Henry Schein(US:HSIC)2021-02-17 17:52Industry Growth and Market Trends - The health care distribution industry is experiencing growth driven by an aging population, increased health care awareness, and improved access to care globally [28]. - The U.S. population aged 45 and older is projected to grow by approximately 11% from 2020 to 2030 and by approximately 22% from 2020 to 2040, compared to total U.S. population growth rates of about 7% and 12% respectively during the same periods [49]. - Increased demand for oral health care is expected due to the rising 45-and-older population, alongside a predicted rise in dental insurance coverage [50]. - The company aims to expand its dental full-service model and medical offerings in various countries, leveraging the "Schein Direct" program for door-to-door delivery in over 190 countries [53]. Customer Engagement and Sales Strategy - As of December 26, 2020, the company had an active user base of approximately 94,500 practices and 374,000 consumers using various software solutions [38]. - The company aims to increase penetration of its existing customer base, which includes over 1 million customers worldwide [47]. - The company has over 3,450 field sales consultants and approximately 2,250 telesales representatives to enhance customer engagement and sales [38]. - The company is focused on leveraging value-added products and services to increase cross-selling opportunities, particularly in the dental and medical sectors [47]. - The company maintains a strong commitment to superior customer service, frequently monitoring customer satisfaction through surveys and focus groups [40]. Financial Performance and Metrics - Net sales for the year ended December 26, 2020, were $10,119,141, an increase of 1.34% from $9,985,803 in 2019 [393]. - Gross profit decreased to $2,814,343 in 2020 from $3,090,886 in 2019, representing a decline of 8.9% [393]. - Operating income fell to $535,303 in 2020, down 25.4% from $718,261 in 2019 [393]. - Net income attributable to Henry Schein, Inc. was $403,794 in 2020, a decrease of 42% compared to $694,734 in 2019 [393]. - Basic earnings per share from continuing operations decreased to $2.83 in 2020 from $4.74 in 2019, a decline of 40.4% [393]. Regulatory Compliance and Risks - Compliance with evolving governmental regulations is critical, as changes may impose unforeseen costs and risks that could adversely affect business operations [55]. - The implementation of the Drug Supply Chain Security Act (DSCSA) is ongoing, with requirements for tracking prescription drugs in the U.S. expected to be fully phased in by 2023 [62]. - The EU Medical Device Regulation (EU MDR) imposes stricter compliance requirements for medical devices, with full application expected by 2024 [72]. - The company is subject to extensive local, state, federal, and foreign regulations affecting its distribution and sale of pharmaceuticals and medical devices, which may impact financial performance [56]. - The company faces significant penalties under fraud and abuse laws, which could include civil and criminal penalties, potentially affecting its financial standing and operational capabilities [81]. Impact of COVID-19 - The COVID-19 pandemic significantly impacted the dental market, with many practices closed or operating at limited capacity in March and April 2020, leading to reduced patient volumes [139]. - Despite a faster-than-anticipated recovery in dental practice openings, patient volumes remain below pre-COVID-19 levels, indicating ongoing uncertainty in demand [139]. - The company experienced significant reductions in demand for certain products during the pandemic, particularly in March and April 2020, affecting overall sales [139]. - Supply chain disruptions for Personal Protective Equipment (PPE) resulted in backorders and potential scarcity, impacting the company's ability to meet customer demand [140]. - The pandemic has led to potential delays in customer payments and defaults on credit arrangements, which could adversely affect cash flows and financial condition [140]. Workforce and Organizational Development - The company employs over 19,000 full-time equivalent employees, with approximately 49% based in the United States and 51% outside [114]. - Approximately 13% of the workforce is subject to collective bargaining agreements, indicating a significant portion of employees are unionized [114]. - The company has invested in over 50 organizational and development training courses aimed at enhancing employee skills and competencies [115]. - The company is committed to enhancing its Diversity and Inclusion initiatives, with an Executive Diversity and Inclusion Council established to guide efforts [115]. - The company has a strong collaborative workplace culture, with performance evaluations based on Team Schein values and a biennial culture survey [116]. Financial Position and Assets - Total assets increased to $7,772,532, up from $7,151,101 in 2019, representing an 8.7% growth [391]. - Cash and cash equivalents rose significantly to $421,185, compared to $106,097 in the previous year, marking a 296.5% increase [391]. - Accounts receivable increased to $1,424,787, up from $1,246,246, reflecting a 14.3% growth [391]. - Total current assets reached $3,791,415, an increase of 17.5% from $3,226,502 in 2019 [391]. - Total liabilities increased to $3,460,448, compared to $3,233,706 in 2019, which is a 7.0% rise [391].