25, 2018, which increased privacy rights for Data Subjects, including individuals who are our customers, suppliers and employees
22. 77Member states may individually impose additional requirements and penalties regarding certain limited matters (for which the GDPR left some room of flexibility), such as employee personal data
23. 78Switzerland enacted FADP
24. 79Effective November 1, 2021, China’s PIPL imposes specific rules for processing personal information and specifies that the law shall also apply to personal information activities carried out outside China but for the purpose of providing products or services to PRC citizens
25. 80Data protection laws in other countries are also quickly evolving, with many countries having updated, or are in the process of updating, their laws to bring them more in line with the model created by GDPR
26. 81Other states have enacted or are considering enacting similar privacy laws, which may subject us to additional requirements and restrictions that could have an impact on our business
27. 82The evolving complexity of privacy and data security legislation in the United States may complicate our compliance efforts and further increase our risk of regulatory enforcement, penalties and litigation
28. 83Compliance with these laws is challenging, constantly evolving and time consuming and federal regulators, state attorneys general and plaintiff’s attorneys have been and will likely continue to be active in this space
29. 84Our 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
30. 85Processing of such data is generally prohibited, except for specific exceptions
31. 86In order to maintain certification of our EHR products, we must satisfy the changing governmental standards
32. 87Each information blocking violation carries a $1 million penalty
33. 88In addition, tax laws and regulations are extremely complex and subject to varying interpretations
34. 89We 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
35. 90As 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
36. 91Customs policies or legislative import restrictions could hinder the Company’s ability to import goods necessary to our operations on a timely basis and result in government enforcement actions and/or sanctions
37. 92Certain of our suppliers have had their ability to service certain markets restricted or negatively impacted because of allegations of forced labor in their supply chain

GENERAL RISKS

1. 93Our global operations are subject to inherent risks that could materially adversely affect our business
2. 94Disruptions in the financial markets may materially adversely affect the availability and cost of credit to us