Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

HENRY SCHEIN, INC.

Page

Number

Report of Independent Registered Public Accounting Firm (

BDO USA, LLP; New York,

NY; PCAOB

ID#

)

Consolidated Financial Statements

Balance Sheets as of December 31, 2022 and December 25, 2021

Statements of Income for the years ended December 31, 2022,

December 25, 2021 and December 26, 2020

Statements of Comprehensive Income for the years ended December 31, 2022,

December 25, 2021 and December 26, 2020

Statements of Changes in Stockholders’ Equity for the years ended

December 31, 2022, December 25, 2021 and December 26, 2020

Statements of Cash Flows for the years ended December 31, 2022,

December 25, 2021 and December 26, 2020

Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation and Significant Accounting Policies

Note 2 – Net Sales from Contracts with Customers

Note 3 – Segment and Geographic Data

Note 4 – Business Acquisitions and Divestiture

Note 5 – Property and Equipment, Net

Note 6 – Leases

Note 7 – Goodwill and Other Intangibles, Net

Note 8 – Investments and Other

Note 9 – Fair Value Measurements

Note 10 – Concentrations of Risk

Note 11 – Derivatives and Hedging Activities

Note 12 – Debt

Note 13 – Income Taxes

Note 14 – Plans of Restructuring and Integration Costs

Note 15 – Commitments and Contingencies

Note 16 – Stock-Based Compensation

Note 17 – Employee Benefit Plans

Note 18 – Redeemable Noncontrolling Interests

Note 19 – Comprehensive Income

Note 20 – Discontinued Operations

Note 21 – Earnings Per Share

Note 22 – Supplemental Cash Flow Information

Note 23 – Related Party Transactions

All other schedules are omitted because the required information is either

inapplicable or is included in the consolidated

financial statements or the notes thereto.

Report Of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Henry Schein, Inc.

Melville, NY

Opinion on the Consolidated Financial Statements

have

audited

the

accompanying

consolidated

balance

sheets

Henry

Schein,

Inc.

(the

“Company”)

December 31, 2022 and December 25, 2021, the related consolidated statements of income, comprehensive income,

stockholders’ equity,

and cash

flows for

each of

the three

years in

the

period ended

December 31,

2022, and

the

related notes

(collectively referred to

as the

“consolidated financial statements”).

In our

opinion, the

consolidated

financial statements

present fairly,

in all

material respects, the

financial position of

the Company

at December

31,

2022 and

December 25, 2021,

and the

results of its

operations and its

cash flows for

each of

the three

years in the

period ended December 31,

2022, in conformity with

accounting principles generally accepted in

the United States

of America.

also

have

audited,

accordance

with

the

standards

the

Public

Company

Accounting

Oversight

Board

(United

States)

(“PCAOB”),

the

Company's

internal

control

over

financial

reporting

December

31,

2022,

based

criteria

established

Internal

Control

–

Integrated

Framework

(2013)

issued

the

Committee

Sponsoring

Organizations

the

Treadway

Commission

(“COSO”)

and

our

report

dated

February

21,

2023,

expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are

the responsibility of the

Company’s management. Our

responsibility is

express

opinion

the

Company’s

consolidated

financial

statements

based

our

audits.

are

public

accounting

firm

registered

with

the

PCAOB

and

are

required

independent

with

respect

the

Company

accordance

with

the

U.S.

federal

securities

laws

and

the

applicable

rules

and

regulations

the

Securities

and

Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and

perform

the

audit

obtain

reasonable

assurance

about

whether

the

consolidated

financial

statements

are

free

material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks

material

misstatement

the

consolidated

financial

statements,

whether

due

error

fraud,

and

performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the

amounts

and

disclosures

the

consolidated

financial

statements.

Our

audits

also

included

evaluating

the

accounting

principles

used

and

significant

estimates

made

management,

well

evaluating

the

overall

presentation of the consolidated financial

statements.

believe that our audits provide

a reasonable basis for our

opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the

current period audit of the consolidated

financial statements that was communicated or required to be communicated

to the audit committee and that: (1)

relates to accounts or disclosures that are material to the consolidated

financial statements and (2) involved our

especially challenging, subjective,

or complex judgments. The communication of the critical

audit matter does not

alter in any way our opinion on the consolidated financial statements, taken

as a whole, and we are not, by

communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the

accounts or disclosures to which it relates.

Revenue growth rates utilized in

the determination of the fair

value of acquired customer relationships

for a

certain acquisition

As described in

Note 4 of

the consolidated financial

statements, the Company

acquired several companies in

the

current year.

As a

result of

the acquisitions,

management was

required to

determine estimated

fair values

of the

assets

acquired

and

liabilities

assumed,

including

certain

identifiable

intangible

assets.

some

instances,

management

utilized

third-party

valuation

specialists

assist

the

preparation

the

valuation

certain

identifiable intangible assets.

Management exercised judgment to

develop and select

revenue growth rates

in the

measurement of the fair value of the customer relationships.

identified

the

revenue

growth

rates

utilized

the

determination

the

fair

value

acquired

customer

relationships

for

certain

acquisition,

critical

audit

matter.

The

principal

considerations

for

our

determination included the

subjectivity and judgment

required to determine

the revenue growth

rates used

in the

fair

value

measurement

acquired

customer

relationships

for

certain

acquisition.

Auditing

these

revenue

growth rates involved especially subjective auditor judgment due to

the nature and extent of audit effort required.

The primary procedures we performed to address this critical audit matter

included:

●

Evaluating the reasonableness of the revenue growth rates by i)

reviewing the historical performance

of the acquired company using its audited financial statements and

(ii) assessing revenue projections

against industry metrics and peer-group companies.

/s/

BDO USA, LLP

We have served as the Company's auditor since 1984.

New York, NY

February 21, 2023

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

December 31,

December 25,

2022

2021

ASSETS

Current assets:

Cash and cash equivalents

Accounts receivable, net of reserves of $

and $

1,442

1,452

Inventories, net

1,963

1,861

Prepaid expenses and other

Total current assets

3,988

3,844

Property and equipment, net

Operating lease right-of-use assets

Goodwill

2,893

2,854

Other intangibles, net

Investments and other

Total assets

8,607

8,481

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND

STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

1,004

1,054

Bank credit lines

Current maturities of long-term debt

Operating lease liabilities

Accrued expenses:

Payroll and related

Taxes

Other

Total current liabilities

2,224

2,307

Long-term debt

1,040

Deferred income taxes

Operating lease liabilities

Other liabilities

Total liabilities

3,936

3,805

Redeemable noncontrolling interests

Commitments and contingencies

(nil)

Stockholders' equity:

Preferred stock, $

0.01

par value,

1,000,000

shares authorized,

none

outstanding

Common stock, $

0.01

par value,

480,000,000

shares authorized,

131,792,817

outstanding on December 31, 2022 and

137,145,558

outstanding on December 25, 2021

Additional paid-in capital

Retained earnings

3,678

3,595

Accumulated other comprehensive loss

(233)

(171)

Total Henry Schein, Inc. stockholders' equity

3,446

3,425

Noncontrolling interests

Total stockholders' equity

4,095

4,063

Total liabilities, redeemable noncontrolling

interests and stockholders' equity

8,607

8,481

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF INCOME

(in millions, except share and per share data)

Years

Ended

December 31,

December 25,

December 26,

2022

2021

2020

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

Restructuring and integration costs

Operating income

Other income (expense):

Interest income

Interest expense

(44)

(28)

(41)

Other, net

(4)

Income from continuing operations before taxes, equity in

earnings of affiliates and noncontrolling interests

Income taxes

(170)

(198)

(95)

Equity in earnings of affiliates

Gain on sale of equity investment

Net income from continuing operations

Income from discontinued operations, net of tax

Net Income

Less: Net income attributable to noncontrolling interests

(28)

(29)

(16)

Net income attributable to Henry Schein, Inc.

Amounts attributable to Henry Schein, Inc.:

Continuing operations

Discontinued operations

Net income attributable to Henry Schein, Inc.

Earnings per share from continuing operations attributable to

Henry Schein, Inc.:

Basic

3.95

4.51

2.83

Diluted

3.91

4.45

2.81

Earnings per share from discontinued operations attributable to Henry

Schein, Inc.:

Basic

0.01

Diluted

0.01

Earnings per share attributable to Henry Schein, Inc.:

Basic

3.95

4.51

2.83

Diluted

3.91

4.45

2.82

Weighted-average common

shares outstanding:

Basic

136,064,221

140,090,889

142,504,193

Diluted

137,755,670

141,772,781

143,403,682

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(in millions)

Years

Ended

December 31,

December 25,

December 26,

2022

2021

2020

Net income

Other comprehensive income, net of tax:

Foreign currency translation gain (loss)

(88)

(84)

Unrealized gain (loss) from foreign currency hedging activities

(7)

Pension adjustment gain

Other comprehensive income (loss), net of tax

(69)

Comprehensive income

Comprehensive income attributable to noncontrolling interests:

Net income

(28)

(29)

(16)

Foreign currency translation loss

Comprehensive income attributable to noncontrolling interests

(21)

(23)

(13)

Comprehensive income attributable to Henry Schein, Inc.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS' EQUITY

(In millions, except share and per share data)

Accumulated

Common Stock

Additional

Other

Total

$.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income (Loss)

Interests

Equity

Balance, December 28, 2019

143,353,459

3,116

(167)

3,630

Net income (excluding $

attributable to Redeemable

noncontrolling interests from continuing operations)

Foreign currency translation gain (excluding loss of $

attributable to Redeemable noncontrolling interests)

Unrealized loss from foreign currency hedging activities,

net of tax benefit of $

(7)

Dividends paid

(1)

Purchase of noncontrolling interests

(2)

(1)

(3)

Change in fair value of redeemable securities

(33)

Noncontrolling interests and adjustments related to

business acquisitions

Repurchase and retirement of common stock

(1,200,000)

(11)

(63)

(74)

Stock-based compensation expense

545,864

Shares withheld for payroll taxes

(236,752)

(15)

Separation of Animal Health business

Transfer of charges in excess of capital

(2)

Balance, December 26, 2020

142,462,571

3,455

(108)

3,984

Net income (excluding $

attributable to Redeemable

noncontrolling interests from continuing operations)

Foreign currency translation loss (excluding loss of $

attributable to Redeemable noncontrolling interests)

(78)

Unrealized gain from foreign currency hedging activities,

net of tax of $

Pension adjustment gain, including tax of $

Dividends paid

(11)

Change in fair value of redeemable securities

(160)

Noncontrolling interests and adjustments related to

business acquisitions

Repurchase and retirement of common stock

(5,505,704)

(53)

(348)

(401)

Stock-based compensation expense

303,643

Shares withheld for payroll taxes

(114,952)

(8)

Transfer of charges in excess of capital

(143)

Balance, December 25, 2021

137,145,558

3,595

(171)

4,063

Net income (excluding $

attributable to Redeemable

noncontrolling interests from continuing operations)

Foreign currency translation loss (excluding loss of $

attributable to Redeemable noncontrolling interests)

(81)

(1)

(82)

Unrealized gain from foreign currency hedging activities,

net of tax of $

Pension adjustment gain, including tax of $

Dividends paid

(1)

Purchase of noncontrolling interests

(7)

Change in fair value of redeemable securities

Noncontrolling interests and adjustments related to

business acquisitions

Repurchase and retirement of common stock

(6,111,676)

(65)

(420)

(485)

Stock issued upon exercise of stock options

35,792

Stock-based compensation expense

1,102,108

Shares withheld for payroll taxes

(376,034)

(32)

Settlement of stock-based compensation awards

(2,931)

Transfer of charges in excess of capital

(35)

Balance, December 31, 2022

131,792,817

3,678

(233)

4,095

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

(in millions)

Years Ended

December 31,

December 25,

December 26,

2022

2021

2020

Cash flows from operating activities:

Net income

Income from discontinued operations

Income from continuing operations

Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization

Impairment charge on intangible assets

Non-cash restructuring charges

Gain on sale of equity investment

(10)

(2)

Stock-based compensation expense

Provision for (benefits from) losses on trade and other

accounts receivable

(8)

Benefit from deferred income taxes

(73)

(11)

(53)

Equity in earnings of affiliates

(15)

(20)

(12)

Distributions from equity affiliates

Changes in unrecognized tax benefits

(2)

(25)

Other

(20)

(10)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(7)

(189)

Inventories

(126)

(295)

(32)

Other current assets

(52)

(6)

Accounts payable and accrued expenses

(96)

Net cash provided by operating activities from continuing

operations

Net cash provided by operating activities from discontinued operations

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of fixed assets

(96)

(79)

(49)

Payments related to equity investments and business

acquisitions, net of cash acquired

(158)

(571)

(60)

Proceeds from sale of equity investment

Proceeds from (repayments to) loan to affiliate

(4)

(1)

Other

(33)

(19)

Net cash used in investing activities

(276)

(677)

(115)

Cash flows from financing activities:

Net change in bank borrowings

(18)

Proceeds from issuance of long-term debt

Principal payments for long-term debt

(59)

(122)

(611)

Debt issuance costs

(3)

(4)

Proceeds from issuance of stock upon exercise of stock options

Payments for repurchases of common stock

(485)

(401)

(74)

Payments for taxes related to shares withheld for employee

taxes

(32)

(8)

(14)

Distributions to noncontrolling shareholders

(21)

(26)

(8)

Acquisitions of noncontrolling interests in subsidiaries

(38)

(60)

(19)

Proceeds from Henry Schein Animal Health Business

Net cash used in financing activities from continuing

operations

(315)

(333)

(182)

Net cash used in financing activities from discontinued

operations

(5)

Net cash used in financing activities

(315)

(333)

(187)

Effect of exchange rate changes on cash and cash equivalents from continuing

operations

(12)

(3)

Net change in cash and cash equivalents from continuing

operations

(1)

(303)

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 1 –Basis of Presentation and Significant Accounting Policies

Nature of Operations

We distribute health care products and services primarily to office-based dental and medical practitioners, across

dental practices, laboratories, physician practices, and ambulatory surgery centers,

as well as government,

institutional health care clinics and alternate care clinics.

We also provide software, technology and other value-

added services to health care practitioners.

Our 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.

We have operations or affiliates in the United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China, the

Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg,

Malaysia, Mexico, the Netherlands, New Zealand, Poland, Portugal, Singapore, South

Africa, Spain, Sweden,

Switzerland, Thailand, United Arab Emirates and the United Kingdom.

Basis of Presentation

Our consolidated financial statements include the accounts of Henry

Schein, Inc. and all of our controlled

subsidiaries.

All intercompany accounts and transactions are eliminated in

consolidation.

Investments in

unconsolidated affiliates in which we have the ability to influence the operating or

financial decisions are accounted

for under the equity method.

Certain prior period amounts have been reclassified to conform to

the current period

presentation.

These reclassifications, individually and in the aggregate, did

not have a material impact on our

consolidated financial condition, results of operations or cash flows.

We consolidate the results of operations and financial position of a trade accounts receivable securitization which

we consider a Variable Interest Entity (“VIE”) because we are the primary beneficiary, and we have the power to

direct activities that most significantly affect the economic performance and have

the obligation to absorb the

majority of the losses or benefits.

For this VIE, the trade accounts receivable transferred to the VIE are

pledged as

collateral to the related debt.

The creditors have recourse to us for losses on these trade accounts receivable.

December 31, 2022 and December 25, 2021, certain trade accounts receivable that

can only be used to settle

obligations of this VIE were $

million and $

million, respectively, and the liabilities of this VIE where the

creditors have recourse to us were $

million and $

million, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles

generally accepted in the United

States requires us to make estimates and assumptions that affect the reported amounts of

assets and liabilities and

disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of

revenues and expenses during the reporting period.

Actual results could differ from those estimates.

In March 2020, the World Health Organization declared the Novel Coronavirus Disease 2019 (“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 for these non-PPE products increased in the

second half of 2020 and continued throughout the years ended December 25,

2021 and December 31, 2022,

resulting in growth over the prior years.

Demand for PPE products declined during the year ended

December 31,

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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.

Fiscal Year

We report our results of operations and cash flows on a

week basis ending on the last Saturday of December.

The year ended December 31, 2022 consisted of

weeks, and the years ended, December 25, 2021 and December

26, 2020 consisted of

weeks.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods

or services in an amount that reflects the

consideration that we expect to receive for those goods or services.

To recognize revenue, we do the following:

identify the contract(s) with a customer;

identify the performance obligations in the contract;

determine the transaction price;

allocate the transaction price to the performance obligations in the contract;

and

recognize revenue when, or as, the entity satisfies a performance obligation.

We generate revenue from the sale of dental and medical consumable products, equipment (Health care distribution

revenues), software products and services and other sources (Technology and value-added services revenues).

Provisions for discounts, rebates to customers, customer returns and other

contra revenue adjustments are included

in the transaction price at contract inception by estimating the most likely

amount based upon historical data and

estimates and are provided for in the period in which the related sales are

recognized.

Revenue derived from the sale of consumable products is recognized at a point

in time when control transfers to the

customer.

Such sales typically entail high-volume, low-dollar orders shipped

using third-party common carriers.

We believe that the shipment date is the most appropriate point in time indicating control has transferred to the

customer because we have no post-shipment obligations and this is when

legal title and risks and rewards of

ownership transfer to the customer and the point at which we have an

enforceable right to payment.

Revenue derived from the sale of equipment is recognized when control

transfers to the customer.

This occurs

when the equipment is delivered.

Such sales typically entail scheduled deliveries of large equipment primarily

equipment service technicians.

Most equipment requires minimal installation, which is

typically completed at the

time of delivery.

Our product generally carries standard warranty terms provided

by the manufacturer, however, in

instances where we provide warranty labor services, the warranty costs

are accrued in accordance with Accounting

Standards Codification (“ASC”) 460 “Guarantees”.

At December 31, 2022 and December 25, 2021, we had

accrued approximately $

million and $

million, respectively, for warranty costs.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Revenue derived from the sale of software products is recognized when

products are delivered to customers or

made available electronically.

Such software is generally installed by customers and does not

require extensive

training due to the nature of its design.

Revenue derived from post-contract customer support for software,

including annual support and/or training, is generally recognized over

time using time elapsed as the input method

that best depicts the transfer of control to the customer.

Revenue derived from software sold on Software-as-a -

Service basis is recognized ratably over the subscription period as

control is transferred to the customer.

Revenue derived from other sources, including freight charges, equipment repairs

and financial services, is

recognized when the related product revenue is recognized or when

the services are provided.

We apply the

practical expedient to treat shipping and handling activities performed after the

customer obtains control as

fulfillment activities, rather than a separate performance obligation in the

contract.

Sales, value-add and other taxes we collect concurrent with revenue-producing

activities are excluded from

revenue.

Certain of our revenue is derived from bundled arrangements that include

multiple distinct performance obligations,

which are accounted for separately.

When we sell software products together with related services (i.e.,

training

and technical support), we allocate revenue to software using the residual

method, using an estimate of the

standalone selling price to estimate the fair value of the undelivered

elements.

Bundled arrangements that include

elements that are not considered software consist primarily of equipment

and the related installation service.

allocate revenue for such arrangements based on the relative selling

prices of the goods or services.

If an

observable selling price is not available (i.e., we do not sell the goods or

services separately), we use one of the

following techniques to estimate the standalone selling price: adjusted

market approach; cost-plus approach; or the

residual method.

There is no specific hierarchy for the use of these methods,

but the estimated selling price reflects

our best estimate of what the selling prices of each deliverable would be

if it were sold regularly on a standalone

basis taking into consideration the cost structure of our business, technical skill

required, customer location and

other market conditions.

See

Note 2 – Revenue from Contracts with Customers

for additional disclosures of disaggregated net sales and

Note 3 – Segment and Geographic Data

for disclosures of net sales by segment and geographic data.

Sales Returns

Sales returns are recognized as a reduction of revenue by the amount

of expected returns and are recorded as refund

liability within current liabilities.

We estimate the amount of revenue expected to be reversed to calculate the sales

return liability based on historical data for specific products, adjusted

as necessary for new products.

The

allowance for returns is presented gross as a refund liability and we

record an inventory asset (and a corresponding

adjustment to cost of sales) for any products that we expect to be returned.

Cost of Sales

The primary components of cost of sales include the cost of the product

(net of purchase discounts, supplier

chargebacks and rebates) and inbound and outbound freight charges.

Costs related to purchasing, receiving, inspections, warehousing, internal

inventory transfers and other costs of our

distribution network are included in selling, general and administrative

expenses along with other operating costs.

Total distribution network costs were $

million, $

million and $

million for the years ended December 31,

2022, December 25, 2021 and December 26, 2020.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Supplier Rebates

Supplier rebates are included as a reduction of cost of sales and are recognized

over the period they are earned.

The

factors we consider in estimating supplier rebate accruals include forecasted

inventory purchases and sales, in

conjunction with supplier rebate contract terms, which generally provide

for increasing rebates based on either

increased purchase or sales volume.

Direct Shipping and Handling Costs

Freight and other direct shipping costs are included in cost of sales.

Direct handling costs, which represent

primarily direct compensation costs of employees who pick, pack and otherwise

prepare, if necessary, merchandise

for shipment to our customers are reflected in selling, general and administrative

expenses.

Direct handling costs

were $

million, $

million and $

million for the years ended December 31, 2022, December 25, 2021

and

December 26, 2020.

Advertising and Promotional Costs

We generally expense advertising and promotional costs as incurred.

Total advertising and promotional expenses

were $

million, $

million and $

million for the years ended December 31, 2022, December 25, 2021

and

December 26, 2020.

Stock Compensation Costs

measure stock-based compensation at the grant date, based on the estimated

fair value of the award, and

recognize the cost (net of estimated forfeitures) as compensation expense on

a straight-line basis over the requisite

service period for time-based restricted stock units and on a graded vesting

basis for the option awards.

For

performance-based awards, at each reporting date, we reassess whether achievement

of the performance condition

is probable and accrue compensation expense when achievement of

the performance condition is probable.

Our

stock-based compensation expense is reflected in selling, general and administrative

expenses.

Employment Benefit Plans and other Postretirement Benefit Plans

Certain of our employees in our international markets participate

in various noncontributory defined benefit plans.

We recognize the funded status, measured as the difference between the fair value of plan assets and the benefit

obligation, of each applicable plan, within accumulated other comprehensive

income in the consolidated balance

sheets, whereby each unfunded plan is recognized as a liability and

each funded plan is recognized as either an

asset or liability based on its funded status.

We measure our plan assets and liabilities at the end of our fiscal year.

Net periodic pension costs and valuations are dependent on assumptions

used by third-party actuaries in calculating

those amounts.

These assumptions include discount rates, expected return on plan

assets, rate of future

compensation levels, retirement rates, mortality rates, and other factors.

We record the service cost component of

net pension cost in selling, general and administrative expenses within

our consolidated statements of income.

Cash and Cash Equivalents

We consider all highly liquid short-term investments with an original maturity of three months or less to be cash

equivalents.

Due to the short-term maturity of such investments,

the carrying amounts are a reasonable estimate of

fair value.

Outstanding checks in excess of funds on deposit of $

million and $

million, primarily related to

payments for inventory, were classified as accounts payable as of December 31, 2022 and December 25, 2021.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Contract Balances

Contract balances represent amounts presented in our consolidated balance

sheets when either we have transferred

goods or services to the customer or the customer has paid consideration to us

under the contract.

These contract

balances include accounts receivable,

contract assets and contract liabilities.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are generally recognized when health care distribution

and technology and value-added

services revenues are recognized.

In accordance with

the “expected credit loss” model, the carrying amount of

accounts receivable is reduced by a valuation allowance that reflects

our best estimate of the amounts that we do

not expect to collect.

In addition to reviewing delinquent accounts receivable, we consider many

factors in

estimating our reserve, including types of customers and their credit worthiness,

experience and historical data

adjusted for current conditions and reasonable supportable forecasts.

record allowances for credit losses based upon a specific review of all

significant outstanding invoices.

For

those invoices not specifically reviewed, provisions are provided at differing rates,

based upon the age of the

receivable, the collection history associated with the geographic region

that the receivable was recorded in, current

economic trends and reasonable supportable forecasts.

write-off a receivable and charge it against its recorded

allowance when we deem them uncollectible.

Our allowance for doubtful accounts was $

million, $

million and $

million as of December 31, 2022,

December 25, 2021 and December 26, 2020, respectively.

Additions to the allowance for the years ended

December 31, 2022, December 25, 2021 and December 26, 2020 were $

million, $

million and $

million.

Deductions to the allowance for the years ended December 31, 2022, December

25, 2021 and December 26, 2020

were $

million, $

million and $

million.

Contract Assets

Contract assets include amounts related to any conditional right to consideration

for work completed but not billed

as of the reporting date, and generally represent amounts owed to us by

customers, but not yet billed.

Contract

assets are transferred to accounts receivable when the right becomes unconditional.

The contract assets primarily

relate to our bundled arrangements for the sale of equipment and consumables

and sales of term software licenses.

Current contract assets are included in Prepaid expenses and other and the non-current

contract assets are included

in investments and other within our consolidated balance sheets.

Current and non-current contract asset balances as

of December 31, 2022 and December 25, 2021 were not material.

Contract Liabilities

Contract liabilities are comprised of advance payments and upfront payments

for service arrangements provided

over time that are accounted for as deferred revenue amounts.

Contract liabilities are transferred to revenue once

the performance obligation has been satisfied.

Current contract liabilities are included in accrued expenses: Other

and the non-current contract liabilities are included in other liabilities

within our consolidated balance sheets.

December 25, 2021, the current portion of contract liabilities of $

million was reported in accrued expenses:

Other, and $

million related to non-current contract liabilities was reported

in other liabilities.

During the year

ended December 31, 2022,

we recognized substantially all of the current contract liability amounts

that were

previously deferred at December 25, 2021.

At December 31, 2022, the current and non-current portion of contract

liabilities were $

million and $

million, respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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 accordance with our policy for inventory valuation, we

consider many factors including the

condition and salability of the inventory, historical sales, forecasted sales and market and economic trends.

From

time to time, we adjust our assumptions for anticipated changes in any

of these or other factors expected to affect

the value of inventory.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation or

amortization.

Depreciation is

computed primarily under the straight-line method

(see

Note 5 – Property and Equipment, Net

for estimated useful

lives).

Amortization of leasehold improvements is computed using

the straight-line method over the lesser of the

useful life of the assets or the lease term.

Capitalized Software Development Costs

Capitalized internal-use software costs consist of costs to purchase and

develop software.

For software to be used

solely to meet internal needs and cloud-based applications used to deliver

our services, we capitalize costs incurred

during the application development stage and include such costs within

property and equipment, net within our

consolidated balance sheets.

For software to be sold, leased, or marketed to external users, we capitalize

software

development costs when technological feasibility is reached and

include such costs in Investments and other within

our consolidated balance sheets.

Leases

determine if an arrangement contains a lease at inception.

An arrangement contains a lease if it implicitly or

explicitly identifies an asset to be used and conveys the right to control

the use of the identified asset in exchange

for consideration.

As a lessee, we include operating leases in operating lease right-of-use

(“ROU”) assets,

operating lease liabilities, and non-current operating lease liabilities in our

consolidated balance sheets.

Finance

leases are included in property and equipment, current maturities

of long-term debt, and long-term debt in our

consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease

term and lease liabilities represent our

obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized

upon commencement of the lease based on the present value of the lease payments

over the lease term.

As most of

our leases do not provide an implicit interest rate, we generally use our incremental

borrowing rate based on the

estimated rate of interest for fully collateralized and fully amortizing borrowings

over a similar term of the lease

payments at commencement date to determine the present value of

lease payments.

When readily determinable, we

use the implicit rate.

Our lease terms may include options to extend or terminate the lease when it is reasonably

certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line

basis

over the lease term.

Expenses associated with operating leases and finance leases

are included in “selling, general

and administrative”

and “interest expense”, respectively within our consolidated statement

of income.

Short-term

leases with a term of 12 months or less are not capitalized.

During the years ended December 31, 2022, December

25, 2021 and December 26, 2020, such short-term lease expense was

million, $

million, and $

million,

respectively.

have lease agreements with lease and non-lease components, which are

generally accounted for as a single

lease component, except non-lease components for leases of vehicles, which

are accounted for separately.

When a

vehicle lease contains both lease and non-lease components, we allocate the

transaction price based on the relative

standalone selling price.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair

value of the net assets acquired,

including the amount assigned to identifiable intangible assets.

Goodwill is subject to impairment analysis annually

or more frequently if needed.

Such impairment analyses for goodwill requires 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 was allocated to such reporting units, for the

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

basis.

For the years ended December 31, 2022 and December 25, 2021, we tested goodwill

for impairment, on the first

day of the fourth quarter, using a quantitative analysis comparing the carrying value of our reporting

units,

including goodwill, to the estimated fair value of our reporting units using

a discounted cash flow methodology.

the fair value of a reporting unit exceeds its carrying amount, goodwill

of the reporting unit is considered not

impaired.

Conversely, impairment loss would be equivalent to the excess of a reporting unit’s carrying value over

its fair value limited to the total amount of goodwill allocated to that

reporting unit.

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 related to fair value models, the inputs and our judgments

in applying them to this analysis.

The most

significant inputs include estimation of future cash flows based on budget

expectations, and determination of

comparable companies to develop a weighted average cost of capital for each

reporting unit.

For the year ended December 31, 2022, we recorded a $

million impairment of goodwill relating to the disposal

of an unprofitable business whose estimated fair value was lower than

its carrying value.

The disposal of this

business is part of our restructuring initiative as more fully discussed

Note 14 – Plans of Restructuring and

Integration Costs

For the year ended December 25, 2021, the results of our goodwill

impairment analysis did

result in any impairments.

Intangible Assets

Intangible assets, other than goodwill, are evaluated for impairment whenever

events or changes in circumstances

indicate that the carrying amount of the assets may not be recoverable

through the estimated undiscounted future

cash flows to be derived from such assets.

Definite-lived intangible assets primarily consist of non-compete agreements,

trademarks, trade names, customer

lists, customer relationships and product development.

For long-lived assets used in operations, impairment losses

are only recorded if the asset’s

carrying amount is not recoverable through its undiscounted, probability-weighted

future cash flows.

We measure the impairment loss based on the difference between the carrying amount and the

estimated fair value.

When an impairment exists, the related assets are written down to fair value.

During the years ended December 31, 2022, December 25, 2021

and December 26, 2020, we recorded total

impairment charges on intangible assets of $

million, $

million and $

million, respectively, as more fully

discussed in

Note 7 – Goodwill and Other Intangibles, Net

Income Taxes

We account for income taxes under an asset and liability approach that requires the recognition of deferred income

tax assets and liabilities for the expected future tax consequences of events

that have been recognized in our

financial statements or tax returns.

In estimating future tax consequences, we generally consider all expected

future

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

events other than enactments of changes in tax laws or rates.

The effect on deferred income tax assets and

liabilities of a change in tax rates is recognized as income or expense in

the period that includes the enactment date.

We file a consolidated U.S. federal income tax return with our 80% or greater owned U.S. subsidiaries

Redeemable Noncontrolling Interests

Some minority stockholders in certain of our consolidated subsidiaries have

the right, at certain times, to require us

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

Their interests in these subsidiaries are classified

outside permanent equity on our consolidated balance sheets and are

carried at the estimated redemption amounts.

The redemption amounts have been estimated based on expected future

earnings and cash flow and, if such

earnings and cash flow are not achieved, the value of the redeemable noncontrolling

interests might be impacted.

Changes in the estimated redemption amounts of the noncontrolling

interests subject to put options are reflected at

each reporting period with a corresponding adjustment to Additional paid-in

capital.

Future reductions in the

carrying amounts are subject to a “floor” amount that is equal to the

fair value of the redeemable noncontrolling

interests at the time they were originally recorded.

The recorded value of the redeemable noncontrolling interests

cannot go below the floor level.

Adjustments to the carrying amount of noncontrolling interests

reflect a fair value redemption feature do not impact the calculation of earnings

per share.

Our net income is

reduced by the portion of the subsidiaries’ net income that is attributable

to redeemable noncontrolling interests.

Noncontrolling Interests

Non-controlling interest represents the ownership interests of certain

minority owners of our consolidated

subsidiaries.

Our net income is reduced by the portion of the subsidiaries

net income that is attributable to

noncontrolling interests.

Comprehensive Income

Comprehensive income includes certain gains and losses that, under accounting

principles generally accepted in the

United States, are excluded from net income as such amounts are recorded

directly as an adjustment to

stockholders’ equity.

Our comprehensive income is primarily comprised of net income,

foreign currency

translation gain (loss), unrealized gain (loss) from foreign currency

hedging activities and pension adjustment gain.

Risk Management and Derivative Financial Instruments

We use derivative instruments to minimize our exposure to fluctuations in foreign currency exchange rates.

Our

objective is to manage the impact that foreign currency exchange rate fluctuations

could have on recognized asset

and liability fair values, earnings and cash flows, as well as our net

investments in foreign subsidiaries.

Our risk

management policy requires that derivative contracts used as hedges be

effective at reducing the risks associated

with the exposure being hedged and be designated as a hedge at the inception

of the contract.

We do not enter into

derivative instruments for speculative purposes.

Our derivative instruments primarily include foreign currency

forward agreements related to certain intercompany loans, certain forecasted

inventory purchase commitments with

foreign suppliers and foreign currency forward contracts to hedge a portion of

our euro-denominated foreign

operations which are designated as net investment hedges.

Foreign currency forward agreements related to forecasted inventory

purchase commitments with foreign suppliers

and foreign currency swaps related to foreign currency denominated debt are designated

as cash flow hedges.

For

derivatives that are designated and qualify as cash flow hedges, the changes

in the fair value of the derivative is

recorded as a component of Accumulated other comprehensive income

in stockholders’ equity and subsequently

reclassified into earnings in the period(s) during which the hedged transaction

affects earnings.

We classify the

cash flows related to our hedging activities in the same category on our consolidated

statements of cash flows as the

cash flows related to the hedged item.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Foreign currency forward contracts related to our euro-denominated

foreign operations are designated as net

investment hedges.

For derivatives that are designated and qualify as net investment

hedges, the changes in the fair

value of the derivative is recorded in the foreign currency translation

gain (loss) component of Accumulated other

comprehensive income in stockholders’ equity until the net investment

is sold or substantially liquidated.

Our foreign currency forward agreements related to foreign currency

balance sheet exposure provide economic

hedges but are not designated as hedges for accounting purposes.

For agreements not designated as hedges, changes in the value of the derivative,

along with the transaction gain or

loss on the hedged item, are recorded in other, net, within our consolidated statements of income.

Total return swaps are entered into for the purpose of economically hedging our unfunded non-qualified

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

(“DCP”).

This swap will offset

changes in our SERP and DCP liabilities.

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

recorded

in selling, general, and administrative expenses within our consolidated

statements of income.

Foreign Currency Translation

and Transactions

The financial position and results of operations of our foreign subsidiaries

are determined using local currency as

the functional currency.

Assets and liabilities of these subsidiaries are translated at the exchange

rate in effect at

each year-end.

Income statement accounts are translated at the average rate

of exchange prevailing during the year.

Translation adjustments arising from the use of differing exchange rates from period to period are included

Accumulated other comprehensive income in stockholders’ equity.

Gains and losses resulting from foreign

currency transactions are included in earnings.

Accounting Pronouncements Adopted

On December 26, 2021 we adopted Accounting Standards Update

(“ASU”) No. 2021 – 08, “Accounting for

Contract Assets and Contract Liabilities from Contracts with Customers”

(Subtopic 805).

ASU 2021 – 08 requires

an acquirer to recognize and measure contract assets and contract liabilities acquired

in a business combination in

accordance with ASU No. 2014 - 09, “Revenue from Contracts with Customers”

(Topic 606).

At the acquisition

date, an acquirer should account for the related revenue contracts in accordance

with Topic 606 as if it had

originated the contracts.

To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine

what to record for the acquired revenue contracts.

Generally, this should result in an acquirer recognizing and

measuring the acquired contract assets and contract liabilities consistent with how

they were recognized and

measured in the acquiree’s financial statements.

Our adoption of ASU 2021 - 08 did not have a material impact on

our consolidated financial statements.

On December 27, 2020 we adopted ASU No. 2019-12, “Income Taxes” (Topic 740): Simplifying the Accounting

for Income Taxes (“ASU 2019-12”).

ASU 2019-12 simplifies the accounting for income taxes by

removing certain

exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and

simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

Our adoption of

ASU 2019-12 did not have a material impact on our consolidated

financial statements.

Recently Issued Accounting Standards

In September 2022, the FASB issued ASU No. 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-

50): Disclosure of Supplier Finance Program Obligations” which will

increase transparency of supplier finance

programs by requiring entities that use such programs in connection with

the purchase of goods and services to

disclose certain qualitative and quantitative information about such

programs.

ASU 2022-04 is effective for fiscal

years beginning after December 15, 2022, including interim periods within

those fiscal years, except for amended

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

rollforward information, which is effective for fiscal years beginning after December

15, 2023.

We do not expect

that the requirements of this guidance will have a material impact on our consolidated

financial statements.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the

Effects of Reference Rate Reform on Financial Reporting” which provides optional expedients

and exceptions for

applying GAAP to contracts, hedging relationships and other transactions affected

by the discontinuation of the

London Interbank Offered Rate (“LIBOR”) or by another reference rate expected

to be discontinued because of

reference rate reform.

The guidance was effective beginning March 12, 2020 and can be applied prospectively

through December 31, 2022.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic

848): Scope (“ASU 2021-01”).

ASU 2021-01 provides temporary optional expedients and exceptions

to certain

guidance in U.S. GAAP to ease the financial reporting burdens related

to the expected market transition from

LIBOR and other interbank offered rates to alternative reference rates, such as

the Secured Overnight Financing

Rate.

The guidance became effective upon issuance, on January 7, 2021, and can

be applied through December 31,

In December 2022, the FASB issued ASU No. 2022-06, “Reference Rate Reform (Topic 848): Deferral of

the Sunset Date of Topic 848,” which extends the period of application of temporary optional expedients from

December 21, 2022 to December 31, 2024.

We do not expect that the requirements of this guidance will have a

material impact on our consolidated financial statements.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 2 – Net Sales from Contracts with Customers

Net sales is recognized in accordance with policies disclosed in

Note 1 – Basis of Presentation and Significant

Accounting Policies

Disaggregation of Net sales

The following table disaggregates our Net sales by reportable segment and

geographic area:

Year

Ended

December 31, 2022

North America

International

Global

Net Sales:

Health care distribution

Dental

4,628

2,845

7,473

Medical

4,375

4,451

Total health care distribution

9,003

2,921

11,924

Technology

and value-added services

Net sales

9,636

3,011

12,647

Year

Ended

December 25, 2021

North America

International

Global

Net Sales:

Health care distribution

Dental

4,506

3,038

7,544

Medical

4,107

4,210

Total health care distribution

8,613

3,141

11,754

Technology

and value-added services

Net sales

9,173

3,228

12,401

Year

Ended

December 26, 2020

North America

International

Global

Net Sales:

Health care distribution

Dental

3,472

2,441

5,913

Medical

3,515

3,617

Total health care distribution

6,987

2,543

9,530

Technology

and value-added services

Total excluding

Corporate TSA net sales

(1)

7,434

2,610

10,044

Corporate TSA net sales

(1)

Net sales

7,434

2,685

10,119

(1)

Corporate TSA net sales represents sales of certain animal health products to Covetrus under the transition services agreement

entered into in connection with the Animal Health Spin-off, which ended in December 2020.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 3 – Segment and Geographic Data

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.

Our

global dental and medical groups serve practitioners in

countries worldwide.

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, diagnostic

tests, infection-control products, PPE and vitamins.

Our global technology and value-added services reportable segment provides

software, technology and other value-

added services to health care practitioners.

Our technology 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 continuing education services for practitioners.

The following tables present information about our reportable and operating

segments:

Years

Ended

December 31,

December 25,

December 26,

2022

2021

2020

Net Sales:

Health care distribution

(1)

Dental

7,473

7,544

5,913

Medical

4,451

4,210

3,617

Total health care distribution

11,924

11,754

9,530

Technology

and value-added services

(2)

Total excluding

Corporate TSA net sales

12,647

12,401

10,044

Corporate TSA net sales

(3)

Total

12,647

12,401

10,119

(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 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.

(3)

Corporate TSA net sales represents sales of certain products to Covetrus under the transition services agreement entered into in

connection with the Animal Health Spin-off, which ended in December 2020.

See

Note-23 Related Party Transactions

for further

information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Years

ended

December 31,

December 25,

December 26,

2022

2021

2020

Operating Income:

Health care distribution

Technology

and value-added services

Total

Income from continuing operations before

taxes

and equity in earnings of affiliates:

Health care distribution

Technology

and value-added services

Total

Depreciation and Amortization:

Health care distribution

Technology

and value-added services

Total

Interest Income:

Health care distribution

Technology

and value-added services

Total

Interest Expense:

Health care distribution

Total

Income Tax

Expense:

Health care distribution

Technology

and value-added services

Total

Purchases of Fixed Assets:

Health care distribution

Technology

and value-added services

Total

As of

December 31,

December 25,

December 26,

2022

2021

2020

Total

Assets:

Health care distribution

7,287

7,157

6,503

Technology

and value-added services

1,320

1,324

1,270

Total

8,607

8,481

7,773

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The following table presents information about our operations by geographic

area as of and for the three years

ended December 31, 2022.

Net sales by geographic area are based on the respective locations

of our subsidiaries.

No country, except for the United States, generated net sales greater than

% of consolidated net sales.

There

were no material amounts of sales or transfers among geographic areas

and there were no material amounts of

export sales.

2022

2021

2020

Net Sales

Long-Lived

Assets

Net Sales

Long-Lived

Assets

Net Sales

Long-Lived

Assets

United States

9,190

2,891

8,722

2,981

7,090

2,363

Other

3,457

1,256

3,679

1,232

3,029

1,252

Consolidated total

12,647

4,147

12,401

4,213

10,119

3,615

Note 4 – Business Acquisitions and Divestiture

Acquisitions

We account for business acquisitions and combinations under the acquisition method of accounting, where the net

assets of acquired businesses are recorded at their fair value at the acquisition

date and our consolidated financial

statements include their results of operations from that date.

Any excess of acquisition consideration over the fair

value of identifiable net assets acquired is recorded as goodwill.

Goodwill is an asset representing the future

economic benefits arising from other assets acquired in a business combination

that are not individually identified

and separately recognized, such as future customers and technology, as well as the assembled workforce.

Excluding goodwill, the major classes of assets and liabilities to which

we generally allocate acquisition

consideration include identifiable intangible assets (i.e., customer

relationships and lists, trademarks and trade

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

and accounts receivable.

The estimated fair

value of identifiable intangible assets 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.

Some prior owners of acquired subsidiaries are eligible to receive additional

purchase price cash consideration, or

we may be entitled to recoup a portion of purchase price cash consideration

if certain financial targets are met.

have accrued liabilities for the estimated fair value of additional purchase

price consideration at the time of the

acquisition, using the income approach, including a probability-weighted

discounted cash flow method or an option

pricing method, where applicable.

Any adjustments to these accrual amounts are recorded

in selling, general and

administrative expenses within our consolidated statements of income.

While we use our best estimates and assumptions to accurately value

assets acquired and liabilities assumed at the

acquisition date as well as contingent consideration, where applicable,

our estimates are inherently uncertain and

subject to refinement.

As a result, within 12 months following the date of acquisition,

or the measurement period,

we may record adjustments to the assets acquired and liabilities assumed

with the corresponding offset to goodwill

within our consolidated balance sheets.

At the end of the measurement period or final determination

of the values

of such assets acquired or liabilities assumed, whichever comes first,

any subsequent adjustments are recognized in

our consolidated statements of operations.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

2022 Acquisitions

We completed several acquisitions during the year ended December 31, 2022, which were immaterial to our

consolidated financial statements. Our acquired ownership interest ranged between

% to

Acquisitions

within our health care distribution segment included companies that

specialize in the distribution of dental products.

Within our technology and value-added services segment, we acquired a company that educates and

connects

dental office managers, practice administrators and dental business leaders across

North America.

The following table aggregates the estimated fair value, as of the

date of acquisition, of consideration paid and net

assets acquired for acquisitions during the year ended December 31, 2022.

Approximately half of the acquired

goodwill is deductible for tax purposes.

2022

Acquisition consideration:

Cash

Deferred consideration

Fair value of previously held equity method investment

Redeemable noncontrolling interests

Total consideration

Identifiable assets acquired and liabilities assumed:

Current assets

Intangible assets

Other noncurrent assets

Current liabilities

(29)

Deferred income taxes

(6)

Other noncurrent liabilities

(8)

Total identifiable

net assets

Goodwill

Total net assets acquired

The following table summarizes the identifiable intangible assets acquired during

the year ended December 31,

2022 and their estimated useful lives as of the date of the acquisition:

Estimated

Useful Lives

2022

(in years)

Customer relationships and lists

Trademark / Tradename

Non-compete agreements

Other

The accounting for certain of our acquisitions during the year ended December

31, 2022 had not been completed in

several areas, including but not limited to pending assessments of accounts

receivable, inventory, intangible assets,

right-of-use lease assets,

accrued liabilities and income and non-income based taxes.

The pro forma financial information has not been presented because the impact

of the acquisitions during the year

ended December 31, 2022 to our consolidated financial statements was immaterial.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

2021 Acquisitions

We completed several acquisitions during the year ended December 25, 2021, which were immaterial to our

financial statements.

Our acquired ownership interests ranged from between approximately

% to

Acquisitions within our health care distribution segment included companies

that specialize in the distribution and

manufacturing of dental and medical products, a provider of home

medical supplies, and a provider of product

kitting and sterile packaging.

Within our technology and value-added services segment, we acquired companies

that focus on dental marketing and website solutions, practice transition

services, revenue cycle management, and

business analytics and intelligence software.

Approximately half of the acquired goodwill is deductible for tax

purposes.

The following table aggregates the estimated fair value, as of the date of

acquisition, of consideration paid and net

assets acquired for acquisitions during the year ended December 25, 2021.

2021

Acquisition consideration:

Cash

Deferred consideration

Estimated fair value of contingent consideration receivable

(5)

Fair value of previously held equity method investment

Redeemable noncontrolling interests

Total consideration

Identifiable assets acquired and liabilities assumed:

Current assets

Intangible assets

Other noncurrent assets

Current liabilities

(93)

Deferred income taxes

(26)

Other noncurrent liabilities

(46)

Total identifiable

net assets

Goodwill

Total net assets acquired

The following table summarizes the identifiable intangible assets acquired during

the year ended December 25,

2021 and their estimated useful lives as of the date of the acquisition:

Estimated

Useful Lives

2021

(in years)

Customer relationships and lists

Trademark / Tradename

Product development

Non-compete agreements

Other

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

2020 Acquisitions

We completed several acquisitions during the year ended December 26, 2020, which were immaterial to our

financial statements.

Our acquired ownership interests ranged from between approximately

% to

Acquisitions within our health care distribution segment included companies

that manufacture endodontic files and

companies that distribute dental supplies.

Within our technology and value-added services segment, we acquired

companies that focus on practice management software and provide software

as a solution for dental practices.

Approximately half of the acquired goodwill is deductible for tax purposes.

The following table aggregates the estimated fair value, as of the

date of acquisition, of consideration paid and net

assets acquired for acquisitions during the year ended December 26, 2020:

2020

Acquisition consideration:

Cash

Deferred consideration

Fair value of previously held equity method investment

Redeemable noncontrolling interests

Total consideration

Identifiable assets acquired and liabilities assumed:

Current assets

Intangible assets

Other noncurrent assets

Current liabilities

(21)

Deferred income taxes

(4)

Other noncurrent liabilities

(1)

Total identifiable

net assets

Goodwill

Total net assets acquired

The following table summarizes the identifiable intangible assets acquired during

the year ended December 26,

2020 and their estimated useful lives as of the date of the acquisition:

Estimated

Useful Lives

2020

(in years)

Customer relationships and lists

Product development

Trademark / Tradename

Non-compete agreements

For the years ended December 31, 2022, December 25, 2021 and December 26,

2020, there were no material

adjustments recorded in our consolidated balance sheets relating to

accounting for acquisitions incomplete in prior

periods.

At December 25, 2021 we recorded an estimated contingent

consideration receivable of $

million, which

was subsequently increased by additional $

million during 2022 based on delays in timing of government approval

of a certain product.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

During the years ended December 31, 2022, December 25, 2021

and December 26, 2020 we incurred $

million, $

million and $

million in acquisition costs reported within income from continuing

operations.

Divestiture

In the third quarter of 2021 we received contingent proceeds of $

million from the 2019 sale of Hu-Friedy,

resulting in the recognition of an additional after-tax gain of $

million.

During the fourth quarter of 2020 we

received contingent proceeds of $

million from the 2019 sale of Hu-Friedy, resulting in the recognition of an

additional after-tax gain of $

million.

We do expect to receive any additional proceeds from the sale of Hu-Friedy.

Note 5 – Property and Equipment, Net

Property and equipment, including related estimated useful lives, consisted

of the following:

December 31,

December 25,

2022

2021

Land

Buildings and permanent improvements

Leasehold improvements

Machinery and warehouse equipment

Furniture, fixtures and other

Computer equipment and software

Less accumulated depreciation

(573)

(550)

Property and equipment, net

Estimated Useful

Lives (in years)

Buildings and permanent improvements

Machinery and warehouse equipment

Furniture, fixtures and other

Computer equipment and software

Amortization of leasehold improvements is computed using the straight-line

method over the lesser of the useful

life of the assets or the lease term.

Property and equipment related depreciation expense for the years

ended December 31, 2022, December 25, 2021

and December 26, 2020 was $

million, $

million

and $

million, respectively.

Please see

Note 6 – Leases

for

finance lease amounts included in property and equipment, net within our

consolidated balance sheets.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 6 – 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

years, some of

which may include options to extend the leases for up to

years.

The components of lease expense were as

follows:

Years

Ended

December 31,

December 25,

December 26,

2022

2021

2020

Operating lease cost:

(1) (2)

Finance

lease cost:

Amortization of right-of-use assets

Total finance

lease cost

(1)

Includes variable lease expenses.

(2)

Operating lease cost for the years ended December 31, 2022, December 25, 2021, and December 26, 2020, include accelerated

amortization of right-of-use assets of $

million, $

million and $

million, respectively, related to facility leases recorded in

“Restructuring and integration costs” within our consolidated statements of income.

Further, for the years ended December 31, 2022,

December 25, 2021 and December 26, 2020, we recognized

impairment of right-of-use assets of $

million, $

million, and $

million respectively, related to facility leases

recorded in “Restructuring and integration costs” within our consolidated

statement of income.

Supplemental balance sheet information related to leases is as follows:

Years

Ended

December 31,

December 25,

2022

2021

Operating Leases:

Operating lease right-of-use assets

Current operating lease liabilities

Non-current operating lease liabilities

Total operating lease liabilities

Finance Leases:

Property and equipment, at cost

Accumulated depreciation

(6)

(5)

Property and equipment, net of accumulated depreciation

Current maturities of long-term debt

Long-term debt

Total finance

lease liabilities

Weighted Average

Remaining Lease Term in

Years:

Operating leases

6.7

7.3

Finance leases

3.1

3.6

Weighted

Average Discount

Rate:

Operating leases

2.8

2.4

Finance leases

3.3

1.7

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Supplemental cash flow information related to leases is as follows:

Years

Ended

December 31,

December 25,

2022

2021

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

Financing cash flows for finance leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

Finance leases

Maturities of lease liabilities are as follows:

December 31, 2022

Operating

Finance

Leases

2023

2024

2025

2026

2027

Thereafter

Total future

lease payments

Less imputed interest

(33)

(1)

Total

As of December 31, 2022, we have additional operating leases with

total lease payments of $

million for buildings

and vehicles that have not yet commenced.

These operating leases will commence subsequent to December 31,

2022, with lease terms of

two years

five years

Certain of our facilities related to our acquisitions are leased from

employees and minority shareholders.

These

leases are classified as operating leases and have a remaining lease term

ranging from

4 months

9 years

As of

December 31, 2022, current and non-current liabilities associated with

related party operating leases were $

million and $

million, respectively.

Related party leases represented

5.0

% and

5.3

% of the total current and non-

current operating lease liabilities, respectively.

The present value of lease payments under these related party

leases

is not material to our consolidated financial statements.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 7 – Goodwill and Other Intangibles, Net

The changes in the carrying amount of goodwill for the years ended December

31, 2022 and December 25, 2021

were as follows:

Health Care

Distribution

Technology

and

Value-Added

Services

Total

Balance as of December 26, 2020

1,501

1,003

2,504

Adjustments to goodwill:

Acquisitions

Foreign currency translation

(29)

(4)

(33)

Balance as of December 25, 2021

1,831

1,023

2,854

Adjustments to goodwill:

Acquisitions

(1)

Impairment

(20)

Foreign currency translation

(22)

(4)

(26)

Balance as of December 31, 2022

1,875

1,018

2,893

For the year

ended December 31,

2022, we recorded

a $

million impairment of

goodwill relating to

the disposal

unprofitable

business

whose

estimated

fair

value

was

lower

than

its

carrying

value.

The

disposal

this

business

part

our

restructuring

initiative

fully

discussed

Note 14 – Plans of Restructuring and

Integration Costs

Other intangible assets consisted of the following:

December 31, 2022

December 25, 2021

Accumulated

Cost

Amortization

Net

Cost

Amortization

Net

Customer lists and relationships

(387)

(353)

Trademarks / trade names - definite lived

(51)

(44)

Product Development

(56)

(70)

Non-compete agreements

(6)

Other

(10)

(8)

Total

1,097

(510)

1,149

(481)

Trademarks, trade names, customer lists and customer relationships were established through

business acquisitions.

Definite-lived trademarks and trade names are amortized on a straight-line

basis over a weighted-average period of

approximately

8.4

years as of December 31, 2022.

Customer lists and customer relationships are definite-lived

intangible assets that are amortized on a straight-line basis over a weighted-average

period of approximately

10.0

years as of December 31, 2022.

Product development is a definite-lived intangible asset that is amortized

on a

straight-line basis over a weighted-average period of approximately

8.6

years as of December 31, 2022.

Non-compete agreements represent amounts paid primarily to prior owners of

acquired businesses, as well as

certain sales persons, in exchange for placing restrictions on their ability

to pose a competitive risk to us.

Such

amounts are amortized, on a straight-line basis over the respective non-compete

period, which generally

commences upon termination of employment or separation from us.

The weighted-average non-compete period for

agreements currently being amortized was approximately

5.3

years as of December 31, 2022.

Amortization expense, excluding impairment charges, related to definite-lived intangible assets

for the years ended

December 31, 2022, December 25, 2021 and December 26, 2020 was $

million, $

million and $

million.

During the year ended December 31, 2022, we recorded $

million of impairment charges related to businesses

within our health care distribution segment, represented by an intangible asset

impairment of $

million related to

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

the disposal of an unprofitable business and a $

million impairment of customer lists and relationships

attributable to customer attrition rates being higher than expected in certain other

businesses.

Our impairment loss

was calculated as the difference between the carrying value and the estimated

fair value of the intangible assets,

using a discounted estimate of future cash flows.

Please see

Note 14 – Plans of Restructuring and Integration Costs

for additional details.

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

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.

During the year ended December 26, 2020, we recorded a $

million impairment charge related to businesses

within our technology and value-added services segment due to customer

attrition rates being higher than expected.

The above intangible asset impairment charges were recorded within selling, general

and administrative expenses;

and restructuring and integration charges in our consolidated statement of income.

The annual amortization expense expected to be recorded for existing

intangibles assets for the years 2023 through

2027 is $

million, $

million and $

million.

Note 8 – Investments and Other

Investments and other consisted of the following:

December 31,

December 25,

2022

2021

Investment in unconsolidated affiliates

Non-current deferred foreign, state and local income taxes

Notes receivable

(1)

Capitalized costs for software to be sold, leased or marketed to external

users

Security deposits

Acquisition-related indemnification

Non-current pension assets

Other long-term assets

Total

(1)

Long-term notes receivable carry interest rates ranging from

3.0

% to

7.5

% and are due in varying installments through

May 11, 2028

Amortization expense, primarily related to capitalized costs for software to

be sold, leased or marketed to external

users, for the years ended December 31, 2022, December 25, 2021 and

December 26, 2020 was $

million, $

million and $

million, respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 9 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or

paid to transfer a liability in an orderly

transaction between market participants at the measurement date.

The fair value hierarchy distinguishes between

(1) market participant assumptions developed based on market data obtained

from independent sources (observable

inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best

information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the

highest priority to unadjusted quoted prices

in active markets for identical assets or liabilities (Level 1) and the lowest priority

to unobservable inputs (Level 3).

The three levels of the fair value hierarchy are described as follows:

Level 1— Unadjusted quoted prices in active markets for identical assets

or liabilities that are accessible at the

measurement date.

Level 2— Inputs other than quoted prices included within Level 1 that are observable

for the asset or liability,

either directly or indirectly.

Level 2 inputs include: quoted prices for similar assets or liabilities

in active markets;

quoted prices for identical or similar assets or liabilities in markets that are

not active; inputs other than quoted

prices that are observable for the asset or liability; and inputs that are

derived principally from or corroborated by

observable market data by correlation or other means.

Level 3— Inputs that are unobservable for the asset or liability.

The following section describes the fair values of our financial instruments

and the methodologies that we used to

measure their fair values.

Investments and notes receivable

There are no quoted market prices available for investments in unconsolidated

affiliates and notes receivable.

Certain of our notes receivable contain variable interest rates.

We believe the carrying amounts are a reasonable

estimate of fair value based on the interest rates in the applicable markets.

Debt

The fair value of our debt (including bank credit lines, current maturities

of long-term debt and long-term debt) is

classified as Level 3 within the fair value hierarchy, and as of December 31, 2022 and December 25, 2021 was

estimated at $

1,149

million and $

million, respectively.

Factors that we considered when estimating the fair

value of our debt include market conditions, such as interest rates and credit

spreads.

Derivative contracts

Derivative contracts are valued using quoted market prices and

significant other observable inputs.

We use

derivative instruments to minimize our exposure to fluctuations in foreign

currency exchange rates.

Our derivative

instruments primarily include foreign currency forward agreements related

to certain intercompany loans, certain

forecasted inventory purchase commitments with foreign suppliers,

foreign currency forward contracts to hedge a

portion of our euro-denominated foreign operations which are designated

as net investment hedges and a total

return swap for the purpose of economically hedging our unfunded

non-qualified SERP and our DCP.

The fair values for the majority of our foreign currency derivative contracts

are obtained by comparing our contract

rate to a published forward price of the underlying market rates, which

is based on market rates for comparable

transactions and are classified within Level 2 of the fair value hierarchy.

See

Note 11-Derivatives and Hedging

Activities

for further information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Total

Return Swaps

The fair value for the Total Return Swap is measured by valuing the underlying ETFs of the swap using market-on-

close pricing by industry providers as of the valuation date and are

classified within Level 2 of the fair value

hierarchy.

Redeemable noncontrolling interests

The values for Redeemable noncontrolling interests are classified within

Level 3 of the fair value hierarchy and are

based on recent transactions and/or implied multiples of earnings.

See

Note 18 – Redeemable Noncontrolling

Interests

for additional information.

Assets measured on a non-recurring basis at fair value include Goodwill

and Other intangibles, net, and are

classified as Level 3 within the fair value hierarchy.

See

Note 1 – Basis of Presentation and Significant Accounting

Policies

and

Note 7 – Goodwill and Other Intangibles, Net

for additional information.

The following table presents

our assets and liabilities that are measured and recognized at fair value on

a recurring basis classified under the

appropriate level of the fair value hierarchy as of December 31, 2022 and

December 25, 2021:

December 31, 2022

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total assets

Liabilities:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total return

swaps

Total liabilities

Redeemable noncontrolling interests

December 25, 2021

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total return

swap

Total assets

Liabilities:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total liabilities

Redeemable noncontrolling interests

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 10 – Concentrations of Risk

Certain financial instruments potentially subject us to concentrations of

credit risk.

These financial instruments

consist primarily of cash equivalents, trade receivables, long-term investments,

notes receivable and derivative

instruments.

In all cases, our maximum exposure to loss from credit

risk equals the gross fair value of the financial

instruments.

We routinely maintain cash balances at financial institutions in excess of insured amounts.

We have

not experienced any loss in such accounts and we manage this risk through

maintaining cash deposits and other

highly liquid investments in high quality financial institutions.

We continuously assess the need for reserves for

such losses, which have been within our expectations.

We do not require collateral or other security to support

financial instruments subject to credit risk, except for long-term notes receivable.

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

instruments, by monitoring the credit worthiness of the financial institutions

who are the counter-parties to such

financial instruments.

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

utilizing numerous investment grade counter-parties.

With respect to our trade receivables, our credit risk is somewhat limited due to a relatively large customer base

and

its dispersion across different types of health care professionals and geographic areas.

No single customer

accounted for more than

% of our net sales in 2022 or 2021.

With respect to our sources of supply, our top 10

health care distribution suppliers and our single largest supplier accounted for approximately

% and

respectively, of our aggregate purchases in each of the years ended December 31, 2022 and December 25, 2021.

Our long-term notes receivable primarily represent strategic financing arrangements

with certain affiliates.

Generally, these notes are secured by certain assets of the counterparty; however, in most cases our security is

subordinate to other commercial financial institutions.

While we have exposure to credit loss in the event of non-

performance by these counter-parties, we conduct ongoing assessments

of their financial and operational

performance.

Note 11 – Derivatives and Hedging Activities

We are exposed to market risks as well as changes in foreign currency exchange rates as measured against the U.S.

dollar and each other, and changes to the credit risk of the derivative counterparties.

We attempt to minimize these

risks by primarily using foreign currency forward contracts and by

maintaining counter-party credit limits.

These

hedging activities provide only limited protection against currency exchange

and credit risks.

Factors that could

influence the effectiveness of our hedging programs include currency markets and

availability of hedging

instruments and liquidity of the credit markets.

All foreign currency forward contracts that we enter into are

components of hedging programs and are entered into for the sole purpose

of hedging an existing or anticipated

currency exposure.

We do not enter into such contracts for speculative purposes and we manage our credit risks by

diversifying our counterparties, maintaining a strong balance sheet and

having multiple sources of capital.

During 2019 we entered into foreign currency forward contracts to hedge

a portion of our euro-denominated

foreign operations which are designated as net investment hedges.

These net investment hedges offset the change

in the U.S. dollar value of our investment in certain euro-functional currency

subsidiaries due to fluctuating foreign

exchange rates.

Gains and losses related to these net investment hedges are recorded

in accumulated other

comprehensive loss within our consolidated balance sheets.

Amounts excluded from the assessment of hedge

effectiveness are included in interest expense within our consolidated statements

of income.

The aggregate

notional value of this net investment hedge, which matures on

November 16, 2023

, is approximately €

million.

During the years ended December 31, 2022 and December 25, 2021, we

recorded losses of $

million and $

million, respectively, within other comprehensive income related to these foreign currency forward contracts.

See

Note 9 – Fair Value Measurements

for additional information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

March 20, 2020

, we entered into a total return swap for the purpose of economically hedging

our unfunded non-

qualified SERP and our DCP.

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

At the inception, the

notional value of the investments in these plans was $

million.

At December 31, 2022, the notional value of the

investments in these plans was $

million.

At December 31, 2022, the financing blended rate for

this swap was

based on the Secured Overnight Financing Rate (“SOFR”) of

4.03

% plus

0.55

%, for a combined rate of

4.58

For

the years ended December 31, 2022 and December 25, 2021, we have

recorded a gain/(loss), within selling, general

and administrative in our consolidated statement of income, of approximately

) million and $

million,

respectively, net of transaction costs, related to this undesignated swap.

During the years ended December 31, 2022

and December 25, 2021, the swap resulted in a neutral impact to our

results of operations.

This swap is expected to

be renewed on an annual basis after its current expiration date of March 31, 2023,

and is expected to result in a

neutral impact to our results of operations.

See

Note 17 – Employee Benefit Plans

for additional information.

Fluctuations in the value of certain foreign currencies as compared

to the U.S. dollar may positively or negatively

affect our revenues, gross margins, operating expenses and retained earnings, all of which are expressed

in U.S.

dollars.

Where we deem it prudent, we engage in hedging programs using primarily

foreign currency forward

contracts aimed at limiting the impact of foreign currency exchange

rate fluctuations on earnings.

We purchase

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

to protect against currency

exchange risks associated with intercompany loans due from our international

subsidiaries and the payment of

merchandise purchases to our foreign suppliers.

We do not hedge the translation of foreign currency profits into

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

exposure.

Amounts related to our

hedging activities are recorded in prepaid expenses and other and/or accrued

expenses: other within our

consolidated balance sheets.

Our hedging activities have historically not had a material impact on our consolidated

financial statements.

Accordingly, additional disclosures related to derivatives and hedging activities required by

ASC 815 have been omitted.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 12 – Debt

Bank Credit Lines

Bank credit lines consisted of the following:

December 31,

December 25,

2022

2021

Revolving credit agreement

Other short-term bank credit lines

Total

Revolving Credit Agreement

August 20, 2021

, we entered into a $

1.0

billion revolving credit agreement (the “Credit Agreement”).

This

facility which matures on

August 20, 2026

replaced our $

million revolving credit facility which was scheduled

to mature in April 2022.

The interest rate is based on the USD LIBOR plus a spread based

on our leverage ratio at

the end of each financial reporting quarter.

Most LIBOR rates have been discontinued after December 31,

2021,

while the remaining LIBOR rates will be discontinued immediately after

June 30, 2023.

We do not expect the

discontinuation of LIBOR as a reference rate in our debt agreements

to have a material adverse effect on our

financial position or to materially affect our interest expense.

The Credit Agreement requires, among other things,

that we maintain certain maximum leverage ratios.

Additionally, the Credit Agreement contains customary

representations, warranties and affirmative covenants as well as customary negative

covenants, subject to

negotiated exceptions, on liens, indebtedness, significant corporate changes

(including mergers), dispositions and

certain restrictive agreements.

As of December 31, 2022 and December 25, 2021, we had

borrowings under this

revolving credit facility.

As of December 31, 2022 and December 25, 2021, there

were $

million and $

million

of letters of credit, respectively, provided to third parties under the credit facility.

Other Short-Term Bank Credit

Lines

As of December 31, 2022 and December 25, 2021, we had various other short-term

bank credit lines available, with

a maximum borrowing capacity of $

million as of December 31, 2022, of which $

million and $

million,

respectively, were outstanding.

At December 31, 2022 and December 25, 2021, borrowings under

all of these

credit lines had a weighted average interest rate of

10.11

% and

10.44

%, respectively.

Long-term debt

Long-term debt consisted of the following:

December 31,

December 25,

2022

2021

Private placement facilities

U.S. trade accounts receivable securitization

Various

collateralized and uncollateralized loans payable with interest,

in varying installments through 2023 at interest rates

ranging from

0.00

% to

3.50

% at December 31, 2022 and

ranging from

2.62

% to

4.27

% at December 25, 2021

Finance lease obligations

Total

1,046

Less current maturities

(6)

(11)

Total long-term debt

1,040

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Private Placement Facilities

Our private placement facilities were amended on

October 20, 2021

to include four (previously three) insurance

companies, have a total facility amount of $

1.5

billion (previously $

1.0

billion), and are available on an

uncommitted basis at fixed rate economic terms to be agreed upon at the

time of issuance, from time to time

through

October 20, 2026

(previously

June 23, 2023

The facilities allow us to issue senior promissory notes to

the lenders at a fixed rate based on an agreed upon spread over applicable

treasury notes at the time of

issuance.

The term of each possible issuance will be selected by us and

can range from

five

15 years

(with an

average life no longer than

12 years

The proceeds of any issuances under the facilities will be used for

general

corporate purposes, including working capital and capital expenditures,

to refinance existing indebtedness, and/or

to fund potential acquisitions.

The agreements provide, among other things, that we maintain

certain maximum

leverage ratios, and contain restrictions relating to subsidiary indebtedness,

liens, affiliate transactions, disposal of

assets and certain changes in ownership.

These facilities contain make-whole provisions in the event that we

pay

off the facilities prior to the applicable due dates.

On March 5, 2021, we amended the private placement facilities to,

among other things, (a) modify the financial

covenant from being based on a net leverage ratio to a total leverage

ratio and (b) restore the maximum

maintenance total leverage ratio to

3.25

x and remove the

1.00

% interest rate increase triggered if the net leverage

ratio were to exceed

3.0

The components of our private placement facility borrowings, which

have a weighted average interest rate of

2.99

%, as of December 31, 2022 are presented in the following table:

Amount of

Date of

Borrowing

Outstanding

Rate

Due Date

January 20, 2012

3.45

January 20, 2024

December 24, 2012

3.00

December 24, 2024

June 16, 2017

3.42

June 16, 2027

September 15, 2017

3.52

September 15, 2029

January 2, 2018

3.32

January 2, 2028

September 2, 2020

2.35

September 2, 2030

June 2, 2021

2.48

June 2, 2031

June 2, 2021

2.58

June 2, 2033

Less: Deferred debt issuance costs

(1)

Total

U.S. Trade Accounts Receivable Securitization

We have a facility agreement based on the securitization of our U.S. trade accounts receivable that is structured as

an asset-backed securitization program with pricing committed for up

three years

On December 15, 2022, we

extended the expiration date of this facility agreement to

December 15, 2025

(the previous maturity date was

October 18, 2024

) and maintained the purchase limit under the facility as

million with

two

banks as agents.

As of December 31, 2022 and December 25, 2021, the borrowings outstanding

under this securitization facility

were $

million and $

million, respectively.

At December 31, 2022, the interest rate on borrowings under

this facility was based on the asset-backed commercial paper rate of

4.58

% plus

0.75

%, for a combined rate of

5.33

At December 25, 2021, the interest rate on borrowings under

this facility was based on the asset-backed

commercial paper rate of

0.19

% plus

0.75

%, for a combined rate of

0.94

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

If our accounts receivable collection pattern changes due to customers

either paying late or not making payments,

our ability to borrow under this facility may be reduced.

We are required to pay a commitment fee of

basis points depending upon program utilization.

As of December 31, 2022,

the aggregate amounts of long-term debt, including finance lease obligations

and net of

deferred debt issuance costs of $

million, maturing in each of the next five years and thereafter

are as follows:

2023

2024

2025

2026

2027

Thereafter

Total

1,046

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 13 – Income Taxes

Income before taxes and equity in earnings of affiliates was as follows:

Years

ended

December 31,

December 25,

December 26,

2022

2021

2020

Domestic

Foreign

Total

The provisions for income taxes were as follows:

Years

ended

December 31,

December 25,

December 26,

2022

2021

2020

Current income tax expense:

U.S. Federal

State and local

Foreign

Total current

Deferred income tax expense (benefit):

U.S. Federal

(48)

(12)

(18)

State and local

(13)

(3)

(5)

Foreign

(12)

(30)

Total deferred

(73)

(11)

(53)

Total provision

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The tax effects of temporary differences that give rise to our deferred income tax asset (liability) were

as follows:

Years

Ended

December 31,

December 25,

2022

2021

Deferred income tax asset:

Net operating losses and other carryforwards

Inventory, premium

coupon redemptions and accounts receivable

valuation allowances

Stock-based compensation

Uniform capitalization adjustment to inventories

Operating lease liability

Other asset

Total deferred income

tax asset

Valuation

allowance for deferred tax assets

(1)

(36)

Net deferred income tax asset

Deferred income tax liability

Intangibles amortization

(112)

(134)

Operating lease right-of-use asset

(61)

(74)

Property and equipment

(7)

Total deferred tax

liability

(180)

(215)

Net deferred income tax asset (liability)

(7)

(1)

Primarily relates to operating losses, the benefits of which are uncertain.

Any future reductions of such valuation allowances will be

reflected as a reduction of income tax expense.

The assessment of the amount of value assigned to our deferred tax assets under

the applicable accounting rules is

judgmental.

We are required to consider all available positive and negative evidence in evaluating the likelihood

that we will be able to realize the benefit of our deferred tax assets in the future.

Such evidence includes reversals

of deferred tax liabilities and projected future taxable income.

Since this evaluation requires consideration of

events that may occur some years into the future, there is an element of

judgment involved.

Realization of our

deferred tax assets is dependent on generating sufficient taxable income in future periods.

believe that it is

more likely than not that future taxable income will be sufficient to allow us to recover

substantially all of the value

assigned to our deferred tax assets.

However, if future events cause us to conclude that it is not more likely than

not that we will be able to recover the value assigned to our deferred tax assets, we

will be required to adjust our

valuation allowance accordingly.

As of December 31, 2022, we had federal, state and foreign net operating

loss carryforwards of approximately

million, $

million and $

million, respectively.

The federal, state and foreign net operating loss

carryforwards will begin to expire in various years from 2023 through

The amounts of federal, state and

foreign net operating losses that can be carried forward indefinitely are $

million, $

million and $

million,

respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The tax provisions differ from the amount computed using the federal statutory income

tax rate as follows:

Years

ended

December 31,

December 25,

December 26,

2022

2021

2020

Income tax provision at federal statutory rate

State income tax provision, net of federal income tax effect

Foreign income tax provision

Pass-through noncontrolling interest

(4)

(3)

Valuation

allowance

(2)

(6)

Unrecognized tax benefits and audit settlements

(18)

Interest expense related to loans

(12)

(11)

Tax benefit related

to legal entity reorganization outside the U.S.

(6)

Other

Total income

tax provision

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.

In 2020, our

effective tax rate was

19.1

The difference between our effective tax rate and the federal statutory tax rate was

primarily due to an Advance Pricing Agreement with the U.S Internal Revenue

Service (the “IRS”) in the U.S.,

other audit resolutions, state and foreign income taxes and interest expense.

On August 16, 2022, the Inflation Reduction Act (H.R. 5376) (“IRA”) was

signed into law in the United States.

Among other things, the IRA imposes a 15% corporate alternative minimum

tax for tax years beginning after

December 31, 2022 and levies a 1% excise tax on net stock repurchases after

December 31, 2022.

We are still in

the process of analyzing the provisions of the IRA.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES

Act”) was enacted in

response to the COVID-19 pandemic.

The CARES Act includes, but is not limited to, certain income tax

provisions that modify the Section 163(j) limitation of business interest and

net operating loss carryover and

carryback rules.

The modifications to Section 163(j) increase the allowable business

interest deduction from

of adjusted taxable income to

% of adjusted taxable income for years beginning in 2019 and 2020.

The CARES

Act eliminated the NOL income limitation for years beginning before 2021

and it extended the carryback period to

five years for losses incurred in 2018, 2019 and 2020.

have analyzed the income tax provisions of the CARES

Act and have accounted for the impact in the year ended December 26, 2020,

which did not have a material impact

on our consolidated financial statements.

There are certain other non-income tax benefits available to us under

the

CARES Act that require further clarification or interpretation that

may affect our consolidated financial statements

in the future.

On December 27, 2020, the Consolidated Appropriations Act was

enacted into law and extended

certain non-income tax benefits under the CARES Act.

On July 20, 2020, the IRS issued final regulations related to the Tax Cuts and Jobs Act enacted in 2017 (the “Tax

Act”).

The final regulations concern the global intangible low-taxed income

(“GILTI”) and subpart F income

provisions of the Tax Act.

To provide flexibility to taxpayers, the IRS is permitting the application of these final

regulations to prior tax years, if the taxpayer elects to do so.

We have analyzed the final regulations, which do not

have a material impact to our consolidated financial statements.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

On December 22, 2017, the U.S. government passed the Tax Act, which requires U.S. companies to pay a

mandatory one-time transition tax on historical offshore earnings that have not been

repatriated to the U.S.

The

transition tax is payable over eight years.

Within our consolidated balance sheets, transition tax of $

million and

million were included in “accrued taxes” for 2022 and 2021, respectively, and $

million and $

million

were included in “other liabilities” for 2022 and 2021, respectively.

Due to the one-time transition tax and the imposition of the GILTI provisions, all previously unremitted earnings

will no longer be subject to U.S. federal income tax; however, there could be U.S., state and/or foreign withholding

taxes upon distribution of such unremitted earnings.

Determination of the amount of unrecognized deferred tax

liability with respect to such earnings is not practicable.

ASC 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.

The total amount of unrecognized tax benefits, which are included in “other

liabilities” within our consolidated

balance sheets, as of December 31, 2022 and December 25, 2021 was approximately

million and $

million,

respectively, of which $

million and $

million, respectively would affect the effective tax rate if recognized.

is possible that the amount of unrecognized tax benefits will change in

the next 12 months, which may result in a

material impact on our consolidated statements of income.

All tax returns audited by the IRS are officially closed through 2018.

The tax years subject to examination by the

IRS include years 2019 and forward.

In addition, limited positions reported in the 2017 tax year are subject

to IRS

examination.

During the quarter ended December 25, 2021, we were notified by

the IRS that tax year 2019 was

selected for examination.

During the quarter ended June 26, 2021 we reached a resolution with

the Appellate

Division for all remaining outstanding issues for 2012 and 2013.

During the quarter ended September 26, 2020 we reached an agreement with

the Advanced Pricing Division on an

appropriate transfer pricing methodology for the years 2014-2025.

The objective of this resolution was to mitigate

future transfer pricing audit adjustments.

In the fourth quarter of 2020, we reached a resolution with the IRS for the

2014-2016 audit cycle.

The total amounts of interest and penalties are classified as a component of

the provision for income taxes.

The

amount of tax interest expense (credit) was approximately $

million, $

million and $(

) million in 2022, 2021

and 2020, respectively.

The total amount of accrued interest is included in “other liabilities”,

and was

approximately $

million as of December 31, 2022 and $

million as of December 25, 2021.

The amount of

penalties accrued for during the periods presented were not material

to our consolidated financial statements.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The following table provides a reconciliation of unrecognized tax benefits:

December 31,

December 25,

December 26,

2022

2021

2020

Balance, beginning of period

Additions based on current year tax positions

Additions based on prior year tax positions

Reductions based on prior year tax positions

(1)

Reductions resulting from settlements with taxing authorities

(1)

(9)

(19)

Reductions resulting from lapse in statutes of limitations

(10)

(3)

(14)

Balance, end of period

Note 14 – 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

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 $

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

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

of-use lease asset of $

million.

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

related costs of $

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 $

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 $

million related to one-time employee and other

costs, as well as restructuring charges of $

million, which are included in the $

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.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Restructuring and integration costs recorded during our 2022, 2021 and

2020 fiscal years consisted of the

following:

Year

Ended December 31, 2022

Health-Care Distribution

Technology

and Value-Added

Services

Restructuring

Costs

Integration

Costs

Restructuring

Costs

Integration

Costs

Total

Severance and employee-related costs

Impairment and accelerated depreciation and

amortization of right-of-use lease assets and

other long-lived assets

Exit and other related costs

Loss on disposal of a business

Integration employee-related and other costs

Total restructuring and integration costs

Year

Ended December 25, 2021

Health-Care Distribution

Technology

and Value-Added

Services

Restructuring

Costs

Integration

Costs

Restructuring

Costs

Integration

Costs

Total

Severance and employee-related costs

Total restructuring and integration costs

Year

Ended December 26, 2020

Health-Care Distribution

Technology

and Value-Added

Services

Restructuring

Costs

Integration

Costs

Restructuring

Costs

Integration

Costs

Total

Severance and employee-related costs

Impairment and accelerated depreciation and

amortization of right-of-use lease assets and

other long-lived assets

Exit and other related costs

Total restructuring and integration costs

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The following table summarizes, by reportable segment, the activity related

to the liabilities associated with our

restructuring initiatives for the year ended December 31, 2022.

The remaining accrued balance of restructuring

costs as of December 31, 2022 is included in accrued expenses: other within

our condensed consolidated balance

sheet.

Technology

and

Health Care

Value-Added

Distribution

Services

Total

Balance, December 25, 2021

Restructuring charges

Non-cash asset impairment and accelerated depreciation and

amortization of right-of-use lease assets and other long-lived

assets

(47)

Non-cash impairment on disposal of a business

(46)

Cash payments and other adjustments

(13)

(2)

(15)

Balance, December 31, 2022

Note 15 – Commitments and Contingencies

Purchase Commitments

In our health care distribution business, we sometimes enter into long-term purchase

commitments to ensure the

availability of products for distribution.

Future minimum annual payments for inventory purchase commitments

of December 31, 2022 were:

2023

2024

2025

2026

2027

Thereafter

Total minimum

inventory purchase commitment payments

Employment, Consulting and Non-Compete Agreements

We have employment, consulting and non-compete agreements that have varying base aggregate annual payments

for the years 2023 through 2027 and thereafter of approximately $

million, $

million, and $

million, respectively.

We also have lifetime consulting agreements that provide for current

compensation of

four-hundred thousand

dollars per year, increasing

twenty-five thousand

dollars every fifth year

with the next increase in 2026.

In addition, some agreements have provisions for additional

incentives and

compensation.

Litigation

Henry Schein, Inc. has been named as a defendant in multiple opioid

related lawsuits (currently less than one-

hundred and fifty (

); in approximately half of those cases one or more of Henry Schein, Inc.’s subsidiaries is

also named as a defendant).

Generally, the lawsuits allege that the manufacturers of prescription opioid drugs

engaged in a false advertising campaign to expand the market for such drugs and

their own market share and that

the entities in the supply chain (including Henry Schein, Inc. and

its affiliated companies) reaped financial rewards

by refusing or otherwise failing to monitor appropriately and restrict

the improper distribution of those drugs.

These actions consist of some that have been consolidated within the

MultiDistrict Litigation (“MDL”) proceeding

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

In Re National Prescription Opiate Litigation (MDL No. 2804; Case No.

17-md-2804) and are currently stayed, and

others which remain pending in state courts and are proceeding independently

and outside of the MDL.

At this

time, the following cases are set for trial: the action filed by DCH Health

Care Authority, et al. in Alabama state

court, which has been designated a bellwether with

eight

thirty-eight

plaintiffs set for a jury trial on July 24,

2023; and the action filed by Florida Health Sciences Center, Inc. (and

other hospitals located throughout the

State of Florida) in Florida state court, which is currently scheduled for a jury

trial in October 2024.

In December

2022, we settled

seven

cases filed in Utah (plus one case in which we were not yet

named a defendant) by

nineteen

plaintiffs for a total amount of

sixty thousand

dollars.

The

seven

cases have been dismissed.

Of Henry Schein’s

2022 net sales of approximately $

12.6

billion from continuing operations, sales of opioids represented

less than

two-tenths of 1 percent

Opioids represent a negligible part of our business.

We intend to defend ourselves

vigorously against these actions.

In August 2022, Henry Schein received a Grand Jury Subpoena from the United

States Attorney’s Office for the

Western District of Virginia,

seeking documents in connection with an investigation of possible

violations of the

Federal Food, Drug & Cosmetic Act by Butler Animal Health Supply, LLC (“Butler”), a former subsidiary of

Henry Schein.

The investigation relates to the sale of veterinary prescription drugs

to certain customers.

October 2022, Henry Schein received a second Grand Jury Subpoena from

the United States Attorney’s Office for

the Western District of Virginia.

The October Subpoena seeks documents relating to payments Henry

Schein

received from Butler or Covetrus, Inc. (“Covetrus”).

Butler was spun off into a separate company and became a

subsidiary of Covetrus in 2019 and is no longer owned by Henry Schein.

We are cooperating with the

investigation.

From time to time, we may become a party to other legal proceedings,

including, without limitation, product

liability claims, employment matters, commercial disputes, governmental

inquiries and investigations (which may

in some cases involve our entering into settlement arrangements or consent

decrees), and other matters arising out

of the ordinary course of our business.

While the results of any legal proceeding cannot be predicted with certainty,

in our opinion none of these other pending matters are currently

anticipated to have a material adverse effect on our

consolidated financial position, liquidity or results of operations.

As of December 31, 2022, we had accrued our best estimate of potential

losses relating to claims that were probable

to result in liability and for which we were able to reasonably estimate

a loss.

This accrued amount, as well as

related expenses, was not material to our financial position, results of operations

or cash flows.

Our method for

determining estimated losses considers currently available

facts, presently enacted laws and regulations and other

factors, including probable recoveries from third parties.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 16 – Stock-Based Compensation

Stock-based awards are provided to certain employees under the terms of our

2020 Stock Incentive Plan and to

non-employee directors under the terms of our 2015 Non-Employee Director

Stock Incentive Plan (together, the

“Plans”).

The Plans are administered by the Compensation Committee of the Board

of Directors (the

“Compensation Committee”).

Historically, equity-based awards to our employees have been granted solely in the

form of time-based and performance-based restricted stock units

(“RSUs”).

However, for our 2021 fiscal year, in

light of the COVID-19 pandemic, the Compensation Committee determined

it would be difficult for management

to set a meaningful three-year cumulative earnings per share target as the goal applicable

to performance-based

RSU awards as it had done in prior years.

Instead, the Compensation Committee set our equity-based awards

employees for fiscal 2021 in the form of time-based RSUs and non-qualified

stock options which focus on stock

value appreciation and retention instead of pre-established performance goals.

Our non-employee directors

continued to receive equity-based awards for fiscal 2021 solely in the form of time-based

RSUs.

In March 2022,

the Compensation Committee reinstated performance-based RSUs

for equity-based awards to employees for fiscal

2022 and awarded grants in the form of performance-based RSUs,

time-based RSUs and non-qualified stock

options.

As of December 31, 2022, there were

70,942,657

shares authorized and

8,034,696

shares available to be granted

under the 2020 Stock Incentive Plan and

1,892,657

shares authorized and

192,400

shares available to be granted

under the 2015 Non-Employee Director Stock Incentive Plan.

RSUs are stock-based awards granted to recipients with specified vesting provisions.

In the case of RSUs, common

stock is delivered on or following satisfaction of vesting conditions.

We issue RSUs to employees that primarily

vest (i) solely based on the recipient’s continued service over time, primarily with

four

-year cliff vesting and/or (ii)

based on achieving specified performance measurements and the recipient’s continued service over time, primarily

with

three

-year cliff vesting.

RSUs granted under the 2015 Non-Employee Director Stock Incentive

Plan primarily

are granted with

-month cliff vesting.

For these RSUs, we recognize the cost as compensation expense on

straight-line basis.

With

respect to time-based RSUs, we estimate the fair value on the date

of grant based on our closing stock price at

the time of grant.

With respect to performance-based RSUs, the number of shares that ultimately vest

and are

received by the recipient is based upon our performance as measured against

specified targets over a specified

period, as determined by the Compensation Committee.

Although there is no guarantee that performance targets

will be achieved, we estimate the fair value of performance-based RSUs based

on our closing stock price at time of

grant.

Each of the Plans provide for certain adjustments to the performance

measurement in connection with awards under

the Plans.

With respect to the performance-based RSUs granted under our 2020 Stock Incentive Plan, such

performance measurement adjustments relate to significant events, including,

without limitation, acquisitions,

divestitures, new business ventures, certain capital transactions (including share

repurchases), differences in

budgeted average outstanding shares (other than those resulting from capital

transactions referred to above),

restructuring costs, if any, certain litigation settlements or payments, if any, changes in accounting principles or in

applicable laws or regulations, changes in income tax rates in certain

markets, foreign exchange fluctuations, the

financial impact of certain products and unforeseen events or circumstances affecting us.

Over the performance period, the number of shares of common stock that will

ultimately vest and be issued and the

related compensation expense is adjusted upward or downward based upon

our estimation of achieving such

performance targets.

The ultimate number of shares delivered to recipients and the

related compensation cost

recognized as an expense will be based on our actual performance metrics

as defined under the Plans.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Stock options are awards that allow the recipient to purchase shares of our

common stock at a fixed price following

vesting of the stock options.

Stock options are granted at an exercise price equal to our closing stock

price on the

date of grant.

Stock options issued beginning in 2021 vest

one-third

per year based on the recipient’s continued

service, subject to the terms and conditions of the 2020 Stock Incentive Plan,

are fully vested

three years

from the

grant date and have a contractual term of

ten years

from the grant date, subject to earlier termination of the term

upon certain events.

Compensation expense for these stock options is recognized

using a graded vesting method.

We estimate the fair value of stock options using the Black-Scholes valuation model.

In addition to equity-based awards granted in fiscal 2021 under the long-term

incentive program, the Compensation

Committee granted a Special Pandemic Recognition Award under the 2020 Stock Incentive Plan to recipients of

performance-based RSUs under the 2018 long-term incentive program.

The payout under the performance-based

restricted stock units granted under the fiscal 2018 long-term incentive program

(the “2018 LTIP”) was negatively

impacted by the global COVID-19 pandemic.

Given the significance of the impact of the pandemic on our

three

year EPS goal under such equity awards and the contributions made by our employees

(including those who

received such awards), on March 3, 2021, the Compensation Committee granted

a Special Pandemic Recognition

Award to recipients of performance-based restricted stock units under the 2018 LTIP who were employed by us on

the grant date of the Special Pandemic Recognition Award.

These time-based RSU awards vest

% on the first

anniversary of the grant date and

% on the second anniversary of the grant date, based on the recipient’s

continued service and subject to the terms and conditions of the 2020 Stock Incentive

Plan, and are recorded as

compensation expense using a graded vesting method.

The combination of the

% payout based on actual

performance of the 2018 LTIP and the one-time Special Pandemic Recognition Award granted in 2021 will

generate a cumulative payout of

% of each recipient’s original number of performance-based restricted stock

units awarded in 2018 if the recipient satisfies the

two

-year vesting schedule commencing on the grant date.

Our accompanying consolidated statements of income reflect pre-tax share-based

compensation expense of $

million ($

million after-tax), $

million ($

million after-tax) and $

million ($

million after-tax) for the years

ended December 31, 2022, December 25, 2021 and December 26, 2020.

Total unrecognized compensation cost related to non-vested awards as of December 31, 2022 was $

million,

which is expected to be recognized over a weighted-average period of

approximately

2.1

years.

The weighted-average grant date fair value of stock-based awards granted

before forfeitures was $

85.51

, $

62.72

and $

60.23

per share during the years ended December 31, 2022, December 25,

2021 and December 26, 2020.

Certain stock-based compensation granted may require us to settle in

the form of a cash payment.

During the year

ended December 31, 2022, we recorded a liability of $

0.4

million relating to the grant date fair value of stock-based

compensation to be settled in cash.

record deferred income tax assets for awards that will result in

future deductions on our income tax returns

based on the amount of compensation cost recognized and our statutory tax

rate in the jurisdiction in which we will

receive a deduction.

Our accompanying consolidated statements of cash flows present our stock-based

compensation expense as an

adjustment to reconcile net income to net cash provided by operating

activities for all periods presented.

In the

accompanying consolidated statements of cash flows, there were no benefits

associated with tax deductions in

excess of recognized compensation as a cash inflow from financing

activities for the years ended December 31,

2022, December 25, 2021 and December 26, 2020.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The following weighted-average assumptions were used in determining

the most recent fair values of stock options

using the Black-Scholes valuation model:

2022

Expected dividend yield

0.00

Expected stock price volatility

27.80

Risk-free interest rate

3.62

Expected life of options (years)

6.00

We have not declared cash dividends on our stock in the past and we do not anticipate declaring cash dividends in

the foreseeable future.

The expected stock price volatility is based on implied volatilities

from traded options on

our stock, historical volatility of our stock, and other factors.

The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the time of grant in conjunction with considering the expected life of options.

The

six

-year expected life of the options was determined using the simplified

method for estimating the expected term

as permitted under SAB Topic 14.

Estimates of fair value are not intended to predict actual future events or

the

value ultimately realized by recipients of stock options, and subsequent

events are not indicative of the

reasonableness of the original estimates of fair value made by us.

The following table summarizes the stock option activity for the year

ended December 31, 2022:

Stock Options

Weighted

Remaining

Average

Weighted Average

Aggregate

Exercise

Remaining Contractual

Intrinsic

Price

Life in Years

Value

Outstanding at beginning of year

767,717

63.24

Granted

420,075

85.81

Exercised

(36,150)

62.92

Forfeited

(34,068)

74.84

Outstanding at end of year

1,117,574

71.38

8.5

Options exercisable at end of year

220,688

63.35

Weighted

Weighted Average

Average

Remaining

Aggregate

Number of

Exercise

Contractual

Intrinsic

Options

Price

Life (in years)

Value

Vested

or expected to vest

885,428

73.50

8.7

The following tables summarize the activity of our unvested RSUs for

the year ended December 31, 2022:

Time-Based Restricted Stock Units

Performance-Based Restricted Stock Units

Weighted Average

Grant Date Fair

Intrinsic Value

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share

Shares/Units

Value Per Share

Per Share

Outstanding at beginning of period

1,945,862

58.79

674,753

59.63

Granted

471,840

85.49

267,865

82.35

Vested

(566,887)

55.46

(396,220)

59.21

Forfeited

(94,771)

67.87

(25,482)

67.65

Outstanding at end of period

1,756,044

66.59

79.87

520,916

60.23

79.87

The total intrinsic value per share of RSUs that vested was $

78.74

, $

73.99

and $

61.49

during the years ended

December 31, 2022, December 25, 2021 and December 26, 2020.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 17 – Employee Benefit Plans

Defined benefit plans

Certain of our employees in our international markets participate

in various noncontributory defined benefit plans.

These plans are managed to provide pension benefits to covered employees

in accordance with local regulations

and practices.

Our net unfunded liability for these plans are recorded

in accrued expenses: other; and other

liabilities within our consolidated balance sheets.

The following table presents the changes in projected benefit

obligations, plan assets, and the funded status of our defined benefit pension

plans:

Years

Ended

December 31,

December 25,

2022

2021

Obligation and funded status:

Change in benefit obligation

Projected benefit obligation, beginning of period

Service costs

Interest cost

Past service cost

Actuarial loss

(19)

(5)

Benefits paid

(1)

Participant contributions

Settlements

(1)

(2)

Effect of foreign currency translation

(4)

(5)

Projected benefit obligation, end of period

Change in plan assets

Fair value of plan assets at beginning of period

Actual return on plan assets

(3)

Employer contributions

Plan participant contributions

Expected return on plan assets

Benefit received

(1)

Settlements

(1)

(3)

Effect of foreign currency translation

(2)

(1)

Fair value of plan assets at end of period

Unfunded status at end of period

(1)

Includes regular benefit payments and amounts transferred in by new

participants.

The majority of our defined benefit plans are unfunded, with the exception

of one plan in one country where the

amount of assets exceeds the projected benefit obligation by approximately

million and $

million as of

December 31, 2022 and December 25, 2021, respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The following table provides the amounts recognized in our consolidated

balance sheets for our defined benefit

pension plans:

Years

Ended

December 31,

December 25,

2022

2021

Non-current assets

Current liabilities

(1)

Non-current liabilities

(59)

(74)

Accumulated other comprehensive loss, pre-tax

The following table provides the net periodic pension cost for our

defined benefit plans:

Years

Ended

December 31,

December 25,

December 26,

2022

2021

2020

Service cost

Interest cost

Expected return on plan assets

(1)

Employee contributions

Amortization of prior service credit

Recognized net actuarial loss

Settlements

Net periodic pension cost

The following tables present the weighted-average actuarial assumptions

used to determine our pension benefit

obligation and our net periodic pension cost for the periods presented:

Years

Ended

December 31,

December 25,

Pension Benefit Obligation

2022

2021

Weighted average

discount rate

1.67

0.87

Years

Ended

December 31,

December 25,

December 26,

Net Periodic Pension Cost

2022

2021

2020

Discount rate-pension benefit

1.25

0.56

0.51

Expected return on plan assets

0.81

0.71

0.87

Rate of compensation increase

1.68

1.95

1.97

Pension increase rate

0.61

0.72

0.67

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The following table presents the estimated pension benefit payments that

are payable to the plan’s participants as of

December 31, 2022:

Year

2023

2024

2025

2026

2027

2028 to 2032

Total

401(k) Plans

We offer

qualified 401(k) plans to substantially all our domestic full-time

employees.

As determined by our Board

of Directors, matching contributions to these plans generally do not

exceed

% of the participants’ contributions

up to

% of their base compensation, subject to applicable legal limits.

Matching contributions consist of cash and

were allocated entirely to the participants’ investment elections on file,

subject to a

% allocation limit to the

Henry Schein Stock Fund.

Due to the impact of COVID-19, as part of our initiative to generate cash savings,

suspended the matching contribution for the second half of 2020.

The matching contribution was reinstated in

Forfeitures attributable to participants whose employment terminates prior

to becoming fully vested are used

to reduce our matching contributions and offset administrative expenses of the 401(k)

plans.

Assets of the 401(k) and other defined contribution plans are held

in self-directed accounts enabling participants to

choose from various investment fund options.

Matching contributions related to these plans charged to operations

during the years ended December 31, 2022, December 25, 2021 and December

26, 2020 amounted to $

million,

million and $

million, respectively.

Within our consolidated statements of income, $

million is included

in selling, general and administrative expenses; and $

million is included in cost of goods sold.

Supplemental Executive Retirement Plan (“SERP”)

We offer

an unfunded, non-qualified SERP to eligible employees.

This plan generally covers officers and certain

highly compensated employees after they have reached the maximum

IRS allowed pre-tax 401(k) contribution

limit.

Our contributions to this plan are equal to the 401(k)

employee-elected contribution percentage applied to

base compensation for the portion of the year in which such employees are

not eligible to make pre-tax

contributions to the 401(k) plan.

Due to the impact of COVID-19, as part of our initiative

to generate cash savings,

we suspended contributions under the SERP for the second half of

Contributions to the SERP were restored

in 2021.

The amounts charged to operations during the years ended December 31,

2022, December 25, 2021 and

December 26, 2020 amounted to $

(1)

million, $

million and $

million, respectively.

The charges are included in

selling, general and administrative expenses line item within our consolidated

statements of income.

Please see

Note 11 – Derivatives and Hedging Activities

for additional information.

Deferred Compensation Plan (“DCP”)

During 2011, we began to offer DCP to a select group of management or highly compensated employees of

the

Company and certain subsidiaries.

This plan allows for the elective deferral of base salary, bonus and/or

commission compensation by eligible employees.

The amounts charged to operations during the years ended

December 31, 2022, December 25, 2021 and December 26, 2020 were approximately

(11)

million, $

million and

million, respectively.

The charges are included in selling, general and administrative expenses line

item within

our consolidated statements of income.

Please see

Note 11 – Derivatives and Hedging Activities

for additional

information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 18 – 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.

ASC 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.

The

components of the change in the redeemable noncontrolling interests for the

years ended December 31, 2022,

December 25, 2021 and December 26, 2020 are presented in the following table:

December 31,

December 25,

December 26,

2022

2021

2020

Balance, beginning of period

Decrease in redeemable noncontrolling interests due to acquisitions of

noncontrolling interests in subsidiaries

(31)

(60)

(17)

Increase in redeemable noncontrolling interests due to business

acquisitions

Net income attributable to redeemable noncontrolling interests

Dividends declared

(21)

(13)

Effect of foreign currency translation loss attributable to redeemable

noncontrolling interests

(6)

(4)

Change in fair value of redeemable securities

(4)

Balance, end of period

Note 19 – Comprehensive Income

Comprehensive income includes certain gains and losses that, under U.S.

GAAP,

are excluded from net income as

such amounts are recorded directly as an adjustment to stockholders’

equity.

The following table summarizes our Accumulated other comprehensive loss, net of

applicable taxes as of:

December 31,

December 25,

December 26,

2022

2021

2020

Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment

(37)

(31)

(25)

Attributable to noncontrolling interests:

Foreign currency translation adjustment

(1)

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

(236)

(155)

(77)

Unrealized gain (loss) from foreign currency hedging activities

(2)

(11)

Pension adjustment loss

(2)

(14)

(20)

Accumulated other comprehensive loss

(233)

(171)

(108)

Total Accumulated

other comprehensive loss

(271)

(202)

(133)

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The following table summarizes the components of comprehensive income, net of

applicable taxes as follows:

December 31,

December 25,

December 26,

2022

2021

2020

Net income

Foreign currency translation gain (loss)

(88)

(84)

Tax effect

Foreign currency translation gain (loss)

(88)

(84)

Unrealized gain (loss) from foreign currency hedging activities

(10)

Tax effect

(3)

Unrealized gain (loss) from foreign currency hedging activities

(7)

Pension adjustment gain

Tax effect

(4)

(2)

Pension adjustment gain

Comprehensive income

Our financial statements are denominated in the U.S. Dollar currency.

Fluctuations in the value of foreign

currencies as compared to the U.S. Dollar may have a significant impact on our

comprehensive income.

The

foreign currency translation gain (loss) during the years ended December

31, 2022, December 25, 2021 and

December 26, 2020 was primarily due to changes in foreign currency exchange

rates of the Euro, British Pound,

Australian Dollar, Brazilian Real, New Zealand Dollar and Canadian Dollar.

The foreign currency translation gain

(loss) during the years ended December 31, 2022, December 25, 2021

and December 26, 2020 was primarily

attributable to a net investment hedge that was entered into during 2019.

See

Note 11-Derivatives and Hedging

Activities

for further information.

The following table summarizes our total comprehensive income, net of

applicable taxes as follows:

December 31,

December 25,

December 26,

2022

2021

2020

Comprehensive income attributable to

Henry Schein, Inc.

Comprehensive income attributable to

noncontrolling interests

Comprehensive income attributable to

Redeemable noncontrolling interests

Comprehensive income

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 20 – Discontinued Operations

Animal Health Spin-off

On February 7, 2019 (the “Distribution Date”), we completed the separation

(the “Separation”) and subsequent

merger (“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”).

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 $

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

% 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

% 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.

In connection with the completion of the Animal Health Spin-off, we entered into

a transition services agreement,

which ended in December 2020, with Covetrus under which we agreed to provide

certain transition services for up

twenty-four months

in areas such as information technology, finance and accounting, human resources, supply

chain, and real estate and facility services.

As a result of the Separation, the financial position and results of operations

of the Henry Schein Animal Health

Business are presented as discontinued operations and have been excluded

from continuing operations and segment

results for all periods presented.

The accompanying notes to the consolidated financial

statements have been

revised to reflect the effect of the Separation and all prior year balances have been

revised accordingly to reflect

continuing operations only.

The historical statements of Comprehensive Income (Loss) and Shareholders'

Equity

have not been revised to reflect the Separation and instead reflect the Separation

as an adjustment to the balances at

December 26, 2020.

In February 2019, we completed the Animal Health Spin-off.

During the year ended December 26, 2020, we

incurred $

million in transaction costs associated with this transaction.

All transaction costs related to the Animal

Health Spin-off have been included in results from discontinued operations.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Summarized financial information for our discontinued operations

is as follows:

Year

Ended

December 26,

2020

Selling, general and administrative

Operating loss

(2)

Income tax benefit

(3)

Income from discontinued operations

Net income from discontinued operations attributable to Henry Schein,

Inc.

The operating loss from discontinued operations for the year ended

December 26, 2020 was primarily attributable

to costs directly related to the Animal Health Spin-off.

See

Note 23 – Related Party Transactions

for additional

information.

The net income from discontinued operations for the year ended December

26, 2020 was primarily attributable to a

reduction in a liability for tax indemnification and a tax refund received

during 2020 by a holding company

previously part of our Animal Health legal structure and other

favorable tax resolutions.

Note 21 – Earnings Per Share

Basic earnings per share is computed by dividing net income attributable

to Henry Schein, Inc. by the weighted-

average number of common shares outstanding for the period.

Our diluted earnings per share is computed similarly

to basic earnings per share, except that it reflects the effect of common shares issuable

for presently unvested RSUs

and upon exercise of stock options using the treasury stock method

in periods in which they have a dilutive effect.

A reconciliation of shares used in calculating earnings per basic and diluted

share follows:

Years

Ended

December 31,

December 25,

December 26,

2022

2021

2020

Basic

136,064,221

140,090,889

142,504,193

Effect of dilutive securities:

Stock options and restricted stock units

1,691,449

1,681,892

899,489

Diluted

137,755,670

141,772,781

143,403,682

The number of antidilutive securities that were excluded from the calculation

of diluted weighted average common

shares outstanding are as follows:

Years

Ended

December 31,

December 25,

December 26,

2022

2021

2020

Stock options

342,716

611,869

Restricted stock units

19,466

1,048

2,398

Total anti-dilutive

securities excluded from EPS computation

362,182

612,917

2,398

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 22 – Supplemental Cash Flow Information

Cash paid for interest and income taxes was:

Years

ended

December 31,

December 25,

December 26,

2022

2021

2020

Interest

Income taxes

For the years ended December 31, 2022, December 25, 2021 and December

26, 2020, we had $

million, $

million and $

(10)

million of non-cash net unrealized gains (losses) related to foreign

currency hedging activities,

respectively.

Note 23 – Related Party Transactions

In connection with the completion of the Animal Health Spin-off during our 2019

fiscal year, we entered into a

transition services agreement with Covetrus under which we agreed to provide

certain transition services for up to

twenty-four months

in areas such as information technology, finance and accounting, human resources, supply

chain, and real estate and facility services.

(see

Note 20 – Discontinued Operations

for additional details).

For the year ended December 26, 2020, we recorded approximately $

million of fees for these services.

Pursuant

to the transition services agreement, Covetrus purchased

certain products from us.

During the year December 26,

2020, net sales to Covetrus under the transition services agreement were

approximately $

million.

Sales to

Covetrus under the transition services agreement ended in December 2020.

In connection with the formation of Henry Schein One, LLC, our joint venture

with Internet Brands, which was

formed on July 1, 2018, we entered into a

ten-year

royalty agreement with Internet Brands whereby we will pay

Internet Brands approximately $

million annually for the use of their intellectual property.

During the years

ended December 31, 2022, December 25, 2021 and December 26, 2020, we recorded

million, $

million and

million, respectively in connection with costs related to this royalty

agreement.

As of December 31, 2022 and

December 25, 2021, Henry Schein One, LLC had a net receivable (payable)

balance from (to) Internet Brands of

) million and $

million, respectively, comprised of amounts related to results of operations and the royalty

agreement.

The components of this receivable and payable are recorded within

prepaid expenses and other; and

accrued expenses: other, respectively, within our consolidated balance sheets.

During our normal course of business, we have interests in entities that we

account for under the equity accounting

method.

During the years ended December 31, 2022, December

25, 2021 and December 26, 2020, we recorded net

sales of $

million, $

million, and $

respectively, to such entities.

During our fiscal years ended 2022, 2021

and 2020, we purchased $

million, $

million and $

million respectively, from such entities.

At December 31,

2022 and December 25, 2021, we had in aggregate $

million and $

million, due from our equity affiliates, and

million and $

million due to our equity affiliates, respectively.

Certain of our facilities related to our acquisitions are leased from employees

and minority shareholders.

Please see

Note 6 – Leases

for further information.

Previous: Item 7A. Quantitative and Qualitative Disclosures About Market Risk · Next: Item 9. Changes in and Disagreements with Accountants on Accounting and