10-Q - HSIC - Equibles

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

April 1, 2023

☐

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

ACT

OF 1934

For the transition period from ____________ to ____________

Commission File Number:

0-27078

HENRY SCHEIN, INC.

(Exact name of registrant as specified in its charter)

Delaware

11-3136595

(State or other jurisdiction of

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

incorporation or organization)

135 Duryea Road

Melville

New York

(Address of principal executive offices)

11747

(Zip Code)

(

631

)

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 May 1, 2023,

there were

131,003,202

shares of the registrant’s common stock outstanding.

HENRY SCHEIN, INC.

INDEX

PART I. FINANCIAL INFORMATION

Page

ITEM 1.

Condensed Consolidated Financial Statements:

Condensed Consolidated Balance Sheets as of April 1, 2023 and December 31, 2022

Condensed Consolidated Statements of Income for the three months ended

April 1, 2023 and March 26, 2022

Condensed Consolidated Statements of Comprehensive Income for the

three months ended April 1, 2023 and March 26, 2022

Condensed Consolidated Statement of Changes in Stockholders' Equity

for the three months ended April 1, 2023 and March 26, 2022

Condensed Consolidated Statements of Cash Flows for the

three months ended April 1, 2023 and March 26, 2022

Notes to Condensed Consolidated Financial Statements

Note 1 – Basis of Presentation

Note 2 – Critical Accounting Policies, Accounting Pronouncements Adopted

and Recently Issued Accounting Standards

Note 3 – Net Sales from Contracts with Customers

Note 4 – Segment Data

Note 5 – Business Acquisitions

Note 6 – Fair Value Measurements

Note 7 – Debt

Note 8 – Income Taxes

Note 9 – Plan of Restructuring

Note 10 – Legal Proceedings

Note 11 – Stock-Based Compensation

Note 12 – Redeemable Noncontrolling Interests

Note 13 – Comprehensive Income

Note 14 – Earnings Per Share

Note 15 – Supplemental Cash Flow Information

Note 16 – 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

ITEM 1.

Legal Proceedings

ITEM 1A.

Risk Factors

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

ITEM 6.

Exhibits

Signature

Table of Contents

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)

April 1,

December 31,

2023

2022

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

126

117

Accounts receivable, net of allowances for credit losses of $

and $

1,470

1,442

Inventories, net

1,918

1,963

Prepaid expenses and other

438

466

Total current assets

3,952

3,988

Property and equipment, net

396

383

Operating lease right-of-use assets

280

284

Goodwill

2,917

2,893

Other intangibles, net

548

587

Investments and other

479

472

Total assets

8,572

8,607

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND

STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

855

1,004

Bank credit lines

236

103

Current maturities of long-term debt

Operating lease liabilities

Accrued expenses:

Payroll and related

231

314

Taxes

156

132

Other

566

592

Total current liabilities

2,172

2,224

Long-term debt

1,021

1,040

Deferred income taxes

Operating lease liabilities

274

275

Other liabilities

368

361

Total liabilities

3,875

3,936

Redeemable noncontrolling interests

570

576

Commitments and contingencies

(nil)

Stockholders' equity:

Preferred stock, $

0.01

par value,

1,000,000

shares authorized,

none

outstanding

Common stock, $

0.01

par value,

480,000,000

shares authorized,

131,196,783

outstanding on April 01, 2023 and

131,792,817

outstanding on December 31, 2022

Additional paid-in capital

Retained earnings

3,684

3,678

Accumulated other comprehensive loss

(213)

(233)

Total Henry Schein, Inc. stockholders' equity

3,472

3,446

Noncontrolling interests

655

649

Total stockholders' equity

4,127

4,095

Total liabilities, redeemable noncontrolling

interests and stockholders' equity

8,572

8,607

Table of Contents

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS

OF INCOME

(in millions,

except share and per share data)

(unaudited)

Three Months Ended

April 1,

March 26,

2023

2022

Net sales

3,060

3,179

Cost of sales

2,094

2,206

Gross profit

966

973

Operating expenses:

Selling, general and administrative

717

682

Depreciation and amortization

Restructuring costs

Operating income

175

244

Other income (expense):

Interest income

Interest expense

(14)

(7)

Other, net

(1)

Income before taxes, equity in earnings of affiliates and noncontrolling interests

163

239

Income taxes

(39)

(57)

Equity in earnings of affiliates

Net income

128

186

Less: Net income attributable to noncontrolling interests

(7)

(5)

Net income attributable to Henry Schein, Inc.

121

181

Earnings per share attributable to Henry Schein, Inc.:

Basic

0.92

1.31

Diluted

0.91

1.30

Weighted-average common

shares outstanding:

Basic

131,365,789

137,296,581

Diluted

133,039,886

139,237,472

Table of Contents

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(in millions)

(unaudited)

Three Months Ended

April 1,

March 26,

2023

2022

Net income

128

186

Other comprehensive income, net of tax:

Foreign currency translation gain

Unrealized gain (loss) from foreign currency hedging activities

(3)

Other comprehensive income, net of tax

Comprehensive income

150

190

Less: Comprehensive income attributable to noncontrolling interests:

Net income

(7)

(5)

Foreign currency translation gain

(2)

(1)

Comprehensive income attributable to noncontrolling interests

(9)

(6)

Comprehensive income attributable to Henry Schein, Inc.

141

184

Table of Contents

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, December 31, 2022

131,792,817

3,678

(233)

649

4,095

Net income (excluding $

attributable to redeemable

noncontrolling interests)

121

124

Foreign currency translation gain (excluding gain of $

attributable to redeemable noncontrolling interests)

Unrealized loss from foreign currency hedging activities,

net of tax benefit of $

(3)

Change in fair value of redeemable securities

Initial noncontrolling interests and adjustments related to

business acquisitions

Repurchases and retirement of common stock

(1,223,919)

(13)

(87)

(100)

Stock-based compensation expense

1,016,300

Stock issued upon exercise of stock options

10,779

Shares withheld for payroll taxes

(399,194)

(29)

Transfer of charges in excess of

capital

(28)

Balance, April 1, 2023

131,196,783

3,684

(213)

655

4,127

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, December 25, 2021

137,145,558

3,595

(171)

638

4,063

Net income (excluding $

attributable to redeemable

noncontrolling interests)

181

182

Foreign currency translation gain (excluding gain of $

attributable to redeemable noncontrolling interests)

Unrealized gain from foreign currency hedging activities,

net of tax of $

Purchase of noncontrolling interests

(7)

Change in fair value of redeemable securities

(3)

Stock-based compensation expense

876,161

Stock issued upon exercise of stock options

26,233

Shares withheld for payroll taxes

(336,331)

(28)

Settlement of stock-based compensation awards

(2,812)

Transfer of charges in excess of

capital

(17)

Balance, March 26, 2022

137,708,809

3,759

(168)

632

4,224

Table of Contents

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(in millions)

(unaudited)

Three Months Ended

April 1,

March 26,

2023

2022

Cash flows from operating activities:

Net income

128

186

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Non-cash restructuring charges

Stock-based compensation expense

Provision for losses on trade and other accounts receivable

Provision for (benefit from) deferred income taxes

(3)

Equity in earnings of affiliates

(4)

Distributions from equity affiliates

Changes in unrecognized tax benefits

Other

(1)

(7)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(20)

Inventories

(9)

Other current assets

Accounts payable and accrued expenses

(243)

(188)

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of fixed assets

(31)

(19)

Payments related to equity investments and business acquisitions,

net of cash acquired

(1)

(5)

Proceeds from loan to affiliate

Other

(9)

(7)

Net cash used in investing activities

(39)

(27)

Cash flows from financing activities:

Net change in bank borrowings

132

Proceeds from issuance of long-term debt

Principal payments for long-term debt

(1)

(53)

Proceeds from issuance of stock upon exercise of stock options

Payments for repurchases and retirement of common stock

(100)

Payments for taxes related to shares withheld for employee taxes

(30)

(26)

Distributions to noncontrolling shareholders

(4)

(5)

Acquisitions of noncontrolling interests in subsidiaries

(8)

(10)

Net cash provided by (used in) financing activities

(62)

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of period

117

118

Cash and cash equivalents, end of period

126

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 1 – Basis of Presentation

Our condensed consolidated financial statements include the accounts of Henry

Schein, Inc. and all of our

controlled subsidiaries (“we”, “us” or “our”).

All intercompany accounts and transactions are eliminated

consolidation.

Investments in unconsolidated affiliates in which we have the ability to

influence the operating or

financial decisions are accounted for under the equity method.

Certain prior period amounts have been reclassified

to conform to the current

period presentation.

These reclassifications, individually and in the aggregate, did

not

have a material impact on our condensed consolidated financial condition,

results of operations or cash flows.

Our accompanying unaudited condensed consolidated financial statements

have been prepared in accordance with

accounting principles generally accepted in the United States

(“U.S. GAAP”) for interim financial information and

with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Accordingly, they do not include all of the

information and footnote disclosures required by U.S. GAAP for complete

financial statements.

The unaudited interim condensed consolidated financial statements should be

read in conjunction with the audited

consolidated financial statements and notes to the consolidated financial

statements contained in our Annual Report

on Form 10-K for the year ended December 31, 2022 and with the information

contained in our other publicly-

available filings with the Securities and Exchange Commission.

The condensed consolidated financial statements

reflect all adjustments considered necessary for a fair presentation of

the consolidated results of operations and

financial position for the interim periods presented.

All such adjustments are of a normal recurring nature.

The preparation of financial statements in conformity with accounting principles

generally accepted in the United

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

and liabilities and

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

statements and the reported amounts of

revenues and expenses during the reporting period.

Actual results could differ from those estimates.

The results of

operations for the three months ended April 1, 2023 are not necessarily

indicative of the results to be expected for

any other interim period or for the year ending December 30, 2023.

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

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

direct activities that most significantly affect the economic performance and have

the obligation to absorb the

majority of the losses or benefits.

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

are pledged as

collateral to the related debt.

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

April 1, 2023 and December 31, 2022, certain trade accounts receivable that

can only be used to settle obligations

of this VIE were $

555

million and $

327

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

have recourse to us were $

420

million and $

255

million, respectively.

Our condensed consolidated financial statements reflect estimates and

assumptions made by us that affect, among

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

asset valuation; inventory valuation; equity

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

deferred income taxes and income

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

supplier rebates; measurement of

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

plans; and pension plan

assumptions.

There is an ongoing risk that the consequences of the COVID-19

pandemic may again have a

material adverse effect on our business, results of operations and cash flows and may

result in a material adverse

effect on our financial condition and liquidity.

However, the extent of the potential impact cannot be reasonably

estimated at this time

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 2 – Critical Accounting Policies, Accounting Pronouncements Adopted

and Recently Issued Accounting

Standards

Critical Accounting Policies

There have been no material changes in our critical accounting policies

during the three months ended April 1,

2023, as compared to the critical accounting policies described in Item

7 of our Annual Report on Form 10-K for

the year ended December 31, 2022.

Recently Issued Accounting Standards

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update

(“ASU”) No. 2022-04, “Liabilities – Supplier Finance Programs (Subtopic

405-50): Disclosure of Supplier Finance

Program Obligations,” which will increase transparency of supplier finance

programs by requiring entities that use

such programs in connection with the purchase of goods and services to disclose

certain qualitative and quantitative

information about such programs.

ASU 2022-04 is effective for fiscal years beginning after December 15, 2022,

including interim periods within those fiscal years, except for amended

roll forward information, which is effective

for fiscal years beginning after December 15, 2023.

We do not expect that the requirements of this guidance will

have a material impact on our condensed consolidated financial statements.

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

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

December 21, 2022 to December 31, 2024.

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

material impact on our condensed consolidated financial statements.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 3 – Net Sales from Contracts with Customers

Net sales are recognized in accordance with policies disclosed in Item

8 of our Annual Report on Form 10-K for

the year ended December 31, 2022.

Disaggregation of Net Sales

The following table disaggregates our net sales by reportable segment and geographic

area:

Three Months Ended

April 1, 2023

North America

International

Global

Net sales:

Health care distribution

Dental

1,144

754

1,898

Medical

951

971

Total health care distribution

2,095

774

2,869

Technology

and value-added services

166

191

Total net sales

2,261

799

3,060

Three Months Ended

March 26, 2022

North America

International

Global

Net sales:

Health care distribution

Dental

1,105

723

1,828

Medical

1,150

1,172

Total health care distribution

2,255

745

3,000

Technology

and value-added services

156

179

Total net sales

2,411

768

3,179

Deferred Revenue

During the three months ended April 1, 2023, we recognized in net sales

million of the amounts that were

previously deferred at December 31, 2022.

At December 31, 2022, the current portion of contract liabilities

of $

million was reported in accrued expenses: other, and $

million related to non-current contract liabilities was

reported in other liabilities.

At April 1, 2023, the current and non-current portion of contract liabilities were

million and $

million, respectively.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 4

–

Segment Data

We conduct our business through

two

reportable segments: (i) health care distribution and (ii) technology and

value-added services.

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

Our global

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

and other

institutions.

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

emergency

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

and large enterprises, such as

group practices and integrated delivery networks, among other providers

across a wide range of specialties.

Our

dental and medical groups serve practitioners in

countries worldwide.

The health care distribution reportable segment aggregates our global dental

and medical operating segments.

This

segment distributes consumable products, dental specialty products, small

equipment, laboratory products, large

equipment, equipment repair services, branded and generic pharmaceuticals,

vaccines, surgical products, diagnostic

tests, infection-control products, personal protective equipment (“PPE”)

and vitamins.

Our global technology and value-added services reportable segment provides

software, technology and other value-

added services to health care practitioners.

Our technology offerings include practice management software

systems for dental and medical practitioners.

Our value-added practice solutions include practice consultancy,

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

basis, e-services, practice

technology, network and hardware services, as well as continuing education services for practitioners.

The following tables present information about our reportable and operating

segments:

Three Months Ended

April 1,

March 26,

2023

2022

Net Sales:

Health care distribution

(1)

Dental

1,898

1,828

Medical

971

1,172

Total health care distribution

2,869

3,000

Technology

and value-added services

(2)

191

179

Total

3,060

3,179

(1)

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

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

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

(2)

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

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

education services for practitioners, consulting and other services.

Three Months Ended

April 1,

March 26,

2023

2022

Operating Income:

Health care distribution

145

211

Technology

and value-added services

Total

175

244

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 5

–

Business Acquisitions

In connection with our business acquisitions, the major classes of

assets and liabilities to which we generally

allocate acquisition consideration to, excluding goodwill, include

identifiable intangible assets (i.e., customer

relationships and lists, trademarks and trade names, product development

and non-compete agreements), inventory

and accounts receivable.

The estimated fair value of identifiable intangible assets

is based on critical judgments

and assumptions derived from analysis of market conditions, including

discount rates, projected revenue growth

rates (which are based on historical trends and assessment of financial projections),

estimated customer attrition and

projected cash flows.

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

and market

conditions.

While we use our best estimates and assumptions to accurately value assets

acquired and liabilities assumed at the

acquisition date as well as contingent consideration, where applicable,

our estimates are inherently uncertain and

subject to refinement.

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

or the measurement period,

we may record adjustments to the assets acquired and liabilities assumed

with the corresponding offset to goodwill

within our condensed consolidated balance sheets.

At the end of the measurement period or final determination of

the values of such assets acquired or liabilities assumed, whichever

comes first, any subsequent adjustments are

recognized in our condensed consolidated statements of operations.

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

31, 2022 had not been completed in

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

assets, and contingent consideration

assets and liabilities.

For the three months ended April 1, 2023 and March 26, 2022,

there were no material

adjustments recorded in our condensed consolidated statements of income

relating to changes in estimated values of

assets acquired, liabilities assumed and contingent consideration

assets and liabilities.

2023 Acquisitions

During the three months ended April 1, 2023, we acquired the majority

of a company within the health care

distribution segment.

The impact of this acquisition was not considered material to

our condensed consolidated

financial statements.

The following table aggregates

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

paid and net

assets acquired for the acquisition during the three months ended April

1, 2023.

2023

Acquisition consideration:

Cash

Deferred consideration

Noncontrolling interests

Total consideration

Intangible assets

Total identifiable

net assets

Goodwill

Total net assets acquired

The acquired goodwill is deductible for tax purposes.

During the three months ended April 1, 2023 the identifiable intangible

assets acquired consisted of customer

relationships and lists of $

million and trademarks and tradenames of $

million.

The estimated useful lives of

these intangible assets are

2 years

and

5 years

, respectively.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Acquisition Costs

During the three months ended April 1, 2023 and March 26, 2022 we

incurred $

million and $

million,

respectively, in acquisition costs.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 6 – Fair Value Measurements

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

paid to transfer a liability in an orderly

transaction between market participants at the measurement date.

The fair value hierarchy distinguishes between

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

from independent sources (observable

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

information available in the circumstances (unobservable inputs).

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

highest priority to unadjusted quoted prices

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

to unobservable inputs (Level 3).

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

•

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

or liabilities that are accessible at the

measurement date.

•

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

for the asset or liability,

either directly or indirectly.

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

in active markets;

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

not active; inputs other than quoted

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

derived principally from or corroborated by

observable market data by correlation or other means.

•

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

The following section describes the fair values of our financial instruments

and the methodologies that we used to

measure their fair values.

Investments and notes receivable

There are no quoted market prices available for investments in unconsolidated

affiliates and notes receivable.

Certain of our notes receivable contain variable interest rates.

We believe the carrying amounts are a reasonable

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

Debt

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

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

classified as Level 3 within the fair value hierarchy, and as of April 1, 2023 and December 31, 2022 was estimated

at $

1,312

million and $

1,149

million, respectively.

Factors that we considered when estimating the fair value

our debt include market conditions, such as interest rates and credit spreads.

Derivative contracts

Derivative contracts are valued using quoted market prices and

significant other observable inputs.

We use

derivative instruments to minimize our exposure to fluctuations in foreign

currency exchange rates.

Our derivative

instruments primarily include foreign currency forward agreements related

to certain intercompany loans, certain

forecasted inventory purchase commitments with foreign suppliers,

foreign currency forward contracts to hedge a

portion of our euro-denominated foreign operations which are designated

as net investment hedges and a total

return swap for the purpose of economically hedging our unfunded non-qualified

supplemental executive retirement

plan and our deferred compensation plan.

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

are obtained by comparing our contract

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

is based on market rates for comparable

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

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Total

Return Swaps

The fair value for the total return swap is measured by valuing

the underlying exchange traded funds of the swap

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

date and are classified within Level 2 of the

fair value hierarchy.

Redeemable noncontrolling interests

The values for redeemable noncontrolling interests are classified within Level

3 of the fair value hierarchy and are

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

See

Note 12 – Redeemable Noncontrolling

Interests

for additional information.

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

and Other intangibles, net, and are

classified as Level 3 within the fair value hierarchy.

The following table presents our assets and liabilities that are measured and

recognized at fair value on a recurring

basis classified under the appropriate level of the fair value hierarchy as of

April 1, 2023 and December 31, 2022:

April 1, 2023

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total return

swaps

Total assets

Liabilities:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total liabilities

Redeemable noncontrolling interests

570

December 31, 2022

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total assets

Liabilities:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total return

swaps

Total liabilities

Redeemable noncontrolling interests

576

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 7 – Debt

Bank Credit Lines

Bank credit lines consisted of the following:

April 1,

December 31,

2023

2022

Revolving credit agreement

Other short-term bank credit lines

236

103

Total

236

103

Revolving Credit Agreement

August 20, 2021

, we entered into a $

1.0

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

This

facility, which matures on

August 20, 2026

replaced our $

750

million revolving credit facility which was scheduled

to mature in April 2022.

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

leverage ratio at

the end of each financial reporting quarter.

Most LIBOR rates have been discontinued after December 31,

2021,

while the remaining LIBOR rates will be discontinued immediately

after June 30, 2023.

We do not expect the

discontinuation of LIBOR as a reference rate in our debt agreements

to have a material adverse effect on our

financial position or to materially affect our interest expense.

The Credit Agreement requires, among other things,

that we maintain certain maximum leverage ratios.

Additionally, the Credit Agreement contains customary

representations, warranties and affirmative covenants as well as customary negative

covenants, subject to

negotiated exceptions, on liens, indebtedness, significant corporate changes

(including mergers), dispositions and

certain restrictive agreements.

As of April 1, 2023 and December 31, 2022, we had

borrowings under this

revolving credit facility, and there were $

million and $

million of letters of credit, respectively, provided to third

parties under the credit facility.

Other Short-Term Bank Credit

Lines

As of April 1, 2023 and December 31, 2022, we had various other short-term

bank credit lines available, with a

maximum borrowing capacity of $

404

million and $

402

million, respectively.

As of April 1, 2023 and December

31, 2022, $

236

million and $

103

million, respectively, were outstanding.

At April 1, 2023 and December 31, 2022,

borrowings under all of these credit lines had a weighted average interest

rate of

7.55

% and

10.11

%, respectively.

Long-term debt

Long-term debt consisted of the following:

April 1,

December 31,

2023

2022

Private placement facilities

699

U.S. trade accounts receivable securitization

360

330

Various

collateralized and uncollateralized loans payable with interest,

in varying installments through 2023 at interest rates

ranging from

0.00

% to

3.65

% at April 1, 2023 and

ranging from

0.00

% to

3.50

% at December 31, 2022

Finance lease obligations

Total

1,076

1,046

Less current maturities

(55)

(6)

Total long-term debt

1,021

1,040

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Private Placement Facilities

Our private placement facilities include

four

insurance companies, have a total facility amount of $

1.5

billion, and

are available on an uncommitted basis at fixed rate economic

terms to be agreed upon at the time of issuance, from

time to time through

October 20, 2026

The facilities allow us to issue senior promissory notes to the

lenders at a

fixed rate based on an agreed upon spread over applicable treasury notes

at the time of issuance.

The term of each

possible issuance will be selected by us and can range from

five

15 years

(with an average life no longer than

years

The proceeds of any issuances under the facilities will be used

for general corporate purposes, including

working capital and capital expenditures, to refinance existing indebtedness,

and/or to fund potential acquisitions.

The agreements provide, among other things, that we maintain

certain maximum leverage ratios, and contain

restrictions relating to subsidiary indebtedness, liens, affiliate transactions, disposal

of assets and certain changes in

ownership.

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

pay off the facilities prior to the

applicable due dates.

The components of our private placement facility borrowings, which

have a weighted average interest rate of

2.99

%, as of April 1, 2023 are presented in the following table:

Amount of

Borrowing

Date of Borrowing

Outstanding

Rate

Due Date

January 20, 2012

3.45

January 20, 2024

December 24, 2012

3.00

December 24, 2024

June 16, 2017

100

3.42

June 16, 2027

September 15, 2017

100

3.52

September 15, 2029

January 2, 2018

100

3.32

January 2, 2028

September 2, 2020

100

2.35

September 2, 2030

June 2, 2021

100

2.48

June 2, 2031

June 2, 2021

100

2.58

June 2, 2033

Less: Deferred debt issuance costs

(1)

Total

699

U.S. Trade Accounts Receivable Securitization

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

an asset-backed securitization program with pricing committed for up

three years

This facility agreement has a

purchase limit of $

450

million with

two

banks as agents, expires on

December 15, 2025

As of April 1, 2023 and December 31, 2022, the borrowings outstanding

under this securitization facility were $

360

million and $

330

million, respectively.

At April 1, 2023, the interest rate on borrowings under this

facility was

based on the asset-backed commercial paper rate of

4.99

% plus

0.75

%, for a combined rate of

5.74

December 31, 2022, the interest rate on borrowings under this facility was

based on the asset-backed commercial

paper rate of

4.58

% plus

0.75

%, for a combined rate of

5.33

If our accounts receivable collection pattern changes due to customers

either paying late or not making payments,

our ability to borrow under this facility may be reduced.

We are required to pay a commitment fee of

basis points depending upon program utilization.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 8 – Income Taxes

For the three months ended April 1, 2023 our effective tax rate was

23.8

% compared to

24.0

% for the prior year

period.

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

relates to state and

foreign income taxes and interest expense as well as stock-based compensation.

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

“other liabilities” within our condensed

consolidated balance sheets, as of April 1, 2023 and December 31, 2022

was $

million and $

million,

respectively, of which $

million and $

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

It is possible that the amount of unrecognized tax benefits will

change in the next 12 months, which may result in a

material impact on our condensed consolidated statements of income.

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

The tax years subject to examination by the

IRS include years 2019 and forward.

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

to IRS

examination.

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

the IRS that tax year 2019 was

selected for examination.

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

of the provision for income taxes.

The

amount of tax interest expense was $

million for the three months ended April 1, 2023 and $

million for the three

months ended March 26, 2022.

The total amount of accrued interest is included in “other

liabilities,” and was $

million as of April 1, 2023 and $

million as of December 31, 2022.

The amount of penalties accrued for during

the periods presented were not material to our condensed consolidated financial

statements

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 9 – Plan of Restructuring

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

funding the priorities of the strategic plan and

streamlining operations and other initiatives to increase efficiency.

We expect this initiative to extend through

2023.

We are currently unable in good faith to make a determination of an estimate of the amount or range of

amounts expected to be incurred in connection with these activities, both with

respect to each major type of cost

associated therewith and with respect to the total cost, or an estimate of

the amount or range of amounts that will

result in future cash expenditures.

During the three months ended April 1, 2023, we recorded restructuring costs of

million primarily related to

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

lease assets and fixed assets, and

other lease exit costs.

This amount also includes $

million related to the disposal of an unprofitable U.S. business,

initiated during 2022 and completed during the three months ended April

1, 2023.

Restructuring costs recorded for the three months ended April 1, 2023 consisted

of the following (there were

restructuring costs for the three months ended March 26, 2022):

Three Months Ended April 1, 2023

Health-Care

Distribution

Technology

and

Value-Added

Services

Total

Severance and employee-related costs

Accelerated depreciation and amortization

Exit and other related costs

Loss on disposal of a business

Total restructuring

costs

The following table summarizes,

by reportable segment, the activity related to the liabilities associated

with our

restructuring initiatives

for the period ended April 1, 2023.

The remaining accrued balance of restructuring costs as

of April 1, 2023 is included in accrued expenses: other within our condensed

consolidated balance sheet.

Technology

and

Health Care

Value-Added

Distribution

Services

Total

Balance, December 31, 2022

Restructuring costs

Non-cash asset impairment and accelerated

depreciation and amortization of right-of-use lease

assets and other long-lived assets

(7)

Cash payments and other adjustments

(14)

(3)

(17)

Balance, April 1, 2023

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 10 – Legal Proceedings

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

lawsuits (currently less than one-

hundred and seventy-five (

175

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

number of those cases).

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

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

their own market share and that the entities

in the supply chain (including Henry Schein, Inc. and its affiliated companies) reaped

financial rewards by refusing

or otherwise failing to monitor appropriately and restrict the improper

distribution of those drugs.

These actions

consist of some that have been consolidated within the MultiDistrict Litigation

(“MDL”) proceeding In Re National

Prescription Opiate Litigation (MDL No. 2804; Case No. 17-md-2804)

and are currently stayed, and others which

remain pending in state courts and are proceeding independently and outside

of the MDL.

At this time, the

following cases are set for trial: the action filed by DCH Health Care Authority, et al. in Alabama state court, which

has been designated a bellwether with

eight

thirty-eight

plaintiffs set for a jury trial on July 24, 2023; and the

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

other hospitals located throughout the State of Florida)

in Florida state court, which is currently scheduled for a jury trial

in May 2025.

Of Henry Schein’s 2022 net sales

of approximately $

12.6

billion from continuing operations, sales of opioids represented

less than

two-tenths

of 1

percent.

Opioids represent a negligible part of our business.

We intend to defend ourselves vigorously against

these actions.

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

States Attorney’s Office for the

Western District of Virginia,

seeking documents in connection with an investigation of possible

violations of the

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

Henry Schein.

The investigation relates to the sale of veterinary prescription drugs

to certain customers.

October 2022, Henry Schein received a second Grand Jury Subpoena

from the United States Attorney’s Office for

the Western District of Virginia.

The October Subpoena seeks documents relating to payments Henry

Schein

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

Butler was spun off into a separate company and became a

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

We are cooperating with the

investigation.

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

including, without limitation, product

liability claims, employment matters, commercial disputes, governmental

inquiries and investigations (which may

in some cases involve our entering into settlement arrangements or consent

decrees), and other matters arising out

of the ordinary course of our business.

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

in our opinion none of these other pending matters are currently

anticipated to have a material adverse effect on our

consolidated financial position, liquidity or results of operations.

As of April 1, 2023, we had accrued our best estimate of potential losses

relating to claims that were probable to

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

loss.

This accrued amount, as well as related

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

or cash flows.

Our method for

determining estimated losses considers currently available

facts, presently enacted laws and regulations and other

factors, including probable recoveries from third parties.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 11 – Stock-Based Compensation

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

our 2020 Stock Incentive Plan and to

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

Stock Incentive Plan (together, the

“Plans”).

The Plans are administered by the Compensation Committee of the Board

of Directors (the

“Compensation Committee”).

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

form of time-based and performance-based restricted stock units (“RSUs”)

with the exception of our 2021 plan year

in which non-qualified stock options were issued in place of performance-based

RSUs.

In 2022, we granted time-

based and performance-based RSUs, as well as non-qualified stock

options.

For our 2023 plan year, we returned to

granting our employees equity-based awards solely in the form of time-based

and performance-based RSUs.

Our

non-employee directors receive equity-based awards solely in the form

of time-based RSUs.

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

In the case of RSUs, common

stock is delivered on or following satisfaction of vesting conditions.

We issue RSUs to employees that primarily

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

four

-year cliff vesting and/or (ii)

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

with

three

-year cliff vesting.

RSUs granted to our non-employee directors primarily are granted

with

-month

cliff vesting.

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

a straight-line basis.

With respect to time-based RSUs, we estimate the fair value based on our closing stock price on the date of

grant.

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

received by the

recipient is based upon our performance as measured against specified

targets over a specified period, as

determined by the Compensation Committee.

Although there is no guarantee that performance targets will be

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

our closing stock price at time of grant.

Each of the Plans provide for certain adjustments to the performance

measurement in connection with awards under

the Plans.

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

performance measurement adjustments relate to significant events, including,

without limitation, acquisitions,

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

repurchases), differences in

budgeted average outstanding shares (other than those resulting from capital

transactions referred to above),

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

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

markets, foreign exchange fluctuations, the

financial impact either positive or negative, of the difference in projected earnings

generated by COVID-19 test kits

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

2023 plan years) and impairment charges

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

year), and unforeseen events or

circumstances affecting us.

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

ultimately vest and be issued and the

related compensation expense is adjusted upward or downward based upon our

estimation of achieving such

performance targets.

The ultimate number of shares delivered to recipients and

the related compensation cost

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

as defined under the Plans.

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

common stock at a fixed price following

vesting of the stock options.

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

price on the

date of grant.

Stock options issued in 2021 and 2022 vest

one-third

per year based on the recipient’s continued

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

are fully vested

three years

from the

grant date and have a contractual term of

ten years

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

upon certain events.

Compensation expense for these stock options is recognized

using a graded vesting method.

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

During the three months

ended April 1, 2023 we did

t grant any stock options.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Our accompanying condensed consolidated statements of income reflect

pre-tax share-based compensation expense

of $

million ($

million after-tax) and $

million ($

million after-tax) for the three months ended April 1, 2023

and March 26, 2022, respectively.

Total unrecognized compensation cost related to unvested awards as of April 1, 2023 was $

119

million, which is

expected to be recognized over a weighted average period of approximately

2.7

years.

Our accompanying condensed consolidated statements of cash flows present

our stock-based compensation expense

as an adjustment to reconcile net income to net cash provided by operating activities

for all periods presented.

the accompanying consolidated statements of cash flows, there were

no benefits associated with tax deductions in

excess of recognized compensation as a cash inflow from financing

activities for the three months ended April 1,

2023 and March 26, 2022, respectively.

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

the foreseeable future.

The expected stock price volatility is based on implied volatilities

from traded options on

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

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

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

The

six

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

method for estimating the expected term

as permitted under SAB Topic 14.

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

the

value ultimately realized by recipients of stock options, and subsequent

events are not indicative of the

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

The following table summarizes the stock option activity during the three

months ended April 1, 2023:

Stock Options

Weighted Average

Aggregate

Exercise

Remaining Contractual

Intrinsic

Price

Life (in years)

Value

Outstanding at beginning of period

1,117,574

71.38

Granted

Exercised

(10,897)

62.71

Forfeited

(5,911)

77.31

Outstanding at end of period

1,100,766

71.44

8.3

Options exercisable at end of period

572,132

68.11

Weighted Average

Aggregate

Number of

Exercise

Remaining Contractual

Intrinsic

Options

Price

Life (in years)

Value

Vested

or expected to vest

520,781

75.22

8.5

The following tables summarize the activity of our unvested RSUs for

the three months ended April 1, 2023:

Time-Based Restricted Stock Units

Performance-Based Restricted Stock Units

Weighted Average

Grant Date Fair

Intrinsic Value

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share

Shares/Units

Value Per Share

Per Share

Outstanding at beginning of period

1,756,044

66.59

520,916

60.23

Granted

395,750

77.75

465,260

79.66

Vested

(387,302)

61.13

(627,596)

60.66

Forfeited

(34,843)

68.16

(39,463)

74.48

Outstanding at end of period

1,729,649

70.38

81.54

319,117

68.96

81.54

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 12 – 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.

The components of the change in the redeemable noncontrolling

interests for the three months ended April 1, 2023 and the year ended December

31, 2022 are presented in the

following table:

April 1,

December 31,

2023

2022

Balance, beginning of period

576

613

Decrease in redeemable noncontrolling interests due to acquisitions of

noncontrolling interests in subsidiaries

(8)

(31)

Increase in redeemable noncontrolling interests due to business

acquisitions

Net income attributable to redeemable noncontrolling interests

Dividends declared

(4)

(21)

Effect of foreign currency translation gain (loss) attributable to

redeemable noncontrolling interests

(6)

Change in fair value of redeemable securities

(3)

(4)

Balance, end of period

570

576

Note 13 – Comprehensive Income

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

GAAP,

are excluded from net income as

such amounts are recorded directly as an adjustment to stockholders’

equity.

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

applicable taxes as of:

April 1,

December 31,

2023

2022

Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment

(35)

(37)

Attributable to noncontrolling interests:

Foreign currency translation adjustment

(1)

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

(213)

(236)

Unrealized gain from foreign currency hedging activities

Pension adjustment loss

(2)

Accumulated other comprehensive loss

(213)

(233)

Total Accumulated

other comprehensive loss

(249)

(271)

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

The following table summarizes the components of comprehensive income, net

of applicable taxes as follows:

Three Months Ended

April 1,

March 26,

2023

2022

Net income

128

186

Foreign currency translation gain

Tax effect

Foreign currency translation gain

Unrealized gain (loss) from foreign currency hedging activities

(4)

Tax effect

(1)

Unrealized gain (loss) from foreign currency hedging activities

(3)

Comprehensive income

150

190

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

Fluctuations in the value of foreign

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

on our comprehensive income.

The

foreign currency translation gain during the three months ended April 1,

2023 and three months ended March 26,

2022 was primarily due to changes in foreign currency exchange

rates of the Euro, British Pound, Australian

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

The following table summarizes our total comprehensive income, net of

applicable taxes as follows:

Three Months Ended

April 1,

March 26,

2023

2022

Comprehensive income attributable to

Henry Schein, Inc.

141

184

Comprehensive income attributable to

noncontrolling interests

Comprehensive income attributable to

Redeemable noncontrolling interests

Comprehensive income

150

190

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 14

–

Earnings Per Share

Basic earnings per share is computed by dividing net income attributable

to Henry Schein, Inc. by the weighted-

average number of common shares outstanding for the period.

Our diluted earnings per share is computed similarly

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

for presently unvested RSUs

and upon exercise of stock options using the treasury stock method

in periods in which they have a dilutive effect.

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

share follows:

Three Months Ended

April 1,

March 26,

2023

2022

Basic

131,365,789

137,296,581

Effect of dilutive securities:

Stock options and restricted stock units

1,674,097

1,940,891

Diluted

133,039,886

139,237,472

The number of antidilutive securities that were excluded from the calculation

of diluted weighted average common

shares outstanding are as follows:

Three Months Ended

April 1,

March 26,

2023

2022

Stock options

422,190

76,597

Restricted stock units

18,305

70,923

Total anti-dilutive

securities excluded from EPS computation

440,495

147,520

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HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 15 – Supplemental Cash Flow Information

Cash paid for interest and income taxes was:

Three Months Ended

April 1,

March 26,

2023

2022

Interest

Income taxes

During the three months ended April 1, 2023 and March 26, 2022, we

had $

(4)

million and $

million of non-cash

net unrealized gains (losses) related to foreign currency hedging activities,

respectively.

Note 16 – Related Party Transactions

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

with Internet Brands, which was

formed on July 1, 2018, we entered into a

ten-year

royalty agreement with Internet Brands whereby we will pay

Internet Brands approximately $

million annually for the use of their intellectual property.

During the three

months ended April 1, 2023 and March 26, 2022, we recorded $

million and $

million, respectively, in

connection with costs related to this royalty agreement.

As of April 1, 2023 and December 31, 2022, Henry Schein

One, LLC had a net payable balance due to Internet Brands of $

million and $

million, respectively, comprised

of amounts related to results of operations and the royalty agreement.

The components of this payable are recorded

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

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

account for under the equity accounting

method.

During the three months ended April 1, 2023 and March 26, 2022,

we recorded net sales of $

million and

million, respectively, to such entities.

During the three months ended April 1, 2023 and March 26, 2022,

purchased $

million and $

million, respectively from such entities.

At April 1, 2023 and December 31, 2022, we

had an aggregate of $

million and $

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

million and $

million, respectively, due to our equity affiliates.

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

and minority shareholders.

These

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

ranging from less than

one year

years

As of April 1, 2023, current and non-current liabilities associated with related

party operating leases were $

million and $

million, respectively.

Related party leases represented

6.1

% and

5.6

% of the total current and non-

current operating lease liabilities.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

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

Litigation Reform Act of 1995, we

provide the following cautionary remarks regarding important factors

that, among others, could cause future results

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

expressed or implied

herein.

All forward-looking statements made by us are subject to

risks and uncertainties and are not guarantees of

future performance.

These forward-looking statements involve known and unknown

risks, uncertainties and other

factors that may cause our actual results, performance and achievements

or industry results to be materially

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

forward-looking

statements.

These statements are generally identified by the use of such

terms as “may,” “could,” “expect,”

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

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

terms.

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

to, those discussed in

the documents we file with the Securities and Exchange Commission

(SEC), including our Annual Report on Form

10-K.

Forward looking statements include the overall impact of the Novel Coronavirus

Disease 2019 (COVID-19)

on us, our results of operations, liquidity and financial condition (including

any estimates of the impact on these

items), the rate and consistency with which dental and other practices

resume or maintain normal operations in the

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

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

the resumption of

normal operations, whether supply chain disruptions will adversely impact

our business, the impact of integration

and restructuring programs as well as of any future acquisitions, general economic

conditions including exchange

rates, inflation and recession, and more generally current expectations

regarding performance in current and future

periods.

Forward looking statements also include the (i) our ability to

have continued access to a variety of

COVID-19 test types and expectations regarding COVID-19

test sales, demand and inventory levels and (ii)

potential for us to distribute the COVID-19 vaccines and ancillary supplies.

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

and historical results

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

and any variants thereof, as well as other disease

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

and other natural disasters; our

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

our ability to develop or acquire and

maintain and protect new products (particularly technology products) and

technologies that achieve market

acceptance with acceptable margins; transitional challenges associated with acquisitions,

dispositions and joint

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

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

in our governing documents that may discourage third-party acquisitions

of us; adverse changes in supplier rebates

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

effects of a highly competitive

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

sites) and consolidating market; the

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

care industry;

risks from expansion of customer purchasing power and multi-tiered

costing structures; increases in shipping costs

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

global and domestic macro-economic

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

in energy pricing and the value of the

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

indicators, international trade

agreements, potential trade barriers and terrorism; failure to comply with existing

and future regulatory

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

to comply with laws and regulations

relating to health care fraud or other laws and regulations;

failure to comply with laws and regulations relating to

the collection, storage and processing of sensitive personal information

or standards in electronic health records or

transmissions; changes in tax legislation; risks related to product liability, intellectual property and other claims;

litigation risks;

new or unanticipated litigation developments and the status of litigation

matters; risks associated

with customs policies or legislative import restrictions; cyberattacks

or other privacy or data security breaches; risks

associated with our global operations; our dependence on our senior management,

employee hiring and retention,

and our relationships with customers, suppliers and manufacturers;

and disruptions in financial markets.

The order

in which these factors appear should not be construed to indicate their

relative importance or priority.

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

or predict.

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

of actual results.

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

required by law.

Where You

Can Find Important Information

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

conference calls and webcasts, press releases, the investor relations

page of our website (www.henryschein.com)

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

Recent Developments

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

in the sales of PPE and COVID-19 test kits.

During the three months ended April 1, 2023, we continued to experience

a decrease in the sales of PPE and

COVID-19 test kits compared with the same period in the prior

year and we expect further decreases in sales in

2023 compared to the prior year.

The impact from inflation, including manufacturer price increases excluding PPE

products, was slightly more

pronounced in Europe than in North America.

Though inflation impacts both our revenues and costs, the

depth and

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

corporate brand

alternatives to our more price-sensitive customers who are unable

to absorb price increases, thus positioning us to

protect our gross profit.

Our condensed consolidated financial statements reflect estimates and

assumptions made by us that affect, among

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

asset valuation; inventory valuation; equity

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

deferred income taxes and income

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

supplier rebates; measurement of

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

plans; and pension plan

assumptions.

There is an ongoing risk that the consequences of the COVID-19

pandemic may again have a

material adverse effect on our business, results of operations and cash flows and may

result in a material adverse

effect on our financial condition and liquidity.

However, the extent of the potential impact cannot be reasonably

estimated at this time.

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Executive-Level Overview

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

by a network of people and

technology.

We 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 90 years of experience distributing health

care products.

We are headquartered in Melville, New York,

employ more than 22,000 people (of which approximately 10,700

are

based outside of the United States) and have operations or affiliates in 32 countries

and territories.

Our broad

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

through contribution from strategic

acquisitions.

have established strategically located distribution centers around

the world to enable us to better serve our

customers and increase our operating efficiency.

This infrastructure, together with broad product and service

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

us to be a single source of

supply for our customers’ needs.

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

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

manufacture certain

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

and repackage/relabel prescription

drugs and/or devices.

have

achieved scale in these global businesses primarily through acquisitions

manufacturers of these products typically do not utilize a distribution channel

to serve customers.

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

care distribution and (ii) technology and

value-added services.

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

Our global

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

and other

institutions.

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

emergency

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

and large enterprises, such as

group practices and integrated delivery networks, among other providers

across a wide range of specialties.

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

medical operating segments,

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

repair services,

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

products (including implant,

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

PPE products and vitamins.

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

and other value-added

services to health care practitioners.

Our technology business offerings include practice management software

systems for dental and medical practitioners.

Our value-added practice solutions include practice consultancy,

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

basis, e-services, practice

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

practitioners.

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

is a unified go-to-market

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

equipment sales and service and

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

combined value that we offer through a single

program.

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

national brand products, our corporate brand products and proprietary specialty

products and solutions (including

implant, orthodontic and endodontic products).

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

including software and other value-added services.

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Industry Overview

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

This trend has benefited

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

prices.

It also has accelerated the

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

groups, which, in addition to

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

capable of providing

specialized management information support.

believe that the trend towards cost containment has the potential

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

enhance the efficiency and

facilitation of practice management.

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

and transactions that we

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

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

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

Industry Consolidation

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

and diverse.

The industry ranges from sole practitioners working out of

relatively small offices to group practices

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

combined or otherwise associated their practices.

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

large quantities of supplies

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

care practitioners

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

reliable and substantially complete

order fulfillment.

The purchasing decisions within an office-based health care practice

are typically made by the

practitioner or an administrative assistant.

Supplies and small equipment are generally purchased from more

than

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

The trend of consolidation extends to our customer base.

Health care practitioners are increasingly seeking to

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

hospital organizations.

In many cases, purchasing decisions for consolidated groups

are made at a centralized or

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

believe that consolidation within the industry will continue to

result in a number of distributors, particularly

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

combine with larger companies that can

provide growth opportunities.

This consolidation also may continue to result in distributors seeking

to acquire

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

opportunities to serve a broader

customer base.

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

a provider of products and services

to the health care industry.

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

our existing

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

businesses.

As industry consolidation continues, we believe that we are positioned

to capitalize on this trend, as we believe we

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

there can be no assurances

that we will be able to successfully accomplish this.

also have invested in expanding

our sales/marketing

infrastructure to include a focus on building relationships with decision

makers who do not reside in the office-

based practitioner setting.

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

candidates for joint venture or

acquisition and intend to continue to seek opportunities to expand our

role as a provider of products and services to

the health care industry.

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

any such

opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or

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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 pharmacology treatments,

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

coverage.

In addition, the physician market continues to benefit from

the shift of procedures and diagnostic testing

from acute care settings to alternate-care sites, particularly physicians’

offices.

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

population is expected to grow by approximately 11%.

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

by approximately 21%.

This compares with expected total U.S. population growth

rates of approximately 6%

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

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

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

and elder-care

services.

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

19 million.

The population

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

the same period.

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

care services continue to increase in the

United States.

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

current and future operating, economic, and industry conditions.

The Centers for Medicare and Medicaid Services,

or CMS, published “National Health Expenditure Data” indicating that

total national health care spending reached

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

measure for

annual production of goods and services in the United States.

Health care spending is projected to reach

approximately $6.8 trillion by 2030, or 19.6% of the nation’s projected gross domestic product.

Government

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

exportation, marketing and sale of,

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

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

including as applicable to our

wholesale distribution of pharmaceuticals and medical devices, manufacturing

activities, and as part of our

specialty home medical supply business that distributes and sells medical equipment

and supplies directly to

patients.

Federal, state and certain foreign governments have also increased enforcement

activity in the health care

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

medical

device regulations and data privacy and security standards.

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

local and foreign laws and regulations,

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

disposal of hazardous or potentially

hazardous substances, and safe working conditions.

In addition, certain of our businesses must operate in

compliance with a variety of burdensome and complex billing and record-keeping

requirements in order to

substantiate claims for payment under federal, state and commercial healthcare

reimbursement programs.

One of

these businesses was suspended in October 2021 by CMS from receiving

payments from Medicare, although it was

permitted to continue to perform and bill for Medicare services.

Such suspension was terminated on September 30,

2022.

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

and there have

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

unsuccessful, to

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

as amended by the Health Care

and Education Reconciliation Act, each enacted in March 2010 (as amended,

the “ACA”).

In addition, activities to

control medical costs, including laws and regulations lowering reimbursement

rates for pharmaceuticals, medical

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

Many of these laws and regulations are subject to

change and their evolving implementation may impact our operations and our

financial performance.

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

impact our financial performance,

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

effect on our business.

A more detailed discussion of governmental laws and regulations

is included in Management’s Discussion &

Analysis of Financial Condition and Results of Operations, contained

in our Annual Report on Form 10-K for the

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

Results of Operations

The following tables summarize the significant components of our operating

results and cash flows for the three

months ended April 1, 2023 and March 26, 2022:

Three Months Ended

April 1,

March 26,

2023

2022

Operating results:

Net sales

3,060

3,179

Cost of sales

2,094

2,206

Gross profit

966

973

Operating expenses:

Selling, general and administrative

717

682

Depreciation and amortization

Restructuring costs

Operating income

175

244

Other expense, net

(12)

(5)

Net income

128

186

Net income attributable to Henry Schein, Inc.

121

181

Three Months Ended

April 1,

March 26,

2023

2022

Cash flows:

Net cash provided by operating activities

Net cash used in investing activities

(39)

(27)

Net cash provided by (used in) financing activities

(62)

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Plan of Restructuring

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

funding the priorities of the strategic plan and

streamlining operations and other initiatives to increase efficiency.

We expect this initiative to extend through

2023.

We are currently unable in good faith to make a determination of an estimate of the amount or range of

amounts expected to be incurred in connection with these activities, both with

respect to each major type of cost

associated therewith and with respect to the total cost, or an estimate of

the amount or range of amounts that will

result in future cash expenditures.

During the three months ended April 1, 2023, we recorded restructuring costs of

$30 million primarily related to

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

lease assets and fixed assets, and

other lease exit costs.

This amount also includes $1 million related to the disposal

of an unprofitable U.S. business,

initiated during 2022 and completed during the three months ended April

1, 2023.

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Three Months Ended April 1, 2023 Compared to Three Months Ended March 26, 2022

Net Sales

Net sales were as follows:

April 1,

% of

March 26,

% of

Increase / (Decrease)

2023

Total

2022

Total

Health care distribution

(1)

Dental

1,898

62.0

1,828

57.5

3.8

Medical

971

31.8

1,172

36.9

(201)

(17.2)

Total health care distribution

2,869

93.8

3,000

94.4

(131)

(4.4)

Technology and value-added services

(2)

191

6.2

179

5.6

6.8

Total

3,060

100.0

3,179

100.0

(119)

(3.8)

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

4.0

2.5

6.5

(2.4)

4.1

Dental Equipment

3.9

1.5

5.4

(2.6)

2.8

Total Dental

4.0

2.3

6.3

(2.5)

3.8

Medical

(17.1)

(0.1)

(17.2)

Total Health Care Distribution

(4.3)

1.4

(2.9)

(1.5)

(4.4)

Technology and value-added services

(2)

6.5

1.5

8.0

(1.2)

6.8

Total

(3.7)

1.4

(2.3)

(1.5)

(3.8)

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

actual values and may not recalculate due to rounding.

(1)

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

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

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

(2)

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

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

education services for practitioners, consulting and other services.

Global Sales

Global net sales for the three months ended April 1, 2023 decreased 3.8% based

upon the components presented in

the table above.

Sales of PPE products and COVID-19 test kits for the three

months ended April 1, 2023 were

approximately $201 million, a decrease of approximately 58.8% versus

the three months ended March 26, 2022.

Excluding PPE products and COVID-19 test kits, the increase in

internally generated local currency sales was

6.3%.

Dental

Dental net sales for the three months ended April 1, 2023 increased 3.8%

based upon the components presented in

the table above.

Our sales growth in local currency for dental merchandise was primarily

attributable to stable

patient traffic along with some price increases.

Our sales growth in local currency for dental equipment was

primarily attributable to growth in North America for traditional equipment,

partially offset by a decrease in digital

equipment.

International dental equipment sales growth in local currency

was supported by a strong equipment

backlog.

Sales of PPE products for the three months ended April 1, 2023

were approximately $92 million, a

decrease of approximately 35.8% versus the three months ended March 26,

2022.

Excluding PPE products, the

increase in internally generated local currency dental sales was 7.4%.

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Medical

Medical net sales for the three months ended April 1, 2023 decreased

17.2% based upon the components presented

in the table above.

The local currency decrease in medical sales is primarily attributable

to lower sales of PPE

products and COVID-19 test kits, partially offset by strong medical equipment and

pharmaceutical sales.

Sales of

PPE products and COVID-19 test kits were approximately $109 million for

the three months ended April 1, 2023, a

decrease of approximately 68.4% compared to the three months ended March

26, 2022.

Excluding PPE products

and COVID-19 test kits, the increase in internally generated local currency medical

sales was 4.2%.

Technology and value-added services

Technology and value-added services net sales for the three months ended April 1, 2023 increased 6.8% based upon

the components presented in the table above.

During the three months ended April 1, 2023,

the trend for sales of

transactional software improved as we increased the number of cloud-based

users, generating demand for our

revenue cycle management solutions which drive practice efficiency and patient engagement.

The increase in sales

during the quarter ended April 1, 2023 was partially offset by the expiration, during

the third quarter of 2022, of a

modestly profitable government contract in one of our value-added services

businesses.

Gross Profit

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

April 1,

Gross

March 26,

Gross

Increase / (Decrease)

2023

Margin %

2022

Margin %

Health care distribution

837

29.2

857

28.6

(20)

(2.3)

Technology and value-added services

129

67.4

116

64.9

11.1

Total

966

31.6

973

30.6

(7)

(0.7)

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

throughout our

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

Additionally, we

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

segment than in

our health care distribution segment.

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

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

The software industry typically realizes higher

gross margins to recover investments in research and development.

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

Changes in

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

the most significant drivers affecting

our gross profit margin.

For example, sales of our corporate brand products achieve

gross profit margins that are

higher than average total gross profit margins of all products.

With respect to customer mix, sales to our large-

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

volumes sold as opposed to the

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

Health care distribution gross profit decreased primarily due to the decrease

in net sales discussed above, partially

offset by $11 million of gross profit from acquisitions and gross margin expansion, mainly as a result of price

increases and a favorable impact of sales mix of higher-margin products.

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

generated sales and gross profit of $3 million from acquisitions, as well as an

increase in gross margin rates

primarily due to the impact of price increases.

Table of Contents

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

April 1,

Respective

March 26,

Respective

Increase

2023

Net Sales

2022

Net Sales

Health care distribution

692

24.1

646

21.5

7.2

Technology and value-added services

51.6

46.4

18.7

Total

791

25.8

729

22.9

8.5

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

Restructuring Costs

Operating Costs

Acquisitions

Total

Health care distribution

Technology and value-added services

Total

The restructuring costs are primarily related to severance and employee-related

costs, accelerated amortization of

right-of-use lease assets and fixed assets, and other lease exit costs.

The increase in operating costs includes

increases in payroll and payroll related costs, travel and convention expenses

and acquisition costs in both of our

reportable segments.

While the U.S. economy has recently experienced inflationary

pressures and strengthening of

the U.S. dollar, their impacts have not been material to our results of operations.

Other Expense, Net

Other expense, net was as follows:

April 1,

March 26,

Variance

2023

2022

Interest income

58.3

Interest expense

(14)

(7)

(97.8)

Other, net

(1)

n/a

Other expense, net

(12)

(5)

(7)

(119.0)

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings and increased interest rates.

Income Taxes

For the three months ended April 1, 2023 our effective tax rate was 23.8% compared

to 24.0% for the prior year

period.

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

relates to state and

foreign income taxes and interest expense as well as stock-based compensation.

Table of Contents

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 7 – 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.

Net cash provided by operating activities was $27 million for the

three months ended April 1, 2023, compared to

net cash provided by operating activities of $93 million for the prior year.

The net change of $66 million was

primarily due to a decrease in operating income and an unfavorable change in

working capital, net of acquisitions.

Net cash used in investing activities was $39 million for the three months

ended April 1, 2023, compared to $27

million for the prior year.

The net change of $12 million was primarily attributable to increased payments

for

purchases of fixed assets.

Net cash provided by financing activities was $21 million for the

three months ended April 1, 2023, compared to

net cash used in financing activities of $62 million for the prior year.

The net change of $83 million was primarily

due to increased net borrowings from debt, partially offset by increased repurchases

of common stock.

Table of Contents

The following table summarizes selected measures of liquidity and capital

resources:

April 1,

December 31,

2023

2022

Cash and cash equivalents

126

117

Working

capital

(1)

1,780

1,764

Debt:

Bank credit lines

236

103

Current maturities of long-term debt

Long-term debt

1,021

1,040

Total debt

1,312

1,149

Leases:

Current operating lease liabilities

Non-current operating lease liabilities

274

275

(1)

Includes $555 million and $327 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

securitization at April 1, 2023 and December 31, 2022, respectively.

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations

increased to 43.4 days as of April 1, 2023 from

41.6 days as of March 26, 2022.

During the three months ended April 1, 2023, we wrote

off approximately $3

million of fully reserved accounts receivable against our trade receivable

reserve.

Our inventory turns from

operations decreased to 4.3 as of April 1, 2023 from 4.7 as of March 26, 2022.

Our working capital accounts may

be impacted by current and future economic conditions.

Leases

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

and certain equipment.

Our leases have remaining terms of less than one year to

approximately 18 years, some of

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

As of April 1, 2023, our right-of-use assets

related to operating leases were $280 million and our current and non-current

operating lease liabilities were $73

million and $274 million, respectively.

Stock Repurchases

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

of up to an additional $400 million in shares

of our common stock.

From March 3, 2003 through April 1, 2023, we repurchased $4.6 billion,

or 88,404,588 shares, under our common

stock repurchase programs, with $415 million available as of April 1, 2023

for future common stock share

repurchases.

Table of Contents

Critical Accounting Policies and Estimates

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

estimates from those disclosed in Item

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

except accounting policies adopted

as of January 1, 2023, which are discussed in

Note 2-Critical Accounting Policies, Accounting Pronouncements

Adopted and Recently Issued Accounting Standards

of the Notes to the Condensed Consolidated Financial

Statements included under Item 1.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted, see

Note 2-Critical

Accounting Policies, Accounting Pronouncements Adopted and Recently Issued Accounting Standards

of the Notes

to the Condensed Consolidated Financial Statements included under Item 1.

ITEM 3.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

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

from that disclosed in Item 7A of our Annual

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

ITEM 4.

CONTROLS AND PROCEDURES

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 April 1,

2023, to ensure that all material

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

under the Exchange Act is accumulated

and communicated to them as appropriate to allow timely decisions

regarding required disclosure and that all such

information is recorded, processed, summarized and reported within the

time periods specified in the SEC’s rules

and forms.

Changes in Internal Control over Financial Reporting

The combination of continued acquisition integrations and systems implementation

activity undertaken during the

quarter ended April 1, 2023 and carried over from prior quarters when considered

in the aggregate, does not

represent a material change in our internal control over financial reporting.

Limitations of the Effectiveness of Internal Control

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

reasonable, not absolute, assurance

that the objectives of the internal control system are met.

Because of the inherent limitations of any internal control

system, no evaluation of controls can provide absolute assurance that

all control issues, if any, within a company

have been detected.

Table of Contents

PART

II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

For a discussion of Legal Proceedings, see

Note 10–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 31, 2022.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS

Purchases of equity securities by the issuer

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

allowed us to repurchase up to two million

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

stock, which represented

approximately 2.3% of the shares outstanding at the commencement of

the program.

Subsequent additional

increases totaling $4.9

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

provide for a total

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

of our common stock to be

repurchased under this program.

As of April 1, 2023, we had repurchased approximately $4.6 billion of

common stock (88,404,588 shares) under

these initiatives, with $415 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 April 1, 2023.

Total Number

Maximum Number

Total

of Shares

Number

Average

Purchased as Part

that May Yet

of Shares

Price Paid

of Our Publicly

Be Purchased Under

Fiscal Month

Purchased (1)

Per Share

Announced Program

Our Program (2)

1/1/2023 through 2/4/2023

460,536

81.74

460,536

5,502,001

2/5/2023 through 3/4/2023

457,763

84.11

457,763

5,562,090

3/5/2023 through 4/1/2023

305,620

78.03

305,620

5,089,528

1,223,919

(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.

Table of Contents

ITEM 6.

EXHIBITS

3.1

Fourth Amended and Restated By-Laws of Henry Schein, Inc., effective March

23, 2023 (Incorporated by reference to Exhibit 3.1 to our Current report on

Form 8-K filed on March 24, 2023)

31.1

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

31.2

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

32.1

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

101.INS

Inline XBRL Instance Document - the instance document does not appear

in the

Interactive Data File because its XBRL tags are embedded within the

Inline

XBRL document+

101.SCH

Inline XBRL Taxonomy Extension Schema Document+

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document+

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document+

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document+

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document+

104

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

quarter ended April 1, 2023, formatted in Inline XBRL (included within

Exhibit

101 attachments).+

Filed or furnished herewith.

Table of Contents

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: May 9, 2023

HTML

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THESECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Stanley M. Bergman, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Henry Schein,<br>Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a<br>material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
---	---
3.	Based on my knowledge, the financial statements, and other financial information included in this report,<br>fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
---	---
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining<br>disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act<br>Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
---	---
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be<br>designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is<br>being prepared;
---	---
(b)	Designed such internal control over financial reporting, or caused such internal control over financial<br>reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting<br>principles;
---	---
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this<br>report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
---	---
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that<br>occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal<br>control over financial reporting; and
---	---
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of<br>internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over<br>financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
---	---
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in<br>the registrant’s internal control over financial reporting.
---	---
Date: May 9, 2023	/s/ Stanley M. Bergman
---	---
	Stanley M. Bergman
	Chairman and Chief Executive Officer

HTML

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THESECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Ronald N. South, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Henry Schein,<br>Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a<br>material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
---	---
3.	Based on my knowledge, the financial statements, and other financial information included in this report,<br>fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
---	---
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining<br>disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act<br>Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
---	---
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be<br>designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is<br>being prepared;
---	---
(b)	Designed such internal control over financial reporting, or caused such internal control over financial<br>reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting<br>principles;
---	---
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this<br>report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
---	---
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that<br>occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal<br>control over financial reporting; and
---	---
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of<br>internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over<br>financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
---	---
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in<br>the registrant’s internal control over financial reporting.
---	---
Date: May 9, 2023	/s/ Ronald N. South
---	---
	Ronald N. South
	Senior Vice President and
	Chief Financial Officer

HTML

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Henry Schein, Inc. (the “Company”) for the period ending April 1, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanley M. Bergman, the Chairman and Chief Executive Officer of the Company, and I, Ronald N. South, Senior Vice President and Chief Financial Officer of the Company, do hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 9, 2023	/s/ Stanley M. Bergman
	Stanley M. Bergman
	Chairman and Chief Executive Officer
Dated: May 9, 2023	/s/ Ronald N. South
---	---
	Ronald N. South
	Senior Vice President and
	Chief Financial Officer

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.