Basis of Presentation and Significant Accounting Policies | Note 1 –Basis of Presentation and Significant Accounting Policies Nature of Operations We distribute health care products and services primarily to office-based dental and medical practitioners, across dental practices, laboratories, physician practices, and ambulatory surgery centers, institutional health care clinics and alternate care clinics. added services to health care practitioners. laboratories, schools, government and other institutions. care centers, ambulatory care sites, emergency medical technicians, dialysis centers, governments and large enterprises, such as group practices and integrated delivery networks, across a wide range of specialties. We have operations or affiliates in 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, Mexico, the Netherlands, New Zealand, Poland, Portugal, Singapore, South Switzerland, Thailand, United Arab Emirates and the United Kingdom. Basis of Presentation Our consolidated financial statements include the accounts of Henry subsidiaries. unconsolidated affiliates in which we have the ability to influence the operating or for under the equity method. presentation. consolidated financial condition, results of operations or cash flows. We consolidate the results of operations and financial position of a trade accounts receivable securitization which we consider a Variable Interest Entity (“VIE”) because we are the primary beneficiary, and we have the power to direct activities that most significantly affect the economic performance and have majority of the losses or benefits. collateral to the related debt. December 31, 2022 and December 25, 2021, certain trade accounts receivable that obligations of this VIE were $ 327 138 creditors have recourse to us were $ 255 105 Use of Estimates The preparation of financial statements in conformity with accounting principles States requires us to make estimates and assumptions that affect the reported amounts of disclosure of contingent assets and liabilities at the date of the financial revenues and expenses during the reporting period. In March 2020, the World Health Organization declared the Novel Coronavirus Disease 2019 (“COVID-19”) a pandemic. created significant volatility and disruption business closures and restrictions, stay-at-home and social distancing ordinances the pandemic, which significantly impacted global business and dramatically and certain medical products in the second quarter of 2020. second half of 2020 and continued throughout the years ended December 25, resulting in growth over the prior years. 2022. Our consolidated financial statements reflect estimates and assumptions our goodwill, long-lived asset and definite-lived intangible asset valuation; valuation; assessment of the annual effective tax rate; valuation of deferred income contingencies; the allowance for doubtful accounts; hedging activity; supplier compensation cost for certain share-based performance awards and cash bonus assumptions. regarding estimates and impairments could change in the future. pandemic may again have a material adverse effect on our business, results of operations result in a material adverse effect on our financial condition and liquidity. impact cannot be reasonably estimated at this time. Fiscal Year We report our results of operations and cash flows on a 52 - 53 The year ended December 31, 2022 consisted of 53 26, 2020 consisted of 52 Revenue Recognition Revenue is recognized when a customer obtains control of promised goods consideration that we expect to receive for those goods or services. • • • • • We generate revenue from the sale of dental and medical consumable products, equipment (Health care distribution revenues), software products and services and other sources (Technology and value-added services revenues). Provisions for discounts, rebates to customers, customer returns and other in the transaction price at contract inception by estimating the most likely estimates and are provided for in the period in which the related sales are Revenue derived from the sale of consumable products is recognized at a point customer. We believe that the shipment date is the most appropriate point in time indicating control has transferred to the customer because we have no post-shipment obligations and this is when ownership transfer to the customer and the point at which we have an Revenue derived from the sale of equipment is recognized when control when the equipment is delivered. equipment service technicians. time of delivery. instances where we provide warranty labor services, the warranty costs Standards Codification (“ASC”) 460 “Guarantees”. accrued approximately $ 8 8 Revenue derived from the sale of software products is recognized when made available electronically. training due to the nature of its design. including annual support and/or training, is generally recognized over that best depicts the transfer of control to the customer. Service basis is recognized ratably over the subscription period as Revenue derived from other sources, including freight charges, equipment repairs recognized when the related product revenue is recognized or when practical expedient to treat shipping and handling activities performed after the fulfillment activities, rather than a separate performance obligation in the Sales, value-add and other taxes we collect concurrent with revenue-producing revenue. Certain of our revenue is derived from bundled arrangements that include which are accounted for separately. and technical support), we allocate revenue to software using the residual standalone selling price to estimate the fair value of the undelivered elements that are not considered software consist primarily of equipment allocate revenue for such arrangements based on the relative selling observable selling price is not available (i.e., we do not sell the goods or following techniques to estimate the standalone selling price: adjusted residual method. our best estimate of what the selling prices of each deliverable would be basis taking into consideration the cost structure of our business, technical skill other market conditions. Sales Returns Sales returns are recognized as a reduction of revenue by the amount liability within current liabilities. return liability based on historical data for specific products, adjusted allowance for returns is presented gross as a refund liability and we adjustment to cost of sales) for any products that we expect to be returned. Cost of Sales The primary components of cost of sales include the cost of the product chargebacks and rebates) and inbound and outbound freight charges. Costs related to purchasing, receiving, inspections, warehousing, internal distribution network are included in selling, general and administrative Total distribution network costs were $ 103 89 72 2022, December 25, 2021 and December 26, 2020. Supplier Rebates Supplier rebates are included as a reduction of cost of sales and are recognized factors we consider in estimating supplier rebate accruals include forecasted conjunction with supplier rebate contract terms, which generally provide increased purchase or sales volume. Direct Shipping and Handling Costs Freight and other direct shipping costs are included in cost of sales. primarily direct compensation costs of employees who pick, pack and otherwise for shipment to our customers are reflected in selling, general and administrative were $ 96 97 79 December 26, 2020. Advertising and Promotional Costs We generally expense advertising and promotional costs as incurred. were $ 47 48 32 December 26, 2020. Stock Compensation Costs We measure stock-based compensation at the grant date, based on the estimated recognize the cost (net of estimated forfeitures) as compensation expense on service period for time-based restricted stock units and on a graded vesting performance-based awards, at each reporting date, we reassess whether achievement is probable and accrue compensation expense when achievement of stock-based compensation expense is reflected in selling, general and administrative Employment Benefit Plans and other Postretirement Benefit Plans Certain of our employees in our international markets participate We recognize the funded status, measured as the difference between the fair value of plan assets and the benefit obligation, of each applicable plan, within accumulated other comprehensive sheets, whereby each unfunded plan is recognized as a liability and asset or liability based on its funded status. Net periodic pension costs and valuations are dependent on assumptions those amounts. compensation levels, retirement rates, mortality rates, and other factors. net pension cost in selling, general and administrative expenses within Cash and Cash Equivalents We consider all highly liquid short-term investments with an original maturity of three months or less to be cash equivalents. fair value. 54 2 payments for inventory, were classified as accounts payable as of December 31, 2022 and December 25, 2021. Contract Balances Contract balances represent amounts presented in our consolidated balance goods or services to the customer or the customer has paid consideration to us balances include accounts receivable, Accounts Receivable and Allowance for Credit Losses Accounts receivable are generally recognized when health care distribution services revenues are recognized. accounts receivable is reduced by a valuation allowance that reflects not expect to collect. estimating our reserve, including types of customers and their credit worthiness, adjusted for current conditions and reasonable supportable forecasts. We record allowances for credit losses based upon a specific review of all those invoices not specifically reviewed, provisions are provided at differing rates, receivable, the collection history associated with the geographic region economic trends and reasonable supportable forecasts. We write-off a receivable and charge it against its recorded allowance when we deem them uncollectible. Our allowance for doubtful accounts was $ 65 67 88 December 25, 2021 and December 26, 2020, respectively. December 31, 2022, December 25, 2021 and December 26, 2020 were $ 8 0 36 Deductions to the allowance for the years ended December 31, 2022, December were $ 10 21 8 Contract Assets Contract assets include amounts related to any conditional right to consideration as of the reporting date, and generally represent amounts owed to us by assets are transferred to accounts receivable when the right becomes unconditional. relate to our bundled arrangements for the sale of equipment and consumables Current contract assets are included in Prepaid expenses and other and the non-current in investments and other within our consolidated balance sheets. of December 31, 2022 and December 25, 2021 were not material. Contract Liabilities Contract liabilities are comprised of advance payments and upfront payments over time that are accounted for as deferred revenue amounts. the performance obligation has been satisfied. and the non-current contract liabilities are included in other liabilities December 25, 2021, the current portion of contract liabilities of $ 89 Other, and $ 10 ended December 31, 2022, previously deferred at December 25, 2021. liabilities were $ 86 8 Inventories and Reserves Inventories consist primarily of finished goods and are valued at the determined by the first-in, first-out method for merchandise or actual cost equipment. condition and salability of the inventory, historical sales, forecasted sales and market and economic trends. time to time, we adjust our assumptions for anticipated changes in any the value of inventory. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation or computed primarily under the straight-line method Amortization of leasehold improvements is computed using useful life of the assets or the lease term. Capitalized Software Development Costs Capitalized internal-use software costs consist of costs to purchase and solely to meet internal needs and cloud-based applications used to deliver during the application development stage and include such costs within consolidated balance sheets. development costs when technological feasibility is reached and our consolidated balance sheets. Leases We determine if an arrangement contains a lease at inception. explicitly identifies an asset to be used and conveys the right to control for consideration. operating lease liabilities, and non-current operating lease liabilities in our leases are included in property and equipment, current maturities consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease obligation to make lease payments arising from the lease. upon commencement of the lease based on the present value of the lease payments our leases do not provide an implicit interest rate, we generally use our incremental estimated rate of interest for fully collateralized and fully amortizing borrowings payments at commencement date to determine the present value of use the implicit rate. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. over the lease term. and administrative” leases with a term of 12 months or less are not capitalized. 25, 2021 and December 26, 2020, such short-term lease expense was 7 4 2 respectively. We have lease agreements with lease and non-lease components, which are lease component, except non-lease components for leases of vehicles, which vehicle lease contains both lease and non-lease components, we allocate the standalone selling price. Goodwill Goodwill represents the excess of the purchase price over the estimated fair including the amount assigned to identifiable intangible assets. or more frequently if needed. carrying value of reporting units. medical; and technology and value-added services. purposes of preparing our impairment analyses, based on a specific identification For the years ended December 31, 2022 and December 25, 2021, we tested goodwill day of the fourth quarter, using a quantitative analysis comparing the carrying value of our reporting including goodwill, to the estimated fair value of our reporting units using the fair value of a reporting unit exceeds its carrying amount, goodwill impaired. its fair value limited to the total amount of goodwill allocated to that Application of the goodwill impairment test requires judgment, including assignment of assets and liabilities that are considered shared services determination of the fair value of each reporting unit. applying the discounted cash flow methodology and confirming with uncertainties related to fair value models, the inputs and our judgments significant inputs include estimation of future cash flows based on budget comparable companies to develop a weighted average cost of capital for each For the year ended December 31, 2022, we recorded a $ 20 of an unprofitable business whose estimated fair value was lower than business is part of our restructuring initiative as more fully discussed For the year ended December 25, 2021, the results of our goodwill no t result in any impairments. Intangible Assets Intangible assets, other than goodwill, are evaluated for impairment whenever indicate that the carrying amount of the assets may not be recoverable cash flows to be derived from such assets. Definite-lived intangible assets primarily consist of non-compete agreements, lists, customer relationships and product development. are only recorded if the asset’s future cash flows. estimated fair value. During the years ended December 31, 2022, December 25, 2021 impairment charges on intangible assets of $ 34 1 20 discussed in Income Taxes We account for income taxes under an asset and liability approach that requires the recognition of deferred income tax assets and liabilities for the expected future tax consequences of events financial statements or tax returns. events other than enactments of changes in tax laws or rates. liabilities of a change in tax rates is recognized as income or expense in We file a consolidated U.S. federal income tax return with our 80% or greater owned U.S. subsidiaries Redeemable Noncontrolling Interests Some minority stockholders in certain of our consolidated subsidiaries have to acquire their ownership interest in those entities at fair value. outside permanent equity on our consolidated balance sheets and are The redemption amounts have been estimated based on expected future earnings and cash flow are not achieved, the value of the redeemable noncontrolling Changes in the estimated redemption amounts of the noncontrolling each reporting period with a corresponding adjustment to Additional paid-in carrying amounts are subject to a “floor” amount that is equal to the interests at the time they were originally recorded. cannot go below the floor level. reflect a fair value redemption feature do not impact the calculation of earnings reduced by the portion of the subsidiaries’ net income that is attributable Noncontrolling Interests Non-controlling interest represents the ownership interests of certain subsidiaries. noncontrolling interests. Comprehensive Income Comprehensive income includes certain gains and losses that, under accounting United States, are excluded from net income as such amounts are recorded stockholders’ equity. translation gain (loss), unrealized gain (loss) from foreign currency Risk Management and Derivative Financial Instruments We use derivative instruments to minimize our exposure to fluctuations in foreign currency exchange rates. objective is to manage the impact that foreign currency exchange rate fluctuations and liability fair values, earnings and cash flows, as well as our net management policy requires that derivative contracts used as hedges be with the exposure being hedged and be designated as a hedge at the inception derivative instruments for speculative purposes. forward agreements related to certain intercompany loans, certain forecasted foreign suppliers and foreign currency forward contracts to hedge a portion of operations which are designated as net investment hedges. Foreign currency forward agreements related to forecasted inventory and foreign currency swaps related to foreign currency denominated debt are designated derivatives that are designated and qualify as cash flow hedges, the changes recorded as a component of Accumulated other comprehensive income reclassified into earnings in the period(s) during which the hedged transaction cash flows related to our hedging activities in the same category on our consolidated cash flows related to the hedged item. Foreign currency forward contracts related to our euro-denominated investment hedges. value of the derivative is recorded in the foreign currency translation comprehensive income in stockholders’ equity until the net investment Our foreign currency forward agreements related to foreign currency hedges but are not designated as hedges for accounting purposes. For agreements not designated as hedges, changes in the value of the derivative, loss on the hedged item, are recorded in other, net, within our consolidated statements of income. Total return swaps are entered into for the purpose of economically hedging our unfunded non-qualified supplemental retirement plan (“SERP”) and our deferred compensation plan changes in our SERP and DCP liabilities. in selling, general, and administrative expenses within our consolidated Foreign Currency Translation The financial position and results of operations of our foreign subsidiaries the functional currency. each year-end. Translation adjustments arising from the use of differing exchange rates from period to period are included Accumulated other comprehensive income in stockholders’ equity. currency transactions are included in earnings. Accounting Pronouncements Adopted On December 26, 2021 we adopted Accounting Standards Update Contract Assets and Contract Liabilities from Contracts with Customers” an acquirer to recognize and measure contract assets and contract liabilities acquired accordance with ASU No. 2014 - 09, “Revenue from Contracts with Customers” date, an acquirer should account for the related revenue contracts in accordance originated the contracts. what to record for the acquired revenue contracts. measuring the acquired contract assets and contract liabilities consistent with how measured in the acquiree’s financial statements. our consolidated financial statements. On December 27, 2020 we adopted ASU No. 2019-12, “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). exceptions to the general principles in Topic 740. simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 did not have a material impact on our consolidated Recently Issued Accounting Standards In September 2022, the FASB issued ASU No. 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405- 50): Disclosure of Supplier Finance Program Obligations” which will programs by requiring entities that use such programs in connection with disclose certain qualitative and quantitative information about such years beginning after December 15, 2022, including interim periods within rollforward information, which is effective for fiscal years beginning after December that the requirements of this guidance will have a material impact on our consolidated In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides optional expedients applying GAAP to contracts, hedging relationships and other transactions affected London Interbank Offered Rate (“LIBOR”) or by another reference rate expected reference rate reform. through December 31, 2022. 848): Scope (“ASU 2021-01”). guidance in U.S. GAAP to ease the financial reporting burdens related LIBOR and other interbank offered rates to alternative reference rates, such as Rate. 2022. the Sunset Date of Topic 848,” which extends the period of application of temporary optional expedients from December 21, 2022 to December 31, 2024. material impact on our consolidated financial statements. |