Henry Schein 10-Q 2023-09-30

HSIC · CIK 1000228 · Form 10-Q · Period ended September 30, 2023 · Filed November 28, 2023

8 sections, 156K characters. Original on sec.gov · Markdown · JSON

Risk Factors Business

Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒

QUARTERLY

REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the

quarterly

period ended

September 30, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT

OF 1934

For the transition period from ____________ to ____________

Commission File Number:

0-27078

HENRY SCHEIN, INC.

(Exact name of registrant as specified in its charter)

Delaware

11-3136595

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

135 Duryea Road

Melville

New York

(Address of principal executive offices)

11747

(Zip Code)

(

)

843-5500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

HSIC

The

Nasdaq

Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required

to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such

shorter period that the registrant was required to file such

reports), and (2) has been subject to such filing requirements for the

past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every

Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during

the preceding 12 months (or for such shorter period

that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller

reporting company, or an emerging growth company.

See the definitions of “large accelerated filer,”

“accelerated filer,”

“smaller reporting company,”

and “emerging growth company”

in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period

for

complying with any new or revised financial accounting standards provided

pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined

in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

As of November 13, 2023,

there were

129,938,341

shares of the registrant’s common stock outstanding.

hsic-20230930p2i0

HENRY SCHEIN, INC.

INDEX

PART I. FINANCIAL INFORMATION

Page

ITEM 1.

Condensed Consolidated Financial Statements:

Condensed Consolidated Balance Sheets

as of September 30, 2023 and December 31, 2022

Condensed Consolidated Statements of Income

for the three and nine months ended

September 30, 2023 and September 24, 2022

Condensed Consolidated Statements of Comprehensive Income

for the

three and nine months ended September 30, 2023 and September 24, 2022

Condensed Consolidated Statement of Changes in Stockholders' Equity

for the three months ended

September 30, 2023 and September 24, 2022

Condensed Consolidated Statement of Changes in Stockholders' Equity

for the nine months ended

September 30, 2023 and September 24, 2022

Condensed Consolidated Statements of Cash Flows

for the nine months ended

September 30, 2023 and September 24, 2022

Notes to Condensed Consolidated Financial Statements

Note 1 – Basis of Presentation

Note 2 – Critical Accounting Policies, Accounting Standard Adopted, and Recently

Issued Accounting Standards

Note 3 – Net Sales from Contracts with Customers

Note 4 – Segment Data

Note 5 – Business Acquisitions

Note 6 – Fair Value Measurements

Note 7 – Derivatives and Hedging Activities

Note 8 – Debt

Note 9 – Income Taxes

Note 10 – Plan of Restructuring

and Integration Costs

Note 11 – Legal Proceedings

Note 12 – Stock-Based Compensation

Note 13 – Redeemable Noncontrolling Interests

Note 14 – Comprehensive Income

Note 15 – Earnings Per Share

Note 16 – Supplemental Cash Flow Information

Note 17 – Related Party Transactions

Note 18 –

Subsequent Event

ITEM 2.

Management's Discussion and Analysis of

Financial Condition and Results of Operations

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

ITEM 4.

Controls and Procedures

PART II. OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

See accompanying notes.

PART

I. FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions,

except share data)

September 30,

December 31,

2023

2022

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance for credit losses of $

and $

1,573

1,442

Inventories, net

1,833

1,963

Prepaid expenses and other

Total current assets

4,113

3,988

Property and equipment, net

Operating lease right-of-use assets

Goodwill

3,595

2,893

Other intangibles, net

Investments and other

Total assets

9,810

8,607

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND

STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

1,004

Bank credit lines

Current maturities of long-term debt

Operating lease liabilities

Accrued expenses:

Payroll and related

Taxes

Other

Total current liabilities

2,093

2,224

Long-term debt

1,815

1,040

Deferred income taxes

Operating lease liabilities

Other liabilities

Total liabilities

4,709

3,936

Redeemable noncontrolling interests

Commitments and contingencies

(nil)

Stockholders' equity:

Preferred stock, $

0.01

par value,

1,000,000

shares authorized,

none

outstanding

Common stock, $

0.01

par value,

480,000,000

shares authorized,

129,935,883

outstanding on September 30, 2023 and

131,792,817

outstanding on December 31, 2022

Additional paid-in capital

Retained earnings

3,897

3,678

Accumulated other comprehensive loss

(247)

(233)

Total Henry Schein, Inc. stockholders' equity

3,651

3,446

Noncontrolling interests

Total stockholders' equity

4,280

4,095

Total liabilities, redeemable noncontrolling

interests and stockholders' equity

9,810

8,607

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS

OF INCOME

(in millions,

except share and per share data)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2023

2022

2023

2022

Net sales

3,162

3,067

9,322

9,276

Cost of sales

2,167

2,153

6,386

6,444

Gross profit

2,936

2,832

Operating expenses:

Selling, general and administrative

2,149

2,010

Depreciation and amortization

Restructuring and integration costs

Operating income

Other income (expense):

Interest income

Interest expense

(25)

(8)

(58)

(23)

Other, net

(2)

Income before taxes, equity in earnings of affiliates and

noncontrolling interests

Income taxes

(39)

(46)

(119)

(155)

Equity in earnings of affiliates

Net income

Less: Net income attributable to noncontrolling interests

(6)

(12)

(21)

(24)

Net income attributable to Henry Schein, Inc.

Earnings per share attributable to Henry Schein, Inc.:

Basic

1.06

1.10

3.04

3.59

Diluted

1.05

1.09

3.02

3.55

Weighted-average common

shares outstanding:

Basic

130,388,353

135,608,678

130,888,717

136,731,413

Diluted

131,442,135

137,084,049

132,149,172

138,488,254

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(in millions)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2023

2022

2023

2022

Net income

Other comprehensive income (loss), net of tax:

Foreign currency translation loss

(45)

(89)

(17)

(176)

Unrealized gain from foreign currency hedging

activities

Pension adjustment gain

Other comprehensive loss, net of tax

(39)

(77)

(15)

(155)

Comprehensive income

Less: Comprehensive income attributable to noncontrolling

interests:

Net income

(6)

(12)

(21)

(24)

Foreign currency translation loss

Comprehensive income attributable to noncontrolling

interests

(4)

(6)

(20)

(10)

Comprehensive income attributable to Henry Schein, Inc.

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENT

OF CHANGES IN

STOCKHOLDERS’ EQUITY

(in millions, except share data)

(unaudited)

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, July 1, 2023

130,576,806

3,769

(210)

4,186

Net income (excluding $

attributable to redeemable

noncontrolling interests)

Foreign currency translation loss (excluding loss of $

attributable to redeemable noncontrolling interests)

(43)

Unrealized gain from foreign currency hedging activities,

net of tax of $

Dividends declared

(1)

Change in fair value of redeemable noncontrolling interests

Initial noncontrolling interests and adjustments related to

business acquisitions

(1)

Repurchases and retirement of common stock

(659,681)

(6)

(44)

(50)

Stock-based compensation expense

23,985

Stock issued upon exercise of stock options

3,884

Shares withheld for payroll taxes

(9,183)

Settlement of stock-based compensation awards

Transfer of charges in excess of

capital

(35)

Balance, September 30, 2023

129,935,883

3,897

(247)

4,280

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, June 25, 2022

136,439,560

3,834

(241)

4,227

Net income (excluding $

attributable to redeemable

noncontrolling interests)

Foreign currency translation loss (excluding loss of $

attributable to redeemable noncontrolling interests)

(83)

Unrealized gain from foreign currency hedging activities,

net of tax of $

Pension adjustment gain, net of tax of $

Dividends declared

(1)

Change in fair value of redeemable securities

Repurchases and retirement of common stock

(1,183,729)

(12)

(78)

(90)

Stock-based compensation expense

3,640

Stock issued upon exercise of stock options

Shares withheld for payroll taxes

(1,194)

(1)

Settlement of stock-based compensation awards

Transfer of charges in excess of

capital

(16)

Balance, September 24, 2022

135,258,887

3,922

(312)

4,245

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENT

OF CHANGES IN

STOCKHOLDERS' EQUITY

(in millions, except share data)

(unaudited)

Accumulated

Common Stock

Additional

Other

Total

$.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, December 31, 2022

131,792,817

3,678

(233)

4,095

Net income (excluding $

attributable to redeemable

noncontrolling interests)

Foreign currency translation loss (excluding loss of $

attributable to redeemable noncontrolling interests)

(16)

Unrealized gain from foreign currency hedging activities,

net of tax of $

Dividends declared

(28)

Change in fair value of redeemable noncontrolling interests

Initial noncontrolling interests and adjustments related to

business acquisitions

(2)

Repurchases and retirement of common stock

(2,521,695)

(26)

(175)

(201)

Stock-based compensation expense

1,060,883

Stock issued upon exercise of stock options

19,744

Shares withheld for payro

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

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

Litigation Reform Act of 1995, we

provide the following cautionary remarks regarding important factors

that, among others, could cause future results

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

expressed or implied

herein.

All forward-looking statements made by us are subject to

risks and uncertainties and are not guarantees of

future performance.

These forward-looking statements involve known and unknown

risks, uncertainties and other

factors that may cause our actual results, performance and achievements

or industry results to be materially

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

forward-looking

statements.

These statements are generally identified by the use of such

terms as “may,” “could,” “expect,”

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

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

terms.

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

to, those discussed in

the documents we file with the Securities and Exchange Commission

(SEC), including our Annual Report on Form

10-K.

Forward looking statements include the overall impact of the Coronavirus

Disease 2019 (COVID-19) on us,

our results of operations, liquidity and financial condition (including

any estimates of the impact on these items),

the rate and consistency with which dental and other practices resume or

maintain normal operations in the United

States and internationally, expectations regarding PPE products and COVID-19 related product sales and inventory

levels, whether additional resurgences or variants of the virus will adversely impact the

resumption of normal

operations, whether supply chain disruptions will adversely impact our

business, the impact of the cybersecurity

incident disclosed in the Company’s Current Report on Form 8-K filed on October 15, 2023 on our business and

results of operations, including the accuracy of our estimates of the

impact, the timing and extent of any recovery

on insurance claims, the impact of integration and restructuring programs

as well as of any future acquisitions,

general economic conditions including exchange rates, inflation and

recession, and more generally current

expectations regarding performance in current and future periods.

Forward looking statements also include (i) our

ability to have continued access to a variety of COVID-19 test types,

and COVID-19 vaccines and ancillary

supplies, and (ii) expectations regarding COVID-19 test sales, demand and

inventory levels.

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

current and historical results

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

and any variants thereof, as well as other disease

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

and other natural disasters; our

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

our ability to develop or acquire and

maintain and protect new products (particularly technology products) and

technologies that achieve market

acceptance with acceptable margins; transitional challenges associated with acquisitions,

dispositions and joint

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

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

in our governing documents that may discourage third-party acquisitions

of us; adverse changes in supplier rebates

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

products; effects of a highly competitive

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

sites) and consolidating market; the

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

care industry;

risks from expansion of customer purchasing power and multi-tiered

costing structures; increases in shipping costs

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

global and domestic macro-economic

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

in energy pricing and the value of the

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

indicators, international trade

agreements, potential trade barriers and terrorism; geopolitical wars;

failure to comply with existing and future

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

failure to comply with laws and

regulations relating to health care fraud or other laws and regulations; failure

to comply with laws and regulations

relating to the collection, storage and processing of sensitive personal

information or standards in electronic health

records or transmissions; changes in tax legislation; risks related to

product liability, intellectual property and other

claims; litigation risks;

new or unanticipated litigation developments and the status

of litigation matters; risks

associated with customs policies or legislative import restrictions; cyberattacks

or other privacy or data security

breaches (including the recent October 2023 incident); risks associated with

our global operations; our dependence

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

with customers, suppliers and

manufacturers; and disruptions in financial markets.

The order in which these factors appear should not be

construed to indicate their relative importance or priority.

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

or predict.

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

of actual results.

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

required by law.

Where You

Can Find Important Information

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

conference calls and webcasts, press releases, the investor relations

page of our website (www.henryschein.com)

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

Recent Developments

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

in the sales of PPE and COVID-19 test kits

as compared to the comparable prior-year period.

During the three and nine months ended September 30, 2023, we

continued to experience a decrease in the sales of PPE and COVID-19

test kits, primarily due to ongoing decreases

in market prices for PPE (principally gloves) and lower market demand

for COVID-19 test kits compared with the

same periods in the prior year, and we expect further decreases in sales in 2023 compared to the prior

year.

While the U.S. economy has recently experienced inflationary

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

impacts have not been material to our results of operations.

The impact from inflation, including manufacturer

price increases excluding PPE products, was slightly more pronounced

in Europe.

Though inflation impacts both

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

often allows us to offer lower-cost national

brand solutions or corporate brand alternatives to our more price-sensitive

customers who are unable to absorb

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

Our condensed consolidated financial statements reflect estimates and

assumptions made by us that affect, among

other things, our goodwill, long-lived asset and definite-lived intangible

asset valuation; inventory valuation; equity

investment valuation; assessment of the annual effective tax rate; valuation of

deferred income taxes and income

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

supplier rebates; measurement of

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

plans; and pension plan

assumptions.

Cybersecurity Incident

On October 14, 2023, we became aware of 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 and our equipment sales and

service operations were mostly unaffected.

Once we became aware of the issue, we took steps to assess, contain and

remediate this incident.

Our distribution

operations resumed and we reactivated our ecommerce platform.

We also notified law enforcement and our

customers and suppliers informing them of both the incident and

management’s efforts to mitigate its impact on our

daily operations.

As previously disclosed, while our forensic investigation is still

ongoing, we have determined that

a data breach occurred.

We are notifying potentially affected parties as appropriate.

On November 22, 2023, we experienced a disruption to our ecommerce

platform and related applications. The

Company has restored its ecommerce platform and certain other

applications in the United States, Canada and

certain European countries.

Our ecommerce platform in the remaining European countries and other applications

are expected to follow shortly.

We continue to review the impact of the incident on our business.

As previously disclosed, we believe the incident

will adversely impact our financial results for the fourth quarter and

full year 2023.

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

There can be no assurance that

the insurance coverage we maintain is sufficient to cover costs and expenses related

to this cybersecurity incident.

Executive-Level Overview

Henry Schein, Inc. is a solutions company for health care professionals powered

by a network of people and

technology.

believe we are the world’s largest provider of health care products and services primarily to office-

based dental and medical practitioners, as well as alternate sites of care.

serve more than one million customers

worldwide including dental practitioners, laboratories, physician practices, and

ambulatory surgery centers, as well

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

believe that we have a strong

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

care products.

We are headquartered in Melville, New York,

employ approximately 24,000 people (of which approximately

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

Our

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

through contribution from

strategic acquisitions.

have established strategically located distribution centers around

the world to enable us to better serve our

customers and increase our operating efficiency.

This infrastructure, together with broad product and service

offerings at competitive prices, and a strong commitment to customer service, enables

us to be a single source of

supply for our customers’ needs.

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

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

manufacture certain

dental specialty products in the areas of implants, orthodontics and endodontics,

and repackage/relabel prescription

drugs and/or devices.

have achieved scale in these global businesses primarily

through acquisitions, as

manufacturers of these products typically do not utilize a distribution channel

to serve customers.

conduct our business through two reportable segments: (i) health

care distribution and (ii) technology and

value-added services.

These segments offer different products and services to the same customer base.

Our global

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

and other

institutions.

Our medical businesses serve physician offices, urgent care centers, ambulatory care sites,

emergency

medical technicians, dialysis centers, home health, federal and state governments

and large enterprises, such as

group practices and integrated delivery networks, among other providers

across a wide range of specialties.

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

medical operating segments,

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

repair services,

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

products (including implant,

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

PPE products and vitamins.

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

and other value-added

services to health care practitioners.

Our technology business offerings include practice management software

systems for dental and medical practitioners.

Our value-added practice solutions include practice consultancy,

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

basis, e-services, practice

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

practitioners.

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

is a unified go-to-market

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

equipment sales and service and

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

combined value that we offer through a single

program.

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

national brand products, our corporate brand products and proprietary specialty

products and solutions (including

implant, orthodontic and endodontic products).

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

including software and other value-added services.

Industry Overview

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

This trend has benefited

distributors capable of providing a broad array of products and services at low

prices.

It also has accelerated the

growth of HMOs, group practices, other managed care accounts and collective buying

groups, which, in addition to

their emphasis on obtaining products at competitive prices, tend to favor distributors

capable of providing

specialized management information support.

believe that the trend towards cost containment has the potential

to favorably affect demand for technology solutions, including software, which can

enhance the efficiency and

facilitation of practice management.

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

and transactions that we

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

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

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

Industry Consolidation

The health care products distribution industry, as it relates to office-based health care practitioners, is fragmented

and diverse.

The industry ranges from sole practitioners working out of

relatively small offices to group practices

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

combined or otherwise associated their practices.

Due in part to the inability of office-based health care practitioners to store and manage

large quantities of supplies

in their offices, the distribution of health care supplies and small equipment to office-based health

care practitioners

has been characterized by frequent, small quantity orders, and a need for rapid,

reliable and substantially complete

order fulfillment.

The purchasing decisions within an office-based health care practice are typically

made by the

practitioner or an administrative assistant.

Supplies and small equipment are generally purchased from more

than

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

The trend of consolidation extends to our customer base.

Health care practitioners are increasingly seeking to

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

hospital organizations.

In many cases, purchasing decisions for consolidated groups

are made at a centralized or

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

believe that consolidation within the industry will continue to

result in a number of distributors, particularly

those with limited financial, operating and marketing resources, seeking to

combine with larger companies that can

provide growth opportunities.

This consolidation also may continue to result in distributors seeking

to acquire

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

opportunities to serve a broader

customer base.

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

a provider of products and services

to the health care industry.

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

our existing

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

businesses.

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

capitalize on this trend, as we believe we

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

there can be no assurances

that we will be able to successfully accomplish this.

also have invested in expanding our sales/marketing

infrastructure to include a focus on building relationships with decision

makers who do not reside in the office-

based practitioner setting.

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

candidates for joint venture or

acquisition and intend to continue to seek opportunities to expand our

role as a provider of products and services to

the health care industry.

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

any such

opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or

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

can be no assurance that the

integration efforts associated with any such transaction would be successful.

Aging Population and Other Market Influences

The health care products distribution industry continues to experience growth

due to the aging population,

increased health care awareness, the proliferation of medical technology

and testing, new pharmacological

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

insurance coverage.

In addition, the physician market continues to benefit from the

shift of procedures and

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

physicians’ offices.

According to the U.S. Census Bureau’s International Database, between 2023 and 2033, the 45 and older

population is expected to grow by approximately 11%.

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

by approximately 21%.

This compares with expected total U.S. population growth

rates of approximately 6%

between 2023 and 2033 and approximately 11% between 2023 and 2043.

According to the U.S. Census Bureau’s International Database, in 2023 there are approximately seven million

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

and elder-care

services.

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

19 million.

The population

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

the same period.

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

care services continue to increase in the

United States.

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

current and future operating, economic, and industry conditions.

The Centers for Medicare and Medicaid Services,

or CMS, published “National Health Expenditure Data” indicating

that total national health care spending reached

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

measure for

annual production of goods and services in the United States.

Health care spending is projected to reach

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

Government

Certain of our businesses involve the distribution, manufacturing, importation,

exportation, marketing and sale of,

and/or third party payment for, pharmaceuticals and/or medical devices, and in this regard, we are subject

extensive local, state, federal and foreign governmental laws and regulations,

including as applicable to our

wholesale distribution of pharmaceuticals and medical devices, manufacturing

activities, and as part of our

specialty home medical supply business that distributes and sells medical equipment

and supplies directly to

patients.

Federal, state and certain foreign governments have also increased enforcement

activity in the health care

sector, particularly in areas of fraud and abuse, anti-bribery and corruption, controlled substances handling,

medical

device regulations and data privacy and security standards.

Certain of our businesses are subject to various additional federal, state,

local and foreign laws and regulations,

including with respect to the sale, transportation, importation, storage, handling

and disposal of hazardous or

potentially hazardous substances; “forever chemicals” such as per-and

polyfluoroalkyl substances (PFAS); and safe

working conditions.

In addition, certain of our businesses must operate in compliance with a

variety of burdensome

and complex coding, billing and record-keeping requirements in order to substantiate

claims for payment under

federal, state and commercial healthcare reimbursement programs.

One of these businesses was suspended in

October 2021 by CMS from receiving payments from Medicare, although

it was permitted to continue to perform

and bill for Medicare services.

Such suspension was terminated on September 30, 2022.

Government and private insurance programs fund a large portion of the total cost of medical care,

and there have

been efforts to limit such private and government insurance programs, including efforts, thus far

unsuccessful, to

seek repeal of the entire United States Patient Protection and Affordable Care Act,

as amended by the Health Care

and Education Reconciliation Act, each enacted in March 2010.

In addition, activities to control medical costs,

including laws and regulations lowering reimbursement rates for pharmaceuticals,

medical devices, medical

supplies, and/or medical treatments or services, are ongoing.

Many of these laws and regulations are subject to

change and their evolving implementation may impact our operations and our

financial performance.

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

impact our financial performance,

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

effect on our business.

A more detailed discussion of governmental laws and regulations

is included in Management’s Discussion &

Analysis of Financial Condition and Results of Operations, contained

in our Annual Report on Form 10-K for the

fiscal year ended December 31, 2022, filed with the SEC on February 21, 2023.

Results of Operations

The following tables summarize the significant components of our operating

results for the three and nine months

ended September 30, 2023 and September 24, 2022 and cash flows for

the nine months ended September 30, 2023

and September 24, 2022:

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2023

2022

2023

2022

Operating results:

Net sales

3,162

3,067

9,322

9,276

Cost of sales

2,167

2,153

6,386

6,444

Gross profit

2,936

2,832

Operating expenses:

Selling, general and administrative

2,149

2,010

Depreciation and amortization

Restructuring and integration costs

Operating income

Other expense, net

(21)

(6)

(48)

(17)

Net income

Net income attributable to Henry Schein, Inc.

Nine Months Ended

September 30,

September 24,

2023

2022

Cash flows:

Net cash provided by operating activities

Net cash used in investing activities

(808)

(211)

Net cash provided by (used in) financing activities

(121)

Plan of Restructuring and Integration Costs

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

funding the priorities of the strategic plan and

streamlining operations and other initiatives to increase efficiency.

We revised our previous expectations of

completion and now expect this initiative to extend through 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 with respect to the total cost, or an

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

cash expenditures.

During the three months ended September 30, 2023 and September 24, 2022,

we recorded restructuring costs of

$11 million and $9 million, respectively.

During the nine months ended September 30, 2023 and September

24,

2022, we recorded restructuring costs of $59 million and $9 million, respectively.

The restructuring costs for these

periods primarily related to severance and employee-related costs,

accelerated amortization of right-of-use lease

assets and fixed assets, and other lease exit costs.

Included in restructuring costs for the nine months ended

September 30, 2023 were immaterial amounts related to the disposal

of an unprofitable U.S. business initiated

during 2022 and completed during the first quarter of 2023.

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

In connection with this acquisition, during the three

months ended September 24, 2022, we recorded integration costs

of $1 million related to one-time employee and

other costs, as well as restructuring charges of $2 million, which are included

in the $9 million of restructuring

charges discussed above.

Three Months Ended September 30, 2023 Compared to Three Months Ended September 24, 2022

Net Sales

Net sales were as follows:

September 30,

% of

September 24,

% of

Increase / (Decrease)

2023

Total

2022

Total

Health care distribution

(1)

Dental

1,882

59.5

1,785

58.2

5.4

Medical

1,070

33.9

1,106

36.0

(36)

(3.1)

Total health care distribution

2,952

93.4

2,891

94.2

2.1

Technology and value-added services

(2)

6.6

5.8

18.8

Total

3,162

100.0

3,067

100.0

3.1

The components of our sales growth were as follows:

Total Local

Currency

Growth

Foreign

Exchange

Impact

Total Sales

Growth

Local Currency Growth

Local Internal

Growth

Acquisition

Growth

Health care distribution

(1)

Dental Merchandise

0.3

4.8

5.1

1.8

6.9

Dental Equipment

(2.0)

0.9

(1.1)

1.7

0.6

Total Dental

(0.2)

3.8

3.6

1.8

5.4

Medical

(4.6)

1.4

(3.2)

0.1

(3.1)

Total Health Care Distribution

(1.9)

2.9

1.0

1.1

2.1

Technology and value-added services

(2)

9.6

8.6

18.2

0.6

18.8

Total

(1.2)

3.2

2.0

1.1

3.1

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

actual values and may not recalculate due to rounding.

(1)

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

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

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

(2)

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

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

education services for practitioners, consulting and other services.

Global Sales

Global net sales for the three months ended September 30, 2023 increased 3.1%

and was primarily attributable to

acquisitions.

The components of our sales growth are presented in the table

above.

The estimated increase in internally generated local currency sales, excluding

PPE products and COVID-19 test

kits, was 1.1%.

We estimate that sales of PPE products and COVID-19 test kits were approximately $175 million

and $244 million for the three months ended September 30, 2023 and

September 24, 2022, respectively,

representing an estimated decrease of $69 million or 28.2%

versus the prior year, with the $69 million net decrease

year-over-year representing 2.2% of global net sales for the three

months ended September 30, 2023.

Dental

Dental net sales for the three months ended September 30, 2023 increased 5.4%.

The components of our sales

growth are presented in the table above.

Our sales growth in local currency for dental merchandise was 5.1%

and

was primarily attributable to acquisitions.

Our decrease in sales in local currency for dental equipment was

primarily attributable to a slowdown in digital equipment sales, partially

offset by growth in North America for

traditional dental equipment.

The estimated increase in internally generated local currency sales, excluding

PPE products, was 0.3%.

estimate that sales of PPE products were approximately $83 million and

$94 million for the three months ended

September 30, 2023 and September 24, 2022,

respectively, representing an estimated decrease of $10 million or

11.0%

versus the prior year, with the $10 million net decrease year-over-year representing 0.5% of dental net sales

for the three months ended September 30, 2023.

Medical

Medical net sales for the three months ended September 30, 2023 decreased

3.1%.

The components of this

decrease are presented in the table above.

The local currency decrease in medical sales is primarily attributable

lower sales of PPE products and COVID-19 test kits.

The estimated increase in internally generated local currency sales, excluding

PPE products and COVID-19 test

kits, was 0.8%

and was adversely impacted by a replacement of branded pharmaceutical

sales with lower priced

generic products and an increase in lower priced corporate brand sales.

We estimate that sales of PPE products and

COVID-19 test kits were approximately $92 million and $150 million

for the three months ended September 30,

2023 and September 24, 2022,

respectively, representing an estimated decrease of $59 million or 39.0% versus the

prior year, with the $59 million net decrease year-over-year representing 5.4%

of medical net sales for the three

months ended September 30, 2023.

Technology and value-added services

Technology and value-added services net sales for the three months ended September 30, 2023 increased 18.8%

driven by acquisitions and revenue of practice management solutions.

The components of our sales growth are

presented in the table above.

During the three months ended September 30, 2023, the trend for sales

of practice

management software growth remains strong as we continued to increase

the number of cloud-based users.

Gross Profit

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

September 30,

Gross

September 24,

Gross

Increase

2023

Margin %

2022

Margin %

Health care distribution

28.8

27.7

6.5

Technology and value-added services

68.7

65.0

25.5

Total

31.5

29.8

8.8

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

throughout our

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

Additionally, we

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

segment than in

our health care distribution segment.

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

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

The software industry typically realizes higher

gross margins to recover investments in research and development.

Within our health care distribution segment, gross profit margins may vary from one period to the next.

Changes in

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

been the most significant drivers affecting

our gross profit margin.

For example, sales of our corporate brand products achieve

gross profit margins that are

higher than average total gross profit margins of all products.

With respect to customer mix, sales to our large-

group customers are typically completed at lower gross margins due to the higher

volumes sold as opposed to the

gross margin on sales to office-based practitioners, who normally purchase lower volumes.

Health care distribution gross profit increased primarily due to the increase

in net sales discussed above, including

$35 million of gross profit from acquisitions and gross margin expansion,

mainly as a result of a favorable impact

of sales mix of higher-margin products.

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

generated sales and gross profit of $13 million from acquisitions, as well as

an increase in gross margin rates,

primarily due to product mix.

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization; and

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

% of

September 30,

Respective

September 24,

Respective

Increase

2023

Net Sales

2022

Net Sales

Health care distribution

23.4

21.5

11.3

Technology and value-added services

49.7

47.2

25.1

Total

25.1

22.9

12.9

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

Restructuring and

Integration Costs

Operating Costs

Acquisitions

Total

Health care distribution

Technology and value-added services

(8)

Total

The restructuring and integration costs are primarily related to severance

and employee-related costs, and other

lease exit costs.

The increase in operating costs includes increases in payroll and

payroll related costs,

facility

related costs and consulting expenses in both of our reportable segments,

and increased acquisition expenses in our

healthcare distribution segment.

Other Expense, Net

Other expense, net was as follows:

September 30,

September 24,

Variance

2023

2022

Interest income

300.2

Interest expense

(25)

(8)

(17)

(202.6)

Other, net

(2)

(3)

(292.4)

Other expense, net

(21)

(6)

(15)

(252.2)

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings and increased interest rates.

Income Taxes

For the three months ended September 30, 2023 our effective tax rate was 21.9% compared

to 22.7% for the prior

year period.

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

relates to state

and foreign income taxes and interest expense.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September

24, 2022

Net Sales

Net sales were as follows:

September 30,

% of

September 24,

% of

Increase / (Decrease)

2023

Total

2022

Total

Health care distribution

(1)

Dental

5,737

61.5

5,466

58.9

5.0

Medical

2,991

32.1

3,274

35.3

(283)

(8.6)

Total health care distribution

8,728

93.6

8,740

94.2

(12)

(0.1)

Technology and value-added services

(2)

6.4

5.8

10.7

Total

9,322

100.0

9,276

100.0

0.5

The components of our sales growth were as follows:

Total Local

Currency

Growth

Foreign

Exchange

Impact

Total Sales

Growth

Local Currency Growth

Local Internal

Growth

Acquisition

Growth

Health care distribution

(1)

Dental Merchandise

1.7

4.0

5.7

(0.4)

5.3

Dental Equipment

2.7

1.5

4.2

(0.4)

3.8

Total Dental

1.9

3.5

5.4

(0.4)

5.0

Medical

(9.3)

0.7

(8.6)

Total Health Care Distribution

(2.3)

2.4

0.1

(0.2)

(0.1)

Technology and value-added services

(2)

7.2

3.8

11.0

(0.3)

10.7

Total

(1.7)

2.5

0.8

(0.3)

0.5

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

actual values and may not recalculate due to rounding.

(1)

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

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

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

(2)

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

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

education services for practitioners, consulting and other services.

Global Sales

Global net sales for the nine months ended September 30, 2023 increased 0.5%.

The components of our sales

growth are presented in the table above.

The estimated increase in internally generated local currency sales, excluding

PPE products and COVID-19 test

kits, was 3.5%.

We estimate that sales of PPE products and COVID-19 test kits were approximately $540 million

and $990 million for the nine months ended September 30, 2023 and

September 24, 2022, respectively,

representing an estimated decrease of $450 million or 45.5% versus the prior year, with the $450 million net

decrease year-over-year representing 4.8% of global net sales for the nine months ended September 30,

Dental

Dental net sales for the nine months ended September 30, 2023 increased

5.0%.

The components of our sales

growth are presented in the table above.

Our sales growth in local currency for dental merchandise was primarily

attributable to acquisitions.

Our sales growth in local currency for dental equipment was primarily

attributable to

growth in traditional equipment sales in North America.

The estimated increase in internally generated local currency sales, excluding

PPE products and COVID-19 test

kits, was 3.8%.

We estimate that sales of PPE products were approximately $264 million and $351 million for the

nine months ended September 30, 2023 and September 24, 2022, respectively, representing an estimated decrease

of $87 million or 25.0%

versus the prior year, with the $87 million net decrease year-over-year representing 1.5%

of dental net sales for the nine months ended September 30, 2023.

Medical

Medical net sales for the nine months ended September 30, 2023 decreased

8.6%.

The components of this decrease

are presented in the table above.

The local currency decrease in medical sales is primarily attributable

to lower

sales of PPE products and COVID-19 test kits and other point-of-care

diagnostic products.

The estimated increase in internally generated local currency sales, excluding

PPE products and COVID-19 test

kits, was 2.3%.

We estimate that sales of PPE products and COVID-19 test kits were approximately $276 million

and $639 million for the nine months ended September 30, 2023 and

September 24, 2022, respectively,

representing an estimated decrease of $363 million or 56.8% versus

the prior year, with the $363 million net

decrease year-over-year representing 12.1% of medical net sales for the nine months ended September 30, 2023.

Technology and value-added services

Technology and value-added services net sales for the nine months ended September 30, 2023 increased 10.7%.

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

During the nine months ended September 30,

2023, the trend for sales of practice management software growth remains

strong as we continued to increase the

number of cloud-based users.

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

The increase in sales during the quarter ended September 30, 2023 was

partially offset by the expiration, during the

third quarter of 2022, of a modestly profitable government contract in

one of our value-added services businesses.

Gross Profit

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

September 30,

Gross

September 24,

Gross

Increase

2023

Margin %

2022

Margin %

Health care distribution

2,534

29.0

2,482

28.4

2.1

Technology and value-added services

67.6

65.3

14.8

Total

2,936

31.5

2,832

30.5

3.7

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

throughout our

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

Additionally, we

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

segment than in

our health care distribution segment.

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

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

The software industry typically realizes higher

gross margins to recover investments in research and development.

Within our health care distribution segment, gross profit margins may vary from one period to the next.

Changes in

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

been the most significant drivers affecting

our gross profit margin.

For example, sales of our corporate brand products achieve

gross profit margins that are

higher than average total gross profit margins of all products.

With respect to customer mix, sales to our large-

group customers are typically completed at lower gross margins due to the higher

volumes sold as opposed to the

gross margin on sales to office-based practitioners, who normally purchase lower volumes.

Health care distribution gross profit for the nine months ended September 30, 2023

increased compared to the

prior-year period due to the increase in sales, mainly due to a reduction in sales of

PPE products and COVID-19

test kits offset by $74 million of gross profit from acquisitions and gross margin expansion

as a result of a favorable

impact of sales mix of higher-margin products.

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

generated sales and gross profit of $18 million from acquisitions, as well

as an increase in gross margin rates

primarily due to product mix and increases in productivity.

Operating Expenses

Operating expenses (consisting of selling, general and administrative expenses;

depreciation and amortization; and

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

% of

September 30,

Respective

September 24,

Respective

Increase

2023

Net Sales

2022

Net Sales

Health care distribution

2,063

23.6

1,903

21.8

8.4

Technology and value-added services

50.1

47.4

17.0

Total

2,360

25.3

2,157

23.3

9.4

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

Restructuring and

Integration Costs

Operating Costs

Acquisitions

Total

Health care distribution

Technology and value-added services

Total

The restructuring and integration costs are primarily related to severance

and employee-related costs, accelerated

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

costs.

During the nine months ended

September 30, 2023, our operating expenses were favorably impacted

by the recognition of a remeasurement gain

of $18 million following an acquisition of a controlling interest of

a previously held equity investment.

The

increase in operating costs includes increases in payroll and payroll related costs,

travel, convention, consulting,

and occupancy expenses in both of our reportable segments and increased

acquisition expenses in our healthcare

distribution segment.

Other Expense, Net

Other expense, net was as follows:

September 30,

September 24,

Variance

2023

2022

Interest income

132.2

Interest expense

(58)

(23)

(35)

(153.4)

Other, net

(2)

(3)

(331.4)

Other expense, net

(48)

(17)

(31)

(184.5)

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings and increased interest rates.

Income Taxes

For the nine months ended September 30, 2023 our effective tax rate was 22.5% compared

to 23.5% for the prior

year period.

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

relates to state

and foreign income taxes and interest expense.

Liquidity and Capital Resources

Our principal capital requirements have included funding of acquisitions, purchases

of additional noncontrolling

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

purchases of fixed assets and

repurchases of common stock.

Working capital requirements generally result from increased sales, special

inventory forward buy-in opportunities and payment terms for receivables

and payables.

Historically, sales have

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

forward buy-in opportunities have

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

to be higher

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

the following year.

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

placements.

Please see

Note 8 – Debt

for further information.

Our ability to generate sufficient cash flows from

operations is dependent on the continued demand of our customers

for our products and services, and access to

products and services from our suppliers.

Our business requires a substantial investment in working capital, which

is susceptible to fluctuations during the

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

Inventory purchase activity is a function of

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

We anticipate

future increases in our working capital requirements.

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

Funding requirements are based on

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

change.

Consequently, we may change

our funding structure to reflect any new requirements.

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

and our available funds under existing credit facilities provide us with

sufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

Our acquisition strategy is focused on investments in companies that

add new customers and sales teams, increase

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

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

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

subsequent to September

30, 2023 we have announced acquisitions of companies specializing

in clear aligners,

homecare medical products

delivered directly to patients, and dental practice transition services.

Net cash provided by operating activities was $532 million for the

nine months ended September 30, 2023,

compared to net cash provided by operating activities of $348 million for

the prior year.

The net change of $184

million was primarily due to a favorable change in working capital (primarily

inventories), net of acquisitions,

partially offset by a decrease in operating income.

Net cash used in investing activities was $808 million for the nine months

ended September 30, 2023, compared to

net cash used in investing activities of $211 million for the prior year.

The net change of $597 million was

primarily attributable to increased business combinations and investment activity.

Net cash provided by financing activities was $307 million for the nine

months ended September 30, 2023,

compared to net cash used in financing activities of $121 million for the prior

year.

The net change of $428 million

was primarily due to increased net borrowings from debt.

The following table summarizes selected measures of liquidity and capital

resources:

September 30,

December 31,

2023

2022

Cash and cash equivalents

Working

capital

(1)

2,020

1,764

Debt:

Bank credit lines

Current maturities of long-term debt

Long-term debt

1,815

1,040

Total debt

1,899

1,149

Leases:

Current operating lease liabilities

Non-current operating lease liabilities

(1)

Includes $0 million and $327 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

securitization at September 30, 2023 and December 31, 2022, respectively.

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations

increased to 43.7 days as of September 30, 2023

from 42.9 days as of September 24, 2022.

During the nine months ended September 30, 2023, we wrote

off

approximately $13 million of fully reserved accounts receivable against

our trade receivable reserve.

Our inventory

turns from operations decreased to 4.5 as of September 30, 2023 from 4.7

as of September 24, 2022.

Our working

capital accounts may be impacted by current and future economic conditions.

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 one year to approximately

18 years, some of which

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

As of September 30, 2023, our right-of-use assets

related to operating leases were $323 million and our current and non-current

operating lease liabilities were $74

million and $314 million, respectively.

Stock Repurchases

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

of up to an additional $400 million in shares

of our common stock.

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

billion, or 89,702,364 shares, under our

common stock repurchase programs, with $315 million available

as of September 30, 2023 for future common

stock share repurchases.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and

estimates from those disclosed in Item

7 of our Annual Report on Form 10-K for the year ended December 31, 2022,

except accounting policies adopted

as of January 1, 2023, which are discussed in

Note 2 - Critical Accounting Policies and Recently Issued Accounting

Standards

of the Notes to the Condensed Consolidated Financial Statements included

under Item 1.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted, see

Note 2 - Critical

Accounting Policies and Recently Issued Accounting Standards

of the Notes to the Condensed Consolidated

Financial Statements included under Item 1.

Item 3. QUANTITATIVE

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk

from that disclosed in Item 7A of our Annual

Report on Form 10-K for the year ended December 31, 2022.

Item 4. CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including

our principal executive officer and

principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and

procedures as of the end of the period covered by this quarterly report

as such term is defined in Rules 13a-15(e)

and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as

amended (the “Exchange Act”).

Based

on this evaluation, our management, including our principal executive

officer and principal financial officer,

concluded that our disclosure controls and procedures were effective as of September 30,

2023, to ensure that all

material information required to be disclosed by us in reports that we file

or submit under the Exchange Act is

accumulated and communicated to them as appropriate to allow timely

decisions regarding required disclosure and

that all such information is recorded, processed, summarized and reported

within the time periods specified in the

SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2023, we acquired a 100% voting equity

interest in S.I.N Implant System,

an implant manufacturer headquartered in Brazil.

The full integration of this acquisition, as well as our previously

reported acquisition of Biotech Dental, will extend beyond year-end and, therefore, we anticipate

excluding Biotech

Dental, and S.I.N. from our annual assessment of internal control over

financial reporting as of December 30, 2023,

as permitted by SEC staff interpretive guidance for newly acquired businesses.

Post-acquisition integration related activities for other dental and

medical businesses acquired during prior quarters

across the U.S., Europe, Australia, China, and Brazil will continue, and

will be included in our annual assessment

of internal control over financial reporting as of December 30, 2023.

These acquisitions, the majority of which

utilize separate information and financial accounting systems, have been

included in our condensed consolidated

financial statements since their respective dates of acquisition.

Finally, we continued systems implementation activities in the U.S. for two of our dental businesses.

The combination of acquisitions (including S.I.N., and Biotech Dental),

continued acquisition integrations and

systems implementation activities undertaken during the quarter and

carried over from prior quarters when

considered in the aggregate, represents a material change in our

internal control over financial reporting.

During the quarter, all acquisitions, continued acquisition integrations and systems implementation activities

involve necessary and appropriate change-management controls

that are considered in our quarterly assessment of

changes in our internal control over financial reporting.

Subsequent to the September 30, 2023 quarter end, on October 14, 2023, we

experienced a cybersecurity incident

that primarily affected the operations of our North American and European

dental and medical distribution

businesses.

As part of the Company’s incident response plan, precautionary actions were

taken to

contain the

incident including shutting down connectivity to networks and key business,

operating and financial accounting

systems globally.

In addition to notifying customers and all relevant law enforcement

authorities, we engaged

external cyber-security experts to support our assessment of the cyber-incident’s impact as well as sanitize, rebuild

and restore our information systems.

On November 22, 2023, we experienced a disruption to our ecommerce

platform and related applications. The

Company has restored its ecommerce platform and certain other

applications in the United States, Canada and

certain European countries.

Our ecommerce platform in the remaining European countries and other applications

are expected to follow shortly.

In order to mitigate the impact of this disruption on our systems and on our

ability to service customers, alternative

procedures and controls were temporarily implemented.

An investigation is ongoing to assess the impact on our

businesses and internal controls over financial reporting.

Limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can provide

only reasonable, not absolute, assurance

that the objectives of the internal control system are met.

Because of the inherent limitations of any internal control

system, no evaluation of controls can provide absolute assurance that

all control issues, if any, within a company

have been detected.

PART

II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

For a discussion of Legal Proceedings, see

Note 11–Legal Proceedings

of the Notes to the Condensed Consolidated

Financial Statements included under Item 1.

Item 1A. RISK FACTORS

Referring to risk factors disclosed in Part 1, Item 1A, of our Annual Report

on Form 10-K for the year ended

December 31, 2022, and in particular the first risk factor under General Risks

addressing security risks associated

with our information systems, the third paragraph is amended and restated

as follows:

While we have implemented measures to protect our IS systems, such

measures may not prevent these events.

Any

such security incidents could disrupt our operations, harm our reputation, or

otherwise have a material adverse

effect on our business.

In addition to immaterial prior incidents, 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 and our

equipment sales and service operations were mostly unaffected.

Once we became aware of the issue, we

took steps

to assess, contain and remediate this incident.

restored affected systems and applications, our distribution

operations resumed and we reactivated our ecommerce platform.

also notified law enforcement and our

customers and suppliers, informing them of both the incident and management’s efforts to mitigate its impact on

our daily operations. As previously disclosed, while our forensic investigation

is still ongoing, we have determined

that a data breach occurred.

We are notifying potentially affected parties as appropriate.

On November 22, 2023,

we experienced a disruption to our ecommerce platform and related

applications. The Company has restored its

ecommerce platform and certain other applications in the United States, Canada

and certain European

countries.

Our ecommerce platform in the remaining European countries

and other applications are expected to

follow shortly.

continue to review the impact of the incident on the Company’s business.

As previously

disclosed, we believe the incident will adversely impact our financial results

for the fourth quarter and full year

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

There can be no assurance

that the insurance coverage we maintain is sufficient or will be available in adequate

amounts or at a reasonable

cost to cover costs and expenses related to security incidents.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS

Purchases of equity securities by the issuer

Our share repurchase program, announced on March 3, 2003, originally

allowed us to repurchase up to two million

shares pre-stock splits (eight million shares post-stock splits) of our common

stock, which represented

approximately 2.3% of the shares outstanding at the commencement

of the program.

Subsequent additional

increases totaling $4.9

billion, authorized by our Board of Directors, to the repurchase program

provide for a total

of $5.0 billion (including $400 million authorized on February 8, 2023) of shares

of our common stock to be

repurchased under this program.

As of September 30, 2023, we had repurchased approximately $4.7 billion

of common stock (89,702,364 shares)

under these initiatives, with $315 million available for future common

stock share repurchases.

The following table summarizes repurchases of our common stock

under our stock repurchase program during the

fiscal quarter ended September 30, 2023:

Total Number

Maximum Number

Total

of Shares

Number

Average

Purchased as Part

that May Yet

of Shares

Price Paid

of Our Publicly

Be Purchased Under

Fiscal Month

Purchased (1)

Per Share

Announced Program

Our Program (2)

7/2/2023 through 8/5/2023

4,674,091

8/6/2023 through 9/2/2023

330,000

76.86

330,000

4,448,396

9/3/2023 through 9/30/2023

329,681

74.72

329,681

4,242,422

659,681

(1)

All repurchases were executed in the open market under our existing publicly announced authorized program.

(2)

The maximum number of shares that may yet be purchased under this program is determined at the end of each month based on the

closing price of our common stock at that time.

This table excludes shares withheld from employees to satisfy minimum tax withholding

requirements for equity-based transactions.

Item 5. OTHER INFORMATION

OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

During the three months ended September 30, 2023, (i)

Stanley M. Bergman

, the Company’s

Chairman of the

Board and Chief Executive Officer

, on behalf of himself and a family trust for which his wife serves

as co-trustee,

and (ii)

James P. Breslawski

, the Company’s

Vice Chairman and President

, each

adopted

a Rule

10b5-1

trading

arrangement which is a trading plan for the future sale of securities that

is intended to satisfy the affirmative

defense of Exchange Act

Rule

10b5-1

(c), as well as the requirements of the Company’s insider trading policy. Each

plan is subject to an initial “cooling off” period during which there may be no transactions

between the adoption

date and a date that is the later of 90 days or two business days following

the Company’s filing of its next quarterly

report on Form 10-Q or Annual Report on form 10-K.

September 8, 2023

, Mr. Bergman and the Bergman

Family 2010 Trust #2 adopted the trading plan to sell a total of

56,886

shares (

40,152

shares to be sold by Mr.

Bergman and

16,734

shares to be sold by the Bergman Family 2010 Trust #2) based on limit orders at specified

prices, with a term of eight months (

i.e.,

through May 7, 2024).

September 19, 2023

, Mr. Breslawski adopted

the trading plan to sell

9,085

shares based on limit orders at specified prices, with a term through

December 31,

Item 6. EXHIBITS

EXHIBITS

10.1

Henry Schein, Inc. Deferred Compensation Plan, as amended and restated

effective as of November 14, 2023. (Incorporated by reference to Exhibit 10.1

to our Current Report on Form 8-K filed on November 16, 2023)**

31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+

31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+

32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+

101.INS

Inline XBRL Instance Document - the instance document does not appear

in the

Interactive Data File because its XBRL tags are embedded within the

Inline

XBRL document+

101.SCH

Inline XBRL Taxonomy Extension Schema Document+

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document+

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document+

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document+

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document+

The cover page of Henry Schein, Inc.’s Quarterly Report on Form 10-Q for the

quarter ended September 30, 2023, formatted in Inline XBRL (included

within

Exhibit 101 attachments).+

** Indicates management contract or compensatory plan or agreement.

+ Filed or furnished herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the

Registrant has duly caused this Report to

be signed on its behalf by the undersigned thereunto duly authorized.

Henry Schein, Inc.

(Registrant)

By: /s/ Ronald N. South

Ronald N. South

Senior Vice President and

Chief Financial Officer

(Authorized Signatory and Principal Financial

and Accounting Officer)

Dated: November 28, 2023