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, P.C.;

New York,

NY; PCAOB

ID#

)

Consolidated Financial Statements

:

Balance Sheets as of December 30, 2023 and December 31, 2022

Statements of Income for the years ended December 30, 2023,

December 31, 2022 and December 25, 2021

Statements of Comprehensive Income for the years ended December 30, 2023,

December 31, 2022 and December 25, 2021

Statements of Changes in Stockholders’ Equity for the years ended

December 30, 2023, December 31, 2022 and December 25, 2021

Statements of Cash Flows for the years ended December 30, 2023,

December 31, 2022 and December 25, 2021

Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation and Significant Accounting Policies

Note 2 – Cybersecurity Incident

Note 3 – Net Sales from Contracts with Customers

Note 4 – Segment and Geographic Data

Note 5 – Business Acquisitions and Divestiture

Note 6 – Property and Equipment, Net

Note 7 – Leases

Note 8 – Goodwill and Other Intangibles, Net

Note 9 – Investments and Other

Note 10 – Fair Value Measurements

Note 11 – Concentrations of Risk

Note 12 – Derivatives and Hedging Activities

Note 13 – Debt

Note 14 – Income Taxes

Note 15 – Plans of Restructuring and Integration Costs

Note 16 – Commitments and Contingencies

Note 17 – Stock-Based Compensation

Note 18 – Employee Benefit Plans

Note 19 – Redeemable Noncontrolling Interests

Note 20 – Comprehensive Income

Note 21 – Earnings Per Share

Note 22 – Supplemental Cash Flow Information

Note 23 – Related Party Transactions

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Henry Schein, Inc.

Melville, NY

Opinion on the Consolidated Financial Statements

We

have

audited

the

accompanying

consolidated

balance

sheets

of

Henry

Schein,

Inc.

(the

“Company”)

as

of

December 30, 2023 and December 31, 2022, the related consolidated statements of income, comprehensive income,

changes in stockholders’ equity,

and cash flows for each of

the three years in the period

ended December 30, 2023,

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 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three

years in

the period

ended December

30, 2023,

in conformity

with accounting

principles generally

accepted in

the

United States of America.

We

also

have

audited,

in

accordance

with

the

standards

of

the

Public

Company

Accounting

Oversight

Board

(United

States)

(“PCAOB”),

the

Company's

internal

control

over

financial

reporting

as

of

December

30,

2023,

based

on

criteria

established

in

Internal

Control

–

Integrated

Framework

(2013)

issued

by

the

Committee

of

Sponsoring

Organizations

of

the

Treadway

Commission

(“COSO”)

and

our

report

dated

February

28,

2024

expressed an adverse opinion thereon.

Basis for Opinion

These consolidated financial statements are

the responsibility of the

Company’s management. Our

responsibility is

to

express

an

opinion

on

the

Company’s

consolidated

financial

statements

based

on

our

audits.

We

are

a

public

accounting

firm

registered

with

the

PCAOB

and

are

required

to

be

independent

with

respect

to

the

Company

in

accordance

with

the

U.S.

federal

securities

laws

and

the

applicable

rules

and

regulations

of

the

Securities

and

Exchange Commission and the PCAOB.

We

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

perform

the

audit

to

obtain

reasonable

assurance

about

whether

the

consolidated

financial

statements

are

free

of

material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial

statements, whether

due to

error or

fraud, and

performing procedures

that respond

to those

risks. Such

procedures

included examining,

on a

test basis,

evidence regarding

the amounts

and disclosures

in the

consolidated financial

statements.

Our audits

also included

evaluating the

accounting principles

used

and significant

estimates made

by

management, as well as evaluating the overall presentation of the consolidated financial statements. We 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.

Business Acquisition

As

described

in

Note

of

the

consolidated

financial

statements,

the

Company

acquired

Shield

Healthcare,

Inc.,

(“Shield”)

in

As

a

result

of

this

acquisition,

management

was

required

to

determine

the

fair

values

of

the

identifiable

assets

acquired

and

liabilities

assumed.

In

connection

with

the

acquisition

of

Shield,

the

Company

recorded $156 million of identifiable intangible assets related to

customer relationships and lists.

We

identified management’s

judgements used to

determine the

revenue growth rates

and discount

rate used

in the

determination

of

the

fair

value

of

the

acquired

customer

relationships

and

lists

in

the

acquisition

of

Shield

as

a

critical audit matter.

The principal considerations

for our determination

were the subjective

judgement required by

management in formulating the

revenue growth rates and

assessing the appropriateness of the

discount rate used in

developing

the

fair

values

of

the

applicable

acquired identifiable

intangible

assets.

Auditing

these

considerations

involved

especially

subjective

and

challenging

auditor

judgement

due

to

the

nature

and

extent

of

audit

effort

required to address these matters, including the extent of specialized

skill or knowledge needed.

The primary procedures we performed to address this critical audit matter

included:

●

Evaluating the reasonableness of the revenue growth rates used in the determination

of the fair values of the

acquired

customer

relationships

and

lists

in

the

acquisition

of

Shield

by:

(i)

reviewing

the

historical

performance of

the

acquired company

using

their

audited financial

statements, and

(ii)

assessing revenue

projections against industry metrics and peer-group companies.

●

Utilizing

personnel

with

specialized

knowledge

and

skill

in

valuation

to

assist

in:

(i)

testing

the

source

information underlying

the determination

of the

discount rate,

and (ii)

developing a

range of

independent

estimates of discount rates and

comparing those to the discount

rate selected by management in connection

with the determination of the fair value of the acquired customer relationships and lists in

the acquisition of

Shield.

/s/

BDO USA,

P.C.

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

New York, NY

February 28, 2024

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

December 30,

December 31,

2023

2022

ASSETS

Current assets:

Cash and cash equivalents

$

$

Accounts receivable, net of allowance for credit losses of $

and $

(1)

1,863

1,442

Inventories, net

1,815

1,963

Prepaid expenses and other

Total current assets

4,488

3,988

Property and equipment, net

Operating lease right-of-use assets

Goodwill

3,875

2,893

Other intangibles, net

Investments and other

Total assets

$

10,573

$

8,607

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND

STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

1,020

$

1,004

Bank credit lines

Current maturities of long-term debt

Operating lease liabilities

Accrued expenses:

Payroll and related

Taxes

Other

Total current liabilities

2,683

2,224

Long-term debt (1)

1,937

1,040

Deferred income taxes

Operating lease liabilities

Other liabilities

Total liabilities

5,420

3,936

Redeemable noncontrolling interests

Commitments and contingencies

(nil)

(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,

129,247,765

outstanding on December 30, 2023 and

131,792,817

outstanding on December 31, 2022

Additional paid-in capital

-

-

Retained earnings

3,860

3,678

Accumulated other comprehensive loss

(206)

(233)

Total Henry Schein, Inc. stockholders' equity

3,655

3,446

Noncontrolling interests

Total stockholders' equity

4,289

4,095

Total liabilities, redeemable noncontrolling

interests and stockholders' equity

$

10,573

$

8,607

(1)

Amounts presented include balances held by our consolidated variable interest entity (“VIE”).

At December 30, 2023 and

December 31, 2022, includes trade accounts receivable of $

million and $

million, respectively, and long-term debt of $

million and $

million, respectively.

See

Note 1 – Basis of Presentation and Significant Accounting Policies

for further

information.

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF INCOME

(in millions, except share and per share data)

Years

Ended

December 30,

December 31,

December 25,

2023

2022

2021

Net sales

$

12,339

$

12,647

$

12,401

Cost of sales

8,478

8,816

8,727

Gross profit

3,861

3,831

3,674

Operating expenses:

Selling, general and administrative

2,956

2,771

2,634

Depreciation and amortization

Restructuring and integration costs

Operating income

Other income (expense):

Interest income

Interest expense

(87)

(35)

(27)

Other, net

(3)

-

Income before taxes, equity in

earnings of affiliates and noncontrolling interests

Income taxes

(120)

(170)

(198)

Equity in earnings of affiliates, net of tax

Gain on sale of equity investment

-

-

Net income

Less: Net income attributable to noncontrolling interests

(20)

(28)

(29)

Net income attributable to Henry Schein, Inc.

$

$

$

Earnings per share attributable to Henry Schein, Inc.:

Basic

$

3.18

$

3.95

$

4.51

Diluted

$

3.16

$

3.91

$

4.45

Weighted-average common

shares outstanding:

Basic

130,618,990

136,064,221

140,090,889

Diluted

131,748,171

137,755,670

141,772,781

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(in millions)

Years

Ended

December 30,

December 31,

December 25,

2023

2022

2021

Net income

$

$

$

Other comprehensive income, net of tax:

Foreign currency translation gain (loss)

(88)

(84)

Unrealized gain (loss) from hedging activities

(18)

Pension adjustment gain (loss)

(3)

Other comprehensive income (loss), net of tax

(69)

(69)

Comprehensive income

Comprehensive income attributable to noncontrolling interests:

Net income

(20)

(28)

(29)

Foreign currency translation loss (gain)

(5)

Comprehensive income attributable to noncontrolling interests

(25)

(21)

(23)

Comprehensive income attributable to Henry Schein, Inc.

$

$

$

See accompanying notes.

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'

Shares

Amount

Capital

Earnings

Income (Loss)

Interests

Equity

Balance, December 26, 2020

142,462,571

$

$

-

$

3,455

$

(108)

$

$

3,984

Net income (excluding $

attributable to Redeemable

noncontrolling interests)

-

-

-

-

Foreign currency translation loss (excluding loss of $

attributable to Redeemable noncontrolling interests)

-

-

-

-

(78)

-

(78)

Unrealized gain from hedging activities,

net of tax of $

-

-

-

-

-

Pension adjustment gain, including tax of $

-

-

-

-

-

Distributions to noncontrolling shareholders

-

-

-

-

-

(11)

(11)

Change in fair value of redeemable securities

-

-

(160)

-

-

-

(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)

-

-

-

(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)

-

-

-

-

Foreign currency translation loss (excluding loss of $

attributable to Redeemable noncontrolling interests)

-

-

-

-

(81)

(1)

(82)

Unrealized gain from hedging activities,

net of tax of $

-

-

-

-

-

Pension adjustment gain, including tax of $

-

-

-

-

-

Distributions to noncontrolling shareholders

-

-

-

-

-

(1)

(1)

Purchase of noncontrolling interests

-

-

-

-

-

(7)

(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)

-

-

-

(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

Net income (excluding $

attributable to Redeemable

noncontrolling interests)

-

-

-

-

Foreign currency translation gain (excluding gain of $

attributable to Redeemable noncontrolling interests)

-

-

-

-

-

Unrealized loss from hedging activities,

including tax benefit of $

-

-

-

-

(18)

-

(18)

Pension adjustment loss, including tax benefit of $

-

-

-

-

(3)

-

(3)

Distributions to noncontrolling shareholders

-

-

-

-

-

(27)

(27)

Change in fair value of redeemable securities

-

-

-

-

-

Noncontrolling interests and adjustments related to

business acquisitions

-

-

-

-

-

(2)

(2)

Repurchase and retirement of common stock

(3,214,136)

-

(33)

(219)

-

-

(252)

Stock issued upon exercise of stock options

21,068

-

-

-

-

Stock-based compensation expense

1,065,319

-

-

-

-

Shares withheld for payroll taxes

(416,605)

-

(34)

-

-

-

(34)

Settlement of stock-based compensation awards

(698)

-

-

-

-

Transfer of charges in excess of capital

-

-

(15)

-

-

-

Balance, December 30, 2023

129,247,765

$

$

-

$

3,860

$

(206)

$

$

4,289

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

(in millions)

Years Ended

December 30,

December 31,

December 25,

2023

2022

2021

Cash flows from operating activities:

Net income

$

$

$

Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization

Impairment charge on intangible assets

Impairment of capitalized software

-

-

Non-cash restructuring charges

-

Gain on sale of equity investment

-

-

(10)

Stock-based compensation expense

Provision for (benefits from) losses on trade and other

accounts receivable

(8)

Benefit from deferred income taxes

(20)

(73)

(11)

Equity in earnings of affiliates

(14)

(15)

(20)

Distributions from equity affiliates

Changes in unrecognized tax benefits

(2)

Other

(3)

(20)

(10)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(327)

(7)

Inventories

(126)

(295)

Other current assets

(138)

(52)

Accounts payable and accrued expenses

(56)

(96)

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property and equipment

(147)

(96)

(79)

Payments related to equity investments and business acquisitions,

net of cash acquired

(955)

(158)

(571)

Proceeds from sale of equity investment

-

-

Proceeds from loan to affiliate

(4)

Settlements for net investment hedges

-

-

Capitalized software costs

(40)

(32)

(33)

Other

(21)

(1)

-

Net cash used in investing activities

(1,135)

(276)

(677)

Cash flows from financing activities:

Net change in bank credit lines

(18)

Proceeds from issuance of long-term debt

1,368

Principal payments for long-term debt

(468)

(59)

(122)

Debt issuance costs

(3)

-

(3)

Proceeds from issuance of stock upon exercise of stock options

-

Payments for repurchases and retirement of common stock

(250)

(485)

(401)

Payments for taxes related to shares withheld for employee

taxes

(34)

(32)

(8)

Distributions to noncontrolling shareholders

(47)

(21)

(26)

Acquisitions of noncontrolling interests in subsidiaries

(19)

(38)

(60)

Net cash provided by (used in) financing activities

(315)

(333)

Effect of exchange rate changes on cash and cash equivalents

(12)

(12)

(3)

Net change in cash and cash equivalents

(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, Morocco, 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 for 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 its primary beneficiary as we have the power to

direct activities that most significantly affect its economic performance and have

the obligation to absorb the

majority of its losses or benefits.

For this VIE, the trade accounts receivable transferred

to the VIE are pledged as

collateral to the related debt.

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

At December 30, 2023 and December 31, 2022,

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.

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;

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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.

See

Note 10 – Fair Value Measurements

for additional information.

Use of Estimates

The preparation of consolidated 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.

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; redeemable noncontrolling

interests; hedging activity; supplier

rebates; measurement of compensation cost for certain share-based

performance awards and cash bonus plans; and

pension plan assumptions.

Fiscal Year

We report our results of operations and cash flows on a

or

weeks per fiscal year basis ending on the last

Saturday of December.

The year ended December 30, 2023 consisted of

weeks, and the years ended December

31, 2022 and December 25, 2021 consisted of

weeks and

weeks, respectively.

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:

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, we satisfy 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 the

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

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

to the customer.

On the shipment date, we have no post-shipment obligations,

legal title and risks and rewards of

ownership transfer to the customer and 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

by

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”) Topic 460 Guarantees.

At December 30, 2023 and December 31, 2022, we had

accrued approximately $

million and $

million, respectively, for warranty costs.

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.

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 a 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.

Some 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 by 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.

We 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., because we or others 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 3 – Revenue from Contracts with Customers

for additional disclosures of disaggregated net sales and

Note 4 – 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 accrued expenses-other within our consolidated balance sheets.

We estimate 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

and resaleable.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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 30,

2023, December 31, 2022 and December 25, 2021, respectively.

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,

sales, supplier

rebate contract terms, which generally provide for increasing rebates based

on either increased purchase or sales

volumes.

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 30, 2023, December 31, 2022

and

December 25, 2021, respectively.

Advertising and Promotional Costs

We expense advertising and promotional costs as incurred.

Total advertising and promotional expenses were $

million, $

million and $

million for the years ended December 30, 2023, December 31, 2022 and

December

25, 2021, respectively.

Stock-Based Compensation Costs

We

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

Some 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 projected

benefit obligation.

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.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Gains and losses that result from changes in actuarial assumptions or

from actual experience that differs from

actuarial assumptions are recognized in and then amortized from Accumulated

other comprehensive income (loss).

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 30, 2023 and December 31, 2022.

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.

We

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.

We

write-off a receivable and charge it against its recorded

allowance when we deem them uncollectible.

Our net accounts receivable balance was $

1,863

million, $

1,442

million, and $

1,452

million at December 30, 2023,

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

Our allowance for credit losses was $

million, $

million $

million, and $

million as of December 30, 2023, December 31, 2022, December 25, 2021,

and

December 26, 2020, respectively.

Additions to the allowance for the years ended December 30, 2023,

December

31, 2022 and December 25, 2021 were $

million, $

million and $

million, respectively.

Deductions to the

allowance for the years ended December 30, 2023, December 31, 2022

and December 25, 2021, were $

million,

$

million and $

million

, respectively.

Contract Assets

Contract assets include amounts related to any conditional right to consideration

for work completed but not billed

as of the reporting date.

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 30,

2023 and December 31, 2022 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.

At

December 30, 2023 and December 31, 2022, the current and non-current contract

liabilities were $

million and

$

million, and $

million and $

million, respectively. During the year ended December 30, 2023, we recognized

substantially all of the current contract liability amounts that were previously

deferred at December 31, 2022.

At

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

December 25, 2021, the current and non-current contract liabilities were

$

million and $

million.

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.

Current contract liabilities at December 30, 2023 included

balances of

$

million related to business acquisitions completed in 2023.

Acquisition-related contract liability amounts at

December 31, 2022 and December 25, 2021 were immaterial.

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 weighted-average first-in, first-out method for merchandise

and by 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 under the straight-line method

using estimated useful lives (See

Note 6 – 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 remaining 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 for 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 within investments and

other within our consolidated balance sheets.

Leases

We

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.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

We

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.

Business Acquisitions

We account for business acquisitions under the acquisition method of accounting, under which

the net assets of

acquired businesses are recorded at their fair value at the acquisition

date and our consolidated financial statements

include the acquired businesses’ results of operations from that date.

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.

We

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 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, 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.

Goodwill

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.

Goodwill represents, for acquired business, 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 30, 2023 and December 31, 2022, 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 their estimated fair values using a discounted

cash flow methodology.

When the estimated

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

reporting unit is considered not

impaired.

Conversely, when a reporting unit’s carrying value exceeds its fair value, an impairment charge against

goodwill, limited to the total amount of goodwill allocated to that

reporting unit, is recognized.

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

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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 30, 2023 and December 25, 2021, the results of

our goodwill impairment analysis did

no

t result in any impairments.

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 in

Note 15 – Plans

of Restructuring and Integration Costs

.

Intangible Assets

In connection with our business acquisitions, the major classes of

assets and liabilities to which we generally

allocate acquisition consideration to, excluding goodwill, 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.

We have calculated the value of these intangible assets using the multi-period excess

earnings method, the relief-from-royalty method, and the with and without

method, where applicable.

These

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

market conditions.

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 undiscounted future cash flows

expected to be derived from such asset or asset group.

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 or asset groups carrying amount is not recoverable

through its undiscounted 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 30, 2023, December 31, 2022

and December 25, 2021, we recorded total

impairment charges, within the selling, general and administrative line of our consolidated statements

of income, on

intangible assets of $

million, $

million and $

million, respectively, as more fully discussed in

Note 8 –

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

events other than expected 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 flows and, if such

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

interests might be impacted.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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

to

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

Noncontrolling 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 hedging activities

and unrealized pension adjustment gain.

Risk Management and Derivative Financial Instruments

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

rates, and our unfunded non-qualified supplemental retirement plan (“SERP”)

and our deferred compensation plan

(“DCP”).

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, the interest rate risk on variable rate debt, and the returns on

our SERP and DCP.

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 hedges at inception

of the contracts.

We do not enter into

derivative instruments for speculative purposes.

Our derivative instruments primarily include foreign currency

forward contracts, total return swaps, and interest rate swaps.

Foreign currency forward agreements related to forecasted inventory

purchase commitments with foreign suppliers,

foreign currency swaps related to foreign currency denominated debt, and

interest rate swaps related to variable rate

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 derivatives are 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

transactions affect earnings.

We classify the cash flows related to our hedging activities in the same category in our

consolidated statements of cash flows as the cash flows related

to the hedged item.

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, changes in the fair

value of the derivatives are 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.

Interest swap agreements are entered into for the purpose of hedging

the cash flow of our variable interest rate term

loan.

Our foreign currency forward agreements related to foreign currency

balance sheet exposure provide economic

hedges but are not designated as hedges for accounting purposes.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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 SERP and DCP.

These swaps are

expected to be renewed on an annual basis.

Changes in the fair values of these total return swaps are recorded in

selling, general, and administrative expenses within our consolidated

statements of income and offset recognized

changes in the fair values of our SERP and DCP liabilities.

Foreign Currency Translation

and Transactions

The financial position and results of operations of our foreign subsidiaries

are determined using local currencies as

the functional currencies.

Assets and liabilities of foreign 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

in

Accumulated other comprehensive income in stockholders’ equity.

Gains and losses resulting from foreign

currency transactions are included in earnings.

Accounting Pronouncements Adopted

During the year ended December 30, 2023, we adopted ASC Topic 848,

“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 or by another reference rate

expected to be discontinued

because of reference rate reform.

The adoption of Topic 848 did not have a material impact on our consolidated

financial statements.

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 December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “

Income Taxes

(Topic 740): Improvements to

Income Tax Disclosures

,” which requires public business entities to disclose

additional information in specified categories with respect to

the reconciliation of the effective tax rate to the

statutory rate for federal, state, and foreign income taxes.

It also requires greater detail about individual reconciling

items in the rate reconciliation to the extent the impact of those items

exceeds a specified threshold.

In addition to

new disclosures associated with the rate reconciliation, the ASU requires

information pertaining to taxes paid (net

of refunds received) to be disaggregated for federal, state, and foreign

taxes and further disaggregated for specific

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

jurisdictions to the extent the related amounts exceed a quantitative threshold.

The ASU also describes items that

need to be disaggregated based on their nature, which is determined by

reference to the item’s fundamental or

essential characteristics, such as the transaction or event that triggered

the establishment of the reconciling item and

the activity with which the reconciling item is associated.

The ASU eliminates the historic requirement that entities

disclose information concerning unrecognized tax benefits having a reasonable

possibility of significantly

increasing or decreasing in the 12 months following the reporting date.

This ASU is effective for annual periods

beginning after December 15, 2024.

Early adoption is permitted for annual financial statements

that have not yet

been issued or made available for issuance.

This ASU should be applied on a prospective basis; however,

retrospective application is permitted.

We are currently evaluating the impact that ASU 2023 – 09 will have on our

consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “

Segment Reporting (Topic 280): Improvements to Reportable

Segments

,” which aims to improve financial reporting by requiring disclosure

of incremental segment information

on an annual and interim basis for all public entities to enable investors to

develop more decision-useful financial

analyses.

Currently, Topic

280 requires that a public entity disclose certain information about its

reportable

segments.

For example, a public entity is required to report a measure of

segment profit or loss that the CODM

uses to assess segment performance and make decisions about allocating

resources.

Topic 280 also requires other

specified segment items and amounts, such as depreciation, amortization,

and depletion expense, to be disclosed

under certain circumstances.

The amendments in this ASU do not change or remove those disclosure

requirements

and do not change how a public entity identifies its operating segments,

aggregates those operating segments, or

applies the quantitative thresholds to determine its reportable segments.

This ASU is effective for fiscal years

beginning after December 15, 2023, and interim periods within fiscal years

beginning after December 15, 2024.

Early adoption is permitted.

We do not expect that the requirements of ASU 2023 – 07 will have a material impact

on our consolidated financial statements.

Note 2 – Cybersecurity Incident

In October 2023 Henry Schein experienced a cybersecurity incident that

primarily affected the operations of our

North American and European dental and medical distribution businesses.

Henry Schein One, our practice

management software, revenue cycle management and patient relationship

management solutions business, was not

affected, and our manufacturing businesses were mostly unaffected.

We reported the incident to law enforcement

authorities, restored affected systems and applications, our distribution operations

resumed and we reactivated our

ecommerce platform. Subsequently, on or about November 8, 2023, we determined that the threat actor obtained

personal and sensitive information maintained on our systems belonging

to certain third parties and since that date

we have notified affected and potentially affected parties as appropriate.

The scope of personal and sensitive data

impacted is still under investigation.

On November 22, 2023, we experienced a disruption

of our ecommerce

platform and related applications, which has since been remediated.

The incident adversely impacted our financial

results for the fourth quarter and full year 2023.

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

million of expenses directly related to the

cybersecurity incident, mostly consisting of professional fees.

We maintain cybersecurity insurance, subject to

certain retentions and policy limitations.

With respect to the October 2023 cybersecurity incident, we have a $

million insurance policy, following a $

million retention.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 3 – Net Sales from Contracts with Customers

Net sales are 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 and operating segment

and geographic area:

Year

Ended

December 30, 2023

North America

International

Global

Net sales:

Health care distribution

Dental

$

4,500

$

3,039

$

7,539

Medical

3,897

3,994

Total health care distribution

8,397

3,136

11,533

Technology

and value-added services

Total net sales

$

9,102

$

3,237

$

12,339

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

Total 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

Total net sales

$

9,173

$

3,228

-

$

12,401

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 4 – 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

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, personal protective equipment 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 30,

December 31,

December 25,

2023

2022

2021

Net sales:

Health care distribution

(1)

Dental

$

7,539

$

7,473

$

7,544

Medical

3,994

4,451

4,210

Total health care distribution

11,533

11,924

11,754

Technology

and value-added services

(2)

Total

$

12,339

$

12,647

$

12,401

(1)

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

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

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

(2)

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

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

education services for practitioners, consulting and other services.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Years

ended

December 30,

December 31,

December 25,

2023

2022

2021

Operating Income:

Health care distribution

$

$

$

Technology

and value-added services

Total

$

$

$

Income 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

$

$

$

Technology

and value-added services

-

-

-

Total

$

$

$

Income Tax

Expense:

Health care distribution

$

$

$

Technology

and value-added services

Total

$

$

$

Equity in Earnings of Affiliates:

Health care distribution

$

$

$

Technology

and value-added services

-

Total

$

$

$

Purchases of Property and Equipment:

Health care distribution

$

$

$

Technology

and value-added services

Total

$

$

$

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

As of

December 30,

December 31,

December 25,

2023

2022

2021

Total

Assets:

Health care distribution

$

9,083

$

7,287

$

7,157

Technology

and value-added services

1,490

1,320

1,324

Total

$

10,573

$

8,607

$

8,481

The following table presents information about our operations by geographic

area as of and for the years ended

December 30, 2023, December 31, 2022 and December 25, 2021.

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.

2023

2022

2021

Net Sales

Long-Lived

Assets

Net Sales

Long-Lived

Assets

Net Sales

Long-Lived

Assets

United States

$

8,631

$

3,434

$

9,190

$

2,891

$

8,722

$

2,981

Other

3,708

2,180

3,457

1,256

3,679

1,232

Consolidated total

$

12,339

$

5,614

$

12,647

$

4,147

$

12,401

$

4,213

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 5 – Business Acquisitions and Divestiture

Our acquisition strategy is focused on investments in companies that

add new customers and sales teams, increase

our geographic footprint (whether entering a new country, such as emerging markets, or building scale where we

have already invested in businesses), and finally, those that enable us to access new products and technologies

.

Acquisition of Shield Healthcare

On October 2, 2023 we acquired a

% voting equity interest in Shield Healthcare, Inc. (“Shield”), a supplier

of

homecare medical products delivered directly to patients in their homes.

Based in California, Shield expands our

existing medical business by delivering a diverse range of products,

including items such as incontinence, urology,

ostomy, enteral nutrition, advanced wound care, and diabetes supplies.

Additionally, Shield offers continuous

glucose monitoring devices directly to patients in their homes.

The following table aggregates

the preliminary estimated fair value, as of the date of acquisition, of

consideration

paid and net assets acquired in the Shield acquisition:

2023

Acquisition consideration:

Cash

$

Deferred consideration

Redeemable noncontrolling interest

Total consideration

$

Identifiable assets acquired and liabilities assumed:

Current assets

$

Intangible assets

Other noncurrent assets

Current liabilities

(24)

Deferred income taxes

(41)

Other noncurrent liabilities

(7)

Total identifiable

net assets

Goodwill

Total net assets acquired

$

Goodwill is a result of expected synergies that are expected to originate from the

acquisition as well as the expected

growth potential of Shield.

The acquired goodwill is not deductible for tax purposes.

The following table summarizes the preliminary identifiable intangible assets

acquired as part of the acquisition of

Shield:

2023

Weighted Average

Useful

Lives (in years)

Customer relationships and lists

$

Trademarks / Tradenames

Total

$

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The accounting for the acquisition of Shield has not been completed

in several respects, including but not limited to

finalizing valuation assessments of accounts receivable, inventory, accrued liabilities and income and non-income

based taxes.

To assist in the allocation of consideration,

we engaged valuation specialists to determine the fair

value of intangible and tangible assets acquired and liabilities assumed.

We

will finalize the amounts recognized as

the information necessary to complete the analysis is obtained.

We expect to finalize these amounts as soon as

possible but no later than one year from the acquisition date.

The pro forma financial information has not been

presented because the impact of the Shield acquisition during the year ended

December 30, 2023 was immaterial to

our consolidated financial statements.

Acquisition of S.I.N. Implant System

On July 5, 2023, we acquired a

% voting equity interest in S.I.N. Implant System (“S.I.N.”).

Based in São

Paulo, S.I.N. manufactures an extensive line of products to perform dental

implant procedures and is focused on

advancing the development of value-priced dental implants.

S.I.N. recently expanded the distribution of its

products into the United States and other international markets.

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

the date of acquisition, of consideration

paid and net assets acquired in the S.I.N., including measurement period

adjustments recorded through December

30, 2023:

Preliminary

Allocation as

of September

30, 2023

Measurement

Period

Adjustments

Preliminary

Allocation as

of December

30, 2023

Acquisition consideration:

Cash

$

$

$

Total consideration

$

$

$

Identifiable assets acquired and liabilities assumed:

Current assets

$

$

(8)

$

Intangible assets

(68)

Other noncurrent assets

Current liabilities

(33)

-

(33)

Long-term debt

(22)

-

(22)

Deferred income taxes

(55)

(35)

Other noncurrent liabilities

(27)

-

(27)

Total identifiable

net assets

(43)

Goodwill

Total net assets acquired

$

$

$

Goodwill is a result of expected synergies that are expected to originate from the

acquisition as well as the expected

growth potential of S.I.N.

The acquired goodwill is not deductible for tax purposes.

Measurement period

adjustments recorded in the year ended December 30, 2023 were primarily

a result of finalization of net working

capital adjustments and third party intangible valuations.

The following table summarizes the preliminary identifiable intangible assets

acquired as part of the acquisition of

S.I.N.:

2023

Weighted Average

Useful

Lives (in years)

Customer relationships and lists

$

Trademarks / Tradenames

Product development

Total

$

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The accounting for the acquisition of S.I.N. has not been completed

in several respects, including but not limited to

finalizing valuation assessments of accounts receivable, inventory, accrued liabilities and income and non-income

based taxes.

To assist in the allocation of consideration,

we engaged valuation specialists to determine the fair

value of intangible and tangible assets acquired and liabilities assumed.

We

will finalize the amounts recognized as

the information necessary to complete the analysis is obtained.

We expect to finalize these amounts as soon as

possible but no later than one year from the acquisition date.

The pro forma financial information has not been

presented because the impact of the S.I.N. acquisition during the year ended

December 30, 2023 was immaterial to

our consolidated financial statements.

Acquisition of Biotech Dental

On April 5, 2023, we acquired a

% voting equity interest in Biotech Dental (“Biotech Dental”), which

is a

provider of dental implants, clear aligners, individualized prosthetics,

and innovative digital dental software based

in France.

Biotech Dental has several important solutions for dental practices

and dental labs, including Nemotec, a

comprehensive, integrated suite of planning and diagnostic software

using open architecture that connects disparate

medical devices to create a digital view of the patient, offering greater diagnostic

accuracy and an improved patient

experience.

The integration of Biotech Dental’s software with Henry Schein One’s industry-leading practice

management software solutions will help customers streamline their

clinical as well as administrative workflow for

the ultimate benefit of patients.

The following table aggregates the preliminary estimated fair value, as

of the date of acquisition, of consideration

paid and net assets acquired in the Biotech Dental acquisition, including

measurement period adjustments recorded

through December 30, 2023:

Preliminary

Allocation as

of July 1, 2023

Measurement

Period

Adjustments

Allocation as

of December

30, 2023

Acquisition consideration:

Cash

$

$

-

$

Fair value of contributed equity share in a controlled subsidiary

-

Redeemable noncontrolling interests

-

Total consideration

$

$

-

$

Identifiable assets acquired and liabilities assumed:

Current assets

$

$

-

$

Intangible assets

Other noncurrent assets

Current liabilities

(50)

(9)

(59)

Long-term debt

(90)

(74)

Deferred income taxes

(38)

(7)

(45)

Other noncurrent liabilities

(16)

(7)

(23)

Total identifiable

net assets

Goodwill

(31)

Total net assets acquired

$

$

-

$

Goodwill is a result of expected synergies that are expected to originate from the

acquisition as well as the expected

growth potential of Biotech Dental.

The acquired goodwill is deductible for tax purposes.

Measurement period

adjustments recorded in the year ended December 30, 2023 were primarily

a result of preliminary third party

intangible valuation and various other adjustments.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The following table summarizes the preliminary identifiable intangible assets

acquired as part of the acquisition of

Biotech Dental:

2023

Weighted Average

Useful

Lives (in years)

Customer relationships and lists

$

Trademarks / Tradenames

Product development

Total

$

The accounting for the acquisition of Biotech Dental has

not been completed in several areas, including but not

limited to pending assessments of accounts receivable, inventory, intangible assets, accrued liabilities and income

and non-income based taxes.

To assist in the allocation of consideration, we engaged valuation specialists to

determine the fair value of intangible and tangible assets acquired and liabilities

assumed.

We will finalize the

amounts recognized as the information necessary to complete the

analysis is obtained.

We expect to finalize these

amounts as soon as possible but no later than one year from the acquisition

date.

The pro forma financial

information has not been presented because the impact of the Biotech Dental

acquisition during the year ended

December 30, 2023 was immaterial to our consolidated financial statements.

Other 2023 Acquisitions

During the year ended December 30, 2023, we acquired companies within

the health care distribution and

technology and value-added services segments.

Our acquired ownership interest ranged between

% to

%.

The following table aggregates

the preliminary estimated fair value, as of the date of acquisition, of

consideration

paid and net assets acquired for these acquisitions during the year ended

December 30, 2023:

2023

Acquisition consideration:

Cash

$

Deferred consideration

Estimated fair value of contingent consideration payable

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

(23)

Deferred income taxes

(11)

Long-term debt

(8)

Other noncurrent liabilities

(10)

Total identifiable

net assets

Goodwill

Total net assets acquired

$

Goodwill is a result of the expected synergies and cross-selling opportunities that

these acquisitions are expected to

provide for us, as well as the expected growth potential.

Approximately half of the acquired goodwill is deductible

for tax purposes.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

In connection with an acquisition of a controlling interest of an

affiliate, we recognized a gain of approximately $

million related to the remeasurement to fair value of our previously held

equity investment, using a discounted cash

flow model based on Level 3 inputs, as defined in

Note 10 – Fair Value Measurements

.

The following table summarizes the preliminary identifiable intangible

assets acquired during the year ended

December 30, 2023 and their estimated useful lives as of the date of the acquisition:

2023

Weighted Average

Useful

Lives (in years)

Customer relationships and lists

$

Trademarks / Tradenames

Non-compete agreements

Product development

Patents

Other

Total

$

The pro forma financial information has not been presented because the

impact of the acquisitions during the year

ended December 30, 2023 was immaterial to our consolidated financial

statements.

2022 Acquisitions

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

consolidated financial statements.

Our acquired ownership interests ranged from between

% to

%.

Acquisitions in 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

$

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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

$

-

Trademarks / Tradenames

Non-compete agreements

-

Other

Total

$

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

$

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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

$

-

Trademarks / Tradenames

-

Product development

-

Non-compete agreements

-

Other

Total

$

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

25, 2021, there were no material

adjustments recorded in our financial statements relating to acquisitions

for which provisional amounts were

recorded in prior periods.

At December 25, 2021 we recorded an estimated contingent consideration

receivable of

$

million, which was subsequently increased by an additional $

million during 2022, by crediting income from

operations, based on delays in timing of government approval of a certain

product.

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

and December 25, 2021 we incurred $

million,

$

million and $

million in acquisition costs, which are included in “selling, general

and administrative” within

our consolidated statements of income.

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 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 after-tax gain

of $

million.

We do not expect to receive any additional proceeds from the sale of Hu-Friedy.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 6 – Property and Equipment, Net

Property and equipment, including related estimated useful lives, consisted

of the following as of:

December 30,

December 31,

2023

2022

Land

$

$

Buildings and permanent improvements

Leasehold improvements

Machinery and warehouse equipment

Furniture, fixtures and other

Computer equipment and software

1,170

Less accumulated depreciation and amortization

(672)

(573)

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

-

Leasehold improvements are amortized on a straight-line basis over

the lesser of the useful life of the assets or the

remaining lease term.

Property and equipment related depreciation expense for the years

ended December 30, 2023, December 31, 2022

and December 25, 2021, was $

million, $

million and $

million, respectively.

Please see

Note 7 – Leases

for

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

consolidated balance sheets.

During the year ended December 30, 2023 we recorded a $

million impairment of capitalized costs, within our

healthcare distribution segment.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 7 – 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 30,

December 31,

December 25,

2023

2022

2021

Operating lease cost:

$

$

$

Variable

lease cost

Short-term lease cost

Total operating lease cost

(1)

Finance lease cost

Total lease cost

$

$

$

(1)

Total operating lease cost for the years ended December 30, 2023, December 31, 2022 and December 25, 2021, included costs 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 30, 2023,

December 31, 2022 and December 25, 2021, we recognized an

impairment of operating lease 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 30,

December 31,

2023

2022

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

(9)

(6)

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

6.6

6.7

Finance leases

2.6

3.1

Weighted Average

Discount Rate:

Operating leases

3.6

%

2.8

%

Finance leases

4.0

%

3.3

%

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 30,

December 31,

2023

2022

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 30, 2023

Operating

Finance

Leases

Leases

2024

$

$

2025

2026

2027

2028

Thereafter

-

Total future

lease payments

Less imputed interest

(48)

(1)

Total

$

$

As of December 30, 2023, we have additional operating leases that have

not yet commenced with total lease

payments of $

million for buildings and vehicles.

These operating leases will commence after December 30,

2023, with lease terms of

one year

to

10 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

five months

to

14 years

.

As

of December 30, 2023, current and non-current liabilities associated with

related party operating leases were $

million and $

million, respectively.

At December 30, 2023 related party leases represented

6.3

% and

7.4

% of the

total current and non-current operating lease liabilities, respectively.

As of December 31, 2022, current and non-

current liabilities associated with related party operating leases were

$

million and $

million, respectively.

At

December 31, 2022 related party leases represented

5.0

% and

5.3

% of the total current and non-current operating

lease liabilities, respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 8 – Goodwill and Other Intangibles, Net

Changes in the carrying amounts

of goodwill for the years ended December 30, 2023 and December

31, 2022 were

as follows:

Health Care

Distribution

Technology

and

Value-Added

Services

Total

Balance as of December 25, 2021

$

1,831

$

1,023

$

2,854

Adjustments to goodwill:

Acquisitions

(1)

Impairment

(20)

-

(20)

Foreign currency translation

(22)

(4)

(26)

Balance as of December 31, 2022

1,875

1,018

2,893

Adjustments to goodwill:

Acquisitions

Foreign currency translation

Balance as of December 30, 2023

$

2,737

$

1,138

$

3,875

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

in

Note 15 – Plans of Restructuring and

Integration Costs

.

Other intangible assets consisted of the following:

December 30, 2023

Weighted Average

Accumulated

Remaining Life

Cost

Amortization

Net

(in years)

Customer relationships and lists

$

$

(346)

$

Trademarks / Tradenames

(69)

Product development

(62)

Non-compete agreements

(6)

Other

(18)

Total

$

1,417

$

(501)

$

December 31, 2022

Weighted Average

Accumulated

Remaining Life

Cost

Amortization

Net

(in years)

Customer relationships and lists

$

$

(387)

$

Trademarks / Tradenames

(51)

Product development

(56)

Non-compete agreements

(6)

Other

(10)

Total

$

1,097

$

(510)

$

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

business acquisitions

and are amortized on a straight-line basis over their respective asset life.

Non-compete agreements represent

amounts paid primarily to prior owners of acquired businesses and 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.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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

for the years ended

December 30, 2023, December 31, 2022 and December 25, 2021, was $

million, $

million and $

million.

During the year ended December 30, 2023 we recorded $

million of impairment charges related to businesses in

our health care distribution segment, the components of which were

$

million primarily related to customer lists

and relationships attributable to lower than anticipated operating

margins in certain businesses, and a $

million

charge related to the planned exit of a business.

These impairment charges were calculated as the differences

between the carrying values and the estimated fair values

of the impaired intangible assets, using a discounted

estimate of future cash flows.

Please see

Note 15 – Plans of Restructuring and Integration Costs

for additional

details.

During the year ended December 31, 2022 we recorded $

million of impairment charges related to businesses in

our health care distribution segment, the components of which were

a $

million charge related to the disposal of

an unprofitable business and a $

million charge related to customer lists and relationships attributable to

customer attrition rates being higher than expected in certain other health

care distribution businesses.

These

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

fair values

of

the impaired intangible assets, using a discounted estimate of future

cash flows.

Please see

Note 15 – Plans of

Restructuring and Integration Costs

for additional details.

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

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.

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

and administrative expenses

and in 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 2024 through

2028 is $

million, $

million, $

million, $

million and $

million.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 9 – Investments and Other

Investments and other consisted of the following:

December 30,

December 31,

2023

2022

Investments 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

10.0

% and are due in varying installments through

November 21, 2028

.

Amortization expense, primarily related to capitalized costs for software to

be sold, leased or marketed to external

users, for the years ended December 30, 2023, December 31, 2022 and

December 25, 2021, was $

million, $

million and $

million, respectively, and is included in the selling, general and administrative line within our

consolidated statements of income.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 10 – Fair Value Measurements

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.

Our investments and notes receivable

fair value is based on Level 3 inputs within the fair value hierarchy.

Debt

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

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

based on Level 3 inputs within the fair value hierarchy, and as of December 30, 2023 and December 31, 2022 was

estimated at $

2,351

million and $

1,149

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.

Our derivative

instruments primarily include foreign currency forward agreements, forecasted

inventory purchase commitments,

foreign currency forward contracts, interest rate swaps, and total return

swaps.

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

are based on market rates for comparable

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

The fair value of the interest rate swap, which is classified within Level 2

of the fair value hierarchy, is determined

by comparing our contract rate to a forward market rate as of the

valuation date.

The fair value of total return swaps is determined by valuing the underlying

exchange traded funds of the swap

using market-on-close pricing by industry providers as of the valuation

date that are classified within Level 2 of the

fair value hierarchy.

Redeemable noncontrolling interests

The values for redeemable noncontrolling interests are based on recent

transactions and/or implied multiples of

earnings that are classified within Level 3 of the fair value hierarchy.

See

Note 19 – Redeemable Noncontrolling

Interests

for additional information.

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

Inputs for measuring intangibles are

classified as Level 3 within the fair value hierarchy.

See

Note 1 – Basis of Presentation and Significant Accounting

Policies

and

Note 8 – Goodwill and Other Intangibles, Net

for additional information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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 30, 2023 and December 31,

2022:

December 30, 2023

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

$

-

$

-

$

$

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

$

-

$

-

$

$

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 11 – 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 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, 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 either of the years ended December 30, 2023

or December 31, 2022.

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 for the year ended December

30, 2023 and approximately

% and

%, respectively, of our aggregate purchases for the year ended December

31, 2022.

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 the rights of 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.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 12 – Derivatives and Hedging Activities

We are exposed to market risks and changes in foreign currency exchange rates against the U.S. dollar and each

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

We attempt to minimize these risks using

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

Our 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 are for the sole

purpose of hedging an existing or

anticipated currency exposure.

We do not enter into foreign currency forward 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.

Our derivative instruments primarily include foreign currency forward contracts,

total

return swaps, and interest rate swaps.

During 2019 we entered foreign currency forward contracts that we

designated as net investment hedges to hedge a

portion of our euro-denominated foreign operations.

These net investment hedges offset changes in the U.S. dollar

value of our investments 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 these net

investment hedges, which matured on

November 16, 2023

, was approximately €

million.

On November 3,

2023 we entered into new foreign currency forward contracts to

hedge a portion of our euro-denominated foreign

operations which are designated as net investment hedges.

The aggregate notional value of these net investment

hedges, which matured on

November 16, 2023

, was approximately €

million.

The aggregate notional value of

this net investment hedge, which matures on

November 3, 2028

, is approximately €

million.

During the years

ended December 30, 2023, December 31, 2022, and December 25, 2021,

we recorded an increase/(decrease) of

$

(32)

million, $

million, and $

million, respectively, within other comprehensive income related to these foreign

currency forward contracts.

See

Note 10 – Fair Value Measurements

for additional information.

On

March 20, 2020

, we entered a total return swap to economically hedge our unfunded

non-qualified SERP and

our DCP.

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

At the swap’s inception, the notional

value of the investments in these plans was $

million.

At December 30, 2023, the notional value of the

investments in these plans was $

million.

At December 30, 2023, the financing blended rate for

this swap was

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

5.33

% plus

0.52

%, for a combined rate of

5.85

%.

For

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

and December 25, 2021, we recorded within selling,

general and administrative expenses in our consolidated statement of income,

a gain (loss ) of $

million, ($

)

million, and $

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

See

Note 18 –

Employee Benefit Plans

for additional information.

On July 11, 2023, we entered into interest rate swap agreements to hedge the cash flow of our variable

rate $

million floating debt term loan facility, with

three years

maturity, effectively changing the floating rate portion of

our obligation to a fixed rate.

Under the terms of the interest rate swap agreements, we receive variable

interest

payments based on the one-month Term SOFR rate and pay interest at a fixed rate.

As of December 30, 2023, the

notional value of the interest rate swap agreements was $

million.

For the year ended December 30, 2023, we

recorded, within accumulated other comprehensive loss within our consolidated

balance sheets, a loss of $

million related to the change in the fair value of these interest rate

swap agreements, since we have designated these

swaps agreements as cash flow hedges.

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

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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 consider foreign currency translation to be 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.

The following table summarizes the terms and fair value of our outstanding derivative

financial instruments as of

December 30, 2023 and December 31, 2022:

December 30, 2023

Notional

Amount

Classification

Fair

Value

Maturity Date

Derivatives used in cash flow hedges:

Foreign currency forward contracts

$

Accrued expenses, other

$

(1)

November 21, 2024

Interest rate swaps

Accrued expenses, other

(10)

July 13, 2026

Derivatives used in net investment hedges:

Foreign currency forward contracts

Accrued expenses, other

(6)

November 3, 2028

Undesignated hedging relationships:

Total return

swaps

Prepaid expenses and other

January 3, 2024

Total

$

1,291

$

(13)

December 31, 2022

Notional

Amount

Classification

Fair

Value

Maturity Date

Derivatives used in cash flow hedges:

Foreign currency forward contracts

$

Prepaid expenses and other

$

December 28, 2023

Derivatives used in net investment hedges:

Foreign currency forward contracts

Prepaid expenses and other

November 16, 2023

Undesignated hedging relationships:

Total return

swaps

Accrued expenses, other

(3)

January 4, 2023

Total

$

$

The following table summarizes the effect of cash flow hedges and net investment hedges

on our consolidated

statements of income for the years ended

December 30, 2023, December 31, 2022 and December

25, 2021:

Years

Ended

December 30,

December 31,

December 25,

2023

2022

2021

Derivatives used in cash flow hedges:

Foreign currency forward contracts

$

(1)

$

-

$

Interest rate swaps

(7)

-

-

Derivatives used in net investment hedges:

Foreign currency forward contracts

(10)

Total

$

(18)

$

$

The amount of gains or losses reclassified from accumulated other comprehensive

loss into income were not

material for the years ended December 30, 2023, December 31, 2022,

and December 25, 2021.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 13 – Debt

Bank Credit Lines

Bank credit lines consisted of the following:

December 30,

December 31,

2023

2022

Revolving credit agreement

$

$

-

Other short-term bank credit lines

Total

$

$

Revolving Credit Agreement

On

August 20, 2021

, we entered a $

1.0

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

which was scheduled to mature on

August 20, 2026

.

On

July 11, 2023

, we amended and restated the Revolving

Credit Agreement to, among other things, extend the maturity date

to

July 11, 2028

and update the interest rate

provisions to reflect the current market approach for a multicurrency

facility.

The interest rate on this revolving

credit facility is based on Term Secured Overnight Financing Rate (“Term SOFR”) plus a spread based on our

leverage ratio at the end of each financial reporting quarter.

The Revolving Credit Agreement requires, among

other things, that we maintain certain maximum leverage ratios.

Additionally, the Revolving 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 30, 2023 and December 31, 2022, we had $

million and $

million in borrowings, respectively under this revolving credit facility.

During the year ended

December 30, 2023, the average outstanding balance under the Revolving Credit

Agreement was approximately

$

million.

As of December 30, 2023 and December 31, 2022, there were $

million and $

million of letters of

credit, respectively, provided to third parties under this Revolving Credit Agreement.

Other Short-Term Bank Credit

Lines

As of December 30, 2023 and December 31, 2022, we had various other

short-term bank credit lines available, in

various currencies, with a maximum borrowing capacity of $

million and $

million, respectively.

As of

December 30, 2023 and December 31, 2022, $

million and $

million, respectively, were outstanding.

During

the year ended December 30, 2023, the average outstanding balances under our

various other short-term bank credit

lines was approximately $

million.

At December 30, 2023 and December 31, 2022, borrowings under

other

short-term bank credit lines had weighted average interest rates of

6.02

% and

10.11

%, respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Long-term debt

Long-term debt consisted of the following:

December 30,

December 31,

2023

2022

Private placement facilities

$

1,074

$

U.S. trade accounts receivable securitization

Term loan

-

Various

collateralized and uncollateralized loans payable with interest,

in varying installments through 2030 at interest rates

from

0.00

% to

9.42

% at December 30, 2023 and

from

0.00

% to

3.50

% at December 31, 2022

Finance lease obligations

Total

2,087

1,046

Less current maturities

(150)

(6)

Total long-term debt

$

1,937

$

1,040

As of December 30, 2023,

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:

2024

$

2025

2026

2027

2028

Thereafter

Total

$

2,087

Private Placement Facilities

Our private placement facilities include four insurance companies, have

a total facility amount of $

1.5

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

.

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

to

15 years

(with an average life no longer than

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.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

The components of our private placement facility borrowings, which

have a weighted average interest rate of

3.65

%, as of December 30, 2023 are presented in the following table:

Amount of

Date of

Borrowing

Borrowing

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

May 4, 2023

4.79

May 4, 2028

May 4, 2023

4.84

May 4, 2030

May 4, 2023

4.96

May 4, 2033

May 4, 2023

4.94

May 4, 2033

Less: Deferred debt issuance costs

(1)

Total

$

1,074

U.S. Trade Accounts Receivable Securitization

We have a facility agreement based on our U.S. trade accounts receivable that is structured as an asset-backed

securitization program with pricing committed for up to

three years

.

This facility agreement has a purchase limit of

$

million with

two

banks as agents, and expires on

December 15, 2025

.

As of December 30, 2023 and December 31, 2022, the borrowings outstanding

under this securitization facility

were $

million and $

million, respectively.

At December 30, 2023, the interest rate on borrowings under

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

5.67

% plus

0.75

%, for a combined rate of

6.42

%.

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

%.

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

to

basis points depending upon program utilization.

On December 20, 2023 and February 23, 2024, we amended this facility

to temporarily adjust certain covenant

levels.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Term Loan

On July 11, 2023, we entered into a

three-year

$

million term loan credit agreement (the “Term Credit

Agreement”).

The interest rate on this term loan is based on the Term SOFR plus a spread based on our leverage

ratio at the end of each financial reporting quarter.

This term loan matures on July 11, 2026.

We are required to make quarterly payments of $

million from September 2023 through June 2024 and quarterly

payments of $

million from September 2024 through June 2026, with the remaining balance

due in July 2026.

As

of December 30, 2023, the borrowings outstanding under this term

loan were $

million.

At December 30, 2023,

the interest on this Term Credit Agreement was

5.36

% plus

1.35

% for a combined rate of

6.71

%.

However, we

have a hedge in place (see

Note 12 – Derivatives and Hedging Activities

for additional information) that ultimately

creates an effective fixed rate of

5.79

%.

The Term Credit Agreement requires, among other things, that we

maintain certain maximum leverage ratios.

Additionally, the Term

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.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 14 – Income Taxes

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

Years

ended

December 30,

December 31,

December 25,

2023

2022

2021

Domestic

$

$

$

Foreign

Total

$

$

$

The provisions for income taxes were as follows:

Years

ended

December 30,

December 31,

December 25,

2023

2022

2021

Current income tax expense:

U.S. Federal

$

$

$

State and local

Foreign

Total current

Deferred income tax expense (benefit):

U.S. Federal

(48)

(12)

State and local

(3)

(13)

(3)

Foreign

(26)

(12)

Total deferred

(20)

(73)

(11)

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 30,

December 31,

2023

2022

Deferred income tax asset:

Net operating losses

$

$

Other carryforwards

Inventory, premium

coupon redemptions and accounts receivable

valuation allowances

Operating lease liability

Other asset

Total deferred income

tax asset

Valuation

allowance for deferred tax assets

(1)

(36)

(36)

Net deferred income tax asset

Deferred income tax liability

Intangibles amortization

(219)

(112)

Operating lease right-of-use asset

(65)

(61)

Property and equipment

(10)

(7)

Total deferred tax

liability

(294)

(180)

Net deferred income tax asset (liability)

$

(16)

$

(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.

We

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 30, 2023, 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 2024 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 30,

December 31,

December 25,

2023

2022

2021

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

(8)

(4)

(4)

Valuation

allowance

(3)

(2)

(6)

Unrecognized tax benefits and audit settlements

Interest expense related to loans

(13)

(12)

(11)

Tax on global

intangible low-taxed income ("GILTI")

Other

(6)

(4)

Total income

tax provision

$

$

$

For the year ended December 30, 2023 our effective tax rate was

22.1

%, compared to

23.5

% for the prior year

period.

In 2023, 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 2022, 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 2021, our

effective tax rate was

23.8

%, 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.

On December 22, 2017, the U.S. government passed the Tax Cuts and Jobs 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 2023 and 2022, respectively, and $

million and $

million

were included in “other liabilities” for 2023 and 2022, 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.

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

technical and administrative

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

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

Effective January 1, 2024, the minimum

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

Future tax reform resulting

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

which may adversely impact our

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

As we operate in jurisdictions which have

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

the impact for 2024 and

beyond.

ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in accordance with other

provisions contained within its guidance.

This topic prescribes a recognition threshold and a measurement

attribute

for the financial statement recognition and measurement of tax positions taken or

expected to be taken in a tax

return.

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

more likely than not to be sustained upon

examination by the taxing authorities.

The amount recognized is measured as the largest amount of benefit that has

a greater than 50% likelihood of being realized upon ultimate audit settlement.

In the normal course of business,

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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 30, 2023 and December 31, 2022, was $

million and $

million, respectively,

of which $

million and $

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

It 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 2019.

The tax years subject to examination by the

IRS include years 2020 and forward.

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

to IRS

examination.

The amount of tax interest expense included as a component of the provision

for taxes was $

million, $

million

and $

million in 2023, 2022 and 2021, respectively.

The total amount of accrued interest is included in “other

liabilities,” and was $

million as of December 30, 2023 and $

million as of December 31, 2022.

The amount

of penalties accrued for during the periods presented were not material to

our consolidated financial statements.

The following table provides a reconciliation of unrecognized tax benefits:

December 30,

December 31,

December 25,

2023

2022

2021

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

(2)

-

(1)

Reductions resulting from settlements with taxing authorities

(3)

(1)

(9)

Reductions resulting from lapse in statutes of limitations

(14)

(10)

(3)

Balance, end of period

$

$

$

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 15 – Plans of Restructuring

and Integration Costs

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

funding the priorities of the BOLD+1 strategic

plan, streamlining operations and other initiatives to increase efficiency.

We revised our previous expectations of

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

We are currently unable in good faith to

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

expected to be incurred in connection with

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

therewith and to the total cost, or an

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

cash expenditures.

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

25, 2021, we recorded

restructuring costs of $

million, $

million, and $

million, respectively.

The restructuring costs for these

periods primarily related to severance and employee-related costs,

impairment of intangible assets, accelerated

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

costs, and certain business exit costs

discussed below.

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

plan, we recorded an impairment of

an intangible asset of $

million related to a planned disposal of a non-U.S. business.

The disposal is expected to

be completed in 2024.

This impairment is included in the $

million of restructuring charges discussed above.

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

restructuring plan, we vacated

one

of the

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

right-of-use lease asset of $

million.

We also initiated the disposal of a non-profitable U.S. 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 was completed during the first quarter of 2023.

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

In connection with this acquisition, during the year

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

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 2023, 2022 and

2021 fiscal years consisted of the

following:

Year

Ended December 30, 2023

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

-

-

-

Total restructuring and integration costs

$

$

-

$

$

-

$

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

$

$

-

$

$

-

$

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 30, 2023.

The remaining accrued balance of restructuring

costs as of December 30, 2023, which primarily relates to severance and

employee-related costs, is included in

accrued expenses: other within our consolidated balance sheets.

Liabilities related to exited leased facilities are

recorded within our current and non-current operating lease liabilities within

our condensed consolidated balance

sheets.

Technology

and

Health Care

Value-Added

Distribution

Services

Total

Balance, December 25, 2021

$

$

$

Restructuring and integration costs

Non-cash asset impairment and accelerated depreciation and

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

(47)

-

(47)

Non-cash impairment on disposal of a business

(46)

-

(46)

Cash payments and other adjustments

(13)

(2)

(15)

Balance, December 31, 2022

Restructuring and integration costs

Non-cash asset impairment and accelerated depreciation and

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

(13)

(2)

(15)

Non-cash impairment on disposal of a business

(12)

-

(12)

Cash payments and other adjustments

(46)

(8)

(54)

Balance, December 30, 2023

$

$

$

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 16 – 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

as

of December 30, 2023 were:

2024

$

2025

2026

2027

2028

-

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 2024 through 2028 and thereafter of approximately $

million, $

million, $

million, $

million, $

million, and $

million, respectively.

We also have lifetime consulting agreements that provide for current

compensation of four-hundred thousand dollars per year, with small scheduled increases every fifth year with the

next increase in 2027.

In addition, some agreements have provisions for additional

incentives and compensation.

Legal Proceedings

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

lawsuits (currently less than one-

hundred and seventy-five (

); one or more of Henry Schein, Inc.’s subsidiaries is also named as a defendant in a

number of those cases).

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 subsidiaries) 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 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

is currently set for a jury trial on July 8, 2024; the action filed by Mobile

County Board of Health, et al. in Alabama

state court, which has been set for a jury trial on August 12, 2024;

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 September 2025.

Of Henry Schein’s 2023 net sales of approximately $

12.3

billion,

sales of opioids represented less than four-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.

In

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 2022 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

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

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

We are cooperating with the

investigation.

On January 18, 2024, a putative class action was filed against the Company

in the U.S. District Court for the

Eastern District of New York (“EDNY”), Case No. 24-cv-387 (the “Cruz-Bermudez Action”), based on the

October 2023 cybersecurity incident described above.

On January 26, 2024, a second putative class action was

filed against the Company based on the cybersecurity incident, also in

the EDNY,

Case No. 24-cv-550 (the

“Depperschmidt Action”).

On February 12, 2024, the Depperschmidt Action was voluntarily dismissed

without

prejudice.

On February 16, 2024, an amended complaint was filed in

the Cruz-Bermudez Action with additional

plaintiffs’ counsel from the Depperschmidt Action and an additional new plaintiff.

Plaintiffs in the Cruz-Bermudez Action seek to represent a class of all individuals

whose personally identifying

information and personal health information was compromised by

the incident.

Plaintiffs generally claim to have

been harmed by alleged actions and/or omissions by the Company

in connection with the incident and that the

Company made deceptive public statements regarding privacy and data protection.

Plaintiffs assert a variety of

common law and statutory claims seeking monetary damages, injunctive

relief, costs and attorneys’ fees, and other

related relief.

The case remains pending.

We intend to defend ourselves vigorously against this action.

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 30, 2023, 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 17 – Stock-Based Compensation

Stock-based awards are provided to certain employees under our 2020 Stock Incentive

Plan and to non-employee

directors under our 2023 Non-Employee Director Stock Incentive Plan

(formerly known as the 2015 Non-

Employee Director Stock Incentive Plan) (together, the “Plans”).

The Plans are administered by the Compensation

Committee of the Board (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”) with the

exception of our 2021 plan year in which non-qualified stock options were

issued in place of performance-based

RSUs and in 2022, when we granted time-based and performance-based

RSUs, as well as non-qualified stock

options.

For our 2023 plan year, we returned to granting our employees equity-based awards solely

in the form of

time-based and performance-based RSUs.

Our non-employee directors receive equity-based awards solely

in the

form of time-based RSUs.

As of December 30, 2023, there were

70,942,657

shares authorized and

6,773,234

shares available to be granted

under the 2020 Stock Incentive Plan and

2,075,000

shares authorized and

393,309

shares available to be granted

under the 2023 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 to our non-employee directors primarily include

-month cliff vesting.

For these RSUs, we recognize the cost as compensation expense on a straight-line

basis.

For all RSUs, we estimate the fair value based on our closing stock

price on the grant date.

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 either positive or negative, of the difference in projected earnings

generated by COVID-19 test kits

(solely with respect to performance-based RSUs granted in the 2022 and

2023 plan years) and impairment charges

(solely with respect to performance-based RSUs granted in the 2023 plan

year), and unforeseen events or

circumstances affecting us.

Over the performance period, the number of RSUs 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 is based on our actual performance metrics as defined under

the 2020 Stock Incentive Plan.

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 after vesting at a fixed

price set at the time of grant.

Stock options were granted at an exercise price equal to our

closing stock price on the

date of grant.

Stock options issued in 2021 and 2022 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 term and

term acceleration upon certain events.

Compensation expense for stock options is recognized using

a graded

vesting method.

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

During the year ended December 30, 2023, we did

no

t grant any stock options.

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 vested

% 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 were 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 generated a

cumulative payout of

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

in 2018 if the recipient satisfied the

two

-year vesting schedule commencing on the grant date.

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

expense of $

million, $

million and $

million for the years ended December 30, 2023, December 31, 2022

and December 25, 2021.

Total unrecognized compensation cost related to unvested awards as of December 30, 2023 was $

million, which

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

2.6

years.

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

was $

76.43

, $

85.51

and $

62.72

per share

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

25, 2021.

Certain stock-based compensation is required to be settled in cash.

During the year ended December 30, 2023, we

recorded a liability of $

0.1

million for stock-based compensation to be settled in cash.

We

record deferred income tax assets for awards that will result in

future income tax deductions based on the

amount of compensation cost recognized and our statutory tax rate in the

jurisdiction in which we will receive a

deduction.

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

expense as a reconciling

adjustment between net income and net cash provided by operating

activities for all periods presented.

There were

no cash benefits associated with tax deductions in excess of recognized

compensation for the years ended

December 30, 2023, December 31, 2022 and December 25, 2021.

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

2021

Expected dividend yield

-

%

-

%

Expected stock price volatility

27.80

%

27.10

%

Risk-free interest rate

3.62

%

1.33

%

Expected life of options (in years)

6.00

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 that most closely aligns to 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 Staff Accounting Bulletin Topic 14.

The following table summarizes the stock option activity for the year

ended December 30, 2023:

Stock Options

Weighted Average

Aggregate

Weighted Average

Remaining Contractual

Intrinsic

Shares

Exercise Price

Life (in years)

Value

Outstanding at beginning of year

1,117,574

$

71.38

Granted

-

-

Exercised

(23,498)

62.74

Forfeited

(15,617)

79.04

Outstanding at end of year

1,078,459

$

71.46

7.6

$

Options exercisable at end of year

573,459

$

68.43

Weighted Average

Aggregate

Number of

Weighted Average

Remaining Contractual

Intrinsic

Options

Exercise Price

Life (in years)

Value

Vested

or expected to vest

503,497

$

74.95

7.7

$

The following tables summarize the activity of our unvested RSUs for

the year ended December 30, 2023:

Time-Based Restricted Stock Units

Performance-Based Restricted Stock Units

Weighted Average

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

1,756,044

$

66.59

520,916

$

60.23

Granted

426,021

77.50

381,571

81.00

Vested

(433,973)

61.96

(631,458)

60.65

Forfeited

(92,699)

72.37

(62,287)

77.45

Outstanding at end of period

1,655,393

$

70.34

$

75.71

208,742

$

78.02

$

75.71

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

76.85

, $

78.74

and $

73.99

during the years ended

December 30, 2023, December 31, 2022 and December 25, 2021, respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 18 – 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 30,

December 31,

2023

2022

Obligation and funded status:

Change in benefit obligation

Projected benefit obligation, beginning of period

$

$

Service costs

Interest cost

Past service cost

-

Actuarial gain (loss)

(19)

Benefits paid

(1)

-

(1)

Participant contributions

Settlements

(3)

(1)

Effect of foreign currency translation

(4)

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

(2)

(1)

Effect of foreign currency translation

(2)

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 30, 2023 and December 31, 2022, 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 30,

December 31,

2023

2022

Non-current assets

$

$

Current liabilities

(1)

(1)

Non-current liabilities

(65)

(59)

Accumulated other comprehensive loss, pre-tax

The following table provides the components of net periodic pension cost

for our defined benefit plans:

Years

Ended

December 30,

December 31,

December 25,

2023

2022

2021

Service cost

$

$

$

Interest cost

-

Expected return on plan assets

(3)

(1)

(1)

Employee contributions

(1)

-

-

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 30,

December 31,

Pension Benefit Obligation

2023

2022

Weighted average

discount rate

2.71

%

1.67

%

Years

Ended

December 30,

December 31,

December 25,

Net Periodic Pension Cost

2023

2022

2021

Discount rate-pension benefit

1.50

%

1.25

%

0.56

%

Expected return on plan assets

0.51

%

0.81

%

0.71

%

Rate of compensation increase

1.64

%

1.68

%

1.95

%

Pension increase rate

0.80

%

0.61

%

0.72

%

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 30, 2023:

Year

2024

$

2025

2026

2027

2028

2029 to 2033

Total

$

401(k) Plans

We offer

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

As determined by our Board,

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 are made in cash and are

allocated consistent with the participants’ investment elections on file, subject

to a

% allocation limit to the

Henry Schein Stock Fund.

Forfeitures attributable to participants whose employment terminates

prior to becoming

fully vested are reallocated as part of our ongoing matching contributions

and to 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 30, 2023, December 31, 2022 and December

25, 2021 amounted to $

million,

$

million and $

million, respectively.

Within our consolidated statements of income, $

million, $

million,

and $

million, is included in selling, general and administrative; and $

million, $

million, and $

million is

included in cost of goods sold for the years ended December 30, 2023, December

31, 2022, and December 25,

2021, respectively.

Supplemental Executive Retirement Plan

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.

The amounts charged to operations during the years ended December 30, 2023,

December 31, 2022 and December 25, 2021 amounted to $

million, $

(1)

million and $

million, respectively.

The

charges are included in selling, general and administrative within our consolidated

statements of income.

Please

see

Note 12 – Derivatives and Hedging Activities

for additional information.

Deferred Compensation Plan

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 (credited)/charged to operations during the years

ended December 30, 2023, December 31, 2022 and December 25, 2021

were approximately $

million, $

(11)

million and $

million, respectively.

The charges are included in selling, general and administrative within our

consolidated statements of income.

Please see

Note 12 – Derivatives and Hedging Activities

for additional

information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 19 – 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 Topic 480-10 is applicable for noncontrolling interests

where we are or may be required to purchase all or a portion of the

outstanding interest in a consolidated subsidiary

from the noncontrolling interest holder under the terms of a put option contained

in contractual agreements.

The

components of the change in the redeemable noncontrolling interests for the

years ended December 30, 2023,

December 31, 2022 and December 25, 2021, are presented in the following table:

December 30,

December 31,

December 25,

2023

2022

2021

Balance, beginning of period

$

$

$

Decrease in redeemable noncontrolling interests due to acquisitions of

noncontrolling interests in subsidiaries

(19)

(31)

(60)

Increase in redeemable noncontrolling interests due to business

acquisitions

Net income attributable to redeemable noncontrolling interests

Distributions declared, net of capital contributions

(19)

(21)

(21)

Effect of foreign currency translation gain (loss)

attributable to

redeemable noncontrolling interests

(6)

(6)

Change in fair value of redeemable securities

(11)

(4)

Balance, end of period

$

$

$

Note 20 – Comprehensive Income

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

GAAP,

are excluded from net income and

are recorded directly to stockholders’ equity.

The following table summarizes our Accumulated other comprehensive loss, net

of applicable taxes as of:

December 30,

December 31,

December 25,

2023

2022

2021

Attributable to redeemable noncontrolling interests:

Foreign currency translation adjustment

$

(32)

$

(37)

$

(31)

Attributable to noncontrolling interests:

Foreign currency translation adjustment

$

(1)

$

(1)

$

-

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

$

(188)

$

(236)

$

(155)

Unrealized gain (loss) from hedging activities

(13)

(2)

Pension adjustment loss

(5)

(2)

(14)

Accumulated other comprehensive loss

$

(206)

$

(233)

$

(171)

Total Accumulated

other comprehensive loss

$

(239)

$

(271)

$

(202)

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 30,

December 31,

December 25,

2023

2022

2021

Net income

$

$

$

Foreign currency translation gain (loss)

(88)

(84)

Tax effect

-

-

-

Foreign currency translation gain (loss)

(88)

(84)

Unrealized gain (loss) from hedging activities

(25)

Tax effect

(3)

(3)

Unrealized gain (loss) from hedging activities

(18)

Pension adjustment gain (loss)

(3)

Tax effect

-

(4)

(2)

Pension adjustment gain (loss)

(3)

Comprehensive income

$

$

$

Our financial statements are denominated in U.S. Dollars.

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 30, 2023, December 31,

2022 and December 25, 2021 was

primarily due to changes in foreign currency exchange rates of the Euro,

Brazilian Real, British Pound, Swiss

Franc, and Canadian Dollar.

The hedging gain (loss) during the years ended December 30, 2023 , December

31, 2022, and December 25, 2021

was attributable to a net investment hedge.

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 30,

December 31,

December 25,

2023

2022

2021

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 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 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 30,

December 31,

December 25,

2023

2022

2021

Basic

130,618,990

136,064,221

140,090,889

Effect of dilutive securities:

Stock options and restricted stock units

1,129,181

1,691,449

1,681,892

Diluted

131,748,171

137,755,670

141,772,781

The number of antidilutive securities that were excluded from the calculation

of diluted weighted average common

shares outstanding are as follows:

Years

Ended

December 30,

December 31,

December 25,

2023

2022

2021

Stock options

424,695

342,716

611,869

Restricted stock units

15,040

19,466

1,048

Total anti-dilutive

securities excluded from earnings per share

computation

439,735

362,182

612,917

Note 22 – Supplemental Cash Flow Information

Cash paid for interest and income taxes was:

Years

ended

December 30,

December 31,

December 25,

2023

2022

2021

Interest

$

$

$

Income taxes

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

25, 2021, we had $

(25)

million, $

million and $

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

activities, respectively.

See

Note 12 – Derivatives and Hedging Activities

for additional information related to our total return swap and

our

interest rate swap agreements.

There was approximately $

million of debt assumed as part of the acquisitions for the year ended

December 30,

Debt assumed during the year ended December 30, 2023 primarily

relates to the acquisitions of Biotech

Dental and S.I.N.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

Note 23 – Related Party Transactions

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 30, 2023, December 31, 2022 and December 25, 2021, we recorded

$

million, $

million and

$

million, respectively, in connection with costs related to this royalty agreement.

As of December 30, 2023 and

December 31, 2022, Henry Schein One, LLC had a net payable balance

to Internet Brands of $

million and $

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

The

components of this payable are recorded within accrued expenses: other, respectively, within our consolidated

balance sheets.

We

have interests in entities that we account for under the equity accounting

method.

In our normal course of

business, during the years ended December 30, 2023, December 31, 2022

and December 25, 2021, we recorded net

sales of $

million, $

million, and $

million respectively, to such entities.

During the years ended December

30, 2023, December 31, 2022 and December 25, 2021, we purchased

$

million, $

million and $

million

respectively, from such entities.

At December 30, 2023 and December 31, 2022, we had an aggregate

$

million

and $

million, respectively, due from our equity affiliates, and $

million and $

million, respectively, due to our

equity affiliates.

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

and minority shareholders.

Please see

Note 7 – Leases

for further information.