# HENRY SCHEIN INC (HSIC) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from HENRY SCHEIN INC's 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/1000228/000100022825000014/hsic-20241228.htm Accession: 0001000228-25-000014 Filing date: 2025-02-25 Report date: 2024-12-28 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/HSIC/ All MD&A years: /company/HSIC/mda/ Previous year: /company/HSIC/mda/fy2023/ (FY 2023) Next year: /company/HSIC/mda/fy2025/ (FY 2025) 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