HENRY SCHEIN INC (HSIC)

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Cautionary Note Regarding Forward-Looking Statements

In accordance with the “Safe Harbor” provisions of the Private Securities

Litigation Reform Act of 1995, we

provide the following cautionary remarks regarding important factors

that, among others, could cause future results

to differ materially from the forward-looking statements, expectations and assumptions

expressed or implied herein.

All forward-looking statements made by us are subject to risks and uncertainties

and are not guarantees of future

performance.

These forward-looking statements involve known and unknown

risks, uncertainties and other factors

that may cause our actual results, performance and achievements

or industry results to be materially different from

any future results, performance or achievements expressed or implied

by such forward-looking statements.

These

statements are generally identified by the use of such terms as “may,” “could,” “expect,” “intend,” “believe,”

“plan,” “estimate,” “forecast,” “project,” “anticipate,” “to be,” “to

make” or other comparable terms. Factors that

could cause or contribute to such differences include, but are not limited to,

those discussed in this Annual Report

on Form 10-K, and in particular the risks discussed under the caption

“Risk Factors” in Item 1A of this report and

those that may be discussed in other documents we file with

the Securities and Exchange Commission (“SEC”).

Risk factors and uncertainties that could cause actual results to differ materially from current

and historical results

include, but are not limited to: our dependence on third parties for

the manufacture and supply of our products and

where we manufacture products, our dependence on third parties

for raw materials or purchased components; risks

relating to the achievement of our strategic growth objectives; risks

related to the recently signed Strategic

Partnership Agreement; our ability to develop or acquire and maintain

and protect new products (particularly

technology products) and services and utilize new technologies

that achieve market acceptance with acceptable

margins; transitional challenges associated with acquisitions, dispositions and joint ventures,

including the failure to

achieve anticipated synergies/benefits, as well as significant demands on our operations,

information systems, legal,

regulatory, compliance, financial and human resources functions in connection with acquisitions, dispositions and

joint ventures; certain provisions in our governing documents that may discourage

third-party acquisitions of us;

adverse changes in supplier rebates or other purchasing incentives;

risks related to the sale of corporate brand

products; risks related to activist investors; security risks associated with our

information systems and technology

products and services, such as cyberattacks or other privacy or data security

breaches (including the October 2023

incident); effects of a highly competitive (including, without limitation, competition

from third-party online

commerce sites) and consolidating market; changes in the health care

industry; risks from expansion of customer

purchasing power and multi-tiered costing structures; increases in shipping costs

for our products or other service

issues with our third-party shippers, and increases in fuel and energy costs; changes

in laws and policies governing

manufacturing, development and investment in territories and countries

where we do business; general global and

domestic macro-economic and political conditions, including inflation,

deflation, recession, unemployment (and

corresponding increase in under-insured populations), consumer confidence,

sovereign debt levels, ongoing wars,

fluctuations in energy pricing and the value of the U.S. dollar as compared to

foreign currencies, and changes to

other economic indicators, international trade agreements; the threat

or outbreak of war, terrorism or public unrest

(including, without limitation, the war in Ukraine, the Israel-Gaza war and other

unrest and threats in the Middle

East and the possibility of a wider European or global conflict); changes

to laws and policies governing foreign

trade, tariffs and sanctions, or greater restrictions on imports and exports; supply

chain disruption; geopolitical

wars; failure to comply with existing and future regulatory requirements,

including relating to health care; risks

associated with the EU Medical Device Regulation; failure to comply

with laws and regulations relating to health

care fraud or other laws and regulations; failure 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;

changes in tax legislation, changes in tax rates and availability of certain tax

deductions; risks related to product

liability, intellectual property and other claims; risks associated with customs policies or legislative import

restrictions; risks associated with disease outbreaks, epidemics, pandemics

(such as the COVID-19 pandemic), or

similar wide-spread public health concerns and other natural or

man-made disasters; risks associated with our

global operations; litigation risks; new or unanticipated litigation developments

and the status of litigation matters;

our dependence on our senior management, employee hiring and retention,

increases in labor costs or health care

costs, and our relationships with customers, suppliers and manufacturers;

and disruptions in financial markets. The

order in which these factors appear should not be construed to indicate their

relative importance or priority.

Table of Contents

Index to Financial Statements

48

We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control

or predict.

Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction

of actual results.

We undertake no duty and have no obligation to update forward-looking statements except as

required by law.

Where You

Can Find Important Information

We may disclose important information through one or more of the following channels: SEC filings, public

conference calls and webcasts, press releases, the investor relations

page of our website (www.henryschein.com)

and the social media channels identified on the About Media Center page of

our website.

Recent Developments

While the U.S. economy has experienced inflationary pressures and

strengthening of the U.S. dollar, their impacts

have not been material to our results of operations.

Though inflation impacts both our revenues and costs, the depth

and breadth of our product portfolio often allows us to offer lower-cost national brand solutions

or corporate brand

alternatives to our more price-sensitive customers who are unwilling to

absorb price increases, thus positioning us

to protect our gross profit.

Segment Reporting

During the fourth quarter of our fiscal year ended December 28, 2024,

we revised our reportable segments to align

with how the Chairman and Chief Executive Officer manages the business, assesses

performance and allocates

resources.

Our revised reportable segments now consist of: (i) Global Distribution

and Value

-Added Services; (ii)

Global Specialty Products; and (iii) Global Technology.

Global Distribution and Value-Added Services includes distribution to the global dental and medical markets of

national brand and corporate brand merchandise, as well as equipment and related

technical services.

This segment

also includes value-added services such as financial services, continuing

education services, consulting and other

services.

This segment also markets and sells under our own corporate brand,

a portfolio of cost-effective, high-

quality consumable merchandise.

Global Specialty Products includes manufacturing, marketing and sales

of dental

implant and biomaterial products; and endodontic, orthodontic and orthopedic

products and other health care-

related products and services.

Global Technology includes development and distribution of practice management

software, e-services, and other products, which are distributed to health

care providers.

Cyber Incident

In October 2023 Henry Schein experienced a cyber incident that primarily

affected the operations of our North

American and European dental and medical distribution businesses.

Henry 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.

On November 22, 2023, we experienced a disruption of our

ecommerce platform and related applications, which was remediated.

During the year ended December 28, 2024, we had a sales decrease

in our dental and medical distribution

businesses, which we believe was primarily a result of lower sales to episodic

customers following last year’s cyber

incident.

We have a number of programs underway focused on re-establishing these customers.

During the years ended December 28, 2024 and December 30, 2023, we

incurred $9 million and $11 million of

expenses directly related to the cyber incident, mostly consisting of professional

fees.

We maintain cyber

insurance, subject to certain retentions and policy limitations.

With respect to the October 2023 cyber incident, we

have a $60 million insurance policy, following a $5 million retention.

During the year ended December 28, 2024,

we submitted a claim under this policy for $60 million and received

insurance proceeds of $40 million, with the

remaining $20 million of the claim being under review by our insurance

providers.

Table of Contents

Index to Financial Statements

49

Executive-Level Overview

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.

We

serve more than one million customers

worldwide including dental practitioners, laboratories, physician practices and

ambulatory surgery centers, as well

as government, institutional health care clinics and other alternate care clinics.

We

believe that we have a strong

brand identity due to our more than 93 years of experience distributing health

care products.

We

are headquartered in Melville, New York, employ approximately 25,000 people (of which approximately

13,000 are based outside of the United States) and have operations or affiliates in 33 countries

and territories.

Our

broad global footprint has evolved over time through our organic growth as well

as through contribution from

strategic acquisitions.

We

have established strategically located distribution centers around

the world to enable us to better serve our

customers and increase our operating efficiency.

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.

While our primary go-to-market strategy is in our capacity as a distributor, we also market and sell our own

corporate brand portfolio of cost-effective, high-quality consumable merchandise products.

We

also manufacture,

source and sell a range of company-owned manufactured products, primarily implants,

biomaterial products,

endodontics, handpiece and small equipment, hand instrument and repair, restoratives, orthodontics, wound

care,

orthopedics and dental lab products.

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.

During the fourth quarter of our fiscal year ended December 28, 2024, we

revised our reportable segments to align

with how the Chairman and Chief Executive Officer manages the business, assesses performance

and allocates

resources.

Our revised reportable segments now consist of: (i) Global Distribution

and Value

-Added Services; (ii)

Global Specialty Products; and (iii) Global Technology.

Global Distribution and Value-Added Services includes distribution to the global dental and medical markets of

national brand and corporate brand merchandise, as well as equipment and related

technical services.

This segment

also includes value-added services such as financial services, continuing education

services, consulting and other

services.

This segment also markets and sells under our own corporate brand,

a portfolio of cost-effective, high-

quality consumable merchandise.

Global Specialty Products includes manufacturing, marketing and sales

of dental

implant and biomaterial products; and endodontic, orthodontic and orthopedic

products and other health care-

related products and services.

Global Technology includes development and distribution of practice management

software, e-services, and other products, which are distributed to health

care providers.

A key element to grow closer to our customers is our One Schein initiative, which

is a unified go-to-market

approach that enables practitioners to work synergistically with our supply chain,

equipment sales and service and

other value-added services, allowing our customers to leverage the

combined value that we offer through a single

program.

Specifically, One Schein provides customers with streamlined access to our comprehensive offering of

national brand products, our corporate brand products and proprietary specialty

products and solutions (including

implant, orthodontic and endodontic products).

In addition, customers have access to a wide range of services,

including software and other value-added services.

Industry Overview

In recent years, the health care industry has increasingly focused on 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 DSOs, GPOs, 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

Table of Contents

Index to Financial Statements

50

the potential to favorably affect demand for technology solutions, including software,

which can enhance the

efficiency and facilitation of practice management.

Our operating results in recent years have been significantly affected by strategies

and transactions that we

undertook to expand our business, domestically and internationally, in part to address significant changes in the

health care industry, including consolidation of health care distribution companies, health care reform, trends

toward managed care, cuts in Medicare and collective purchasing arrangements.

Industry Consolidation

The health care products 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 group practices

or service organizations ranging in size from a few practitioners to a large number of practitioners who have

combined or otherwise associated their practices.

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 or an administrative assistant.

Supplies and small equipment are generally purchased from more

than

one distributor, with one generally serving as the primary supplier.

The trend of consolidation extends to our customer base.

Health care practitioners are increasingly seeking to

partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician

hospital organizations.

In many cases, purchasing decisions for consolidated groups

are made at a centralized or

professional staff level; however, orders are delivered to the practitioners’ offices.

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

companies that can enhance their current product and service offerings or provide

opportunities to serve a broader

customer base.

Our approach to acquisitions and joint ventures has been to expand our role as

a provider of products and services

to the health care industry.

This trend has resulted in our expansion into service areas that complement

our existing

operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired

businesses.

As industry consolidation continues, we believe that we are positioned to

capitalize on this trend, as we believe we

have the ability to support increased sales through our existing infrastructure, although

there can be no assurances

that we will be able to successfully accomplish this.

We

are focused on building relationships with decision makers

who do not reside in the office-based practitioner setting.

As the health care industry continues to change, we continually evaluate possible

candidates for joint venture or

acquisition and intend to continue to seek opportunities to expand our

role as a provider of products and services to

the health care industry.

There can be no assurance that we will be able to successfully pursue

any such

opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or

consummated, we would incur merger and/or acquisition-related costs, and there

can be no assurance that the

integration efforts associated with any such transaction would be successful.

Aging Population and Other Market Influences

The health care products distribution industry continues to experience growth

due to the aging population,

increased health care awareness, the proliferation of medical technology

and testing, new pharmacological

treatments, and expanded third-party insurance coverage, partially offset by the effects of unemployment

on

Table of Contents

Index to Financial Statements

51

insurance coverage.

In addition, the physician market continues to benefit from the

shift of procedures and

diagnostic testing from acute care settings to alternate-care sites, particularly

physicians’ offices.

According to the U.S. Census Bureau’s International Database, between 2024 and 2034, the 45 and older

population is expected to grow by approximately 10%.

Between 2024 and 2044, this age group is expected to grow

by approximately 18%.

This compares with expected total U.S. population growth

rates of approximately 4%

between 2024 and 2034 and approximately 6% between 2024 and 2044.

According to the U.S. Census Bureau’s International Database, in 2024 there are approximately seven million

Americans aged 85 years or older, the segment of the population most in need of long-term care

and elder-care

services.

By the year 2050, that number is projected to increase to approximately

17 million.

The population aged

65 to 84 years is projected to increase by approximately 18% during

the same period.

As a result of these market dynamics, annual expenditures for health care services

continue to increase in the

United States.

We

believe that demand for our products and services will grow while

continuing to be impacted by

current and future operating, economic, and industry conditions.

The Centers for Medicare and Medicaid Services

or CMS published “National Health Expenditure Data” indicating that

total national health care spending reached

approximately $4.9 trillion in 2023, or 17.6% of the nation’s gross domestic product, the benchmark measure

for

annual production of goods and services in the United States.

Health care spending is projected to reach

approximately $7.7 trillion by 2032, or 19.7% of the nation’s projected gross domestic product.

Government

Our businesses are generally subject to numerous laws and regulations that could

impact our financial performance,

and failure to comply with such laws or regulations could have a material adverse

effect on our business.

See “

Item

1. Business – Governmental Regulations

” for a discussion of laws, regulations and governmental activity

that may

affect our results of operations and financial condition.

Table of Contents

Index to Financial Statements

52

Results of Operations

The following tables summarize the significant components of our operating

results and cash flows for each of the

three years ended December 28, 2024, December 30, 2023, and December

31, 2022 (in millions):

Years

Ended

December 28,

December 30,

December 31,

2024

2023

2022

Operating results:

Net sales

$

12,673

$

12,339

$

12,647

Cost of sales

8,657

8,479

8,816

Gross profit

4,016

3,860

3,831

Operating expenses:

Selling, general and administrative

3,034

2,956

2,771

Depreciation and amortization

251

209

182

Restructuring and integration costs

110

80

131

Operating income

$

621

$

615

$

747

Other expense, net

$

(108)

$

(73)

$

(26)

Income taxes

(128)

(120)

(170)

Net income

398

436

566

Net income attributable to Henry Schein, Inc.

390

416

538

Years

Ended

December 28,

December 30,

December 31,

2024

2023

2022

Cash flows:

Net cash provided by operating activities

$

848

$

500

$

602

Net cash used in investing activities

(430)

(1,135)

(276)

Net cash provided by (used in) financing activities

(510)

701

(315)

Table of Contents

Index to Financial Statements

53

Plans of Restructuring and Integration Costs

On August 6, 2024, we committed to a new restructuring plan (the “2024

Plan”) to integrate recent acquisitions,

right-size operations and further increase efficiencies.

During the year ended December 28, 2024, we recorded

restructuring charges associated with the 2024 Plan of $73 million, which primarily

related to severance and

employee-related costs, accelerated amortization of right-of-use

lease assets and fixed assets, impairment of

intangible assets related to the disposal of a portion of a business

and other exit costs.

We expect to record

restructuring charges associated with the 2024 Plan in 2025; however an estimate

of the amount of these charges

has not yet been determined.

During the year ended December 28, 2024, in connection with the 2024 Plan,

we recorded an impairment of

goodwill and intangible assets of $13 million related to the disposal of a portion

of a business.

This impairment is

included in the $73 million of restructuring charges discussed above and related

to the Global Specialty Products

segment.

On August 1, 2022, we committed to a restructuring plan (the “2022

Plan”) focused on funding the priorities of the

BOLD+1 strategic plan, streamlining operations and other initiatives to

increase efficiency.

The 2022 Plan has

been completed as of July 31, 2024.

During the years ended December 28, 2024, December

30, 2023, and

December 31, 2022, in connection with our 2022 Plan, we recorded restructuring

costs of $37 million, $80 million,

and $128 million, respectively.

The restructuring costs for these periods primarily related to

severance and

employee-related costs, accelerated amortization of right-of-use

lease assets and fixed assets, impairment of

intangible assets related to disposal of a U.S. business,

and other exit costs.

During the year ended December 30, 2023, in connection with the 2022 Plan,

we recorded an impairment of an

intangible asset of $12 million related to disposal of a U.S. business.

This impairment is included in the $80

million of restructuring costs discussed above and related to the Global Specialty

Products segment.

The disposal

was completed during the first quarter of 2024.

During the year ended December 31, 2022, in connection with the 2022 Plan,

we vacated one of the buildings at our

corporate headquarters in Melville, New York, which resulted in an accelerated amortization of a right-of-use lease

asset of $34 million.

We also initiated the disposal of a non-profitable U.S. business within the Global Specialty

Products segment and recorded related costs of $49 million, which primarily

consisted of impairment of intangible

assets and goodwill, inventory impairment, and severance and employee-related

costs, which are included in the

Global Specialty Products segment.

These costs are included in the $128 million of restructuring

charges discussed

above.

The disposal was completed during the first quarter of 2023.

On August 26, 2022, we acquired Midway Dental Supply.

In connection with this acquisition, during the year

ended December 31, 2022, we recorded integration costs of $3 million

related to one-time employee and other

costs, as well as restructuring charges of $9 million, which are included in the

$128 million of restructuring charges

discussed above.

The integration and restructuring costs related to Midway Dental

Supply are recorded in the

Global Distribution and Value-Added Services segment.

Table of Contents

Index to Financial Statements

54

2024 Compared to 2023

Note: Percentages for Net Sales; Gross Profit; Operating Expenses; Other

Expense, Net; and Income Taxes are

based on actual values and may not recalculate due to rounding.

During the fourth quarter of our fiscal year ended December 28, 2024,

we revised our reportable segments to align

with how the Chairman and Chief Executive Officer manages the business, assesses

performance and allocates

resources.

Our revised reportable segments now consist of: (i) Global Distribution

and Value

-Added Services; (ii)

Global Specialty Products; and (iii) Global Technology.

All prior comparative segment information has been recast

to reflect our new segment structure.

Net Sales

Net sales by reportable segment and by major product or service type were

as follows:

% of

% of

Increase / (Decrease)

2024

Total

2023

Total

$

%

Global Distribution and Value

-Added Services

Global Dental merchandise

(1)

$

4,727

37.3

%

$

4,787

38.8

%

$

(60)

(1.3)

%

Global Dental equipment

(2)

1,719

13.6

1,671

13.5

48

2.9

Global Value

-added services

(3)

233

1.8

191

1.6

42

21.5

Global Dental

6,679

52.7

6,649

53.9

30

0.4

Global Medical

(4)

4,081

32.2

3,912

31.7

169

4.3

Total Global Distribution and Value

-Added Services

10,760

84.9

10,561

85.6

199

1.9

Global Specialty Products

(5)

1,446

11.4

1,331

10.8

115

8.7

Global Technology

(6)

630

5.0

602

4.9

28

4.7

Eliminations

(163)

(1.3)

(155)

(1.3)

(8)

n/a

Total

$

12,673

100.0

$

12,339

100.0

$

334

2.7

(1)

Includes infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, dental

implants, gypsum, acrylics, articulators, abrasives, PPE products,

and our own corporate brand of consumable merchandise.

(2)

Includes dental chairs, delivery units and lights, digital dental laboratories, X-ray supplies and equipment, equipment repair and

high-tech and digital restoration equipment.

(3)

Consists of financial services on a non-recourse basis, continuing education services for practitioners, consulting and other services.

(4)

Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, X-ray

products, equipment, PPE products and vitamins.

(5)

Includes manufacturing, marketing and sales of dental implant and biomaterial products; and endodontic, orthodontic and

orthopedic products and other health care-related products and services.

(6)

Consists of practice management software, e-services, and other products, which are distributed to health care providers.

The components of our sales growth/(decline) were as follows:

Local Currency Growth/(Decline)

Total Local

Currency

Growth/(Decline)

Foreign

Exchange

Impact

Total Sales

Growth/(Decline)

Local Internal

Growth

Acquisition

Growth

Global Distribution and Value

-Added Services

Global Dental Merchandise

(1.2)

%

0.2

%

(1.0)

%

(0.3)

%

(1.3)

%

Global Dental Equipment

2.7

0.3

3.0

(0.1)

2.9

Global Value

-added services

0.4

21.4

21.8

(0.3)

21.5

Global Dental

(0.2)

0.9

0.7

(0.3)

0.4

Global Medical

(1.2)

5.5

4.3

-

4.3

Total Global Distribution and Value

-Added Services

(0.6)

2.6

2.0

(0.1)

1.9

Global Specialty Products

0.1

9.1

9.2

(0.5)

8.7

Global Technology

2.4

2.0

4.4

0.3

4.7

Total

(0.4)

3.3

2.9

(0.2)

2.7

Table of Contents

Index to Financial Statements

55

Global Sales

Global net sales for the year ended December 28, 2024 increased 2.7%.

The components of sales growth are

presented in the table above.

The 0.4% decrease in our internally generated local currency sales was primarily

attributable to the migration to

lower priced products and the challenging economic environment in

certain markets and lower sales of PPE

products and COVID-19 test kits.

For the year ended December 28, 2024, the estimated increase in

internally

generated local currency sales, excluding PPE products and COVID-19

test kits, was 0.3%.

Global Distribution and Value-Added Services Sales

Global Distribution and Value-Added Services net sales for the year ended December 28, 2024 increased 1.9%.

The components of our sales increase are presented in the table

above.

The 0.2% decrease in internally generated local currency dental sales was primarily

due to the migration to lower

priced dental merchandise products and a challenging economic environment

in certain markets, and lower sales of

PPE products.

The decrease was partially offset by sales growth in traditional equipment and parts and

services in

the United States and sales growth in digital equipment in our international

markets, partially offset by lower sales

of digital equipment in the United States and declines in sales of

traditional equipment in certain international

markets.

The growth in traditional equipment benefited from installation

delays during the fourth quarter of 2023

after the cyber incident.

The 1.2% decrease in internally generated local currency medical sales reflects

the conversion of certain

pharmaceutical products to lower priced generics, and lower sales of PPE

products,

COVID-19 test kits and

influenza vaccines, partially offset by strong sales of point-of-care diagnostics including

multi-assay flu/COVID

combination test kits.

The acquisition growth in medical sales was attributable to our expansion

in the Home Solutions market, including

the acquisition of Shield Healthcare during the year ended December

30, 2023.

The acquisition growth in value-

added services within dental sales was attributable primarily to an acquisition

of a practice transitions business in

2023.

We estimate that sales of PPE products and COVID-19 test kits were approximately $622

million for the year

ended December 28, 2024 as compared to $710 million for the year ended

December 30, 2023 representing an

estimated decrease of $88 million.

The estimated $88 million net decrease in sales of PPE products

and COVID-19

test kits represents 5.8% of Global Distribution and Value-Added Services

net sales for the year ended December

28, 2024, and was primarily due to lower glove prices and reduced demand

following the cyber incident.

The

estimated increase in the segment’s internally generated local currency sales, excluding PPE products and COVID-

19 test kits, was 0.3%.

Global Specialty Products

Global Specialty Products net sales for the year ended December

28, 2024 increased

8.7%.

The components of our

sales increase are presented in the table above.

The internally generated local currency sales were relatively flat due to implant

sales growth in certain international

markets and growth in endodontics sales in the United States and

international markets, offset by a decline in

implant sales in the United States and lower orthodontic sales.

The increase in local currency Global Specialty

Products sales was attributable to the acquisitions of TriMed during the year ended December 28, 2024,

and

Biotech Dental and S.I.N. Implant System during the year ended December

30, 2023.

Table of Contents

Index to Financial Statements

56

Global Technology

Global Technology net sales for the year ended December 28, 2024 increased 4.7%.

The components of sales

growth are presented in the table above.

The internally generated local currency increase of 2.4% in Global Technology sales was primarily attributable to a

continued increase in the number of cloud-based users of our practice management

software and an increase in

revenue cycle management solutions and our analytical products.

Gross Profit

Gross profit and gross margin percentages by segment and in total were as follows:

Gross

Gross

Increase / (Decrease)

2024

Margin %

2023

Margin %

$

%

Global Distribution and Value

-Added Services

$

2,776

25.8

%

$

2,699

25.6

%

$

77

3.2

%

Global Specialty Products

802

55.4

720

54.1

82

11.3

Global Technology

424

67.4

417

69.2

7

1.9

Corporate

14

n/a

24

n/a

(10)

(41.4)

Total

$

4,016

31.7

$

3,860

31.3

$

156

4.1

As a result of different practices of categorizing costs associated with distribution networks

throughout our

industry, our gross margins may not necessarily be comparable to other distribution companies.

Gross margin

percentages vary between our segments.

We realize substantially higher gross margin from sales of products that

we develop and manufacture within our Global Specialty Products segment

compared to gross margin from sales of

products that we distribute within our Global Distribution and Value-Added Services segment.

Within our Global

Technology segment, higher gross margins result from us being both the developer and seller of software products

and services.

Within our Global Distribution and Value

-Added Services segment, gross profit margins may vary between the

periods as a result of the changes in the mix of products sold as well as

changes in our customer mix.

With respect

to customer mix, sales to our large-group customers are typically completed at lower gross

margins due to the

higher volumes sold as opposed to the gross margin on sales to office-based practitioners, who normally

purchase

lower volumes.

The increase in Global Distribution and Value-Added Services gross profit for the year ended December 28, 2024

compared to the prior-year-period is due to acquisitions and margin expansion providing a favorable impact

of sales

mix of higher-margin products.

The increase in Global Specialty Products gross profit reflects increased

sales volume and higher gross profit from

internally generated sales and gross profit from acquisitions.

The increase in gross margin rates was due to product

mix.

The increase in Global Technology gross profit is the result of a higher gross profit from internally generated sales

and gross profit from acquisitions.

The decrease in gross margin rates was due to increased vendor costs and

product mix.

Table of Contents

Index to Financial Statements

57

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization; and

restructuring and integration costs) by segment were as follows:

% of

% of

Respective

Respective

Increase / (Decrease)

2024

Net Sales

2023

Net Sales

$

%

Global Distribution and Value

-Added Services

$

2,080

19.3

%

$

2,034

19.3

%

$

46

2.3

%

Global Specialty Products

624

43.2

545

41.0

79

14.4

Global Technology

272

43.2

275

45.6

(3)

(0.8)

Corporate

91

n/a

116

n/a

(25)

(22.1)

3,067

24.2

2,970

24.1

97

3.3

Adjustments

(1)

328

n/a

275

n/a

53

n/a

Total operating expenses

$

3,395

26.8

$

3,245

26.3

$

150

4.6

(1)

Adjustments represent items excluded from segment operating income to enable comparison of financial results between periods.

These items may vary independently of business performance.

Please see

Note 4 – Segment and Geographic Data

.

These

adjustments (current year vs. prior year) consist of (i) acquisition intangible amortization ($184 million vs. $150 million); (ii)

restructuring costs ($110 million vs. $80 million); (iii) changes in contingent consideration ($45 million vs. $0 million); (iv) cyber

incident third-party advisory expenses, net of insurance proceeds ($31 million net proceeds vs. $11 million net expenses); (v)

impairment of capitalized assets ($12 million vs. $27 million); (vi) impairment of intangible assets ($0 million vs. $7 million); (vii)

litigation settlements ($6 million vs. $0 million); and (viii) costs associated with shareholder advisory matters ($2 million vs. $0

million).

The net increase in operating expenses is attributable to the following:

Operating Costs

(excluding

acquisitions)

Acquisitions

Adjustments

Total

Global Distribution and Value

-Added Services

$

(23)

$

69

$

-

$

46

Global Specialty Products

9

70

-

79

Global Technology

(8)

5

-

(3)

Corporate

(25)

-

-

(25)

(47)

144

-

97

Adjustments

-

-

53

53

Total operating expenses

$

(47)

$

144

$

53

$

150

The components of the net increase in total operating expenses are presented

in the table above.

The decrease in

operating costs (excluding acquisitions) during the year ended December 28,

2024 included cost savings from our

restructuring activities and reflected a gain of $19 million related to the remeasurement

to fair value of a previously

held equity investment within our Global Distribution and Value-Added Services segment.

Other Expense, Net

Other expense, net was as follows:

Variance

2024

2023

$

%

Interest income

$

24

$

17

$

7

39.8

%

Interest expense

(131)

(87)

(44)

(51.7)

Other, net

(1)

(3)

2

n/a

Other expense, net

$

(108)

$

(73)

$

(35)

(49.3)

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings and increased interest rates.

Table of Contents

Index to Financial Statements

58

Income Taxes

Our effective tax rate was 24.9% for the year ended December 28, 2024, compared to 22.1%

for the prior year

period.

The difference between our effective and federal statutory tax rates primarily relates to state

and foreign

income taxes and interest expense.

The Organization of Economic Co-Operation and Development (OECD) issued

technical and administrative

guidance on Pillar Two rules in December 2021, which provides for a global minimum tax rate on the earnings of

large multinational businesses on a country-by-country basis.

Effective January 1, 2024, the minimum global tax

rate is 15% for various jurisdictions pursuant to the Pillar Two rules.

Future tax reform resulting from these

developments may result in changes to long-standing tax principles, which

may adversely impact our effective tax

rate going forward or result in higher cash tax liabilities.

As of December 28, 2024,

the impact of the Pillar Two

rules to our financial statements was immaterial.

Table of Contents

Index to Financial Statements

59

2023 Compared to 2022

Discussion of the results of operations for the year ended December

30, 2023 as compared to December 31, 2022

was included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results

of

Operations” in the Company’s Form 10-K for the year ended December 30, 2023, as filed with the SEC on

February 28, 2024. During the fourth quarter of our fiscal year ended

December 28, 2024, we revised our reportable

segments to align with how the Chairman and Chief Executive Officer manages

the business, assesses performance

and allocates resources.

A discussion of the results of operations for the year ended

December 30, 2023 as

compared to December 31, 2022 for net sales and segment adjusted operating

income based on the realigned

segments is presented below.

Note: Percentages for Net Sales; Gross Profit; Operating Expenses; Other

Expense, Net; and Income Taxes are

based on actual values and may not recalculate due to rounding.

Net Sales

Net sales were as follows:

% of

% of

Increase / (Decrease)

2023

Total

2022

Total

$

%

Global Distribution and Value

-Added Services

Global Dental merchandise

(1)

$

4,787

38.8

%

$

4,763

37.7

%

$

24

0.5

%

Global Dental equipment

(2)

1,671

13.5

1,715

13.5

(44)

(2.6)

Global Value

-added services

(3)

191

1.6

151

1.2

40

27.1

Global Dental

6,649

53.9

6,629

52.4

20

0.3

Global Medical

(4)

3,912

31.7

4,346

34.4

(434)

(10.0)

Total Global Distribution and Value

-Added Services

10,561

85.6

10,975

86.8

(414)

(3.8)

Global Specialty Products

(5)

1,331

10.8

1,273

10.1

58

4.6

Global Technology

(6)

602

4.9

549

4.3

53

9.6

Eliminations

(155)

(1.3)

(150)

(1.2)

(5)

n/a

Total

$

12,339

100.0

$

12,647

100.0

$

(308)

(2.4)

(1)

Includes infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, dental

implants, gypsum, acrylics, articulators, abrasives, PPE products,

and our own corporate brand of consumable merchandise.

(2)

Includes dental chairs, delivery units and lights, digital dental laboratories, X-ray supplies and equipment, equipment repair and

high-tech and digital restoration equipment.

(3)

Consists of financial services on a non-recourse basis, continuing education services for practitioners, consulting and other services.

(4)

Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, X-ray

products, equipment, PPE products and vitamins.

(5)

Includes manufacturing, marketing and sales of dental implant and biomaterial products; and endodontic, orthodontic and

orthopedic products and other health care-related products and services.

(6)

Consists of practice management software, e-services, and other products, which are distributed to health care providers.

The components of our sales growth/(decline) were as follows:

Local Currency Growth/(Decline)

Total Local

Currency

Growth/

(Decline)

Foreign

Exchange

Impact

Total Sales

Growth/

(Decline)

Local

Internal

Growth

Acquisition

Growth

Extra Week

Impact

Global Distribution and Value

-Added Services

Global Dental Merchandise

(0.6)

%

2.2

%

(1.0)

%

0.6

%

(0.1)

%

0.5

%

Global Dental Equipment

(1.7)

1.1

(2.1)

(2.7)

0.1

(2.6)

Global Value

-added services

11.4

16.5

(0.7)

27.2

(0.1)

27.1

Global Dental

(0.6)

2.2

(1.3)

0.3

-

0.3

Global Medical

(11.0)

2.3

(1.3)

(10.0)

-

(10.0)

Total Global Distribution and Value

-Added Services

(4.7)

2.2

(1.3)

(3.8)

-

(3.8)

Global Specialty Products

(4.0)

8.7

(1.0)

3.7

0.9

4.6

Global Technology

8.3

2.1

(0.8)

9.6

-

9.6

Total

(4.2)

2.9

(1.2)

(2.5)

0.1

(2.4)

Table of Contents

Index to Financial Statements

60

Global Sales

We report our results of operations on a 52 or 53 weeks per fiscal year basis ending on the last Saturday of

December.

The year ended December 30, 2023 consisted of 52 weeks, and

the year ended December 31, 2022

consisted of 53 weeks,

resulting in an extra week of sales.

Global net sales for the year ended December 30, 2023 decreased 2.4%.

The components of our sales decline are

presented in the table above.

The 4.2% decrease in our internally generated local currency sales was primarily

attributable to a decrease in sales

of PPE products and COVID-19 test kits.

For the nine months ended September 30, 2023, the estimated

increase in

internally generated local currency sales, excluding PPE products

and COVID-19 test kits, was 3.5%.

However, as

a result of the adverse impact of the 2023 cyber incident during the quarter ended

December 30, 2023, our

internally generated local currency sales, excluding sales of PPE products

and COVID-19 test kits, on a full year

basis were flat compared to the prior year.

Global Distribution and Value-Added Services Sales

Global Distribution and Value-Added Services net sales for the year ended December 30, 2023 decreased 3.8%.

The components of our sales decline are presented in the table above.

The 0.6% decrease in internally generated local currency dental sales was attributable

to a decrease in sales of

dental merchandise and dental equipment as a result of the adverse

impact of the 2023 cyber incident.

The 11.0% decrease in internally generated local currency medical sales is primarily attributable

to the impact of

the 2023 cyber incident and to lower sales of PPE products and COVID-19

test kits and other point-of-care

diagnostic products.

The acquisition growth in medical sales was attributable to our expansion

in the Home Solutions market, including

the acquisition of Shield Healthcare during the year ended December

30, 2023.

The acquisition growth in value-

added services was attributable primarily to an acquisition of a practice

transitions business in 2023.

The increase in internally generated local currency value-added services

sales is attributable to an increase in our

dental billing solutions, partially offset by the expiration, during the year ended

December 31, 2022, of a modestly

profitable government contract in one of our value-added services businesses.

We estimate that sales of PPE products and COVID-19 test kits were approximately $710

million for the year

ended December 30, 2023

as compared to $1,238 million for the year ended December 31, 2022

representing an

estimated decrease of $528 million.

The estimated $528 million net decrease in sales of PPE products

and COVID-

19 test kits represents 5.0%

of Global Distribution and Value-Added Services net sales for the year ended

December 30, 2023 and was primarily due to lower market prices and loss of

demand during the 2023 cyber

incident.

Excluding PPE products and COVID-19 test kits, our internally

generated local currency sales were flat.

Global Specialty Products

Global Specialty Products net sales for the year ended December 30, 2023

increased 4.6%.

The components of

sales increase are presented in the table above.

The decrease in internally generated local currency sales was primarily

attributable to lower sales in our

orthodontics business,

partially impacted by a patent expiration and the October 2023

cyber incident and declines in

certain other health care related consumable merchandise products.

The acquisition growth in Global Specialty Products sales was attributable

to the acquisitions of Biotech Dental and

S.I.N. Implant system during the year ended December 30, 2023.

Table of Contents

Index to Financial Statements

61

Global Technology

Global Technology net sales for the year ended December 30, 2023 increased 9.6%.

The components of our sales

growth are presented in the table above.

During the year ended December 30, 2023, the trend for sales of practice

management software growth remained strong as we continued to

increase the number of cloud-based users.

We

also experienced increased demand for our revenue cycle management solutions

and our analytical products.

This

segment of our business was not directly affected by the 2023 cyber

incident in the fourth quarter.

Gross Profit

Gross profit and gross margin percentages by reportable segment were as follows:

Gross

Gross

Increase / (Decrease)

2023

Margin %

2022

Margin %

$

%

Global Distribution and Value

-Added Services

$

2,699

25.6

%

$

2,769

25.2

%

$

(70)

(2.5)

%

Global Specialty Products

720

54.1

678

53.3

42

6.3

Global Technology

417

67.4

375

69.2

42

11.3

Corporate

24

n/a

9

n/a

15

152.9

Total

$

3,860

31.7

$

3,831

31.3

$

29

0.8

As a result of different practices of categorizing costs associated with distribution networks

throughout our

industry, our gross margins may not necessarily be comparable to other distribution companies.

Gross margin

percentages vary between our segments.

We realize substantially higher gross margin from sales of products that

we develop and manufacture within our Global Specialty Products segment

compared to gross margin from sales of

products that we distribute within our Global Distribution and Value-Added Services segment.

Within our Global

Technology segment, higher gross margins result from us being both the developer and seller of software products

and services.

Within our Global Distribution and Value

-Added Services segment, gross profit margins may vary between the

periods as a result of the changes in the mix of products sold as well as

changes in our customer mix.

For example,

sales of our corporate brand and certain specialty products achieve

gross profit margins that are higher than average

total gross profit margins of all products.

With respect to customer mix, sales to our large-group customers are

typically completed at lower gross margins due to the higher volumes sold as opposed

to the gross margin on sales

to office-based practitioners, who normally purchase lower volumes.

The decrease in Global Distribution and Value-Added Services gross profit for the year ended December 30, 2023

compared to the prior year was due to the 2023 cyber incident and a

reduction in sales of PPE products and

COVID-19 test kits, partially offset by additional gross profit from acquisitions.

The increase in Global Specialty Products gross profit is primarily attributable

to gross profit from our acquisitions

offset by lower gross profit from our orthodontics business and certain other health

care related consumable

merchandise products.

The increase in gross margin rates was due to a favorable impact of sales mix.

The increase in Global Technology gross profit reflects increased local currency revenues and additional gross

profit from acquisitions.

Table of Contents

Index to Financial Statements

62

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization,

restructuring and integration costs) by segment were as follows:

% of

% of

Respective

Respective

Increase / (Decrease)

2023

Net Sales

2022

Net Sales

$

%

Global Distribution and Value

-Added Services

$

2,034

19.3

%

$

1,936

17.6

%

$

98

5.0

%

Global Specialty Products

545

41.0

486

38.2

59

12.3

Global Technology

275

45.6

250

45.4

25

10.1

Corporate

116

n/a

121

n/a

(5)

(4.9)

2,970

24.1

2,793

22.1

177

6.3

Adjustments

(1)

275

n/a

291

n/a

(16)

n/a

Total operating expenses

$

3,245

26.3

$

3,084

24.4

$

161

5.2

(1)

Adjustments represent items excluded from segment operating income to enable comparison of financial results between periods.

These items may vary independently of business performance.

Please see

Note 4 – Segment and Geographic Data

.

These

adjustments (current year vs. prior year) consist of (i) acquisition intangible amortization ($150 million vs. $126 million); (ii)

restructuring costs ($80 million vs. $131 million); (iii) cyber incident third-party advisory expenses ($11 million vs. $0 million);

(iv) impairment of capitalized assets ($27 million vs. $0 million); and (v) impairment of intangible assets ($7 million vs. $34

million).

The net increase in operating expenses is attributable to the following:

Operating Costs

(excluding

acquisitions)

Acquisitions

Adjustments

Total

Global Distribution and Value

-Added Services

$

45

$

53

$

-

$

98

Global Specialty Products

(12)

71

-

59

Global Technology

21

4

-

25

Corporate

(5)

-

-

(5)

49

128

-

177

Adjustments

-

-

(16)

(16)

Total operating expenses

$

49

$

128

$

(16)

$

161

The increase in operating costs (excluding acquisitions) during the year ended

December 30, 2023 includes

increases in payroll and payroll related costs primarily in our Global

Distribution and Value-Added Services

segment.

During the year ended December 30, 2023, our operating expenses

were favorably impacted by the

recognition of a remeasurement gain of $18 million following an acquisition of

a controlling interest of a previously

held equity investment.

Other Expense, Net

Other expense, net was as follows:

Variance

2023

2022

$

%

Interest income

$

17

$

8

$

9

125.1

%

Interest expense

(87)

(35)

(52)

(148.7)

Other, net

(3)

1

(4)

n/a

Other expense, net

$

(73)

$

(26)

$

(47)

(172.9)

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings and increased interest rates.

Table of Contents

Index to Financial Statements

63

Income Taxes

Our effective tax rate was 22.1% for the year ended December 30, 2023 compared to 23.5%

for the prior year.

In

each year, the difference between our effective and federal statutory tax rates primarily relates to state and foreign

income taxes and interest expense.

The Organization of Economic Co-Operation and Development (OECD) issued

technical and administrative

guidance on Pillar Two rules in December 2021, which provides for a global minimum tax rate on the earnings of

large multinational businesses on a country-by-country basis.

Effective January 1, 2024, the minimum global tax

rate is 15% for various jurisdictions pursuant to the Pillar Two rules.

Future tax reform resulting from these

developments may result in changes to long-standing tax principles, which

may adversely impact our effective tax

rate going forward or result in higher cash tax liabilities.

As of December 30, 2023, the impact of the Pillar Two

rules to our financial statements was immaterial.

Table of Contents

Index to Financial Statements

64

Liquidity and Capital Resources

Our principal capital requirements have included funding of acquisitions, purchases

of additional noncontrolling

interests, repayments of debt principal, the funding of working capital needs,

purchases of fixed assets and

repurchases of common stock.

Working capital requirements generally result from increased sales, special

inventory forward buy-in opportunities and payment terms for receivables

and payables.

Historically, sales have

tended to be stronger during the second half of the year and special inventory

forward buy-in opportunities have

been most prevalent just before the end of the year, and have caused our working capital requirements

to be higher

from the end of the third quarter to the end of the first quarter of

the following year.

We finance our business primarily through cash generated from our operations, revolving credit facilities and debt

placements.

Please see

Note 14 – Debt

for further information.

Our ability to generate sufficient cash flows from

operations is dependent on the continued demand of our customers

for our products and services, and access to

products and services from our suppliers.

Our business requires a substantial investment in working capital, which

is susceptible to fluctuations during the

year as a result of inventory purchase patterns and seasonal demands.

Inventory purchase activity is a function of

sales activity, special inventory forward buy-in opportunities and our desired level of inventory.

We finance our business to provide adequate funding for at least 12 months.

Funding requirements are based on

forecasted profitability and working capital needs, which, on occasion, may

change.

Consequently, we may change

our funding structure to reflect any new requirements.

We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,

and our available funds under existing credit facilities provide us with

sufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

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.

Net cash provided by operating activities was $848 million for the

year ended December 28, 2024, compared to net

cash provided by operating activities of $500 million for the prior year.

The net change of $348 million was

primarily attributable to changes in working capital accounts (primarily accounts

receivable and inventory), and

higher cash net income.

The residual impacts of the 2023 cyber incident on our working

capital during the year

ended December 28, 2024 included an increase in operating cash flows from

accounts receivable due to improved

collection levels and decreased cash flows from accounts payable and accrued

expenses resulting from previously

delayed payments.

Net cash used in investing activities was $430 million for the year

ended December 28, 2024, compared to net cash

used in investing activities of $1,135 million for the prior year.

The net change of $705 million was primarily

attributable to decreased payments for equity investments and business

acquisitions.

Net cash used in financing activities was $510 million for the year

ended December 28, 2024, compared to net cash

provided by financing activities of $701 million for the prior year.

The net change of $1,211 million was primarily

due to decreased net borrowings from debt to finance our investments,

increased acquisitions of noncontrolling

interests in subsidiaries and increased repurchases of common stock.

Table of Contents

Index to Financial Statements

65

The following table summarizes selected measures of liquidity and capital

resources:

December 28,

December 30,

2024

2023

Cash and cash equivalents

$

122

$

171

Working

capital

(1)

1,180

1,805

Debt:

Bank credit lines

$

650

$

264

Current maturities of long-term debt

56

150

Long-term debt

1,830

1,937

Total debt

$

2,536

$

2,351

Leases:

Current operating lease liabilities

$

75

$

80

Non-current operating lease liabilities

259

310

(1)

Includes $241 million and $284 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

securitization at December 28, 2024 and December 30, 2023, respectively.

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations

increased to 47.3 days as of December 28, 2024

from 46.2 days as of December 30, 2023.

Adjusted for the impact of the cyber incident our days sales outstanding

decreased to 45.7 days as of December 28, 2024.

During the years ended December 28, 2024 and December

30,

2023, we wrote off approximately $12 million and $16 million, respectively, of fully reserved accounts receivable

against our trade receivable reserve.

Our inventory turns from operations increased to 5.0 as of December

28, 2024

from 4.5 as of December 30, 2023.

Our working capital accounts may be impacted by current and

future economic

conditions.

Contractual obligations

The following table summarizes our contractual obligations related

to fixed and variable rate long-term debt and

finance lease obligations, including interest (assuming a weighted

average interest rate of 4.88%), as well as

inventory purchase commitments and operating lease obligations

as of December 28, 2024:

Payments due by period

1 year

2 - 3 years

4 - 5 years

5 years

Total

Contractual obligations:

Long-term debt, including interest

$

140

$

1,053

$

337

$

657

$

2,187

Inventory purchase commitments

9

5

-

-

14

Operating lease obligations

87

130

80

81

378

Transition tax obligations

24

-

-

-

24

Finance lease obligations, including interest

3

3

1

-

7

Total

$

263

$

1,191

$

418

$

738

$

2,610

For information relating to our debt please see

Note 14 – Debt

.

Table of Contents

Index to Financial Statements

66

Leases

We have operating and finance leases for corporate offices, office space, distribution and other facilities, vehicles

and certain equipment.

Our leases have remaining terms of less than one year to approximately

17 years, some of

which may include options to extend the leases for up to 15 years.

As of December 28, 2024, our right-of-use

assets related to operating leases were $293 million and our current and

non-current operating lease liabilities were

$75 million and $259 million, respectively.

Please see

Note 8 – Leases

for further information.

Stock Repurchases

On January 27, 2025, our Board authorized the repurchase of up

to an additional $500 million in shares of our

common stock.

From March 3, 2003 through December 28, 2024, we repurchased $5.1

billion, or 95,814,454 shares, under our

common stock repurchase programs, with $380 million available

as of December 28, 2024 for future common stock

share repurchases.

Subject to market conditions and other factors, we plan to continue

to accelerate our share

repurchase activity.

Redeemable Noncontrolling Interests

Some minority stockholders in certain of our subsidiaries have the right,

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

Accounting Standards Codification Topic 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling

interest holder under the terms of a put

option contained in contractual agreements.

As of December 28, 2024 and December 30, 2023, our balance

for

redeemable noncontrolling interests was $806 million and $864 million,

respectively.

Please see

Note 20 –

Redeemable Noncontrolling Interests

for further information.

Unrecognized tax benefits

As more fully disclosed in

Note 15 – Income Taxes

of “Notes to Consolidated Financial Statements,” we cannot

reasonably estimate the timing of future cash flows related to our unrecognized

tax benefits, including accrued

interest, of $108 million and $115 million as of December 28, 2024 and December 30, 2023, respectively.

Critical Accounting Estimates

Our accounting policies are described in

Note 1 – Basis of Presentation and Significant Accounting Policies

of the

consolidated financial statements.

The preparation of consolidated financial statements requires us

to make

estimates and judgments that affect the reported amounts of assets, liabilities, revenues

and expenses and related

disclosures of contingent assets and liabilities.

We base our estimates on historical data, when available,

experience, industry and market trends, and on various other assumptions

that are believed to be reasonable under

the circumstances, the combined results of which form the basis for

making judgments about the carrying values of

assets and liabilities that are not readily apparent from other sources.

We believe that the estimates, judgments and

assumptions upon which we rely are reasonable based upon information

available to us at the time that these

estimates, judgments and assumptions are made.

However, by their nature, estimates are subject to various

assumptions and uncertainties.

Therefore, reported results may differ from estimates and any such differences may

be material to our consolidated financial statements.

We believe that the following critical accounting estimates, which have been discussed with the Audit Committee

of our Board, affect the significant estimates and judgments used in the preparation

of our consolidated financial

statements:

Table of Contents

Index to Financial Statements

67

Inventories and Reserves

Inventories consist primarily of finished goods, raw materials and

work-in-process and are valued at the lower of

cost or net realizable value.

Cost is determined by the weighted average method for merchandise and

actual cost

for large equipment,

high tech equipment and drop-shipments.

We include product costs, labor, and related fixed

and variable overhead in the cost of inventory

that we manufacture.

In estimating carrying value of inventory, we

consider many factors including the condition and salability of the inventory

by reviewing on-hand quantities,

historical sales, forecasted sales and market and economic trends.

Business Combinations

The estimated fair value of acquired identifiable intangible assets (i.e., customer

relationships and lists, trademarks

and trade names, product development and non-compete agreements)

is based on critical judgments and

assumptions derived from analysis of market conditions, including discount

rates, projected revenue growth rates

(which are based on historical trends and assessment of financial projections),

estimated customer attrition and

projected cash flows.

These assumptions are forward-looking and could be affected by future economic

and market

conditions.

Please see

Note 5 – Business Acquisitions

for further discussion of our acquisitions.

Goodwill

Goodwill is subject to impairment analysis at least once annually as

of the first day of our fourth quarter, or if an

event occurs or circumstances change that would more likely than

not reduce a reporting unit’s fair value below

carrying value.

We regard our reporting units to be our operating segments or one level below the operating

segments.

Goodwill is allocated to such reporting units, for the purposes of

preparing our impairment analyses,

based on a specific identification basis.

Application of the goodwill impairment test requires judgment, including

the identification of reporting units,

assignment of assets and liabilities that are considered shared services

to the reporting units, and ultimately the

determination of the fair value of each reporting unit.

The fair value of each reporting unit is calculated by

applying the discounted cash flow methodology and confirming with

a market approach.

There are inherent

uncertainties, however, related to fair value models, the inputs and our judgments in applying them

to this analysis.

The most significant inputs include estimation of detailed future cash flows based

on budget expectations, and

determination of comparable companies to develop a weighted average

cost of capital for each reporting unit.

On an annual basis, we prepare financial projections.

These projections are based on input from our leadership and

are presented annually to our Board.

Influences on this year's forecasted financial information and

the fair value

model include: the impact of planned strategic initiatives, the continued

integration of recent acquisitions and

overall market conditions.

The estimates used to calculate the fair value of a reporting unit change

from year to

year based on operating results, market conditions, and other factors.

During the year ended December 28, 2024, we engaged third-party valuation

specialists to determine the relative

fair value of our goodwill related to the revision of our reportable segments.

Our management reviewed and

approved this valuation.

During the fourth quarter of our fiscal year ended December 28, 2024,

we revised our segment structure to align

with how our Chairman and Chief Executive Officer manages the business, assesses

performance and allocates

resources.

Our revised reportable segments now consist of: (i) Global Distribution

and Value

-Added Services; (ii)

Global Specialty Products; and (iii) Global Technology.

Reporting units under the former structure were tested for

impairment, and no impairment was identified.

As a result of the realignment and the change in operating

segments, we reallocated goodwill to each of our new reporting units using

a relative fair value approach.

Based on

the impairment test under the new structure, it was determined that the

fair values of our reporting units more likely

than not exceeded their carrying values, resulting in no impairment.

For both the former and new structure

goodwill impairment tests as of September 30, 2024, the fair values of reporting

units were computed using the

methodology described above.

Table of Contents

Index to Financial Statements

68

In connection with our restructuring initiatives, during the year ended

December 28, 2024, we recorded an $11

million impairment of goodwill in the Global Specialty Products segment,

relating to the disposal of a portion of a

business; such impairment was calculated based on the relative fair value of

goodwill.

For the year ended

December 31, 2022, in connection with our restructuring activities, we

recorded a $20 million impairment of

goodwill, in the Global Specialty Products segment, relating to the disposal

of an unprofitable business for which

estimated fair value was lower than carrying value.

Apart from the above impairments identified in connection with

our restructuring initiative, we did not record any

additional impairment during the years ended December 28, 2024, December

30, 2023, and December 31, 2022.

We performed our annual quantitative testing for the remaining goodwill and the fair value of each of our reporting

units sufficiently exceeded the carrying values.

Definite-Lived Intangible Assets

Annually or if we identify an impairment indicator,

definite-lived intangible assets such as non-compete

agreements, trademarks, trade names, customer relationships and lists, and

product development are reviewed for

impairment indicators.

If any impairment indicators exist, quantitative testing

is performed on the asset.

The quantitative impairment model is a two-step test under which we

first calculate the recoverability of the

carrying value by comparing the undiscounted projected cash flows associated

with the asset or asset group,

including its estimated residual value, to the carrying amount.

If the cash flows associated with the asset or asset

group are less than the carrying value, we perform a fair value assessment

of the asset, or asset group.

If the

carrying amount is found to be greater than the fair value, we record an

impairment loss for the excess of book

value over the fair value.

In addition, in all cases of an impairment review, we re-evaluate the remaining useful

lives of the assets and modify them, as appropriate.

Although we believe our judgments, estimates and/or

assumptions used in estimating cash flows and determining fair value

are reasonable, making material changes to

such judgments, estimates and/or assumptions could materially affect such impairment

analyses and our financial

results.

During the year ended December 28, 2024, we recorded $4 million of

impairment charges related to businesses in

our Global Distribution and Value-Added Services segment.

It included $2 million of a trade name impairment,

calculated using the relative fair value, related to a disposal of a business,

and $1 million related to trade name

impairment due to business integration in connection with our restructuring

initiatives.

The remaining $1 million

impairment charges related to trade names and non-compete agreements and were

calculated as the differences

between the carrying values and the estimated fair values of the impaired

intangible assets, using a discounted

estimate of future cash flows.

During the year ended December 30, 2023, we recorded $19 million of

impairment charges related to businesses in

our Global Distribution and Value-Added Services segment, consisting of $7 million primarily related to customer

lists and relationships attributable to lower than anticipated operating

margins in certain businesses, and a $12

million charge related to the planned exit of a business in connection with our restructuring

initiatives.

These

impairment charges were calculated as the differences between the carrying values and the

estimated fair values of

the impaired intangible assets, using a discounted estimate of future

cash flows.

During the year ended December 31, 2022, we recorded $49 million of

impairment charges related to businesses in

our Global Distribution and Value-Added Services segment, consisting of a $15 million charge related to the

disposal of an unprofitable business in connection with our restructuring

initiatives, and a $34 million charge

related to customer lists and relationships attributable to customer attrition rates

being higher than expected in

certain other Global Distribution and Value-Added Services businesses.

These impairment charges were calculated

as the differences between the carrying values and the estimated fair values of

the impaired intangible assets, using

a discounted estimate of future cash flows.

Please see

Note 16 – Plans of Restructuring and Integration Costs

for additional details.

Table of Contents

Index to Financial Statements

69

Redeemable Noncontrolling Interests

Some minority stockholders in certain of our consolidated subsidiaries have

the right, at certain times, to require us

to acquire their ownership interest in those entities at fair value.

The redemption amounts have been estimated

based on recent transactions and/or implied multiples of earnings

and, if such earnings and cash flows are not

achieved, the value of the redeemable noncontrolling interests might be impacted.

See

Note 1 – Basis of

Presentation and Significant Accounting Policies

and

Note 20 – Redeemable Noncontrolling Interests

for additional

information.

Income Tax

When determining if the realization of a deferred tax asset is likely to assess

the need to record a valuation

allowance, estimates and judgement are required.

We

consider all available evidence, both positive and negative,

including estimated future taxable earnings, ongoing planning strategies,

future reversals of existing temporary

differences and historical operating results.

Additionally, changes to tax laws and statutory tax rates can have an

impact on our determination.

We

evaluate the realizability of our deferred tax assets quarterly.

Accounting Standards Codification Topic 740 prescribes the accounting for uncertainty in income taxes recognized

in the financial statements in accordance with provisions contained within

its guidance.

This topic prescribes a

recognition threshold and a measurement attribute for the financial statement

recognition and measurement of tax

positions taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be

more likely than not to be sustained upon examination by the taxing authorities.

The amount recognized is

measured as the largest amount of benefit that has a greater than 50% likelihood of being

realized upon ultimate

audit settlement.

In the normal course of business, our tax returns are subject

to examination by various taxing

authorities.

Such examinations may result in future tax and interest assessments

by these taxing authorities for

uncertain tax positions taken in respect of certain tax matters.

Please see

Note 15 – Income Taxes

for further

discussion.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted in the future, please see

Note 1 – Basis of Presentation and Significant Accounting Policies

included under Item 8.

Table of Contents

Index to Financial Statements

70

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Cautionary Note Regarding Forward-Looking Statements

In accordance with the “Safe Harbor” provisions of the Private Securities

Litigation Reform Act of 1995, we

provide the following cautionary remarks regarding important factors

that, among others, could cause future results

to differ materially from the forward-looking statements, expectations and assumptions

expressed or implied

herein.

All forward-looking statements made by us are subject to

risks and uncertainties and are not guarantees of

future performance.

These forward-looking statements involve known and unknown

risks, uncertainties and other

factors that may cause our actual results, performance and achievements

or industry results to be materially

different from any future results, performance or achievements expressed or implied by such

forward-looking

statements.

These statements are generally identified by the use of such

terms as “may,” “could,” “expect,”

“intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,”

“to be,” “to make” or other comparable

terms.

Factors that could cause or contribute to such differences include, but are not limited

to, those discussed in

this Annual Report on Form 10-K, and in particular the risks discussed under

the caption “Risk Factors” in Item 1A

of this report and those that may be discussed in other documents we

file with the Securities and Exchange

Commission (“SEC”).

Risk factors and uncertainties that could cause actual results to differ materially from

current and historical results

include, but are not limited to: our dependence on third parties for

the manufacture and supply of our products; our

ability to develop or acquire and maintain and protect new products (particularly

technology products) and

technologies that achieve market acceptance with acceptable margins; transitional

challenges associated with

acquisitions, dispositions and joint ventures, including the failure

to achieve anticipated synergies/benefits, as well

as significant demands on our operations, information systems,

legal, regulatory, compliance, financial and human

resources functions in connection with acquisitions, dispositions and

joint ventures; certain provisions in our

governing documents that may discourage third-party acquisitions of us; adverse

changes in supplier rebates or

other purchasing incentives; risks related to the sale of corporate brand products;

security risks associated with our

information systems and technology products and services, such as

cyberattacks or other privacy or data security

breaches (including the October 2023 incident); effects of a highly competitive (including, without

limitation,

competition from third-party online commerce sites) and consolidating

market;

changes in the health care industry;

risks from expansion of customer purchasing power and multi-tiered

costing structures; increases in shipping costs

for our products or other service issues with our third-party shippers; general

global and domestic macro-economic

and political conditions, including inflation, deflation, recession, ongoing

wars, fluctuations in energy pricing and

the value of the U.S. dollar as compared to foreign currencies, and changes

to other economic indicators,

international trade agreements, potential trade barriers and terrorism; geopolitical

wars; failure to comply with

existing and future regulatory requirements; risks associated with the EU Medical

Device Regulation; failure to

comply with laws and regulations relating to health care fraud or other

laws and regulations; failure 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; changes in tax legislation;

risks related to product liability, intellectual

property and other claims; risks associated with customs policies

or legislative import restrictions; risks associated

with disease outbreaks, epidemics, pandemics (such as the COVID-19

pandemic), or similar wide-spread public

health concerns and other natural or man-made disasters; risks associated with our

global operations; litigation

risks; new or unanticipated litigation developments and the status

of litigation matters; our dependence on our

senior management, employee hiring and retention, and our relationships

with customers, suppliers and

manufacturers; and disruptions in financial markets.

The order in which these factors appear should not be

construed to indicate their relative importance or priority.

We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control

or predict.

Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction

of actual results.

We undertake no duty and have no obligation to update forward-looking statements except as

required by law.

Table of Contents

45

Where You

Can Find Important Information

We may disclose important information through one or more of the following channels: SEC filings, public

conference calls and webcasts, press releases, the investor relations

page of our website (www.henryschein.com)

and the social media channels identified on the Newsroom page of our website.

Recent Developments

During the years ended December 30, 2023 and December 31, 2022 we

continued to experience a decrease in the

sales of PPE and COVID-19 test kits as compared to the comparable

prior-year periods, primarily due to lower

market pricing of PPE and lower market demand for COVID-19

test kits.

While the U.S. economy has recently experienced inflationary

pressures and strengthening of the U.S. dollar, their

impacts have not been material to our results of operations.

Though inflation impacts both our revenues and costs,

the depth and breadth of our product portfolio often allows us to offer lower-cost

national brand solutions or

corporate brand alternatives to our more price-sensitive customers who

are unwilling to absorb price increases, thus

positioning us to protect our gross profit.

Our consolidated financial statements reflect estimates and assumptions

made by us that affect, among other things,

our goodwill, long-lived asset and definite-lived intangible asset valuation;

inventory valuation; equity investment

valuation; assessment of the annual effective tax rate; valuation of deferred income

taxes and income tax

contingencies; the allowance for doubtful accounts; hedging activity; supplier

rebates; measurement of

compensation cost for certain share-based performance awards and cash bonus

plans; and pension plan

assumptions.

Cybersecurity Incident

In addition to immaterial and unrelated prior incidents at certain of

our subsidiaries, in October 2023 Henry Schein

experienced a cybersecurity incident that primarily affected the operations of our

North American and European

dental and medical distribution businesses.

Henry 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. Once we became aware of the issue, we took steps

to assess, contain and

remediate this incident.

We restored affected systems and applications, our distribution operations resumed and we

reactivated our ecommerce platform.

We also notified law enforcement and our employees, customers, suppliers

and investors, informing them of both the incident and management’s efforts to mitigate its impact on our daily

operations and data maintained on the Company’s systems.

Subsequently, on or about November 8, 2023, we

determined that the threat actor obtained personal and sensitive information

maintained on our systems belonging to

certain third parties and since that date we have notified affected and potentially affected parties

as appropriate.

The scope of personal and sensitive data impacted is still under investigation.

On November 22, 2023, we

experienced a related disruption to our ecommerce platform and related

applications, which has since been

remediated.

As described in “Management’s Discussion & Analysis – 2023 Compared to 2022, the incident

adversely impacted our financial results for the fourth quarter and full year 2023.

We also expect some short-term

residual impact on our financial results in 2024.

We maintain cybersecurity insurance, subject to certain retentions and policy limitations.

With respect to the

October 2023 cybersecurity incident, we have a $60 million insurance policy, following a $5 million retention.

Table of Contents

46

Executive-Level Overview

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.

We

serve more than one million customers

worldwide including dental practitioners, laboratories, physician practices, and

ambulatory surgery centers, as well

as government, institutional health care clinics and other alternate care clinics.

We

believe that we have a strong

brand identity due to our more than 91 years of experience distributing health

care products.

We are headquartered in Melville, New York,

employ approximately 25,000 people (of which approximately

11,500 are based outside of the United States) and have operations or affiliates in 33 countries and territories.

Our

broad global footprint has evolved over time through our organic success as well as

through contribution from

strategic acquisitions.

We

have established strategically located distribution centers around

the world to enable us to better serve our

customers and increase our operating efficiency.

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.

While our primary go-to-market strategy is in our capacity as a distributor, we also market and sell our own

corporate brand portfolio of cost-effective, high-quality consumable merchandise products,

including in vitro

diagnostic devices, manufacture certain dental specialty products in

the areas of implants, orthodontics and

endodontics, manufacture drug products, and repackage/relabel prescription drugs

and/or devices.

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.

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.

Our global

dental businesses serve office-based dental practitioners, dental laboratories, schools, government

and other

institutions.

Our medical businesses serve 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.

The health care distribution reportable segment, combining our global dental and

medical operating segments,

distributes consumable products, small equipment, laboratory products, large equipment, equipment

repair services,

branded and generic pharmaceuticals, vaccines, surgical products, dental specialty

products (including implant,

orthodontic and endodontic products), diagnostic tests, infection-control products,

PPE products and vitamins.

Our global technology and value-added services business provides software, technology

and other value-added

services to health care practitioners.

Our technology business offerings include practice management software

systems for dental and medical practitioners.

Our value-added practice solutions include practice consultancy,

education, revenue cycle management and financial services on a non-recourse

basis, e-services, practice

technology, network and hardware services, as well as consulting, and continuing education services for

practitioners.

A key element to grow closer to our customers is our One Schein initiative, which

is a unified go-to-market

approach that enables practitioners to work synergistically with our supply chain,

equipment sales and service and

other value-added services, allowing our customers to leverage the

combined value that we offer through a single

program.

Specifically, One Schein provides customers with streamlined access to our comprehensive offering of

national brand products, our corporate brand products and proprietary specialty

products and solutions (including

implant, orthodontic and endodontic products).

In addition, customers have access to a wide range of services,

including software and other value-added services.

Table of Contents

47

Industry Overview

In recent years, the health care industry has increasingly focused on 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.

Our operating results in recent years have been significantly affected by strategies

and transactions that we

undertook to expand our business, domestically and internationally, in part to address significant changes in the

health care industry, including consolidation of health care distribution companies, health care reform, trends

toward managed care, cuts in Medicare and collective purchasing arrangements.

Industry Consolidation

The health care products 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 group practices

or service organizations ranging in size from a few practitioners to a large number of practitioners who have

combined or otherwise associated their practices.

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 or an administrative assistant.

Supplies and small equipment are generally purchased from more

than

one distributor, with one generally serving as the primary supplier.

The trend of consolidation extends to our customer base.

Health care practitioners are increasingly seeking to

partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician

hospital organizations.

In many cases, purchasing decisions for consolidated groups

are made at a centralized or

professional staff level; however, orders are delivered to the practitioners’ offices.

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

companies that can enhance their current product and service offerings or provide

opportunities to serve a broader

customer base.

Our approach to acquisitions and joint ventures has been to expand our role as

a provider of products and services

to the health care industry.

This trend has resulted in our expansion into service areas that complement

our existing

operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired

businesses.

As industry consolidation continues, we believe that we are positioned to

capitalize on this trend, as we believe we

have the ability to support increased sales through our existing infrastructure, although

there can be no assurances

that we will be able to successfully accomplish this.

We

also have invested in expanding our sales/marketing

infrastructure to include a focus on building relationships with decision

makers who do not reside in the office-

based practitioner setting.

As the health care industry continues to change, we continually evaluate possible

candidates for joint venture or

acquisition and intend to continue to seek opportunities to expand our

role as a provider of products and services to

the health care industry.

There can be no assurance that we will be able to successfully pursue

any such

opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or

consummated, we would incur merger and/or acquisition-related costs, and there

can be no assurance that the

integration efforts associated with any such transaction would be successful.

Table of Contents

48

Aging Population and Other Market Influences

The health care products distribution industry continues to experience growth

due to the aging population,

increased health care awareness, the proliferation of medical technology

and testing, new pharmacological

treatments, and expanded third-party insurance coverage, partially offset by the effects of unemployment

on

insurance coverage.

In addition, the physician market continues to benefit from the

shift of procedures and

diagnostic testing from acute care settings to alternate-care sites, particularly

physicians’ offices.

According to the U.S. Census Bureau’s International Database, between 2023

and 2033, the 45 and older

population is expected to grow by approximately 11%.

Between 2023 and 2043, this age group is expected to grow

by approximately 21%.

This compares with expected total U.S. population growth

rates of approximately 6%

between 2023 and 2033

and approximately 11% between 2023 and 2043.

According to the U.S. Census Bureau’s International Database, in 2023

there are approximately seven million

Americans aged 85 years or older, the segment of the population most in need of long-term care

and elder-care

services.

By the year 2050, that number is projected to nearly triple to approximately

19 million.

The population

aged 65 to 84 years is projected to increase by approximately 23% during

the same period.

As a result of these market dynamics, annual expenditures for health

care services continue to increase in the

United States.

We believe that demand for our products and services will grow while continuing to be impacted by

current and future operating, economic, and industry conditions.

The Centers for Medicare and Medicaid Services,

or CMS, published “National Health Expenditure Data” indicating

that total national health care spending reached

approximately $4.5 trillion in 2022, or 17.3% of the nation’s gross domestic product, the benchmark

measure for

annual production of goods and services in the United States.

Health care spending is projected to reach

approximately $7.2 trillion by 2031, or 19.6% of the nation’s projected gross domestic product.

Government

Our businesses are generally subject to numerous laws and regulations that could

impact our financial performance,

and failure to comply with such laws or regulations could have a

material adverse effect on our business.

See “

Item 1. Business – Governmental Regulations

” for a discussion of laws, regulations and governmental activity

that may affect our results of operations and financial condition.

Table of Contents

49

Results of Operations

Refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

in

our 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results

of operations for the fiscal year 2022 compared to fiscal year 2021.

The following tables summarize the significant components of our operating

results and cash flows:

Years

Ended

December 30,

December 31,

December 25,

2023

2022

2021

Operating results:

Net sales

$

12,339

$

12,647

$

12,401

Cost of sales

8,478

8,816

8,727

Gross profit

3,861

3,831

3,674

Operating expenses:

Selling, general and administrative

2,956

2,771

2,634

Depreciation and amortization

210

182

180

Restructuring and integration costs

80

131

8

Operating income

$

615

$

747

$

852

Other expense, net

$

(73)

$

(26)

$

(21)

Gain on sale of equity investment

-

-

7

Net income

436

566

660

Net income attributable to Henry Schein, Inc.

416

538

631

Years

Ended

December 30,

December 31,

December 25,

2023

2022

2021

Cash flows:

Net cash provided by operating activities

$

500

$

602

$

710

Net cash used in investing activities

(1,135)

(276)

(677)

Net cash provided by (used in) financing activities

701

(315)

(333)

Table of Contents

50

Plans of Restructuring and Integration Costs

On August 1, 2022, we committed to a restructuring plan focused on

funding the priorities of the BOLD+1 strategic

plan, streamlining operations and other initiatives to increase efficiency.

We revised our previous expectations of

completion and we have extended this initiative through the end of 2024.

We are currently unable in good faith to

make a determination of an estimate of the amount or range of amounts

expected to be incurred in connection with

these activities, both with respect to each major type of cost associated

therewith and to the total cost, or an

estimate of the amount or range of amounts that will result in future

cash expenditures.

During the years ended December 30, 2023, December 31, 2022, and December

25, 2021, we recorded

restructuring costs of $80 million, $128 million, and $8 million, respectively.

The restructuring costs for these

periods primarily related to severance and employee-related costs,

impairment of intangible assets, accelerated

amortization of right-of-use lease assets and fixed assets, other lease exit

costs, and certain business exit costs

discussed below.

During the year ended December 30, 2023, in connection with our restructuring

plan, we recorded an impairment of

an intangible asset of $12 million related to a planned disposal of a non-U.S.

business.

The disposal is expected to

be completed in 2024.

This impairment is included in the $80 million of restructuring

charges discussed above.

During the year ended December 31, 2022, in connection with our

restructuring plan, we vacated one of the

buildings at our corporate headquarters in Melville, New York, which resulted in an accelerated amortization of a

right-of-use lease asset of $34 million.

We also initiated the disposal of a non-profitable U.S. business and

recorded related costs of $49 million, which primarily consisted of

impairment of intangible assets and goodwill,

inventory impairment, and severance and employee-related costs.

These expenses are included in the $128 million

of restructuring charges discussed above.

The disposal was completed during the first quarter of 2023.

On August 26, 2022, we acquired Midway Dental Supply.

In connection with this acquisition, during the year

ended December 31, 2022, we recorded integration costs of $3 million

related to one-time employee and other

costs, as well as restructuring charges of $9 million, which are included in the

$128 million of restructuring charges

discussed above.

On November 20, 2019, we committed to a contemplated restructuring

initiative intended to mitigate stranded costs

associated with the spin-off of our animal health business and to rationalize operations

and provide expense

efficiencies.

These activities were originally expected to be completed by

the end of 2020 but we extended them to

the end of 2021 in light of the changes to the business environment brought

on by the COVID-19 pandemic.

The

restructuring activities under this prior initiative were completed

in 2021.

Table of Contents

51

2023 Compared to 2022

Note: Percentages for Net Sales; Gross Profit; Operating Expenses; Other

Expense, Net; and Income Taxes are

based on actual values and may not recalculate due to rounding.

Net Sales

Net sales were as follows:

% of

% of

Increase / (Decrease)

2023

Total

2022

Total

$

%

Health care distribution

(1)

Dental

$

7,539

61.1

%

$

7,473

59.1

%

$

66

0.9

%

Medical

3,994

32.4

4,451

35.2

(457)

(10.3)

Total health care distribution

11,533

93.5

11,924

94.3

(391)

(3.3)

Technology and value-added services

(2)

806

6.5

723

5.7

83

11.4

Total

$

12,339

100.0

$

12,647

100.0

$

(308)

(2.4)

The components of our sales growth were as follows:

Local Currency Growth/(Decline)

Total Local

Currency

Growth/(Decline)

Foreign

Exchange

Impact

Total Sales

Growth/(Decline)

Local Internal

Growth

Acquisition

Growth

Extra Week

Impact

Health care distribution

(1)

Dental Merchandise

(1.6)

%

4.2

%

(1.0)

%

1.6

%

0.1

%

1.7

%

Dental Equipment

(0.9)

1.1

(2.1)

(1.9)

-

(1.9)

Total Dental

(1.4)

3.4

(1.3)

0.7

0.2

0.9

Medical

(11.2)

2.2

(1.3)

(10.3)

-

(10.3)

Total Health Care Distribution

(5.1)

2.9

(1.2)

(3.4)

0.1

(3.3)

Technology and value-added services

(2)

7.2

5.0

(0.8)

11.4

-

11.4

Total

(4.4)

3.1

(1.2)

(2.5)

0.1

(2.4)

(1)

Consists of consumable products, dental specialty products (including implant, orthodontic and endodontic products), small

equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical

products, diagnostic tests, infection-control products, PPE products and vitamins.

(2)

Consists of practice management software and other value-added products, which are distributed primarily to health care providers,

practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, continuing

education services for practitioners, consulting and other services.

Global Sales

We report our results of operations on a 52 or 53 weeks per fiscal year basis ending on the last Saturday of

December.

The year ended December 30, 2023, consisted of 52 weeks,

and the year ended, December 31, 2022

consisted of 53 weeks,

resulting in an extra week of sales.

Global net sales for the year ended December 30, 2023 decreased 2.4%.

The components of our sales growth are

presented in the table above.

The 4.4% decrease in our internally generated local currency sales was primarily

attributable to a decrease in sales

of PPE products and COVID-19 test kits.

For the nine months ended September 30, 2023, the estimated

increase in

internally generated local currency sales, excluding PPE products

and COVID-19 test kits, was 3.5%.

However, as

a result of the adverse impact of the cybersecurity incident during the quarter

ended December 30, 2023, our

internally generated local currency sales, excluding sales of PPE products

and COVID-19 test kits, on a full year

basis were flat compared to the prior year.

In addition, we estimate that sales of PPE products and COVID-19

test kits were approximately $713 million and

$1,245 million for the years ended December 30, 2023 and December 31,

2022, respectively, representing an

Table of Contents

52

estimated decrease of $532 million or 42.7%

versus the prior year, with the $532 million net decrease year-over-

year representing 4.2%

of global net sales for the year ended December 30, 2023.

Dental

Dental net sales for the year ended December 30, 2023 increased 0.9%.

The components of our sales growth are

presented in the table above.

Our decrease in internally generated local currency sales for dental

merchandise was

primarily attributable to the negative impact of the cybersecurity incident.

Our sales decrease in internally

generated local currency for dental equipment was also primarily attributable

to the impact of the cybersecurity

incident.

We estimate that sales of PPE products were approximately $338 million and $448 million for the years ended

December 30, 2023 and December 31, 2022, respectively, representing an estimated decrease of $110 million or

24.5% versus the prior year, with the $110 million net decrease year-over-year representing 1.5% of dental net sales

for the year ended December 30, 2023.

The decrease in sales of PPE products is primarily due to lower

market

prices and loss of demand during the cybersecurity incident.

Our estimated internally generated local currency

sales, excluding PPE products were flat compared to the prior year.

Medical

Medical net sales for the year ended December 30, 2023 decreased 10.3%.

The components of our sales growth are

presented in the table above.

The internally generated local currency decrease in medical sales

is primarily

attributable to the impact of the cybersecurity incident that occurred

during the fourth quarter of the year ended

December 30, 2023 and to lower sales of PPE products and COVID-19

test kits and other point-of-care diagnostic

products.

We estimate that sales of PPE products and COVID-19 test kits were approximately $375 million and $797 million

for the years ended December 30, 2023 and December 31, 2022, respectively, representing an estimated decrease

of

$422 million or 52.9% versus the prior year, with the $422 million net decrease year-over-year representing 10.6%

of medical net sales for the year ended December 30, 2023.

The decrease in sales of these products is primarily due

to lower market prices of PPE, lower market demand of COVID-19

test kits, and loss of sales of both product

categories during the cybersecurity incident.

The estimated decrease in internally generated local currency

sales,

excluding PPE products and COVID-19 test kits was 2.2%.

Technology and value-added services

Technology and value-added services net sales for the year ended December 30, 2023 increased 11.4%.

The

components of our sales growth are presented in the table above.

During the year ended December 30, 2023, the

trend for sales of practice management software growth remains

strong as we continued to increase the number of

cloud-based users.

We also experienced increased demand for our revenue cycle management solutions and our

analytical products.

The increase in sales during the year ended December 30, 2023

was partially offset by the

expiration, during the year ended December 31, 2022, of a modestly profitable

government contract in one of our

value-added services businesses.

This segment of our business was largely unaffected by the cybersecurity incident

in the fourth quarter.

Gross Profit

Gross profit and gross margin percentages by segment and in total were as follows:

Gross

Gross

Increase / (Decrease)

2023

Margin %

2022

Margin %

$

%

Health care distribution

$

3,312

28.7

%

$

3,357

28.2

%

$

(45)

(1.3)

%

Technology and value-added services

549

68.0

474

65.5

75

15.7

Total

$

3,861

31.3

$

3,831

30.3

$

30

0.8

Table of Contents

53

As a result of different practices of categorizing costs associated with distribution networks

throughout our

industry, our gross margins may not necessarily be comparable to other distribution companies.

Additionally, we

realize substantially higher gross margin percentages in our technology and value-added services

segment than in

our health care distribution segment.

These higher gross margins result from being both the developer and seller of

software products and services, as well as certain financial services.

The software industry typically realizes higher

gross margins to recover investments in research and development.

Within our health care distribution segment, gross profit margins may vary between the periods as a result of

the

changes in the mix of products sold as well as changes in our customer

mix.

For example, sales of our corporate

brand and certain specialty products achieve gross profit margins that are higher than average

total gross profit

margins of all products.

With respect to customer mix, sales to our large-group customers are typically completed

at lower gross margins due to the higher volumes sold as opposed to the gross margin on sales to office-based

practitioners, who normally purchase lower volumes.

Health care distribution gross profit for the year ended December 30, 2023

decreased compared to the prior-year-

period due to the decrease in sales resulting from the cybersecurity

incident and a reduction in sales of PPE

products and COVID-19 test kits, partially offset by gross profit from acquisitions

and gross margin expansion as a

result of a favorable impact of sales mix of higher-margin products.

Technology and value-added services gross profit increased as a result of a higher gross profit from internally

generated sales and gross profit from acquisitions, as well as an increase

in gross margin rates primarily due to

product mix and increases in productivity.

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization,

restructuring and integration costs) by segment and in total were as follows:

% of

% of

Respective

Respective

Increase

2023

Net Sales

2022

Net Sales

$

%

Health care distribution

$

2,842

24.6

%

$

2,738

23.0

%

$

104

3.8

%

Technology and value-added services

404

50.1

346

47.8

58

16.8

Total

$

3,246

26.3

%

$

3,084

24.4

%

$

162

5.3

%

The net increase in operating expenses is attributable to the following:

Operating Costs

Restructuring and

Integration Costs

Acquisitions

Total

Health care distribution

$

92

$

(55)

$

67

$

104

Technology and value-added services

5

4

49

58

Total

$

97

$

(51)

$

116

$

162

The increase in operating costs during the year ended December 30, 2023 includes

increases in payroll and payroll

related costs, travel, convention and consulting expenses in both of our reportable

segments and increased

acquisition expenses in our healthcare distribution segment.

During the year ended December 30, 2023, our

operating expenses were favorably impacted by the recognition of

a remeasurement gain of $18 million following

an acquisition of a controlling interest of a previously held equity

investment, and were negatively impacted by

restructuring, an impairment of capitalized costs of $27 million and impairment

of intangible assets of $7 million

within our health care distribution segment.

During the year ended December 30, 2023, we also incurred $11

million of direct costs, primarily professional fees, for the remediation of

the cybersecurity incident.

The

restructuring and integration costs are primarily related to severance and

employee-related costs, accelerated

amortization of right-of-use lease assets and fixed assets, and other lease exit

costs.

Table of Contents

54

Other Expense, Net

Other expense, net was as follows:

Variance

2023

2022

$

%

Interest income

$

17

$

8

$

9

125.1

%

Interest expense

(87)

(35)

(52)

(148.7)

Other, net

(3)

1

(4)

n/a

Other expense, net

$

(73)

$

(26)

$

(47)

(172.9)

%

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings and increased interest rates.

Income Taxes

Our effective tax rate was 22.1% for the year ended December 30, 2023 compared to 23.5%

for the prior year.

In

each year, the difference between our effective and federal statutory tax rates primarily relates to state and foreign

income taxes and interest expense.

The Organization of Economic Co-Operation and Development (OECD) issued

technical and administrative

guidance on Pillar Two Model Rules in December 2021, which provides for a global minimum tax rate on the

earnings of large multinational businesses, on a country-by-country basis.

Effective January 1, 2024, the minimum

global tax rate is 15% for various jurisdictions pursuant to the Pillar Two framework.

Future tax reform resulting

from these developments may result in changes to long-standing tax principles,

which may adversely impact our

effective tax rate going forward or result in higher cash tax liabilities.

As we operate in jurisdictions which have

adopted Pillar 2, we are continuing to analyze the implications to effectively manage

the impact for 2024 and

beyond.

Table of Contents

55

Liquidity and Capital Resources

Our principal capital requirements have included funding of acquisitions, purchases

of additional noncontrolling

interests, repayments of debt principal, the funding of working capital needs,

purchases of fixed assets and

repurchases of common stock.

Working capital requirements generally result from increased sales, special

inventory forward buy-in opportunities and payment terms for receivables

and payables.

Historically, sales have

tended to be stronger during the second half of the year and special inventory

forward buy-in opportunities have

been most prevalent just before the end of the year, and have caused our working capital requirements

to be higher

from the end of the third quarter to the end of the first quarter of

the following year.

We finance our business primarily through cash generated from our operations, revolving credit facilities and debt

placements.

Please see

Note 13 – Debt

for further information.

Our ability to generate sufficient cash flows from

operations is dependent on the continued demand of our customers

for our products and services, and access to

products and services from our suppliers.

Our business requires a substantial investment in working capital, which

is susceptible to fluctuations during the

year as a result of inventory purchase patterns and seasonal demands.

Inventory purchase activity is a function of

sales activity, special inventory forward buy-in opportunities and our desired level of inventory.

We anticipate

future increases in our working capital requirements.

We finance our business to provide adequate funding for at least 12 months.

Funding requirements are based on

forecasted profitability and working capital needs, which, on occasion, may

change.

Consequently, we may change

our funding structure to reflect any new requirements.

We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,

and our available funds under existing credit facilities provide us with

sufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

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.

As

part of our BOLD+1 Strategic Plan, including pursuing focused mergers and acquisitions,

during the year ended

December 30, 2023 we have announced acquisitions of companies specializing

in implant systems, clear aligners,

homecare medical products delivered directly to patients, and dental practice

transition services.

Net cash provided by operating activities was $500 million for the

year ended December 30, 2023, compared to net

cash provided by operating activities of $602 million for the prior year.

The net change of $102 million was

primarily attributable to lower cash net income.

During the quarter ended December 30, 2023, the cybersecurity

incident had several offsetting impacts to the operating cash flows from our working

capital, net of acquisitions,

including a decrease in operating cash flows from accounts receivable

due to delayed timing of billings and limited

collection efforts resulting from the impact of the cybersecurity incident, and an increase

in operating cash flows

resulting from reduced inventory purchases.

Net cash used in investing activities was $1,135 million for the

year ended December 30, 2023, compared to net

cash used in investing activities of $276 million for the prior year.

The net change of $859 million was primarily

attributable to increased payments for equity investments and business acquisitions,

and increased purchases of

fixed assets resulting from our continued investment in our facilities and operations.

Net cash provided by financing activities was $701 million for the year

ended December 30, 2023, compared to net

cash used in financing activities of $315 million for the prior year.

The net change of $1,016 million was primarily

due to increased net borrowings from debt

to finance our investments, partially offset by decreased repurchases of

common stock.

Table of Contents

56

The following table summarizes selected measures of liquidity and capital

resources:

December 30,

December 31,

2023

2022

Cash and cash equivalents

$

171

$

117

Working

capital

(1)

1,805

1,764

Debt:

Bank credit lines

$

264

$

103

Current maturities of long-term debt

150

6

Long-term debt

1,937

1,040

Total debt

$

2,351

$

1,149

Leases:

Current operating lease liabilities

$

80

$

73

Non-current operating lease liabilities

310

275

(1)

Includes $284 million and $327 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

securitizations at December 30, 2023 and December 31, 2022, respectively.

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations

increased to 46.2 days as of December 30, 2023

from 41.9 days as of December 31, 2022 due to delays in billings

leading to limited collections in the quarter ended

December 30, 2023 as a result of the cybersecurity incident.

During the years ended December 30, 2023 and

December 31, 2022, we wrote off approximately $16 million and $10 million, respectively, of fully reserved

accounts receivable against our trade receivable reserve.

Our inventory turns from operations was 4.5 as of

December 30, 2023 and 4.7 as of December 31, 2022.

Our working capital accounts may be impacted by current

and future economic conditions.

Contractual obligations

The following table summarizes our contractual obligations related

to fixed and variable rate long-term debt and

finance lease obligations, including interest (assuming a weighted

average interest rate of 4.8%), as well as

inventory purchase commitments and operating lease obligations

as of December 30, 2023:

Payments due by period

1 year

2 - 3 years

4 - 5 years

5 years

Total

Contractual obligations:

Long-term debt, including interest

$

243

$

1,097

$

346

$

783

$

2,469

Inventory purchase commitments

5

8

4

-

17

Operating lease obligations

92

141

86

119

438

Transition tax obligations

11

24

-

-

35

Finance lease obligations, including interest

4

3

2

-

9

Total

$

355

$

1,273

$

438

$

902

$

2,968

For information relating to our debt please see

Note 13 – Debt

.

Table of Contents

57

Leases

We have operating and finance leases for corporate offices, office space, distribution and other facilities, vehicles

and certain equipment.

Our leases have remaining terms of less than one year to

approximately 18 years, some of

which may include options to extend the leases for up to 15 years.

As of December 30, 2023, our right-of-use

assets related to operating leases were $325 million and our current and non-current

operating lease liabilities were

$80 million and $310 million, respectively.

Please see

Note 7 – Leases

for further information.

Stock Repurchases

On February 8, 2023, our Board authorized the repurchase of up

to an additional $400 million in shares of our

common stock.

From March 3, 2003 through December 30, 2023, we repurchased $4.7

billion, or 90,394,805 shares, under our

common stock repurchase programs, with $265 million available

as of December 30, 2023 for future common stock

share repurchases.

Redeemable Noncontrolling Interests

Some minority stockholders in certain of our consolidated subsidiaries have

the right, at certain times, to require us

to acquire their ownership interest in those entities.

Accounting Standards Codification Topic 480-10 is applicable

for noncontrolling interests where we are or may be required to purchase

all or a portion of the outstanding interest

in a consolidated subsidiary from the noncontrolling interest holder

under the terms of a put option contained in

contractual agreements.

As of December 30, 2023 and December 31, 2022,

our balance for redeemable

noncontrolling interests was $864 million and $576 million, respectively.

Please see

Note 19 – Redeemable

Noncontrolling Interests

for further information.

Unrecognized tax benefits

As more fully disclosed in

Note 14 – Income Taxes

of “Notes to Consolidated Financial Statements,” we cannot

reasonably estimate the timing of future cash flows related to our unrecognized

tax benefits, including accrued

interest, of $115 million as of December 30, 2023.

Critical Accounting Estimates

Our accounting policies are more fully described in

Note 1 – Basis of Presentation and Significant Accounting

Policies

of the consolidated financial statements.

The preparation of consolidated financial statements requires us

to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues

and expenses and

related disclosures of contingent assets and liabilities.

We base our estimates on historical data, when available,

experience, industry and market trends, and on various other assumptions

that are believed to be reasonable under

the circumstances, the combined results of which form the basis for

making judgments about the carrying values of

assets and liabilities that are not readily apparent from other sources.

We believe that the estimates, judgments and

assumptions upon which we rely are reasonable based upon information

available to us at the time that these

estimates, judgments and assumptions are made.

However, by their nature, estimates are subject to various

assumptions and uncertainties.

Therefore, reported results may differ from estimates and any such differences may

be material to our consolidated financial statements.

We believe that the following critical accounting estimates, which have been discussed with the Audit Committee

of our Board, affect the significant estimates and judgments used in the preparation

of our consolidated financial

statements:

Inventories and Reserves

Inventories consist primarily of finished goods and are valued at

the lower of cost or net realizable value.

Cost is

determined by the first-in, first-out method for merchandise and actual cost

for large equipment and high tech

equipment.

In estimating carrying value of inventory, we consider many factors including the condition and

Table of Contents

58

salability of the inventory by reviewing on-hand quantities, historical sales,

forecasted sales and market and

economic trends.

Certain of our products, specifically PPE and COVID-19 test kits, have experienced

changes in

net realizable value, due to volatility of pricing and changes in demand

for these products.

Business Combinations

The estimated fair value of acquired identifiable intangible assets (i.e., customer

relationships and lists, trademarks

and trade names, product development and non-compete agreements)

is based on critical judgments and

assumptions derived from analysis of market conditions, including discount

rates, projected revenue growth rates

(which are based on historical trends and assessment of financial projections),

estimated customer attrition and

projected cash flows.

These assumptions are forward-looking and could be affected by future economic

and market

conditions.

Please see

Note 5 – Business Acquisitions and Divestitures

for further discussion of our acquisitions.

Goodwill

Goodwill is subject to impairment analysis at least once annually as

of the first day of our fourth quarter, or if an

event occurs or circumstances change that would more likely than

not reduce a reporting unit’s fair value below

carrying value.

We regard our reporting units to be our operating segments: our global dental and medical

businesses, and technology and value-added services.

Goodwill is allocated to such reporting units, for the

purposes of preparing our impairment analyses, based on a specific identification

basis.

Application of the goodwill impairment test requires judgment, including

the identification of reporting units,

assignment of assets and liabilities that are considered shared services

to the reporting units, and ultimately the

determination of the fair value of each reporting unit.

The fair value of each reporting unit is calculated by

applying the discounted cash flow methodology and confirming with

a market approach.

There are inherent

uncertainties, however, related to fair value models, the inputs and our judgments in applying them

to this analysis.

The most significant inputs include estimation of detailed future cash flows based

on budget expectations, and

determination of comparable companies to develop a weighted average

cost of capital for each reporting unit.

On an annual basis, we prepare financial projections.

These projections are based on input from our leadership and

are presented annually to our Board.

Influences on this year's forecasted financial information and

the fair value

model include: the impact of planned strategic initiatives, the continued

integration of recent acquisitions and

overall market conditions.

The estimates used to calculate the fair value of a reporting unit change

from year to

year based on operating results, market conditions, and other factors.

Our third-party valuation specialists provide inputs into our determination

of the discount rate.

The rate is

dependent on a number of underlying assumptions, including the risk-free rate,

tax rate, equity risk premium, debt

to equity ratio and pre-tax cost of debt.

Long-term growth rates are applied to our estimation of future cash flows.

The long-term growth rates are tied to

growth rates we expect to achieve beyond the years for which we have

forecasted operating results.

We also

consider external benchmarks, and other data points which we believe are

applicable to our industry and the

composition of our global operations.

For the years ended December 30, 2023 and December 25, 2021, we believe

the fair value of each of our reporting

units sufficiently exceeds the carrying values and thus we did not record any amount

for goodwill impairment.

Based on our quantitative assessment for the year ended December 31, 2022,

we recorded a $20 million impairment

of goodwill relating to the disposal of an unprofitable business for which

estimated fair value was lower than

carrying value.

As part of our analysis for the rest of the goodwill balance, we performed

a sensitivity analysis on

the discount rate and long-term growth rate assumptions.

The sensitivities did not result in any additional

impairment charges.

Table of Contents

59

Definite-Lived Intangible Assets

Annually or if we identify an impairment indicator,

definite-lived intangible assets such as non-compete

agreements, trademarks, trade names, customer relationships and lists, and

product development are reviewed for

impairment indicators.

If any impairment indicators exist, quantitative testing

is performed on the asset.

The quantitative impairment model is a two-step test under which we

first calculate the recoverability of the

carrying value by comparing the undiscounted projected cash flows associated

with the asset or asset group,

including its estimated residual value, to the carrying amount.

If the cash flows associated with the asset or asset

group are less than the carrying value, we perform a fair value assessment

of the asset, or asset group.

If the

carrying amount is found to be greater than the fair value, we record an

impairment loss for the excess of book

value over the fair value.

In addition, in all cases of an impairment review, we re-evaluate the remaining useful

lives of the assets and modify them, as appropriate.

Although we believe our judgments, estimates and/or

assumptions used in estimating cash flows and determining fair value

are reasonable, making material changes to

such judgments, estimates and/or assumptions could materially affect such impairment

analyses and our financial

results.

During the year ended December 30, 2023 we recorded $19 million of

impairment charges related to businesses in

our health care distribution segment, the components of which were

$7 million primarily related to customer lists

and relationships attributable to lower than anticipated operating

margins in certain businesses, and a $12 million

charge related to the planned exit of a business.

These impairment charges were calculated as the differences

between the carrying values and the estimated fair values of the impaired

intangible assets, using a discounted

estimate of future cash flows.

Please see

Note 15 – Plans of Restructuring and Integration Costs

for additional

details.

During the year ended December 31, 2022 we recorded $49 million of

impairment charges related to businesses in

our health care distribution segment, the components of which were

a $15 million charge related to the disposal of

an unprofitable business and a $34 million charge related to customer lists and relationships

attributable to

customer attrition rates being higher than expected in certain other

health care distribution businesses.

These

impairment charges were calculated as the differences between the carrying values and the

estimated fair values of

the impaired intangible assets, using a discounted estimate of future

cash flows.

Please see

Note 15 – Plans of

Restructuring and Integration Costs

for additional details.

During the year ended December 25, 2021, we recorded a $1 million

impairment charge related ratably to a

business within our health care distribution segment and a business within

our technology and value-added services

segment.

Redeemable Noncontrolling Interests

Some minority stockholders in certain of our consolidated subsidiaries have

the right, at certain times, to require us

to acquire their ownership interest in those entities at fair value.

The redemption amounts have been estimated

based on recent transactions, expected future earnings and cash flows

and, if such earnings and cash flows are not

achieved, the value of the redeemable noncontrolling interests might be impacted.

See

Note 1 – Basis of

Presentation and Significant Accounting Policies

and

Note 19 – Redeemable Noncontrolling Interests

for additional

information.

Income Tax

When determining if the realization of a deferred tax asset is likely to assess

the need to record a valuation

allowance, estimates and judgement are required.

We

consider all available evidence, both positive and negative,

including estimated future taxable earnings, ongoing planning strategies,

future reversals of existing temporary

differences and historical operating results.

Additionally, changes to tax laws and statutory tax rates can have an

impact on our determination.

Our intention is to evaluate the realizability of our deferred tax assets quarterly.

ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in the financial statements in

accordance with provisions contained within its guidance.

This topic prescribes a recognition threshold and a

measurement attribute for the financial statement recognition and measurement

of tax positions taken or expected to

Table of Contents

60

be taken in a tax return.

For those benefits to be recognized, a tax position must be more

likely than not to be

sustained upon examination by the taxing authorities.

The amount recognized is measured as the largest amount of

benefit that has a greater than 50% likelihood of being realized upon ultimate

audit settlement.

In the normal

course of business, our tax returns are subject to examination by various

taxing authorities.

Such examinations may

result in future tax and interest assessments by these taxing authorities for uncertain

tax positions taken in respect of

certain tax matters.

Please see

Note 14 – Income Taxes

for further discussion.

The Financial Accounting Standards Board Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-

Taxed Income (“GILTI”),

states that an entity can make an accounting policy election to

either recognize deferred

taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related

to GILTI in the year the tax is incurred.

We have elected to recognize the tax on GILTI as a period expense in the

period the tax is incurred.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted in the future, please see

Note 1 – Basis of Presentation and Significant Accounting Policies

included under Item 8.

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Cautionary Note Regarding Forward-Looking Statements

In accordance with the “Safe Harbor” provisions of the Private Securities

Litigation Reform Act of 1995, we

provide the following cautionary remarks regarding important factors

that, among others, could cause future results

to differ materially from the forward-looking statements, expectations and assumptions

expressed or implied

herein.

All forward-looking statements made by us are subject to

risks and uncertainties and are not guarantees of

future performance.

These forward-looking statements involve known and unknown

risks, uncertainties and other

factors that may cause our actual results, performance and achievements

or industry results to be materially

different from any future results, performance or achievements expressed or implied by such forward-looking

statements.

These statements are generally identified by the use of such

terms as “may,” “could,” “expect,”

“intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,”

“to be,” “to make” or other comparable

terms.

Factors that could cause or contribute to such differences include, but are not limited

to, those discussed in

this Annual Report on Form 10-K, and in particular the risks discussed under

the caption “Risk Factors” in Item 1A

of this report and those that may be discussed in other documents we

file with the Securities and Exchange

Commission (SEC).

Forward looking statements include the overall impact of the Novel Coronavirus

Disease 2019

(COVID-19) on us, our results of operations, liquidity and financial condition

(including any estimates of the

impact on these items), the rate and consistency with which dental

and other practices resume or maintain normal

operations in the United States and internationally, expectations regarding personal protective equipment (“PPE”)

products and COVID-19 related product sales and inventory levels, whether

additional resurgences or variants of

the virus will adversely impact the resumption of normal operations, whether

supply chain disruptions will

adversely impact our business, the impact of integration and restructuring

programs as well as of any future

acquisitions, general economic conditions including exchange rates,

inflation and recession, and more generally

current expectations regarding performance in current and future periods.

Forward looking statements also include

the (i) our ability to have continued access to a variety of COVID-19

test types, expectations regarding COVID-19

test sales, demand and inventory levels, as well as the efficacy or relative efficacy of the test

results given that the

test efficacy has not been, or will not have been, independently verified under

normal FDA procedures and (ii)

potential for us to distribute the COVID-19 vaccines and ancillary supplies.

Risk factors and uncertainties that could cause actual results to differ materially from

current and historical results

include, but are not limited to: risks associated with COVID-19

and any variants thereof, as well as other disease

outbreaks, epidemics, pandemics, or similar wide-spread public health concerns

and other natural disasters; our

dependence on third parties for the manufacture and supply of our products;

our ability to develop or acquire and

maintain and protect new products (particularly technology products) and

technologies that achieve market

acceptance with acceptable margins; transitional challenges associated with acquisitions,

dispositions and joint

ventures, including the failure to achieve anticipated synergies/benefits; legal, regulatory, compliance,

cybersecurity, financial and tax risks associated with acquisitions, dispositions and joint ventures; certain provisions

in our governing documents that may discourage third-party acquisitions

of us; adverse changes in supplier rebates

or other purchasing incentives; risks related to the sale of corporate brand

products; effects of a highly competitive

(including, without limitation, competition from third-party online commerce

sites) and consolidating market; the

repeal or judicial prohibition on implementation of the Affordable Care Act; changes in the health

care industry;

risks from expansion of customer purchasing power and multi-tiered

costing structures; increases in shipping costs

for our products or other service issues with our third-party shippers; general

global and domestic macro-economic

and political conditions, including inflation, deflation, recession, fluctuations

in energy pricing and the value of the

U.S. dollar as compared to foreign currencies, and changes to other economic

indicators, international trade

agreements, potential trade barriers and terrorism; failure to comply with existing

and future regulatory

requirements; risks associated with the EU Medical Device Regulation; failure

to comply with laws and regulations

relating to health care fraud or other laws and regulations; failure 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; changes in tax legislation; risks related to product liability, intellectual property and other claims;

litigation risks;

new or unanticipated litigation developments and the status of litigation

matters; risks associated

with customs policies or legislative import restrictions; cyberattacks

or other privacy or data security breaches; risks

associated with our global operations; our dependence on our senior management,

employee hiring and retention,

and our relationships with customers, suppliers and manufacturers;

and disruptions in financial markets.

The order

in which these factors appear should not be construed to indicate their

relative importance or priority.

Table of Contents

44

We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control

or predict.

Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction

of actual results.

We undertake no duty and have no obligation to update forward-looking statements except as

required by law.

Where You

Can Find Important Information

We may disclose important information through one or more of the following channels: SEC filings, public

conference calls and webcasts, press releases, the investor relations

page of our website (www.henryschein.com)

and the social media channels identified on the Newsroom page of our website.

Recent Developments

The COVID-19 pandemic negatively impacted the global economy, disrupted global supply chains and created

significant volatility and disruption of global financial markets in

2020 and 2021.

The impact of COVID-19 had a

material adverse effect on our business, results of operations and cash flows in 2020.

During the year ended

December 25, 2021, patient traffic levels returned to levels approaching pre-pandemic

levels.

Demand for dental

products and certain medical products throughout 2021 was driven

by sales of PPE and COVID-19 test kits.

During the year ended December 31, 2022 we experienced a decrease

in the sales volume of PPE and COVID-19

test kits.

The volatility in sales of COVID-19 test kits has moderated, albeit at a significantly

lower level of sales

compared with 2021, resulting in us recording an inventory obsolescence

reserve of $17 million for COVID-19 test

kits during the year ended December 31, 2022.

While the U.S. economy has recently experienced inflationary

pressures and strengthening of the U.S dollar, their

impacts have not been material to our results of operations in the

fourth quarter or full year ended December 31,

2022, and we currently expect moderating of inflation and foreign currency

fluctuations.

Though inflation impacts

both our revenues and costs, the depth and breadth of our product portfolio

often allows us to offer lower-cost

national brand solutions or corporate brand alternatives to our more

price-sensitive customers who are unable to

absorb price increases, thus positioning us to protect our gross profit.

Our consolidated financial statements reflect estimates and assumptions

made by us that affect, among other things,

our goodwill, long-lived asset and definite-lived intangible asset valuation;

inventory valuation; equity investment

valuation; assessment of the annual effective tax rate; valuation of deferred income

taxes and income tax

contingencies; the allowance for doubtful accounts; hedging activity; supplier

rebates; measurement of

compensation cost for certain share-based performance awards and cash

bonus plans; and pension plan

assumptions.

Due to the significant uncertainty surrounding the future impact

of COVID-19, our judgments

regarding estimates and impairments could change in the future.

There is an ongoing risk that the COVID-19

pandemic 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.

However, the extent of the potential

impact cannot be reasonably estimated at this time.

Table of Contents

45

Executive-Level Overview

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.

We

serve more than one million customers

worldwide including dental practitioners, laboratories, physician practices, and

ambulatory surgery centers, as well

as government, institutional health care clinics and other alternate care clinics.

We

believe that we have a strong

brand identity due to our more than 90 years of experience distributing health

care products.

We are headquartered in Melville, New York,

employ approximately 22,000 people (of which approximately

10,700 are based outside of the United States) and have operations or

affiliates in 32 countries and territories.

Our

broad global footprint has evolved over time through our organic success as well as

through contribution from

strategic acquisitions.

We

have established strategically located distribution centers around

the world to enable us to better serve our

customers and increase our operating efficiency.

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.

While our primary go-to-market strategy is in our capacity as a distributor, we also market and sell under

our own

corporate brand portfolio of cost-effective, high-quality consumable merchandise products,

and 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.

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.

Our global

dental businesses serve office-based dental practitioners, dental laboratories, schools, government

and other

institutions.

Our medical businesses serve 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.

The health care distribution reportable segment, combining our global dental and

medical operating segments,

distributes consumable products, small equipment, laboratory products, large equipment, equipment

repair services,

branded and generic pharmaceuticals, vaccines, surgical products, dental specialty

products (including implant,

orthodontic and endodontic products), diagnostic tests, infection-control products,

PPE products and vitamins.

Our global technology and value-added services business provides software, technology

and other value-added

services to health care practitioners.

Our technology business offerings include practice management software

systems for dental and medical practitioners.

Our value-added practice solutions include practice consultancy,

education, revenue cycle management and financial services on a non-recourse

basis, e-services, practice

technology, network and hardware services, as well as consulting, and continuing education services for

practitioners.

A key element to grow closer to our customers is our One Schein initiative, which

is a unified go-to-market

approach that enables practitioners to work synergistically with our supply chain,

equipment sales and service and

other value-added services, allowing our customers to leverage the

combined value that we offer through a single

program.

Specifically, One Schein provides customers with streamlined access to our comprehensive offering of

national brand products, our corporate brand products and proprietary specialty

products and solutions (including

implant, orthodontic and endodontic products).

In addition, customers have access to a wide range of services,

including software and other value-added services.

Table of Contents

46

Industry Overview

In recent years, the health care industry has increasingly focused on 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.

Our operating results in recent years have been significantly affected by strategies

and transactions that we

undertook to expand our business, domestically and internationally, in part to address significant changes in the

health care industry, including consolidation of health care distribution companies, health care reform, trends

toward managed care, cuts in Medicare and collective purchasing arrangements.

Our current and future results have been and could be impacted by the COVID-19

pandemic, the current economic

environment and continued economic and public health uncertainty.

Since the onset of the COVID-19 pandemic in

early 2020, we have been carefully monitoring its impact on our global

operations and have taken appropriate steps

to minimize the risk to our employees.

We

have seen and expect to continue to see changes in demand trends

for

some of our products and services, supply chain challenges and labor

challenges, as rates of infection fluctuate, new

strains or variants of COVID-19 emerge and spread, governments adapt their approaches

to combatting the virus,

and local conditions change across geographies.

As a result, we expect to see continued volatility.

Industry Consolidation

The health care products 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 group practices

or service organizations ranging in size from a few practitioners to a large number of practitioners who have

combined or otherwise associated their practices.

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 or an administrative assistant.

Supplies and small equipment are generally purchased from more

than

one distributor, with one generally serving as the primary supplier.

The trend of consolidation extends to our customer base.

Health care practitioners are increasingly seeking to

partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician

hospital organizations.

In many cases, purchasing decisions for consolidated groups

are made at a centralized or

professional staff level; however, orders are delivered to the practitioners’ offices.

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

companies that can enhance their current product and service offerings or provide

opportunities to serve a broader

customer base.

Our approach to acquisitions and joint ventures has been to expand our role as

a provider of products and services

to the health care industry.

This trend has resulted in our expansion into service areas that complement

our existing

operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired

businesses.

As industry

consolidation continues, we believe that we are positioned to capitalize

on this trend, as we believe we

have the ability to support increased sales through our existing infrastructure, although

there can be no assurances

that we will be able to successfully accomplish this.

We

also have invested in expanding our sales/marketing

Table of Contents

47

infrastructure to include a focus on building relationships with decision

makers who do not reside in the office-

based practitioner setting.

As the health care industry continues to change, we continually evaluate possible

candidates for joint venture or

acquisition and intend to continue to seek opportunities to expand our

role as a provider of products and services to

the health care industry.

There can be no assurance that we will be able to successfully pursue

any such

opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or

consummated, we would incur merger and/or acquisition-related costs, and there

can be no assurance that the

integration efforts associated with any such transaction would be successful.

Aging Population and Other Market Influences

The health care products distribution industry continues to experience growth

due to the aging population,

increased health care awareness, 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.

In addition, the physician market continues to benefit from

the shift of procedures and diagnostic testing

from acute care settings to alternate-care sites, particularly physicians’

offices.

According to the U.S. Census Bureau’s International Database, between 2022 and 2032, the 45 and older

population is expected to grow by approximately 11%.

Between 2022 and 2042, this age group is expected to grow

by approximately 21%.

This compares with expected total U.S. population growth

rates of approximately 6%

between 2022 and 2032 and approximately 12% between 2022 and 2042.

According to the U.S. Census Bureau’s International Database, in 2022 there are approximately seven million

Americans aged 85 years or older, the segment of the population most in need of long-term care

and elder-care

services.

By the year 2050, that number is projected to nearly triple to approximately

19 million.

The population

aged 65 to 84 years is projected to increase by approximately 27% during

the same period.

As a result of these market dynamics, annual expenditures for health care services

continue to increase in the

United States.

We believe that demand for our products and services will grow while continuing to be impacted by

current and future operating, economic, and industry conditions.

The Centers for Medicare and Medicaid Services,

or CMS, published “National Health Expenditure Data” indicating

that total national health care spending reached

approximately $4.3 trillion in 2021, or 18.3% of the nation’s gross domestic product, the benchmark

measure for

annual production of goods and services in the United States.

Health care spending is projected to reach

approximately $6.2 trillion in 2028, or 19.7% of the nation’s projected gross domestic product.

Government

Our businesses are generally subject to numerous laws and regulations that could

impact our financial performance,

and failure to comply with such laws or regulations could have a

material adverse effect on our business.

See “

Item 1. Business – Governmental Regulations

” for a discussion of laws, regulations and governmental activity

that may affect our results of operations and financial condition.

Table of Contents

48

Results of Operations

Refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in

our 2021 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results

of operations for the fiscal year 2021 compared to fiscal year 2020.

The following tables summarize the significant components of our operating

results and cash flows from continuing

operations:

Years

Ended

December 31,

December 25,

December 26,

2022

2021

2020

Operating results:

Net sales

$

12,647

$

12,401

$

10,119

Cost of sales

8,816

8,727

7,303

Gross profit

3,831

3,674

2,816

Operating expenses:

Selling, general and administrative

2,771

2,634

2,086

Depreciation and amortization

182

180

163

Restructuring and integration costs

131

8

32

Operating income

$

747

$

852

$

535

Other expense, net

$

(26)

$

(21)

$

(35)

Gain on sale of equity investments, net of tax

-

7

2

Net income from continuing operations

566

660

419

Income from discontinued operations, net of tax

-

-

1

Net income attributable to Henry Schein, Inc.

538

631

404

Years

Ended

December 31,

December 25,

December 26,

2022

2021

2020

Cash flows:

Net cash provided by operating activities from continuing operations

$

602

$

710

$

594

Net cash used in investing activities from continuing operations

(276)

(677)

(115)

Net cash used in financing activities from continuing operations

(315)

(333)

(182)

Table of Contents

49

Plans of Restructuring and Integration Costs

On August 1, 2022, we committed to a restructuring plan focused on

funding the priorities of the strategic plan and

streamlining operations and other initiatives to increase efficiency.

We expect this initiative to extend through

2023.

We are currently unable in good faith to make a determination of an estimate of the amount or range of

amounts expected to be incurred in connection with these activities, both with

respect to each major type of cost

associated therewith and with respect to the total cost, or an estimate of the

amount or range of amounts that will

result in future cash expenditures.

During the year ended December 31, 2022, we recorded restructuring charges of $128

million primarily related to

severance and employee-related costs, accelerated amortization of right-of-use

lease assets, impairment of other

long-lived assets and lease exit costs.

During the three months ended December 31, 2022, in connection with our restructuring

plan, we vacated one of

the buildings at our corporate headquarters in Melville NY, which resulted in an accelerated amortization of right-

of-use lease asset of $34 million.

We also initiated the disposal of a non-profitable US business and recorded

related costs of $49 million which primarily consisted of impairment of

intangible assets and goodwill, inventory

impairment, and severance and employee-related costs.

These expenses are included in the $128 million of

restructuring charges discussed above.

The disposal is expected to be completed in the first quarter of 2023.

On August 26, 2022, we acquired Midway Dental Supply.

In connection with this acquisition, during the year

ended December 31, 2022, we recorded integration costs of $3 million related

to one-time employee and other

costs, as well as restructuring charges of $9 million, which are included in the

$128 million of restructuring charges

discussed above.

On November 20, 2019, we committed to a contemplated restructuring

initiative intended to mitigate stranded costs

associated with the spin-off of our animal health business and to rationalize operations

and provide expense

efficiencies.

These activities were originally expected to be completed by

the end of 2020 but we extended them to

the end of 2021 in light of the changes to the business environment brought

on by the COVID-19 pandemic.

The

restructuring activities under this prior initiative were completed

in 2021.

Table of Contents

50

2022 Compared to 2021

Net Sales

Net sales were as follows:

% of

% of

Increase / (Decrease)

2022

Total

2021

Total

$

%

Health care distribution

(1)

Dental

$

7,473

59.1

%

$

7,544

60.8

%

$

(71)

(0.9)

%

Medical

4,451

35.2

4,210

34.0

241

5.7

Total health care distribution

11,924

94.3

11,754

94.8

170

1.4

Technology and value-added services

(2)

723

5.7

647

5.2

76

11.8

Total

$

12,647

100.0

$

12,401

100.0

$

246

2.0

The components of our sales growth were as follows:

Local Currency Growth

Total Sales

Growth

Foreign

Exchange

Impact

Total Local

Currency

Growth

Acquisition

Growth

Extra Week

Impact

Local Internal

Growth

Health care distribution

(1)

Dental Merchandise

(2.6)

%

(3.5)

%

0.9

%

1.3

%

1.0

%

(1.4)

%

Dental Equipment

4.7

(4.6)

9.3

0.6

2.3

6.4

Total Dental

(0.9)

(3.7)

2.8

1.2

1.2

0.4

Medical

5.7

(0.3)

6.0

2.4

1.5

2.1

Total Health Care Distribution

1.4

(2.5)

3.9

1.6

1.3

1.0

Technology and value-added services

(2)

11.8

(1.5)

13.3

5.4

0.8

7.1

Total

2.0

(2.4)

4.4

1.8

1.3

1.3

Note: Percentages for Net Sales; Gross Profit; Selling, General and Administrative; Other Expense, Net; and Income Taxes are based on

actual values and may not recalculate due to rounding.

(1)

Consists of consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and

generic pharmaceuticals, vaccines, surgical products, dental specialty products (including implant, orthodontic and endodontic

products), diagnostic tests, infection-control products, PPE products and vitamins.

(2)

Consists of practice management software and other value-added products, which are distributed primarily to health care providers,

practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, continuing

education services for practitioners, consulting and other services.

Global Sales

Global net sales for the year ended December 31, 2022 increased 2.0% based

upon the components presented in the

table above.

We estimate that sales for the year ended

December 31, 2022 of PPE products and COVID-19 test kits

were approximately $1,245 million, an estimated decrease of 34.7% versus the prior

year.

Excluding PPE products

and COVID-19 test kits,

the estimated increase in internally generated local currency sales was 6.7%.

Dental

Dental net sales for the year ended December 31, 2022 decreased 0.9% based

upon the components presented in the

table above.

Our sales growth in local currency for dental merchandise decreased

primarily due to a decrease in

PPE product sales.

We estimate that global dental sales for the year ended December 31, 2022 of PPE products

were approximately $447 million, an estimated decrease of 32.5% versus the prior

year.

Excluding PPE products,

the estimated increase in internally generated local currency dental sales

was 3.8%.

Dental equipment sales in local

currency increased in both our North American and international markets,

primarily due to increased demand.

Table of Contents

51

Medical

Medical net sales for the year ended December 31, 2022 increased 5.7% based

upon the components presented in

the table above.

Globally, we estimate our medical business recorded sales of approximately $798 million of

sales

of PPE products

and COVID-19 test kits for the year ended December 31, 2022, an estimated

decrease of

approximately 27.4% compared to the prior year.

Excluding PPE products and COVID-19 test kits, the estimated

increase in internally generated local currency medical sales was

2.1%.

Te

chnology and value-added services

Technology and value-added services net sales for the year ended December 31, 2022 increased 11.8% based upon

the components presented in the table above.

During the year ended December 31, 2022, the trend for transactional

software sales improved as we increased the number of users, generating demand

for our sales cycle management

solutions, and also from cloud-based solutions that drive practice efficiency and patient engagement.

Gross Profit

Gross profit and gross margin percentages by segment and in total were as follows:

Gross

Gross

Increase

2022

Margin %

2021

Margin %

$

%

Health care distribution

$

3,357

28.2

%

$

3,239

27.6

%

$

118

3.6

%

Technology and value-added services

474

65.5

435

67.2

39

9.0

Total

$

3,831

30.3

$

3,674

29.6

$

157

4.3

As a result of different practices of categorizing costs associated with distribution networks

throughout our

industry, our gross margins may not necessarily be comparable to other distribution companies.

Additionally, we

realize substantially higher gross margin percentages in our technology and value-added services

segment than in

our health care distribution segment.

These higher gross margins result from being both the developer and seller of

software products and services, as well as certain financial services.

The software industry typically realizes higher

gross margins to recover investments in research and development.

Within our health care distribution segment, gross profit margins may vary from one period to the next.

Changes in

the mix of products sold as well as changes in our customer mix have

been the most significant drivers affecting

our gross profit margin.

For example, sales of our corporate brand products achieve

gross profit margins that are

higher than average total gross profit margins of all products.

With respect to customer mix, sales to our large-

group customers are typically completed at lower gross margins due to the higher

volumes sold as opposed to the

gross margin on sales to office-based practitioners, who normally purchase lower volumes.

Health care distribution gross profit increased primarily due to the increase

in net sales discussed above.

The

overall increase in our health care distribution gross profit was attributable to

$67 million of gross profit from

acquisitions and gross margin expansion, mainly as a result of increased sales

mix of higher-margin products.

Technology and value-added services gross profit increased as a result of an increase in gross profit from internally

generated sales and gross profit from acquisitions, partially offset by a decrease in

gross margin rates.

Gross

margin rates decreased primarily due to lower gross margins of recently acquired companies in

the business

services sector and our continued investment in product development and customer

service.

Table of Contents

52

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization,

restructuring and integration costs) by segment and in total were as follows:

% of

% of

Respective

Respective

Increase

2022

Net Sales

2021

Net Sales

$

%

Health care distribution

$

2,738

23.0

%

$

2,512

21.4

%

$

226

9.0

%

Technology and value-added services

346

47.8

310

48.0

36

11.4

Total

$

3,084

24.4

$

2,822

22.8

$

262

9.3

The net increase in operating expenses is attributable to the

following:

Change in

Restructuring and

Integration Costs

Increase in

Operating Costs

Acquisitions

Total

Health care distribution

$

121

$

39

$

66

$

226

Technology and value-added services

2

20

14

36

Total

$

123

$

59

$

80

$

262

The increase in restructuring and integration costs is attributable to our disposal

of an unprofitable business,

acceleration of amortization of right-of-use lease assets related

to the exit from one of the properties at our

corporate headquarters, severance costs, and other costs relating to

the exit of some facilities.

The increase in

operating costs includes a $20 million intangible assets impairment charge within

our health care distribution

segment, and increases in payroll and payroll related costs and travel and convention

expenses in both of our

reportable segments.

While the U.S. economy has recently experienced inflationary

pressures and strengthening of

the U.S dollar, their impacts have not been material to our results of operations.

Other Expense, Net

Other expense, net was as follows:

Variance

2022

2021

$

%

Interest income

$

17

$

7

$

10

158.9

%

Interest expense

(44)

(28)

(16)

(59.1)

Other, net

1

-

1

n/a

Other expense, net

$

(26)

$

(21)

$

(5)

(26.0)

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings and increased interest rates.

Income Taxes

For the year ended December 31, 2022, our effective tax rate was 23.5% compared to 23.8%

for the prior year

period.

In 2022, the difference between our effective tax rate and the federal statutory tax rate primarily

relates to

state and foreign income taxes and interest expense.

In 2021, the difference between our effective tax rate and the

federal statutory tax rate was primarily due to state and foreign income

taxes and interest expense.

Gain on Sale of Equity Investment

In the third quarter of 2021, we received contingent proceeds of $10 million

from the 2019 sale of Hu-Friedy

resulting in the recognition of an additional after-tax gain of $7

million.

No further proceeds are expected from this

sale.

Table of Contents

53

Liquidity and Capital Resources

Our principal capital requirements have included funding of acquisitions, purchases

of additional noncontrolling

interests, repayments of debt principal, the funding of working capital needs,

purchases of fixed assets and

repurchases of common stock.

Working capital requirements generally result from increased sales, special

inventory forward buy-in opportunities and payment terms for receivables

and payables.

Historically, sales have

tended to be stronger during the second half of the year and special inventory

forward buy-in opportunities have

been most prevalent just before the end of the year, and have caused our working capital requirements

to be higher

from the end of the third quarter to the end of the first quarter of

the following year.

We finance our business primarily through cash generated from our operations, revolving credit facilities and debt

placements.

Please see

Note 12 – Debt

for further information.

Our ability to generate sufficient cash flows from

operations is dependent on the continued demand of our customers for our

products and services, and access to

products and services from our suppliers.

Our business requires a substantial investment in working capital, which

is susceptible to fluctuations during the

year as a result of inventory purchase patterns and seasonal demands.

Inventory purchase activity is a function of

sales activity, special inventory forward buy-in opportunities and our desired level of inventory.

We anticipate

future increases in our working capital requirements.

We finance our business to provide adequate funding for at least 12 months.

Funding requirements are based on

forecasted profitability and working capital needs, which, on occasion, may

change.

Consequently, we may change

our funding structure to reflect any new requirements.

We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,

and our available funds under existing credit facilities provide us with

sufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

Net cash provided by operating activities was $602 million for the

year ended December 31, 2022, compared to net

cash from continuing operations provided by operating activities of $710 million

for the prior year.

The net change

of $108 million was primarily due to unfavorable net cash used by our working

capital accounts, net of

acquisitions, driven by an impact of timing of payments which

resulted in an increase in other current assets and

relative decreases in accounts payable and accrued expenses, partially offset by the

relative year over year impact

of inventory increases (2021 increase was more significant than the

2022 increase).

Net cash used in investing activities was $276 million for the year

ended December 31, 2022, compared to $677

million for the prior year.

The net change of $401 million was primarily attributable to decreased payments

for

equity investments and business acquisitions.

Net cash used in financing activities was $315 million for the year

ended December 31, 2022, compared to net cash

used in financing activities of $333 million for the prior year.

The net change of $18 million was primarily due to

increased net borrowings from debt, partially offset by increased repurchases of common

stock.

Table of Contents

54

The following table summarizes selected measures of liquidity and capital

resources:

December 31,

December 25,

2022

2021

Cash and cash equivalents

$

117

$

118

Working

capital

(1)

1,764

1,537

Debt:

Bank credit lines

$

103

$

51

Current maturities of long-term debt

6

11

Long-term debt

1,040

811

Total debt

$

1,149

$

873

Leases:

Current operating lease liabilities

$

73

$

76

Non-current operating lease liabilities

275

268

(1)

Includes $327 million and $138 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

securitization at December 31, 2022 and December 25, 2021, respectively.

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations

increased to 41.9 days as of December 31, 2022

from 41.8 days as of December 25, 2021.

During the years ended December 31, 2022 and December

25, 2021, we

wrote off approximately $10 million and $8 million, respectively, of fully reserved accounts receivable against our

trade receivable reserve.

Our inventory turns from operations was 4.7 as of December

31, 2022 and 5.2 as of

December 25, 2021.

Our working capital accounts may be impacted by current and

future economic conditions.

Contractual obligations

The following table summarizes our contractual obligations related

to fixed and variable rate long-term debt and

finance lease obligations, including interest (assuming a weighted

average interest rate of 4.3%), as well as

inventory purchase commitments and operating lease obligations

as of December 31, 2022:

Payments due by period

1 year

2 - 3 years

4 - 5 years

5 years

Total

Contractual obligations:

Long-term debt, including interest

$

41

$

508

$

134

$

538

$

1,221

Inventory purchase commitments

5

8

8

-

21

Operating lease obligations

82

122

79

98

381

Transition tax obligations

19

23

-

-

42

Finance lease obligations, including interest

5

4

1

1

11

Total

$

152

$

665

$

222

$

637

$

1,676

For information relating to our debt please see

Note 12 – Debt

.

Table of Contents

55

Leases

We have operating and finance leases for corporate offices, office space, distribution and other facilities, vehicles

and certain equipment.

Our leases have remaining terms of less than one year to approximately

19 years, some of

which may include options to extend the leases for up to 15 years.

As of December 31, 2022, our right-of-use

assets related to operating leases were $284 million and our current and non-current

operating lease liabilities were

$73 million and $275 million, respectively.

Please see

Note 6 – Leases

for further information.

Stock Repurchases

On March 8, 2021, we announced the reinstatement of our share repurchase

program, which had been temporarily

suspended in April of 2020.

From March 3, 2003 through December 31, 2022, we repurchased $4.5

billion, or 87,180,669 shares, under our

common stock repurchase programs, with $115 million available as of December 31, 2022 for future

common stock

share repurchases.

On February 8, 2023, our Board of Directors authorized the repurchase

of up to an additional $400 million in shares

of our common stock.

Redeemable Noncontrolling Interests

Some minority stockholders in certain of our consolidated subsidiaries have

the right, at certain times, to require us

to acquire their ownership interest in those entities.

Accounting Standards Codification (“ASC”) Topic 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling

interest holder under the terms of a put

option contained in contractual agreements.

As of December 31, 2022 and December 25, 2021, our balance

for

redeemable noncontrolling interests was $576 million and $613 million, respectively.

Please see

Note 18 –

Redeemable Noncontrolling Interests

for further information.

Unrecognized tax benefits

As more fully disclosed in

Note 13 – Income Taxes

of “Notes to Consolidated Financial Statements,” we cannot

reasonably estimate the timing of future cash flows related to the unrecognized

tax benefits, including accrued

interest, of $94 million as of December 31, 2022.

Critical Accounting Policies and Estimates

Our accounting policies are more fully described in

Note 1 – Basis of Presentation and Significant Accounting

Policies

of the consolidated financial statements.

The preparation of consolidated financial statements requires us

to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues

and expenses and

related disclosures of contingent assets and liabilities.

We base our estimates on historical data, when available,

experience, industry and market trends, and on various other assumptions

that are believed to be reasonable under

the circumstances, the combined results of which form the basis for

making judgments about the carrying values of

assets and liabilities that are not readily apparent from other sources.

We believe that the estimates, judgments and

assumptions upon which we rely are reasonable based upon information

available to us at the time that these

estimates, judgments and assumptions are made.

However, by their nature, estimates are subject to various

assumptions and uncertainties.

Therefore, reported results may differ from estimates and any such differences may

be material to our consolidated financial statements.

We believe that the following critical accounting estimates, which have been discussed with the Audit Committee

of our Board of Directors, affect the significant estimates and judgments used in

the preparation of our financial

statements:

Table of Contents

56

Inventories and Reserves

Inventories consist primarily of finished goods and are valued at

the lower of cost or net realizable value.

Cost is

determined by the first-in, first-out method for merchandise or actual cost

for large equipment and high tech

equipment.

In estimating carrying value of inventory, we consider many factors including the condition and

salability of the inventory by reviewing on-hand quantities, historical sales,

forecasted sales and market and

economic trends.

Certain of our products, specifically PPE and COVID-19 test kits, have experienced

changes in

net realizable value, due to volatility of pricing and changes in demand

for these products.

Business Combinations

The estimated fair value of acquired identifiable intangible assets (trademarks

and trade names, customer

relationships and lists, non-compete agreements and product development)

is based on critical estimates, judgments

and assumptions derived from: analysis of market conditions; discount

rates; projected cash flows; customer

retention rates; and estimated useful lives.

Please see

Note 4 – Business Acquisitions and Divestitures

for further

discussion of our acquisitions.

Goodwill

Goodwill is subject to impairment analysis at least once annually as of

the first day of our fourth quarter, or if an

event occurs or circumstances change that would more likely than

not reduce the fair value of a reporting unit

below its carrying value.

Such impairment analyses for goodwill require a comparison of

the fair value to the

carrying value of reporting units.

We regard our reporting units to be our operating segments: global dental,

global

medical, and technology and value-added services.

Goodwill is allocated to such reporting units, for the purposes

of preparing our impairment analyses, based on a specific identification

basis.

Application of the goodwill impairment test requires judgment, including

the identification of reporting units,

assignment of assets and liabilities that are considered shared services

to the reporting units, and ultimately the

determination of the fair value of each reporting unit.

The fair value of each reporting unit is calculated by

applying the discounted cash flow methodology and confirming with

a market approach.

There are inherent

uncertainties, however, related to fair value models, the inputs and our judgments in applying them

to this analysis.

The most significant inputs include estimation of detailed future cash flows based

on budget expectations, and

determination of comparable companies to develop a weighted average

cost of capital for each reporting unit.

On an annual basis, we prepare annual and

medium-term financial projections.

These projections are based on

input from our leadership and are presented annually to our Board of Directors.

Influences on this year's forecasted

financial information and the fair value model include: the impact of planned

strategic initiatives, the continued

integration of recent acquisitions and overall market conditions.

The estimates used to calculate the fair value of a

reporting unit change from year to year based on operating results,

market conditions, and other factors.

Our third-party valuation specialists provide inputs into our determination

of the discount rate.

The rate is

dependent on a number of underlying assumptions, including the risk-free rate,

tax rate, equity risk premium, debt

to equity ratio

and pre-tax cost of debt.

Long-term growth rates are applied to our estimation of future cash flows.

The long-term growth rates are tied to

growth rates we expect to achieve beyond the years for which we have

forecasted operating results.

We also

consider external benchmarks, and other data points which we believe are

applicable to our industry and the

composition of our global operations.

Based on our quantitative assessment for the year ended December 31, 2022,

we recorded a $20 million impairment

of goodwill relating to the disposal of an unprofitable business whose

estimated fair value was lower than its

carrying value.

As part of our analysis for the rest of the goodwill balance,

we performed a sensitivity analysis on

the discount rate and long-term growth rate assumptions.

The sensitivities did not result in any additional

impairment charges.

Table of Contents

57

Definite-Lived Intangible Assets

Annually, definite-lived intangible assets such as non-compete agreements, trademarks, trade names, customer

relationships and lists, and product development are reviewed for impairment

indicators.

If any impairment

indicators exist, quantitative testing is performed on the asset.

The quantitative impairment model is a two-step test under which we

first calculate the recoverability of the

carrying value by comparing the undiscounted, probability-weighted value

of the projected cash flows associated

with the asset or asset group, including its estimated residual value, to

the carrying amount.

If the cash flows

associated with the asset or asset group are less than the carrying value,

we would perform a fair value assessment

of the asset, or asset group.

If the carrying amount is found to be greater than the fair value, we record an

impairment loss for the excess of book value over the fair value.

In addition, in all cases of an impairment review,

we re-evaluate the remaining useful lives of the assets and modify them,

as appropriate.

Although we believe our

judgments, estimates and/or assumptions used in estimating cash flows

and determining fair value are reasonable,

making material changes to such judgments, estimates and/or assumptions

could materially affect such impairment

analyses and our financial results.

During the years ended December 31, 2022, December 25, 2021

and December 26, 2020, we recorded total

impairment charges on intangible assets of approximately $49 million ($34 million

related to impairment of

customer lists and relationships attributable to customer attrition rates being higher

than expected in certain

businesses and $15 million due to the disposal of an unprofitable

business), $1 million and $20 million,

respectively.

For the year ended December 31, 2022 impairment charges were recorded

within our health care

distribution segment.

For the years ended December 25, 2021 and December 26,

2020, impairment charges were

recorded within our health care distribution and technology and value-added services

segments.

Income Tax

When determining if the realization of the deferred tax asset is likely by assessing

the need for a valuation

allowance, estimates and judgement are required.

We

consider all available evidence, both positive and negative,

including estimated future taxable earnings, ongoing planning strategies,

future reversals of existing temporary

differences and historical operating results.

Additionally, changes to tax laws and statutory tax rates can have an

impact on our determination.

Our intention is to evaluate the realizability of our deferred tax assets quarterly.

ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in the financial statements in

accordance with other provisions contained within this guidance.

This topic prescribes a recognition threshold and

a measurement attribute for the financial statement recognition and measurement

of tax positions taken or expected

to be taken in a tax return.

For those benefits to be recognized, a tax position must be more likely

than not to be

sustained upon examination by the taxing authorities.

The amount recognized is measured as the largest amount of

benefit that has a greater than 50% likely of being realized upon ultimate

audit settlement.

In the normal course of

business, our tax returns are subject to examination by various taxing

authorities.

Such examinations may result in

future tax and interest assessments by these taxing authorities for uncertain

tax positions taken in respect of certain

tax matters.

Please see

Note 13 – Income Taxes

for further discussion.

The FASB Staff Q&A, Topic

740 No. 5, Accounting for Global Intangible Low-Taxed Income (“GILTI”), states

that an entity can make an accounting policy election to either recognize deferred

taxes for temporary differences

expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is

incurred.

We elected to recognize the tax on GILTI

as a period expense in the period the tax is incurred.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted in the future, please see

Note 1 – Basis of Presentation and Significant Accounting Policies

included under Item 8.

Table of Contents

58

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

In accordance with the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995, we provide the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. All forward-looking statements made by us are subject to risks and uncertainties and are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These statements are generally identified by the use of such terms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,” “to be,” “to make” or other comparable terms. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular the risks discussed under the caption “Risk Factors” in Item 1A of this report and those that may be discussed in other documents we file with the Securities and Exchange Commission (SEC). Forward looking statements include the overall impact of the Novel Coronavirus Disease 2019 (COVID-19) on the Company, its results of operations, liquidity and financial condition (including any estimates of the impact on these items), the rate and consistency with which dental and other practices resume or maintain normal operations in the United States and internationally, expectations regarding personal protective equipment (“PPE”) and COVID-19 related product sales and inventory levels, whether additional resurgences or variants of the virus will adversely impact the resumption of normal operations, whether vaccine mandates will adversely impact the Company (by disrupting our workforce and/or business), whether supply chain disruptions will adversely impact our business, the impact of restructuring programs as well as of any future acquisitions, and more generally current expectations regarding performance in current and future periods. Forward looking statements also include the (i) ability of the Company to have continued access to a variety of test types, expectations regarding COVID-19 test sales, demand and inventory levels, as well as the efficacy or relative efficacy of the test results given that the test efficacy has not been, or will not have been, independently verified under normal FDA procedures and (ii) potential for the Company to distribute the COVID-19 vaccines and ancillary supplies.

Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to: risks associated with COVID-19 and any variants thereof, as well as other disease outbreaks, epidemics, pandemics, or similar wide-spread public health concerns and other natural disasters; our dependence on third parties for the manufacture and supply of our products; our ability to develop or acquire and maintain and protect new products (particularly technology products) and technologies that achieve market acceptance with acceptable margins; transitional challenges associated with acquisitions, dispositions and joint ventures, including the failure to achieve anticipated synergies/benefits; financial and tax risks associated with acquisitions, dispositions and joint ventures; certain provisions in our governing documents that may discourage third-party acquisitions of us; effects of a highly competitive (including, without limitation, competition from third-party online commerce sites) and consolidating market; the repeal or judicial prohibition on implementation of the Affordable Care Act; changes in the health care industry; risks from expansion of customer purchasing power and multi-tiered costing structures; increases in shipping costs for our products or other service issues with our third-party shippers; general global macro-economic and political conditions, including international trade agreements, potential trade barriers and terrorism; failure to comply with existing and future regulatory requirements; risks associated with the EU Medical Device Regulation; failure to comply with laws and regulations relating to health care fraud or other laws and regulations; failure 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; changes in tax legislation; risks related to product liability, intellectual property and other claims; litigation risks; new or unanticipated litigation developments and the status of litigation matters; risks associated with customs policies or legislative import restrictions; cyberattacks or other privacy or data security breaches; risks associated with our global operations; our dependence on our senior management, employee hiring and retention, and our relationships with customers, suppliers and manufacturers; and disruptions in financial markets. The order in which these factors appear should not be construed to indicate their relative importance or priority.

42

Table of Contents

We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control or predict. Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction of actual results. We undertake no duty and have no obligation to update forward-looking statements.

Where You Can Find Important Information

We may disclose important information through one or more of the following channels: SEC filings, public conference calls and webcasts, press releases, the investor relations page of our website (www.henryschein.com) and the social media channels identified on the Newsroom page of our website.

Recent Developments

COVID-19 Pandemic

In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of global financial markets. In response, many countries implemented business closures and restrictions, stay-at-home and social distancing ordinances and similar measures to combat the pandemic, which significantly impacted global business and dramatically reduced demand for dental products and certain medical products in the second quarter of 2020. Demand increased in the second half of 2020 and continued throughout 2021 resulting in growth over the prior year driven by sales of PPE, COVID-19 tests and other COVID-19 related products.

Our consolidated financial statements reflect estimates and assumptions made by us that affect, among other things, our goodwill, long-lived asset and definite-lived intangible asset valuation; inventory valuation; equity investment valuation; assessment of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; the allowance for doubtful accounts; hedging activity; supplier rebates; measurement of compensation cost for certain share-based performance awards and cash bonus plans; and pension plan assumptions. Due to the significant uncertainty surrounding the future impact of COVID-19, our judgments regarding estimates and impairments could change in the future. In addition, the impact of COVID-19 pandemic had a material adverse effect on our business, results of operations and cash flows in the second quarter of 2020. In the latter half of the second quarter of 2020, dental and medical practices began to re-open worldwide, and continued to do so during the second half of 2020. During the year ended December 25, 2021, patient traffic levels returned to levels approaching pre-pandemic levels. There is an ongoing risk that the COVID-19 pandemic 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. However, the extent of the potential impact cannot be reasonably estimated at this time.

Policies, rules and regulations relating to vaccine mandates currently vary by jurisdiction and by customer. In the United States, the vaccine mandate requiring that all federal contractors be vaccinated was stayed in December 2021 and is currently pending litigation. In addition, in January 2022, the United States Supreme Court blocked a federal mandate that would require businesses with more than 100 employees to make their employees receive a COVID-19 vaccination or undergo weekly COVID-19 testing. In addition, state governments and some customers have also issued vaccine requirements for workers in their jurisdictions or who may service their accounts, and some state regulations contradict the contemplated federal vaccine mandates. Also, various international jurisdictions have, or may in the future impose vaccine mandates or additional COVID-19 regulations. The imposition of government or customer mandated vaccination or testing mandates may impact our ability to retain current employees, attract new employees and retain certain product and service contracts. It is possible that a significant number of our employees have not been vaccinated, and in the event of a vaccine mandate some of those employees may seek exemptions or otherwise resist vaccination. The implementation of vaccine mandates could potentially cause labor shortages if employees refuse to get vaccinated and their employment is terminated, either voluntarily or involuntarily. Such labor shortages could also affect our ability to retain certain specific contracts to which the mandates may apply, reduce our sales and/or affect our ability to fulfill customer orders, impacting our revenue and profitability. Furthermore, managing and tracking vaccination status and ongoing testing for exempt and/or unvaccinated employees could potentially increase our costs, as could addressing inconsistent mandates. COVID-19 vaccine mandates and similar regulations have the potential to significantly adversely affect our business, as the nature and effect of such mandates are uncertain at this time.

43

Table of Contents

Corporate Transactions

During the fourth quarter of 2019, we sold an equity investment in Hu-Friedy Mfg. Co., LLC (“Hu-Friedy”), a manufacturer of dental instruments and infection prevention solutions. Our investment was non-controlling, we were not involved in running the business and had no representation on the board of directors. During the fourth quarter of 2019, we also sold certain other equity investments. In the aggregate, the sales of these investments resulted in a pre-tax gain in 2019 of approximately $250.2 million and an after-tax gain of approximately $186.8 million. During 2020 and 2021, we received contingent proceeds of $2.1 million and $9.8 million from the 2019 sale of Hu-Friedy resulting in the recognition of additional after-tax gains of $1.6 million and $7.3 million, respectively.

On February 7, 2019 (the “Distribution Date”), we completed the separation (the “Separation”) and subsequent merger of our animal health business (the “Henry Schein Animal Health Business”) with Direct Vet Marketing, Inc. (d/b/a Vets First Choice, “Vets First Choice”) (the “Merger”). This was accomplished by a series of transactions among us, Vets First Choice, Covetrus, Inc. (f/k/a HS Spinco, Inc. “Covetrus”), a wholly owned subsidiary of ours prior to the Distribution Date, and HS Merger Sub, Inc., a wholly owned subsidiary of Covetrus (“Merger Sub”). In connection with the Separation, we contributed, assigned and transferred to Covetrus certain applicable assets, liabilities and capital stock or other ownership interests relating to the Henry Schein Animal Health Business. On the Distribution Date, we received a tax-free distribution of $1,120 million from Covetrus pursuant to certain debt financing incurred by Covetrus. On the Distribution Date and prior to the Animal Health Spin-off, Covetrus issued shares of Covetrus common stock to certain institutional accredited investors (the “Share Sale Investors”) for $361.1 million (the “Share Sale”). The proceeds of the Share Sale were paid to Covetrus and distributed to us. Subsequent to the Share Sale, we distributed, on a pro rata basis, all of the shares of the common stock of Covetrus held by us to our stockholders of record as of the close of business on January 17, 2019 (the “Animal Health Spin-off”). After the Share Sale and Animal Health Spin-off, Merger Sub consummated the Merger whereby it merged with and into Vets First Choice, with Vets First Choice surviving the Merger as a wholly owned subsidiary of Covetrus. Immediately following the consummation of the Merger, on a fully diluted basis, (i) approximately 63% of the shares of Covetrus common stock were (a) owned by our stockholders and the Share Sale Investors, and (b) held by certain employees of the Henry Schein Animal Health Business (in the form of certain equity awards), and (ii) approximately 37% of the shares of Covetrus common stock were (a) owned by stockholders of Vets First Choice immediately prior to the Merger, and (b) held by certain employees of Vets First Choice (in the form of certain equity awards). After the Separation and the Merger, we no longer beneficially owned any shares of Covetrus common stock and, following the Distribution Date, will not consolidate the financial results of Covetrus for the purpose of our financial reporting. Following the Separation and the Merger, Covetrus was an independent, publicly traded company on the Nasdaq Global Select Market.

Executive-Level Overview

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. We serve more than one million customers worldwide including dental practitioners, laboratories, physician practices, and ambulatory surgery centers, as well as government, institutional health care clinics and other alternate care clinics. We believe that we have a strong brand identity due to our more than 89 years of experience distributing health care products.

We have established strategically located distribution centers around the world to enable us to better serve our customers and increase our operating efficiency. 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.

While our primary go-to-market strategy is in our capacity as a distributor, we also manufacture certain dental specialty products and solutions 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.

44

Table of Contents

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. Our global dental businesses serve office-based dental practitioners, dental laboratories, schools and other institutions. Our global medical businesses serve office-based medical practitioners, ambulatory surgery centers, other alternate-care settings and other institutions.

The health care distribution reportable segment aggregates our global dental and medical operating segments. This segment distributes consumable products, dental specialty products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, dental specialty products (including implant, orthodontic and endodontic products), diagnostic tests, infection-control products, PPE and vitamins.

Our global technology and value-added services business provides software, technology and other value-added services to health care practitioners. Our technology business offerings include practice management software systems for dental and medical practitioners. Our value-added practice solutions include practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, practice technology, network and hardware services, as well as consulting, and continuing education services for practitioners.

A key element to grow closer to our customers is our One Schein initiative, which is a unified go-to-market approach that enables practitioners to work synergistically with our supply chain, equipment sales and service and other value-added services, allowing our customers to leverage the combined value that we offer through a single program. Specifically, One Schein provides customers with streamlined access to our comprehensive offering of national brand products, our private label products and proprietary specialty products and solutions (including implant, orthodontic and endodontic products). In addition, customers have access to a wide range of services, including software and other value-added services.

Industry Overview

In recent years, the health care industry has increasingly focused on 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.

Our operating results in recent years have been significantly affected by strategies and transactions that we undertook to expand our business, domestically and internationally, in part to address significant changes in the health care industry, including consolidation of health care distribution companies, health care reform, trends toward managed care, cuts in Medicare and collective purchasing arrangements.

Our current and future results have been and could be impacted by the COVID-19 pandemic, the current economic environment and continued economic and public health uncertainty. Since the onset of the COVID-19 pandemic in early 2020, we have been carefully monitoring its impact on our global operations and have taken appropriate steps to minimize the risk to our employees. We have seen and expect to continue to see changes in demand trends for some of our products and services, supply chain challenges and labor challenges, as rates of infection fluctuate, new strains or variants of COVID-19 emerge and spread, vaccine uptake and mandates increase and change, governments adapt their approaches to combatting the virus (including without limitation, vaccine mandates), and local conditions change across geographies. For example, vaccine mandates affecting our workforce, whether imposed through government regulations or contracts with governmental authorities or other customers, could potentially cause staffing shortages if employees choose not to comply as well as other consequences to our business or operations, managing and tracking vaccination status and ongoing testing for exempt employees could potentially increase our costs, as could addressing inconsistent COVID-19 vaccination mandates. As a result, we expect to see continued volatility through at least the duration of the pandemic.

45

Table of Contents

Industry Consolidation

The health care products 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 group practices or service organizations ranging in size from a few practitioners to a large number of practitioners who have combined or otherwise associated their practices.

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 or an administrative assistant. Supplies and small equipment are generally purchased from more than one distributor, with one generally serving as the primary supplier.

The trend of consolidation extends to our customer base. Health care practitioners are increasingly seeking to partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician hospital organizations. In many cases, purchasing decisions for consolidated groups are made at a centralized or professional staff level; however, orders are delivered to the practitioners’ offices.

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 companies that can enhance their current product and service offerings or provide opportunities to serve a broader customer base.

Our trend with regard to acquisitions and joint ventures has been to expand our role as a provider of products and services to the health care industry. This trend has resulted in our expansion into service areas that complement our existing operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired businesses.

As industry consolidation continues, we believe that we are positioned to capitalize on this trend, as we believe we have the ability to support increased sales through our existing infrastructure, although there can be no assurances that we will be able to successfully accomplish this. We also have invested in expanding our sales/marketing infrastructure to include a focus on building relationships with decision makers who do not reside in the office-based practitioner setting.

As the health care industry continues to change, we continually evaluate possible candidates for joint venture or acquisition and intend to continue to seek opportunities to expand our role as a provider of products and services to the health care industry. There can be no assurance that we will be able to successfully pursue any such opportunity or consummate any such transaction, if pursued. If additional transactions are entered into or consummated, we would incur merger and/or acquisition-related costs, and there can be no assurance that the integration efforts associated with any such transaction would be successful. In response to the COVID-19 pandemic, we had taken a range of actions to preserve cash, including the temporary suspension of significant acquisition activity. During the second half of 2020, as global conditions improved, we resumed our acquisition strategy.

Aging Population and Other Market Influences

The health care products distribution industry continues to experience growth due to the aging population, increased health care awareness, 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. In addition, the physician market continues to benefit from the shift of procedures and diagnostic testing from acute care settings to alternate-care sites, particularly physicians’ offices.

According to the U.S. Census Bureau’s International Database, in 2021 there were more than six and a half million Americans aged 85 years or older, the segment of the population most in need of long-term care and elder-care

46

Table of Contents

services. By the year 2050, that number is projected to nearly triple to approximately 19 million. The population aged 65 to 84 years is projected to increase by approximately 32% during the same period.

As a result of these market dynamics, annual expenditures for health care services continue to increase in the United States. We believe that demand for our products and services will grow while continuing to be impacted by current and future operating, economic, and industry conditions. The Centers for Medicare and Medicaid Services, or CMS, published “National Health Expenditure Data” indicating that total national health care spending reached approximately $4.1 trillion in 2020, or 19.7% of the nation’s gross domestic product, the benchmark measure for annual production of goods and services in the United States. Health care spending is projected to reach approximately $6.2 trillion in 2028, approximately 19.7% of the nation’s projected gross domestic product. The latest projections begin after the latest historical year 2018 and go through 2028. These projections do not take into account the impacts of COVID-19 because of the timing of the report and the highly uncertain nature of the pandemic.

Government

Our businesses are generally subject to numerous laws and regulations that could impact our financial performance, and failure to comply with such laws or regulations could have a material adverse effect on our business.

See “Item 1. Business – Governmental Regulations” for a discussion of laws, regulations and governmental activity that may affect our results of operations and financial condition.

47

Table of Contents

Results of Operations

Refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2020 compared to fiscal year 2019.

The following tables summarize the significant components of our operating results and cash flows from continuing operations (in thousands):