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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-15 compared with 2021-02-17 · 39 added, 108 removed, 8 unchanged (95% of the section changed)

2 unchanged sentences

dollar and each other, and changes to the credit markets.

We attempt to minimize these risks by primarily using

foreign currency forward contracts and by maintaining counter-party credit limits.

These hedging activities provide

only limited protection against currency exchange and credit risks.

Factors that could influence the effectiveness of

our hedging programs include currency markets and availability of hedging

instruments and liquidity of the credit

All foreign currency forward contracts that we enter into are components

of hedging programs and are

entered into for the sole purpose of hedging an existing or anticipated

currency exposure.

We do not enter into such

contracts for speculative purposes and we manage our credit risks by diversifying

our investments, maintaining a

strong balance sheet and having multiple sources of capital.

We attempt to minimize these risks by primarily using foreign currency forward contracts and by maintaining counter-party credit limits.

These hedging activities provide only limited protection against currency exchange and credit risks.

Factors that could influence the effectiveness of our hedging programs include currency markets and availability of hedging instruments and liquidity of the credit markets.

All foreign currency forward contracts that we enter into are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure.

We do not enter into such contracts for speculative purposes and we manage our credit risks by diversifying our investments, maintaining a strong balance sheet and having multiple sources of capital.

Foreign Currency Agreements

The value of certain foreign currencies as compared to the U.S.

and the value of certain underlying functional

currencies of the Company, including its foreign subsidiaries, may affect our financial results.

Fluctuations in

exchange rates may positively or negatively affect our revenues, gross margins, operating expenses

earnings, all of which are expressed in U.S.

Where we deem it prudent, we engage in hedging programs

using primarily foreign currency forward contracts aimed at limiting

the impact of foreign currency exchange rate

fluctuations on earnings.

We purchase short-term (i.e., generally 18 months or less) foreign currency forward

contracts to protect against currency exchange risks associated with intercompany

loans due from our international

subsidiaries and the payment of merchandise purchases to foreign

We do not hedge the translation of

foreign currency profits into U.S.

dollars, as we regard this as an accounting

exposure, not an economic

dollar and the value of certain underlying functional currencies of the Company, including its foreign subsidiaries, may affect our financial results.

Fluctuations in exchange rates may positively or negatively affect our revenues, gross margins, operating expenses and retained earnings, all of which are expressed in U.S.

Where we deem it prudent, we engage in hedging programs using primarily foreign currency forward contracts aimed at limiting the impact of foreign currency exchange rate fluctuations on earnings.

We purchase short-term (i.e., generally 18 months or less) foreign currency forward contracts to protect against currency exchange risks associated with intercompany loans due from our international subsidiaries and the payment of merchandise purchases to foreign suppliers.

We do not hedge the translation of foreign currency profits into U.S.

dollars, as we regard this as an accounting exposure, not an economic exposure.

A hypothetical 5% change in the average value of the U.S.

in 2020 compared to foreign currencies

would have changed our 2020 reported Net income attributable to Henry

by approximately $1.3

As of December 26, 2020, we had forward foreign currency exchange

agreements, which expire through November

16, 2023, which include a mark-to-market loss of $9.9 million as determined

by quoted market prices.

the forward foreign currency exchange agreements, Henry Schein, Inc.

had EUR/USD forward contracts notionally

totaling an amount of approximately €200 million, with a reported fair value

of these contracts as a net liability of

$9.6 million.

A 5% increase in the value of the Euro to the USD from December 26,

2020, with all other variables

held constant, would have had an unfavorable effect on the fair value of these forward contracts

by decreasing the

value of these instruments by $11.9 million.

On March 20, 2020, we entered into a total return swap for the purpose

of economically hedging our unfunded non-

qualified supplemental retirement plan (“SERP”) and our deferred compensation

plan (“DCP”).

This swap will

offset changes in our SERP and DCP liabilities.

At the inception, the notional value of the investments in these

plans was $43.4 million.

At December 26, 2020, the notional value of the investments

in these plans was $67.6

At December 26, 2020 the financing rate for this swap was

based on LIBOR of 0.15% plus 0.38%, for a

combined rate of 0.53%.

From March 20, 2020, the effective date of the swap, to December 26, 2020, we have

recorded a gain, within the selling, general and administrative line item

in our consolidated statement of income, of

approximately $21.2 million, net of transaction costs, related to this undesignated

swap for the year ended

December 26, 2020.

This gain was offset by the change in fair value adjustment in deferred compensation,

resulting in a neutral impact to our results of operations.

This swap is expected to be renewed on an annual basis.

dollar in 2021 compared to foreign currencies would have changed our 2021 reported Net income attributable to Henry Schein, Inc.

by approximately $8.4 million.

As of December 25, 2021, we had forward foreign currency exchange agreements, which expire through November 16, 2023, which include a mark-to-market gain of $6.3 million as determined by quoted market prices.

Included in the forward foreign currency exchange agreements, Henry Schein, Inc.

had EUR/USD forward contracts notionally totaling an amount of approximately €200 million, with a reported fair value of these contracts as a net gain of $6.5 million.

A 5% increase in the value of the Euro to the USD from December 25, 2021, with all other variables held constant, would have had an unfavorable effect on the fair value of these forward contracts by decreasing the value of these instruments by $10.7 million.

Total Return Swaps

On March 20, 2020, we entered into a total return swap for the purpose of economically hedging our unfunded non-qualified supplemental retirement plan (“SERP”) and our deferred compensation plan (“DCP”).

This swap will offset changes in our SERP and DCP liabilities.

At the inception, the notional value of the investments in these plans was $43.4 million.

At December 25, 2021, the notional value of the investments in these plans was $88.7 million.

At December 25, 2021, the financing blended rate for this swap was based on LIBOR of 0.09% plus 0.46%, for a combined rate of 0.55%.

For the years ended December 25, 2021 ended and December 26, 2020, we have recorded a gain, within the selling, general and administrative line item in our consolidated statement of income, of approximately $12.1 million and $21.2 million, respectively, net of transaction costs, related to this undesignated swap.

This swap is expected to be renewed on an annual basis after its current expiration date of March 29, 2022, and is expected to result in a neutral impact to our results of operations.

Short-Term Investments

We limit our credit risk with respect to our cash equivalents, short-term investments and derivative instruments, by

monitoring the credit worthiness of the financial institutions who are

the counterparties to such financial

As a risk management policy, we limit the amount of credit exposure by diversifying and utilizing

numerous investment grade counterparties.

Interest Rate Debt

As of December 26, 2020, we had variable interest rate exposure for certain

of our revolving credit facilities and

We limit our credit risk with respect to our cash equivalents, short-term investments and derivative instruments, by monitoring the credit worthiness of the financial institutions who are the counterparties to such financial instruments.

As a risk management policy, we limit the amount of credit exposure by diversifying and utilizing numerous investment grade counterparties.

Variable Interest Rate Debt

As of December 25, 2021, we had variable interest rate exposure for certain of our revolving credit facilities and our U.S.

trade accounts receivable securitization.

Our revolving credit facility which we entered into on April 18, 2017

and expires on April 18, 2022, has an interest

rate that is based on the U.S.

Dollar LIBOR plus a spread based on our

leverage ratio at the end of each financial

reporting quarter.

As of December 26, 2020, there was $0.0 million outstanding under

this revolving credit

During the year ended December 26, 2020, the average outstanding

balance under this revolving credit

facility was approximately $21.4 million.

Based upon our average outstanding balance for this revolving

facility, for each hypothetical increase of 25 basis points, our interest expense thereunder would have increased by

less than $0.1 million.

Our U.S trade accounts receivable securitization, which we entered into

on April 17, 2013 and was scheduled to

expire on April 29, 2022, has an interest rate that is based upon the asset-backed

commercial paper rate.

22, 2020, the expiration date for this facility was extended to June 12, 2023.

As of December 26, 2020, the

commercial paper rate was 0.22% plus 0.95%, for a combined rate of

At December 26, 2020 the

outstanding balance was $0.0 million under this securitization facility.

During the year ended December 26, 2020,

the average outstanding balance under this securitization facility was approximately

$92.3 million.

Based upon our

average outstanding balance for this securitization facility, for each hypothetical increase of 25 basis points, our

interest expense thereunder would have increased by $0.2 million.

Our revolving credit facility which we entered into on August 20, 2021 and expires on August 20, 2026, has an interest rate that is based on the U.S.

Dollar LIBOR plus a spread based on our leverage ratio at the end of each financial reporting quarter.

As of December 25, 2021, there was $0.0 million outstanding under this revolving credit facility.

During the year ended December 25, 2021, the average outstanding balance under this revolving credit facility was approximately $1.5 million.

Based upon our average outstanding balance for this revolving credit facility, for each hypothetical increase of 25 basis points, our interest expense thereunder would have increased by less than $0.1 million.

Our U.S trade accounts receivable securitization, which we entered into on April 17, 2013 and expires on October 18, 2024, has an interest rate that is based upon the asset-backed commercial paper rate.

As of December 25, 2021, the commercial paper rate was 0.19% plus 0.75%, for a combined rate of 0.94%.

At December 25, 2021 the outstanding balance was $105.0 million under this securitization facility.

During the year ended December 25, 2021, the average outstanding balance under this securitization facility was approximately $44.0 million.

Based upon our average outstanding balance for this securitization facility, for each hypothetical increase of 25 basis points, our interest expense thereunder would have increased by $0.1 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk