Henry Schein 10-Q 2024-09-28

Filed 2024-11-05. 7 sections, 162K characters. Original on sec.gov · Markdown · JSON

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 28, 2024

☐

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 October 28, 2024,

there were

124,681,294

shares of the registrant’s common stock outstanding.

hsic-20240928p2i0

HENRY SCHEIN, INC.

INDEX

PART I. FINANCIAL INFORMATION

Page

ITEM 1.

Condensed Consolidated Financial Statements:

Condensed Consolidated Balance Sheets

as of September 28, 2024 and December 30, 2023

Condensed Consolidated Statements of Income

for the three and nine months ended

September 28, 2024 and September 30, 2023

Condensed Consolidated Statements of Comprehensive Income

for the

three and nine months ended September 28, 2024 and September 30, 2023

Condensed Consolidated Statement of Changes in Stockholders' Equity

for the three months ended

September 28, 2024 and September 30, 2023

Condensed Consolidated Statement of Changes in Stockholders' Equity

for the nine months ended

September 28, 2024 and September 30, 2023

Condensed Consolidated Statements of Cash Flows

for the nine months ended

September 28, 2024 and September 30, 2023

Notes to Condensed Consolidated Financial Statements

Note 1 – Basis of Presentation

Note 2 – Significant Accounting Policies and Recently

Issued Accounting Standards

Note 3 – Cyber Incident

Note 4 – Net Sales from Contracts with Customers

Note 5 – Segment Data

Note 6 – Business Acquisitions

Note 7 – Fair Value Measurements

Note 8 – Debt

Note 9 – Income Taxes

Note 10 – Plans of Restructuring

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

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

ITEM 6.

Exhibits

Signature

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 28,

December 30,

2024

2023

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

Accounts receivable, net of allowance for credit losses of $

and $

(1)

1,660

1,863

Inventories, net

1,754

1,815

Prepaid expenses and other

Total current assets

4,147

4,488

Property and equipment, net

Operating lease right-of-use assets

Goodwill

3,986

3,875

Other intangibles, net

1,100

Investments and other

Total assets

10,605

10,573

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND

STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

1,026

1,020

Bank credit lines

Current maturities of long-term debt

Operating lease liabilities

Accrued expenses:

Payroll and related

Taxes

Other

Total current liabilities

2,929

2,683

Long-term debt (1)

1,906

1,937

Deferred income taxes

Operating lease liabilities

Other liabilities

Total liabilities

5,634

5,420

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,

125,154,194

outstanding on September 28, 2024 and

129,247,765

outstanding on December 30, 2023

Additional paid-in capital

Retained earnings

3,766

3,860

Accumulated other comprehensive loss

(264)

(206)

Total Henry Schein, Inc. stockholders' equity

3,503

3,655

Noncontrolling interests

Total stockholders' equity

4,139

4,289

Total liabilities, redeemable noncontrolling

interests and stockholders' equity

10,605

10,573

(1)

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

At September 28, 2024 and

December 30, 2023, includes trade accounts receivable of $

million and $

million, respectively, and long-term debt of $

million and $

million, respectively.

See

Note 1 – Basis of Presentation

for further information.

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 28,

September 30,

September 28,

September 30,

2024

2023

2024

2023

Net sales

3,174

3,162

9,482

9,322

Cost of sales

2,181

2,167

6,459

6,386

Gross profit

3,023

2,936

Operating expenses:

Selling, general and administrative

2,296

2,149

Depreciation and amortization

Restructuring costs

Operating income

Other income (expense):

Interest income

Interest expense

(34)

(25)

(96)

(58)

Other, net

(2)

(1)

(2)

Income before taxes, equity in earnings of affiliates and

noncontrolling interests

Income taxes

(32)

(39)

(97)

(119)

Equity in earnings of affiliates, net of tax

Net income

Less: Net income attributable to noncontrolling interests

(6)

(21)

Net income attributable to Henry Schein, Inc.

Earnings per share attributable to Henry Schein, Inc.:

Basic

0.79

1.06

2.32

3.04

Diluted

0.78

1.05

2.30

3.02

Weighted-average common

shares outstanding:

Basic

126,124,715

130,388,353

127,550,045

130,888,717

Diluted

127,054,934

131,442,135

128,498,494

132,149,172

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(in millions)

(unaudited)

Three Months Ended

Nine Months Ended

September 28,

September 30,

September 28,

September 30,

2024

2023

2024

2023

Net income

Other comprehensive income (loss), net of tax:

Foreign currency translation gain (loss)

(45)

(58)

(17)

Unrealized gain (loss) from hedging activities

(18)

(3)

Other comprehensive income (loss), net of tax

(39)

(61)

(15)

Comprehensive income

Comprehensive income attributable to noncontrolling interests:

Net income

(6)

(21)

Foreign currency translation loss (gain)

(12)

Comprehensive income attributable to noncontrolling

interests

(12)

(4)

(3)

(20)

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, June 29, 2024

127,080,545

3,803

(292)

4,148

Net income (loss) (excluding $

attributable to Redeemable

noncontrolling interests)

(1)

Foreign currency translation gain (excluding gain of $

attributable to Redeemable noncontrolling interests)

Unrealized loss from hedging activities,

net of tax benefit of $

(18)

Purchase of noncontrolling interests

(1)

(2)

Change in fair value of redeemable securities

(6)

Noncontrolling interests and adjustments related to

business acquisitions

(4)

(3)

Repurchase and retirement of common stock

(1,954,076)

(18)

(119)

(137)

Stock issued upon exercise of stock options

22,448

Stock-based compensation expense

7,655

Shares withheld for payroll taxes

(2,403)

Settlement of stock-based compensation awards

Transfer of charges in excess of

capital

(17)

Balance, September 28, 2024

125,154,194

3,766

(264)

4,139

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 hedging activities,

net of tax of $

Distributions to noncontrolling shareholders

(1)

Change in fair value of redeemable securities

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

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 30, 2023

129,247,765

3,860

(206)

4,289

Net income (excluding loss of $

attributable to Redeemable

noncontrolling interests)

Foreign currency translation gain/(loss) (excluding loss of $

attributable to Redeemable noncontrolling interests)

(55)

(54)

Unrealized loss from hedging activities,

net of tax benefit of $

(3)

Distributions to noncontrolling shareholders

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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.

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

current and historical results

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

the manufacture and supply of our products; our

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

technology products) and

technologies that achieve market acceptance with acceptable margins; transitional

challenges associated with

acquisitions, dispositions and joint ventures, including the failure

to achieve anticipated synergies/benefits, as well

as significant demands on our operations, information systems,

legal, regulatory, compliance, financial and human

resources functions in connection with acquisitions, dispositions and

joint ventures; certain provisions in our

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

changes in supplier rebates or

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

security risks associated with our

information systems and technology products and services, such as

cyberattacks or other privacy or data security

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

limitation,

competition from third-party online commerce sites) and consolidating

market; changes in the health care industry;

risks from expansion of customer purchasing power and multi-tiered

costing structures; increases in shipping costs

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

global and domestic macro-economic

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

wars, fluctuations in energy pricing and

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

to other economic indicators,

international trade agreements, potential trade barriers and terrorism; geopolitical

wars; failure to comply with

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

Device Regulation; failure to

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

laws and regulations; failure to comply with

laws and regulations relating to the collection, storage and processing of

sensitive personal information or standards

in electronic health records or transmissions; changes in tax legislation;

risks related to product liability, intellectual

property and other claims; risks associated with customs policies

or legislative import restrictions; risks associated

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

pandemic), or similar wide-spread public

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

global operations; litigation

risks; new or unanticipated litigation developments and the status

of litigation matters; our dependence on our

senior management, employee hiring and retention, and our relationships

with customers, suppliers and

manufacturers; and disruptions in financial markets.

The order in which these factors appear should not be

construed to indicate their relative importance or priority.

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

or predict.

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

of actual results.

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

required by law.

Where You

Can Find Important Information

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

conference calls and webcasts, press releases, the investor relations

page of our website (www.henryschein.com)

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

of our website.

Recent Developments

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

strengthening of the U.S. dollar, their impacts

have not been material to our results of operations.

Though inflation impacts both our revenues and costs, the

depth

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

or corporate brand

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

absorb price increases, thus positioning us

to protect our gross profit.

Cyber Incident

In October 2023 Henry Schein experienced a cyber incident that primarily

affected the operations of our North

American and European dental and medical distribution businesses.

Henry Schein One, our practice management

software, revenue cycle management and patient relationship management

solutions business, was not affected, and

our manufacturing businesses were mostly unaffected.

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

ecommerce platform and related applications, which was remediated.

During the three and nine months ended September 28, 2024, we had a

sales decrease in our dental and medical

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

to episodic customers following last

year’s cyber incident.

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

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

With respect to the October 2023

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

During the three and nine

months ended September 28, 2024, we received insurance proceeds of

$10 million and $20 million, respectively,

representing a partial insurance recovery of losses related to the cyber 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 92 years of experience distributing health

care products.

We are headquartered in Melville, New York,

employ approximately 26,000 people (of which approximately

13,000 are based outside of the United States) and have operations or

affiliates in 33 countries and territories.

Our

broad global footprint has evolved over time through our organic 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,

including in vitro

diagnostic devices, manufacture certain dental specialty products in

the areas of implants, orthodontics and

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

and/or devices.

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,

personal protective equipment

(“PPE”) products, vitamins and orthopedic implants.

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.

are focused on building relationships with decision makers

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

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

candidates for joint venture or

acquisition and intend to continue to seek opportunities to expand our

role as a provider of products and services to

the health care industry.

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

any such

opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or

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

can be no assurance that the

integration efforts associated with any such transaction would be successful.

Aging Population and Other Market Influences

The health care products distribution industry continues to experience growth

due to the aging population,

increased health care awareness, the proliferation of medical technology

and testing, new pharmacological

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

insurance coverage.

In addition, the physician market continues to benefit from the

shift of procedures and

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

physicians’ offices.

According to the U.S. Census Bureau’s International Database, between 2024

and 2034, the 45 and older

population is expected to grow by approximately 11%.

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

by approximately 20%.

This compares with expected total U.S. population growth

rates of approximately 6%

between 2024 and 2034

and approximately 11% between 2024 and 2044.

According to the U.S. Census Bureau’s International Database, in 2024

there are approximately seven million

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

and elder-care

services.

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

19 million.

The population

aged 65 to 84 years is projected to increase by approximately 20% 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

(“CMS”) published “National Health Expenditure Data” indicating that total

national health care spending reached

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

measure for

annual production of goods and services in the United States.

Health care spending is projected to reach

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

Government

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

exportation, marketing, sale and

promotion of pharmaceuticals and/or medical devices, and in this regard, we

are subject to 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

businesses that distribute and sell 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 anti-corruption, controlled substances handling,

medical device regulations and data

privacy and security standards.

Certain of our businesses involve pharmaceuticals and/or medical devices,

including in vitro diagnostic devices,

that are paid for by third parties and 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.

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.

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; amalgam bans;

pricing disclosures; supply chain transparency around labor practices; and safe working

conditions.

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.

CMS

recently released the 2024 durable medical equipment, prosthetics, orthotics

and supplies (“DMEPOS”)

reimbursement schedule, which, effective January 1, 2024, reduced the DMEPOS reimbursement

rates for non-

rural suppliers, such as us, by removing the Coronavirus Aid, Relief,

and Economic Security (aka CARES) Act

relief rates in effect during the COVID-19 pandemic.

This and other 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 30, 2023, filed with the SEC on February 28, 2024.

Results of Operations

The following tables summarize the significant components of our operating

results for the three and nine months

ended September 28, 2024 and September 30, 2023 and cash flows for

the nine months ended September 28, 2024

and September 30, 2023:

Three Months Ended

Nine Months Ended

September 28,

September 30,

September 28,

September 30,

2024

2023

2024

2023

Operating results:

Net sales

3,174

3,162

9,482

9,322

Cost of sales

2,181

2,167

6,459

6,386

Gross profit

3,023

2,936

Operating expenses:

Selling, general and administrative

2,296

2,149

Depreciation and amortization

Restructuring costs

Operating income

Other expense, net

(29)

(21)

(79)

(48)

Net income

Net income attributable to Henry Schein, Inc.

Nine Months Ended

September 28,

September 30,

2024

2023

Cash flows:

Net cash provided by operating activities

Net cash used in investing activities

(372)

(808)

Net cash provided by (used in) financing activities

(306)

Plans of Restructuring

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

focused on funding the priorities of the

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

increase efficiency.

The 2022 Plan has

been completed as of July 31, 2024.

During the three months ended September 28, 2024 and

September 30, 2023,

in connection with our 2022 Plan, we recorded restructuring costs of

$12 million and $11 million, respectively.

During the nine months ended September 28, 2024 and September 30, 2023,

in connection with our 2022 Plan, we

recorded restructuring costs of $37 million and $59 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 exit costs.

We expect to record immaterial charges associated with the 2022 Plan during the

remainder of 2024.

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

Plan”) to integrate recent acquisitions,

right-size operations and further increase efficiencies.

During the three and nine months ended September 28,

2024, we recorded restructuring charges associated with the 2024 Plan of $36 million

which primarily related to

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

lease assets and fixed assets, and

other lease exit costs.

We expect to record restructuring charges associated with the 2024 Plan during the fourth

quarter of 2024 and in 2025, however an estimate of the amount of these charges has not

yet been determined.

Three Months Ended September 28, 2024 Compared to Three Months Ended September 30, 2023

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

Net; and Income Taxes are

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

Net Sales

Net sales were as follows:

September 28,

% of

September 30,

% of

Increase / (Decrease)

2024

Total

2023

Total

Health care distribution

(1)

Dental

1,852

58.4

1,882

59.5

(30)

(1.6)

Medical

1,101

34.7

1,070

33.9

2.9

Total health care distribution

2,953

93.1

2,952

93.4

Technology and value-added services

(2)

6.9

6.6

5.1

Total

3,174

100.0

3,162

100.0

0.4

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

(2.5)

0.3

(2.2)

(0.6)

(2.8)

Dental Equipment

1.8

0.9

2.7

0.1

2.8

Total Dental

(1.6)

0.5

(1.1)

(0.5)

(1.6)

Medical

(4.8)

7.6

2.8

0.1

2.9

Total Health Care Distribution

(2.7)

3.0

0.3

(0.3)

Technology and value-added services

(2)

(1.1)

6.0

4.9

0.2

5.1

Total

(2.6)

3.2

0.6

(0.2)

0.4

(1)

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

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

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

(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, practice technology, network and hardware services, and other services.

Global Sales

Global net sales for the three months ended September 28, 2024 increased 0.4%.

The components of our sales

growth are presented in the table above.

The 2.6% decrease in our internally generated local currency sales was primarily

attributable to the slower than

anticipated pace of recovery from the cyber incident, the challenging economic

environment in certain markets and

lower sales of PPE products and COVID-19 test kits, partially offset by sales growth in

dental equipment and dental

specialty products.

For the three months ended September 28, 2024, the estimated

decrease in internally generated

local currency sales, excluding PPE products and COVID-19

test kits, was 2.2%.

We estimate that sales of PPE products and COVID-19 test kits were approximately $157 million and $175 million

for the three months ended September 28, 2024 and September 30, 2023,

respectively, representing an estimated

decrease of $18 million, or 10.1% versus the prior year, with the $18 million net decrease year-over-year

representing 0.6% of global net sales for the three months ended September

28, 2024.

Dental

Dental net sales for the three months ended September 28, 2024 decreased 1.6%.

The components of our sales

decline are presented in the table above.

The decrease in local currency sales was attributable to a 1.6% decrease

in internally generated local currency sales

of dental merchandise,

partially offset by an increase in internally generated local currency sales of dental

equipment and dental specialty products and sales from entities acquired

during the twelve months ended

September 28, 2024.

The decrease in internally generated local currency sales

of dental merchandise was primarily

attributable to the slower than anticipated pace of recovery from

the cyber incident,

the challenging economic

environment in certain markets, and lower sales of PPE products.

The increase in internally generated local

currency sales of dental equipment was primarily attributable to certain

international markets and traditional

equipment and our parts and service business in North America, partially offset by

a decline in digital imaging in

North America.

We estimate that sales of PPE products were approximately $72 million and $83 million for the three months ended

September 28, 2024 and September 30, 2023, respectively, representing an estimated decrease of $11 million, or

13.0% versus the prior year, with the $11 million net decrease year-over-year representing 0.6% of dental net sales

for the three months ended September 28, 2024.

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

glove prices.

The estimated decrease in internally generated local currency

sales, excluding PPE products,

was

1.0%.

Medical

Medical net sales for the three months ended September 28, 2024

increased 2.9%.

The components of our sales

growth are presented in the table above.

The increase in local currency sales was attributable to our expansion

in the Home Solutions market,

including the

acquisition of Shield Healthcare during the year ended December

30, 2023, and our acquisition of TriMed, Inc.

during the second quarter of 2024, partially offset by a 4.8% decrease in internally

generated local currency medical

sales, resulting from

the slower than anticipated pace of recovery from the cyber incident,

the conversion of

certain pharmaceutical products

to lower priced generics,

and lower sales of influenza vaccines,

PPE products and

COVID-19 test kits.

We estimate that sales of PPE products and COVID-19 test kits were approximately $85 million and $92 million

for the three months ended September 28, 2024 and September 30, 2023,

respectively, representing an estimated

decrease of $7 million, or 7.5%

versus the prior year, with the $7 million net decrease year-over-year representing

0.6% of medical net sales for the three months ended September 28, 2024.

The decrease in sales of these products

was primarily due to lower market prices of PPE products (primarily lower

glove pricing).

The estimated decrease

in internally generated local currency sales, excluding PPE

products and COVID-19 test kits,

was 4.6%.

Technology and value-added services

Technology and value-added services net sales for the three months ended September 28, 2024 increased 5.1%.

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

The internally generated local currency

increase in technology and value-added services sales was primarily attributable

to entities acquired during the

twelve months ended September 28, 2024,

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

management software and an increase in revenue cycle management solutions.

Gross Profit

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

September 28,

Gross

September 30,

Gross

Increase / (Decrease)

2024

Margin %

2023

Margin %

Health care distribution

28.6

28.8

(7)

(0.9)

Technology and value-added services

67.8

68.7

3.8

Total

31.3

31.5

(2)

(0.2)

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 product development.

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

the

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

mix.

For example, sales of our corporate

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

average total gross profit

margins of all products.

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

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

practitioners, who normally purchase lower volumes.

Health care distribution gross profit for the three months ended September

28, 2024 was relatively flat compared to

the prior-year-period.

Technology and value-added services gross profit increased as a result of gross profit from acquisitions, partially

offset by lower internally generated sales.

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization; and

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

% of

September 28,

Respective

September 30,

Respective

Increase

2024

Net Sales

2023

Net Sales

Health care distribution

24.6

23.4

5.1

Technology and value-added services

50.1

49.7

6.0

Total

26.3

25.1

5.2

The net increase (decrease) in operating expenses is attributable to

the following:

Operating Costs

Restructuring Costs

Acquisitions

Total

Health care distribution

(18)

Technology and value-added services

(6)

Total

(24)

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

in the table above.

The increase in

operating costs during the three months ended September 28, 2024

includes increases in payroll and payroll related

costs in both of our reportable segments, as well as increased acquisition

intangible amortization in our healthcare

distribution segment, partially offset by a gain of $19 million related to the remeasurement

to fair value of a

previously held equity investment within our healthcare distribution segment.

During the three months ended September 28, 2024,

we also incurred $1 million of expenses, within our health care

distribution segment, directly related to the cyber incident,

mostly consisting of professional fees.

During the three

months ended September 28, 2024, we received insurance proceeds of

$10 million, recorded as a reduction of

selling, general and administrative expenses, representing a partial

insurance recovery of losses related to the cyber

incident.

Other Expense, Net

Other expense, net was as follows:

September 28,

September 30,

Variance

2024

2023

Interest income

(3.2)

Interest expense

(34)

(25)

(9)

(31.9)

Other, net

(2)

(45.4)

Other expense, net

(29)

(21)

(8)

(36.4)

Interest expense increased primarily due to increased borrowings and increased

interest rates.

Income Taxes

Our effective tax rate was 24.7% for the three months ended September 28, 2024, compared

to 21.9% for the prior

year period.

The difference between our effective and federal statutory tax rates

primarily relates to state and

foreign income taxes and interest expense.

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

technical and administrative

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

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

Effective January 1, 2024, the minimum global tax

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

As of September 28, 2024, the impact of the

Pillar Two rules to our financial statements was immaterial.

As we operate in jurisdictions which have adopted

Pillar Two, we are continuing to analyze the implications to effectively manage the impact for 2024 and beyond.

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.

Nine Months Ended September 28, 2024 Compared to Nine Months Ended September

30, 2023

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

Expense, Net; and Income Taxes are

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

Net Sales

Net sales were as follows:

September 28,

% of

September 30,

% of

Increase / (Decrease)

2024

Total

2023

Total

Health care distribution

(1)

Dental

5,690

60.0

5,737

61.5

(47)

(0.8)

Medical

3,140

33.1

2,991

32.1

5.0

Total health care distribution

8,830

93.1

8,728

93.6

1.2

Technology and value-added services

(2)

6.9

6.4

9.7

Total

9,482

100.0

9,322

100.0

1.7

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

(3.0)

1.9

(1.1)

(0.2)

(1.3)

Dental Equipment

0.5

0.4

0.9

Total Dental

(2.2)

1.5

(0.7)

(0.1)

(0.8)

Medical

(3.3)

8.3

5.0

Total Health Care Distribution

(2.6)

3.9

1.3

(0.1)

1.2

Technology and value-added services

(2)

1.9

7.7

9.6

0.1

9.7

Total

(2.3)

4.1

1.8

(0.1)

1.7

(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, vitamins and orthopedic implants.

(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, practice technology, network and hardware services, and other services.

Global Sales

Global net sales for the nine months ended September 28, 2024 increased 1.7%.

The components of our sales

growth are presented in the table above.

The 2.3% decrease in our internally generated local currency sales was primarily

attributable to the slower than

anticipated pace of recovery from the cyber incident, the challenging economic

environment in certain markets and

lower sales of PPE products.

For the nine months ended September 28, 2024, the estimated decrease

in internally

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

test kits, was 1.7%.

We estimate that sales of PPE products and COVID-19 test kits were approximately $478 million and $540 million

for the nine months ended September 28, 2024 and September 30, 2023,

respectively, representing an estimated

decrease of $62 million, or 11.3%

versus the prior year, with the $62 million net decrease year-over-year

representing 0.6% of global net sales for the nine months ended September

28, 2024.

Dental

Dental net sales for the nine months ended September 28, 2024 decreased

0.8%.

The components of our sales

decline are presented in the table above.

The decrease in local currency sales was attributable to a decrease

in internally generated local currency sales for

dental merchandise of 2.2%,

partially offset by sales growth in internally generated local currency sales for dental

equipment and dental specialty products.

The decrease in internally generated local currency sales of dental

merchandise was primarily attributable to the slower than anticipated pace

of recovery from the cyber incident, the

challenging economic environment in certain markets, and lower sales

of PPE products.

Our sales growth in

internally generated local currency sales for dental equipment was primarily

due to growth in North America for

traditional equipment and our parts and service business, partially offset by lower North American

digital

equipment sales and declines in certain international markets, and some

sales shifting into the first quarter of 2024

due to the delay of equipment installations during the fourth quarter of 2023

resulting from the impact of the cyber

incident.

We estimate that sales of PPE products were approximately $228 million and $264 million for the nine months

ended September 28, 2024 and September 30, 2023, respectively, representing an estimated decrease of $36

million, or 13.4%

versus the prior year, with the $36 million net decrease year-over-year representing 0.6%

dental net sales for the nine months ended September 28, 2024.

The decrease in sales of PPE products was

primarily due to lower glove prices and reduced demand following the

cyber incident.

The estimated decrease in

internally generated local currency sales, excluding PPE products,

was 1.6%.

Medical

Medical net sales for the nine months ended September 28, 2024 increased

5.0%.

The components of our sales

growth are presented in the table above.

The increase in local currency sales was attributable to our expansion

in the Home Solutions market,

including the

acquisition of Shield Healthcare during the year ended December 30, 2023,

offset by a decrease of 3.3% in

internally generated local currency medical sales, resulting from the slower

than anticipated pace of recovery from

the cyber incident, the conversion of certain pharmaceutical products to lower

priced generics, and lower sales of

PPE products and influenza vaccines,

partially offset by strong sales of point-of-care diagnostics including multi-

assay flu/COVID combination test kits.

We estimate that sales of PPE products and COVID-19 test kits were approximately $250 million and $276 million

for the nine months ended September 28, 2024 and September 30, 2023,

respectively, representing an estimated

decrease of $26 million, or 9.4% versus the prior year, with the $26 million net decrease year-over-year

representing 0.8% of medical net sales for the nine months ended September

28, 2024.

The decrease in sales of

these products was primarily due to lower market prices of PPE products (primarily

lower glove pricing).

The

estimated decrease in internally generated local currency sales, excluding

PPE products and COVID-19 test kits,

was 2.6%.

Technology and value-added services

Technology and value-added services net sales for the nine months ended September 28, 2024 increased 9.7%.

The

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

The internally generated local currency increase

of 1.9% in technology and value-added services sales was primarily

attributable to a continued increase in the

number of cloud-based users of our practice management software and an

increase in revenue cycle management

solutions and our analytical products.

Gross Profit

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

September 28,

Gross

September 30,

Gross

Increase

2024

Margin %

2023

Margin %

Health care distribution

2,586

29.3

2,534

29.0

2.0

Technology and value-added services

67.1

67.6

8.8

Total

3,023

31.9

2,936

31.5

2.9

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 product development.

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

the

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

mix.

For example, sales of our corporate

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

average total gross profit

margins of all products.

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

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

practitioners, who normally purchase lower volumes.

Health care distribution gross profit for the nine months ended September 28, 2024

increased compared to the

prior-year-period due to gross profit from acquisitions and gross margin expansion as a result of a favorable impact

of sales mix of higher-margin products.

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

generated sales and gross profit from acquisitions.

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization; and

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

% of

September 28,

Respective

September 30,

Respective

Increase

2024

Net Sales

2023

Net Sales

Health care distribution

2,196

24.9

2,063

23.6

6.5

Technology and value-added services

55.4

50.1

21.4

Total

2,557

27.0

2,360

25.3

8.3

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

Operating Costs

Restructuring Costs

Acquisitions

Total

Health care distribution

Technology and value-added services

Total

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

in the table above.

The increase in

operating costs during the nine months ended September 28, 2024

includes increases in payroll and payroll related

costs, travel, convention expenses and litigation settlement costs in both

of our reportable segments, as well as

increased acquisition intangible amortization in our healthcare distribution

segment, partially offset by a gain of

$19 million related to the remeasurement to fair value of a previously held

equity investment within our healthcare

distribution segment.

The impact from this remeasurement gain was similar to that of a

remeasurement gain related

to another buy-up of a business within our healthcare distribution segment

during the nine months ended September

30, 2023.

also recorded an increase of $38 million in accrued contingent consideration

related to a 2023 acquisition in our

technology and value-added services segment.

During the nine months ended September 28, 2024, we also

incurred $12 million of expenses, within our health care distribution segment,

directly related to the cyber incident,

mostly consisting of professional fees.

During the nine months ended September 28, 2024, we received

insurance

proceeds of $20 million, recorded as a reduction of selling, general

and administrative expenses, representing a

partial insurance recovery of losses related to the cyber incident.

Other Expense, Net

Other expense, net was as follows:

September 28,

September 30,

Variance

2024

2023

Interest income

44.7

Interest expense

(96)

(58)

(38)

(64.7)

Other, net

(1)

(2)

(82.4)

Other expense, net

(79)

(48)

(31)

(63.8)

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings and increased interest rates.

Income Taxes

Our effective tax rate was 25.1% for the nine months ended September 28, 2024, compared

to 22.5% for the prior

year period.

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

and

foreign income taxes and interest expense.

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

technical and administrative

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

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

Effective January 1, 2024, the minimum global tax

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

As of September 28, 2024, the impact of the

Pillar Two rules to our financial statements was immaterial.

As we operate in jurisdictions which have adopted

Pillar Two, we are continuing to analyze the implications to effectively manage the impact for 2024 and beyond.

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.

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.

Net cash provided by operating activities was $644 million for the

nine months ended September 28, 2024,

compared to net cash provided by operating activities of $532 million for

the prior year.

The net change of $112

million was primarily attributable to changes in working capital accounts,

primarily accounts receivable and

inventory; partially offset by lower cash net income.

During the nine months ended September 28, 2024, the cyber

incident had several residual impacts to the operating cash flows from our

working capital, net of acquisitions,

including an increase in operating cash flows from accounts receivable due

to improved collection levels and

decreased cash flows from accounts payable and accrued expenses resulting

from previously delayed payments.

Net cash used in investing activities was $372 million for the nine

months ended September 28, 2024, compared to

net cash used in investing activities of $808 million for the prior year.

The net change of $436 million was

primarily attributable to decreased payments for equity investments

and business acquisitions.

Net cash used in financing activities was $306 million for the nine

months ended September 28, 2024, compared to

net cash provided by financing activities of $307 million for the

prior year.

The net change of $613 million was

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

and increased acquisitions of

noncontrolling interests in subsidiaries and increased repurchases of common

stock.

The following table summarizes selected measures of liquidity and capital

resources:

September 28,

December 30,

2024

2023

Cash and cash equivalents

Working

capital

(1)

1,218

1,805

Debt:

Bank credit lines

Current maturities of long-term debt

Long-term debt

1,906

1,937

Total debt

2,653

2,351

Leases:

Current operating lease liabilities

Non-current operating lease liabilities

(1)

Includes $341 million and $284 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

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

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations

increased to 48.6 days as of September 28, 2024

from 43.7 days as of September 30, 2023, which was primarily attributable

to the impact of the cyber incident.

During the nine months ended September 28, 2024, we wrote off approximately $7

million of fully reserved

accounts receivable against our trade receivable reserve.

Our inventory turns from operations increased to 5.0 as of

September 28, 2024 from 4.5 as of September 30, 2023.

Our working capital accounts may be impacted by current

and future economic conditions.

Leases

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

vehicles

and certain equipment.

Our leases have remaining terms of approximately one year

to approximately 17 years,

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

As of September 28, 2024, our right-of-

use assets related to operating leases were $304 million and our current and non-current

operating lease liabilities

were $77 million and $262 million, respectively.

Stock Repurchases

On July 31, 2024 our Board of Directors authorized the repurchase of up

to an additional $500 million in shares of

our common stock.

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

billion, or 94,763,315 shares, under our

common stock repurchase programs, with $455 million available

as of September 28, 2024 for future common

stock share repurchases.

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

to accelerate our share

repurchase activity in light of our favorable cash position.

Redeemable Noncontrolling Interests

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

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

Accounting Standards Codification Topic 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling

interest holder under the terms of a put

option contained in contractual agreements.

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

for

redeemable noncontrolling interests was $832 million and $864 million,

respectively.

Please see

Note 13 –

Redeemable Noncontrolling Interests

for further information.

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 30, 2023.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted, see

Note 2 - Significant

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 30, 2023.

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 28,

2024, 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, and the rules of the Nasdaq stock exchange.

Changes in Internal Control over Financial Reporting

The combination of acquisitions,

including the acquisition of TriMed Inc. (“TriMed”), continued acquisition

integrations and systems implementation activity 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. As

previously reported, the full integration of TriMed will extend beyond year-end and, therefore, we anticipate

excluding TriMed from our annual assessment of internal control over financial reporting as of December

28, 2024,

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

During the quarter ended September 28, 2024, we completed the acquisition

of a dental distribution business and

acquired a controlling interest of a dental affiliate in Europe.

Also, post-acquisition integration related activities

continued for our dental and medical businesses acquired during prior quarters.

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.

Also, during the quarter ended September 28, 2024, we completed the

systems implementation activities for

implementing a new e-commerce system for certain dental distribution

businesses in the UK and Ireland.

Additionally, we completed the systems implementation activities related to the integration of a previously acquired

Australian medical distribution business into our existing Australian

ERP system.

Finally, we continued systems

implementation activities for two of our dental distribution businesses in France

and Brazil.

All acquisitions, continued acquisition integrations and systems implementation

activities involve necessary and

appropriate change-management controls that are considered in our quarterly

assessment of the design and

operating effectiveness of our internal control over financial reporting.

The deficiencies in internal control over financial reporting identified

as of December 30, 2023 at the application

control level related to logical and user access management and segregation

of duties have continued to be the

subject of ongoing remediation including implementation of specific

action plans and the testing/validation of

control operating effectiveness, which are expected to be substantially completed prior to year-end.

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

There have been no material changes from the risk factors disclosed in

Part 1, Item 1A, of our Annual Report on

Form 10-K for the year ended December 30, 2023.

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 $5.5 billion (including $500 million authorized on July 31, 2024) of shares of

our common stock to be

repurchased under this program.

As of September 28, 2024, we had repurchased approximately $5.1 billion

of common stock (94,763,315 shares)

under these initiatives, with $455 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 28, 2024:

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)

6/30/2024 through 8/3/2024

486,030

68.56

486,030

7,837,251

8//2024 through 8/31/2024

1,063,515

69.14

1,063,515

6,847,137

9/1/2024 through 9/28/2024

404,531

69.56

404,531

6,213,125

1,954,076

(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 6. EXHIBITS

EXHIBITS

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 28, 2024, formatted in Inline XBRL (included

within

Exhibit 101 attachments).+

+ 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 5, 2024