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

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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 and

where we manufacture products, our dependence on third parties

for raw materials or purchased components; risks

relating to the achievement of our strategic growth objectives; risks

related to the Strategic Partnership Agreement

with KKR Hawaii Aggregator L.P. entered into in January 2025; our ability to develop or acquire and maintain and

protect new products (particularly technology products) and services

and utilize new technologies that achieve

market acceptance with acceptable margins; transitional challenges associated with

acquisitions, dispositions and

joint ventures, including the failure to achieve anticipated synergies/benefits, as well

as significant demands on our

operations, information systems, legal, regulatory, compliance, financial and human resources functions in

connection with acquisitions, dispositions and joint ventures; certain

provisions in our governing documents that

may discourage third-party acquisitions of us; adverse changes in supplier

rebates or other purchasing incentives;

risks related to the sale of corporate brand products; risks related to activist

investors; security risks associated with

our information systems and technology products and services, such as cyberattacks

or other privacy or data

security breaches (including the October 2023 incident); effects of a highly competitive

(including, without

limitation, competition from third-party online commerce sites) and consolidating

market; changes in the health

care industry; risks from expansion of customer purchasing power

and multi-tiered costing structures; increases in

shipping costs for our products or other service issues with our third-party shippers,

and increases in fuel and

energy costs; changes in laws and policies governing manufacturing, development and investment

in territories and

countries where we do business; general global and domestic macro-economic

and political conditions, including

inflation, deflation, recession, unemployment (and corresponding

increase in under-insured populations), consumer

confidence, sovereign debt levels, ongoing wars, fluctuations in energy pricing and

the value of the U.S. dollar as

compared to foreign currencies, changes to other economic indicators

and international trade agreements; the threat

or outbreak of war, terrorism or public unrest (including, without limitation, the war in Ukraine,

the Israel-Gaza war

and other unrest and threats in the Middle East and the possibility of a wider

European or global conflict); changes

to laws and policies governing foreign trade, tariffs and sanctions, including

the current imposition of additional

new tariffs by the U.S. on numerous countries, retaliatory tariffs and potential for additional retaliatory

tariffs;

greater restrictions on imports and exports; supply chain disruption; geopolitical

wars; failure to comply with

existing and future regulatory requirements, including relating to health

care; risks associated with the EU Medical

Device Regulation; failure to comply with laws and regulations relating to

health care fraud or other laws and

regulations; failure to comply with laws and regulations relating to the

collection, storage and processing of

sensitive personal information or standards in electronic health records

or transmissions; changes in tax legislation,

changes in tax rates and availability of certain tax deductions; risks related

to product liability, intellectual property

and other claims; risks associated with customs policies or legislative

import restrictions; risks associated with

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

pandemic), or similar wide-spread public health

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

operations; litigation risks; new

or unanticipated litigation developments and the status of litigation matters;

our dependence on our senior

management, employee hiring and retention, increases in labor costs or

health care costs, and our relationships with

customers, suppliers and manufacturers; and disruptions in financial markets.

The order in which these factors

appear should not be construed to indicate their relative importance or priority.

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

or predict.

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

of actual results.

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

required by law.

Where You

Can Find Important Information

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

conference calls and webcasts, press releases, the investor relations

page of our website (www.henryschein.com)

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

of our website.

Recent Developments

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

strengthening of the U.S. dollar, their impacts

have not been material to our results of operations.

Though inflation impacts both our revenues and costs, the

depth

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

or corporate brand

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

absorb price increases, thus positioning us

to protect our gross profit.

Segment Reporting

During the fourth quarter of our fiscal year ended December 28, 2024,

we revised our reportable segments to align

with how the Chairman and Chief Executive Officer manages the business, assesses

performance and allocates

resources.

Our revised reportable segments now consist of: (i) Global Distribution

and Value

-Added Services; (ii)

Global Specialty Products; and (iii) Global Technology.

Global Distribution and Value-Added Services includes distribution to the global dental and medical markets of

national brand and corporate brand merchandise, as well as equipment and related

technical services.

This segment

also includes value-added services such as financial services, continuing

education services, consulting and other

services.

This segment also markets and sells under our own corporate brand,

a portfolio of cost-effective, high-

quality consumable merchandise.

Global Specialty Products includes manufacturing, marketing

and sales of dental

implant and biomaterial products; and endodontic, orthodontic and orthopedic

products and other health care-

related products and services.

Global Technology includes development and distribution of practice management

software, e-services, and other products, which are distributed to health

care providers.

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, corporate brand products and proprietary specialty products

and solutions (including

implant, orthodontic and endodontic products).

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

including software and other value-added services.

Industry Overview

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

This trend has benefited

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

prices.

It also has accelerated the

growth of DSOs, GPOs, HMOs, group practices, other managed care

accounts and collective buying groups, which,

in addition to their emphasis on obtaining products at competitive prices,

tend to favor distributors capable of

providing specialized management information support.

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 2025 and 2035, the 45 and older

population is expected to grow by approximately 10%.

Between 2025 and 2045, this age group is expected to grow

by approximately 17%.

This compares with expected total U.S. population growth

rates of approximately 4%

between 2025 and 2035 and approximately 6% between 2025 and 2045.

According to the U.S. Census Bureau’s International Database, in 2025 there are approximately seven million

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

and elder-care

services.

By the year 2050, that number is projected to increase to approximately

17 million.

The population aged

65 to 84 years is projected to increase by approximately 15% during

the same period.

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

continue to increase in the

United States.

believe that demand for our products and services will grow while

continuing to be impacted by

current and future operating, economic, and industry conditions.

The Centers for Medicare and Medicaid Services

or CMS published “National Health Expenditure Data” indicating that

total national health care spending reached

approximately $4.9 trillion in 2023, or 17.6% of the nation’s gross domestic product, the benchmark measure

for

annual production of goods and services in the United States.

Health care spending is projected to reach

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

believe similar demographic changes are also occurring in other

markets we serve outside the U.S.

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 supplies

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 orthopaedic, in vitro

diagnostic devices, software regulated as a medical device, and sales of

medical equipment and supplies directly to

patients, that are paid for by third parties and/or patients 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 health care 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.

Laws and

regulations are subject to change and their evolving implementation may impact

our operations and our financial

performance.

Certain of our businesses also maintain contracts with governmental agencies

and are subject to certain regulatory

requirements specific to government contractors.

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 28, 2024, filed with the SEC on February

25, 2025.

Results of Operations

The following tables summarize the significant components of our operating

results and cash flows for the three

months ended March 29, 2025 and March 30, 2024 (in millions):

Three Months Ended

March 29,

March 30,

2025

2024

Operating results:

Net sales

3,168

3,172

Cost of sales

2,168

2,160

Gross profit

1,000

1,012

Operating expenses:

Selling, general and administrative

Depreciation and amortization

Restructuring costs

Operating income

Other expense, net

(30)

(23)

Income taxes

(35)

(32)

Net income

Net income attributable to Henry Schein, Inc.

Three Months Ended

March 29,

March 30,

2025

2024

Cash flows:

Net cash provided by operating activities

Net cash used in investing activities

(99)

(72)

Net cash provided by (used in) financing activities

(151)

Plans of Restructuring

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 months ended March 29, 2025, we recorded

restructuring charges associated with the 2024 Plan of $25 million, which primarily

related to severance and

employee-related costs.

We expect to record restructuring charges associated with the 2024 Plan through the end of

2025; however, an estimate of the amount of these charges has not yet been determined.

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 March 30, 2024, in connection

with our 2022

Plan, we recorded restructuring costs of $10 million, which primarily

related to severance and employee-related

costs, accelerated amortization of right-of-use assets and

fixed assets, and other exit costs.

Three Months Ended March 29, 2025 Compared to Three Months Ended March 30, 2024

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

Expense, Net; and Income Taxes are

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

During the fourth quarter of our fiscal year ended December 28, 2024,

we revised our reportable segments to align

with how the Chairman and Chief Executive Officer manages the business, assesses

performance and allocates

resources.

Our revised reportable segments now consist of: (i) Global Distribution

and Value

-Added Services; (ii)

Global Specialty Products; and (iii) Global Technology.

All prior comparative segment information has been recast

to reflect our new segment structure.

Net Sales

Net sales by reportable segment and by major product or service type were

as follows:

March 29,

% of

March 30,

% of

Increase / (Decrease)

2025

Total

2024

Total

Global Distribution and Value

-Added Services

Global Dental merchandise

(1)

1,185

37.4

1,210

38.1

(25)

(2.1)

Global Dental equipment

(2)

12.1

12.7

(18)

(4.5)

Global Value

-added services

(3)

1.7

1.8

(4)

(8.1)

Global Dental

1,621

51.2

1,668

52.6

(47)

(2.9)

Global Medical

(4)

1,055

33.3

1,025

32.3

2.9

Total Global Distribution and Value

-Added Services

2,676

84.5

2,693

84.9

(17)

(0.7)

Global Specialty Products

(5)

11.6

11.3

2.0

Global Technology

(6)

5.1

5.0

2.9

Eliminations

(37)

(1.2)

(38)

(1.2)

n/a

Total

3,168

100.0

3,172

100.0

(4)

(0.1)

(1)

Includes infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, dental

implants, gypsum, acrylics, articulators, abrasives, PPE products,

and our own corporate brand of consumable merchandise.

(2)

Includes dental chairs, delivery units and lights, digital dental laboratories, X-ray supplies and equipment, equipment repair and

high-tech and digital restoration equipment.

(3)

Consists of financial services on a non-recourse basis, continuing education services for practitioners, consulting and other services.

(4)

Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, X-ray

products, equipment, PPE products and vitamins.

(5)

Includes manufacturing, marketing and sales of dental implant and biomaterial products; and endodontic, orthodontic and

orthopedic products and other health care-related products and services.

(6)

Consists of practice management software, e-services, and other products, which are distributed to health care providers.

The components of our sales growth/(decline) were as follows:

Constant Currency

Growth/(Decline)

Total Constant

Currency

Growth/(Decline)

Foreign

Exchange

Impact

Total Sales

Growth/

(Decline)

Local Internal

Growth/(Decline)

Acquisition

Growth

Global Distribution and Value

-Added Services

Global Dental Merchandise

0.4

(2.5)

(2.1)

Global Dental Equipment

(3.2)

0.8

(2.4)

(2.1)

(4.5)

Global Value

-added services

(14.4)

7.2

(7.2)

(0.9)

(8.1)

Global Dental

(1.3)

0.8

(0.5)

(2.4)

(2.9)

Global Medical

1.8

1.2

3.0

(0.1)

2.9

Total Global Distribution and Value

-Added Services

(0.1)

0.9

0.8

(1.5)

(0.7)

Global Specialty Products

0.3

4.0

4.3

(2.3)

2.0

Global Technology

3.4

(0.5)

2.9

Total

0.2

1.2

1.4

(1.5)

(0.1)

Global Sales

Global net sales for the three months ended March 29, 2025 decreased 0.1%.

Foreign exchange resulted in a 1.5%

decrease in sales growth,

partially offset by 1.2% acquisition sales growth.

The components of our sales decrease

are presented in the table above.

The 0.2% increase in our internally generated local currency sales was

primarily attributable to lower sales of PPE

products and COVID-19 test kits, and the impact of the deferral of sales of

U.S. dental equipment from the fourth

quarter of 2023 into the first quarter of 2024 as a result of the cyber incident,

partially offset by dental merchandise

and equipment sales growth in certain of our international markets,

and medical sales growth attributable to

increased patient traffic and growth of our Home Solutions business.

For the three months ended March 29, 2025,

the estimated increase in internally generated local currency sales, excluding

PPE products and COVID-19 test kits,

was 0.7%.

Global Distribution and Value-Added Services Sales

Global Distribution and Value-Added Services net sales for the three months ended March 29, 2025 decreased

0.7%.

The components of our sales decrease are presented in

the table above.

The 1.3% decrease in internally generated local currency dental sales was primarily

due to lower sales of PPE

products and the impact of the deferral of sales of U.S. dental equipment

from the fourth quarter of 2023 into the

first quarter of 2024 as a result of the cyber incident.

The decrease was partially offset by dental merchandise and

equipment sales growth in certain of our international markets.

The 1.8% increase in internally generated local currency medical sales was

attributable to increased patient traffic

and growth of our Home Solutions business,

partially offset by lower sales of PPE products and COVID-19 test

kits.

The decrease in internally generated local currency value-added services

sales was attributable primarily to lower

sales in our practice transitions business,

which can fluctuate from quarter to quarter.

We estimate that sales of PPE products and COVID-19 test kits were approximately $163

million for the three

months ended March 29, 2025,

as compared to $180 million for the three months ended March

30, 2024,

representing an estimated decrease of $17 million.

The estimated $17 million net decrease in sales of PPE products

and COVID-19 test kits represents 0.6% of Global Distribution and Value-Added Services

net sales for the three

months ended March 29, 2025, and was primarily due to lower glove

prices.

The estimated increase in the

segment’s internally generated local currency sales, excluding PPE products and COVID-19 test kits, was

0.5%.

Global Specialty Products

Global Specialty Products net sales for the three months ended March

29, 2025 increased 2.0%.

The components

of our sales increase are presented in the table above.

The 0.3% increase in internally generated local currency sales was attributable

to growth in our implant and

biomaterial businesses in certain of our international markets, partially

offset by a decline in endodontic and

orthodontic sales globally and implant sales in the United States.

The increase in constant currency Global

Specialty Products sales was also attributable to the acquisition of TriMed Inc. during the year ended

December 28,

Global Technology

Global Technology net sales for the three months ended March 29, 2025 increased 2.9%.

The components of sales

growth are presented in the table above.

The internally generated local currency increase of 3.4% in Global Technology sales was primarily attributable to a

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

software and an increase in

revenue cycle management solutions, partially offset by lower revenues of certain legacy products.

Gross Profit

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

March 29,

Gross

March 30,

Gross

Increase / (Decrease)

2025

Margin %

2024

Margin %

Global Distribution and Value

-Added Services

25.4

26.2

(26)

(3.7)

Global Specialty Products

56.0

55.1

3.7

Global Technology

67.9

67.2

4.0

Corporate

n/a

Total

1,000

31.6

1,012

31.9

(12)

(1.2)

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.

Gross margin

percentages vary between our segments.

We realize substantially higher gross margin from sales of products that

we develop and manufacture within our Global Specialty Products segment

compared to gross margin from sales of

products that we distribute within our Global Distribution and Value-Added Services segment.

Within our Global

Technology segment, higher gross margins result from us being both the developer and seller of software products

and services.

Within our Global Distribution and Value

-Added Services segment,

gross profit margins may vary between the

periods as a result of the changes in the mix of products sold as well as

changes in our customer mix.

With respect

to customer mix, sales to our large-group customers are typically completed at lower gross

margins due to the

higher volumes sold as opposed to the gross margin on sales to office-based practitioners, who normally

purchase

lower volumes.

The decrease in Global Distribution and Value-Added Services gross profit for the three months ended March 29,

2025 compared to the prior-year-period is due to lower sales of dental equipment in the U.S.,

lower sales in our

practice transitions business and lower gross margins of our dental merchandise

products.

The increase in Global Specialty Products gross profit reflects increased

internally generated sales volume and

gross profit from acquisitions.

The increase in gross margin rates was due to product mix.

The increase in Global Technology gross profit is the result of higher internally generated sales, and improved

gross margin rates.

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization; and

restructuring costs) by segment were as follows:

% of

March 29,

Respective

March 30,

Respective

Increase / (Decrease)

2025

Net Sales

2024

Net Sales

Global Distribution and Value

-Added Services

19.2

19.9

(22)

(4.1)

Global Specialty Products

40.7

43.2

(6)

(3.9)

Global Technology

42.1

45.8

(4)

(5.4)

Corporate

n/a

24.3

24.8

(16)

(2.1)

Adjustments

(1)

n/a

(21)

n/a

Total operating expenses

26.0

27.2

(37)

(4.4)

(1)

Adjustments represent items excluded from segment operating income

to enable comparison of financial

results between periods.

These items may vary independently of business performance.

Please see

Note 5

– Segment Data

These adjustments (current quarter vs. prior quarter) consist of

(i) acquisition intangible

amortization ($43 million vs. $46 million), (ii) restructuring costs ($25 million

vs. $10 million), (iii)

changes in contingent consideration ($(2) million vs. $15 million),

(iv) cyber incident third-party advisory

expenses, net of insurance proceeds ($(20) million net proceeds vs. $5

million net expenses), (v)

impairment of intangible assets ($1 million vs. $0 million), and (vi)

costs associated with shareholder

advisory matters ($8 million vs. $0 million).

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

Operating Costs

(excluding

acquisitions)

Acquisitions

Adjustments

Total

Global Distribution and Value

-Added Services

(28)

(22)

Global Specialty Products

(4)

(2)

(6)

Global Technology

(4)

Corporate

(20)

(16)

Adjustments

(21)

Total operating expenses

(20)

(21)

(37)

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

in the table above.

The decrease in

operating costs (excluding acquisitions) during the three months ended

March 29, 2025 included cost savings from

our restructuring activities, certain changes in estimates and other operating

cost efficiencies, partially offset by an

increase in Corporate costs related to investments in technology, higher corporate administrative fees, as well as a

return to historical levels of compensation.

Other Expense, Net

Other expense, net was as follows:

March 29,

March 30,

Variance

2025

2024

Interest income

13.6

Interest expense

(35)

(30)

(5)

(15.5)

Other, net

(1)

(3)

(146.1)

Other expense, net

(30)

(23)

(7)

(31.2)

Interest income increased primarily due to increased late fee income.

Interest expense increased primarily due to

increased borrowings, partially offset by lower interest rates.

Income Taxes

Our effective tax rate was 24.9% for the three months ended March 29, 2025, compared

to 25.6%

for the prior year

period.

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

and foreign

income taxes and interest expense.

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

technical and administrative

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

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

Effective January 1, 2024, the minimum global tax

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

Future tax reform resulting from these

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

may adversely impact our effective tax

rate going forward or result in higher cash tax liabilities.

As of March 29, 2025, the impact of the Pillar Two rules

to our financial statements was immaterial.

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 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 $37 million for the

three months ended March 29, 2025, compared to

net cash provided by operating activities of $197 million for the

prior year.

The net change of $160 million was

primarily attributable to changes in working capital accounts (primarily

accounts receivable, inventory, and

accounts payable and accrued expenses).

Our operating cash flows during the three months ended March

30, 2024

were affected by the residual impacts of the 2023 cyber incident and included a higher-than-normal

level of cash

collections.

Our cash collections normalized during the three months ended

March 29, 2025.

Net cash used in investing activities was $99 million for the three months

ended March 29, 2025, compared to net

cash used in investing activities of $72 million for the prior year.

The net change of $27 million was primarily

attributable to increased payments for equity investments and business

acquisitions.

Net cash provided by financing activities was $89 million for the

three months ended March 29, 2025, compared to

net cash used in financing activities of $151 million for the prior year.

The net change of $240 million was

primarily due to increased net borrowings from debt to finance our investments,

partially offset by increased

repurchases of common stock.

The following table summarizes selected measures of liquidity and capital

resources:

March 29,

December 28,

2025

2024

Cash and cash equivalents

Working

capital

(1)

1,120

1,180

Debt:

Bank credit lines

Current maturities of long-term debt

Long-term debt

1,968

1,830

Total debt

2,891

2,536

Leases:

Current operating lease liabilities

Non-current operating lease liabilities

(1)

Includes $471 million and $241 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

securitization at March 29, 2025 and December 28, 2024, 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 decreased

to 44.1 days as of March 29, 2025 from

50.4 days as of March 30, 2024, which was primarily attributable to

impact that the cyber incident had on the cash

collections during the three months ended March 30, 2024.

During the three months ended March 29, 2025, we

wrote off approximately $2 million of fully reserved accounts receivable against our trade

receivable reserve.

Our

inventory turns from operations decreased to 4.8 as of March 29, 2025

from 4.9 as of March 30, 2024.

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 less than one year to approximately

16 years, some of

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

As of March 29, 2025, our right-of-use assets

related to operating leases were $294 million and our current and non-current

operating lease liabilities were $77

million and $256 million, respectively.

Stock Repurchases

On January 27, 2025, 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 March 29, 2025, we repurchased $5.3 billion,

or 98,069,939 shares, under our

common stock repurchase programs, with $718 million available

as of March 29, 2025 for future common stock

share repurchases.

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

to accelerate our share

repurchase activity.

Redeemable Noncontrolling Interests

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

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

Accounting Standards Codification Topic 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling

interest holder under the terms of a put

option contained in contractual agreements.

As of March 29, 2025 and December 28, 2024, our balance

for

redeemable noncontrolling interests was $765 million and $806 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 28, 2024.

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.

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