10-K - HSIC - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,

D.C.

20549

FORM

10-K

(Mark One)

☒

ANNUAL REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

December 26, 2020

☐

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

Securities registered pursuant to Section

12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES

☒

NO:

☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES:

☐

☒

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

☒

NO:

☐

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

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES

☒

NO:

☐

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

“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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal

control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared

or issued its audit report. YES:

☒

NO:

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2

of the Exchange Act).

YES:

☐

NO:

☒

The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant, computed by reference to the closing sales price as

quoted on the Nasdaq Global Select Market on June 27, 2020, was approximately $

7,932,914,000

As of February 8, 2021, there were

142,464,090

shares of registrant’s Common Stock, par value $.01 per share, outstanding.

Documents Incorporated by Reference:

Portions of the Registrant’s definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year

(December 26, 2020) are incorporated by reference in Part III hereof.

TABLE OF CONTENTS

Page

Number

PART I.

ITEM 1.

Business

ITEM 1A.

Risk Factors

ITEM 1B.

Unresolved Staff Comments

ITEM 2.

Properties

ITEM 3.

Legal Proceedings

ITEM 4.

Mine Safety Disclosures

PART II

ITEM 5.

Market for Registrant's Common Equity, Related Stockholder Matters

and Issuer Purchases of Equity Securities

ITEM 6.

Selected Financial Data

ITEM 7.

Management's Discussion and Analysis of Financial Condition

and Results of Operations

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

ITEM 8.

Financial Statements and Supplementary Data

ITEM 9.

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure

124

ITEM 9A.

Controls and Procedures

124

ITEM 9B.

Other Information

127

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance

127

ITEM 11.

Executive Compensation

127

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters

128

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

128

ITEM 14.

Principal Accounting Fees and Services

128

PART IV.

ITEM 15.

Exhibits,

Financial Statement Schedules

128

ITEM 16.

Form

10-K Summary

136

Signatures

137

Table of Contents

PART

ITEM 1.

Business

General

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.

Our philosophy is grounded in our

commitment to help customers operate a more efficient and successful business so

the practitioner can provide

better clinical care.

With more than 88 years of experience distributing health care products, we have built a vast set of small,

mid-sized

and large customers in the dental and medical markets, serving more than one

million customers worldwide across

dental practices and laboratories and physician practices, as well as government,

institutional health care clinics and

other alternate care clinics.

We are headquartered in Melville, New York,

employ more than 19,000 people (of which approximately 9,800 are

based outside the United States) and have operations or affiliates in 31 countries and

territories, including the

United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China,

the Czech Republic, France, Germany,

Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, the Netherlands, New

Zealand, Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland,

Thailand, United Arab Emirates

and the United Kingdom.

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

through contribution from strategic acquisitions.

Our business extends far beyond our supply chain capabilities across

the globe. We provide a wide breadth

of products, value-added solutions and support to customers, including

consumables and equipment. Through

Henry Schein One, we offer dental practice management, patient engagement

and demand creation software

solutions. We also offer a broad range of financial services for our customers to help them operate and expand their

business operations. We believe our hands-on consultative approach to support practice decision-making is a key

differentiator for our business.

We offer

a comprehensive selection of more than 120,000 branded products

and Henry Schein private brand

products in stock, as well as more than 180,000 additional products

available as special-order items.

As the market continues to evolve toward solutions that offer ease and convenience for

ordering products and

communicating with our solutions teams, we are investing in digital enhancements

to our e-commerce platforms

and our web capabilities.

We have established over 3.5 million square feet of space in 28 strategically located distribution centers around the

world to enable us to better serve our customers and increase our operating

efficiency.

Our infrastructure allows us

to provide rapid and accurate order fulfillment. Historically, approximately 99% of items have been shipped

without back ordering and were shipped on the same business day the order

is received.

Due to the significant

increase in demand for personal protective equipment (“PPE”), as a result

of the COVID-19 pandemic, during the

year ended December 26, 2020, approximately 93% of items ordered

were shipped without back ordering and 90%

were shipped on the same business day the order was received.

As the demand for PPE stabilizes, we expect our

percentage of items shipped without back ordering and shipped on the

same day to return to historic levels.

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.

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.

The health care distribution reportable segment aggregates our global

dental and medical operating segments.

This

combined dental and medical segment distributes consumable products,

small equipment, laboratory products, large

equipment, equipment repair services, branded and generic pharmaceuticals,

vaccines, surgical products, diagnostic

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tests, infection-control products

and vitamins.

Our global dental group serves office-based dental practitioners,

dental laboratories, schools, government and other institutions.

Our global medical group serves 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.

While our primary go-to-market strategy is in our capacity as a

distributor, we also manufacture certain dental specialty products in the areas of implants, orthodontics

and

endodontics. We have achieved scale in these global businesses primarily through acquisitions as manufacturers of

these products typically do not utilize a distribution channel to serve customers.

As an alternative to branded product options, we also market under our own

private label portfolio of cost-effective,

high-quality consumable merchandise products for our dental and medical customers.

Sales of our private label

products generally achieve gross profit margins that are higher than the average margin on the other

products we

sell.

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

technology and other value-added

services to health care practitioners.

Henry Schein One, the largest contributor of sales to this category, offers

software systems for dental practitioners. This segment also includes a

small medical software business known as

MicroMD. In addition, we offer physicians a broad suite of electronic health records,

integrated revenue cycle

management, and patient communication services. Finally, our value-added practice solutions include financial

service offerings, which include practice finance solutions such as credit card billing

and facilitation of customer

loans (on a non-recourse basis) to acquire equipment and technology, as well as solutions to broker dental practice

transitions. We do not take on the liability of such loans but instead receive an origination fee for coordinating

loans between practice customers and third-party banking groups.

Recent Developments

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent

Developments” herein for a discussion related to the COVID-19

pandemic and recent corporate transactions.

Industry

The global health care 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 mid-sized and large

group practices ranging in size from a few practitioners to several hundred

practices owned or operated by dental

support organizations (DSOs), hospital systems, or integrated delivery networks

(IDNs).

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, hygienist or office manager.

Supplies and small equipment are generally purchased from

more than

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

The health care distribution industry continues to experience growth due

to demand driven by the aging population,

increased health care awareness and the importance of preventative care,

an increasing understanding of the

connection between good oral health and overall health, improved access

to care globally, 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 and technological improvements,

including

the advancement of software and services, prosthetic solutions and telemedicine.

In addition, the non-acute market

continues to benefit from the shift of procedures and diagnostic

testing from acute care settings to alternate-care

sites, particularly physicians’ offices and ambulatory surgery centers.

We 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

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

opportunities to serve a broader

customer base.

In addition, customer consolidation will likely lead to multiple locations

under common management and the

movement of more procedures from the hospital setting to the physician

or alternate care setting as the health care

industry is increasingly focused on efficiency and 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.

We 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.

Competition

The distribution and manufacture of health care supplies and equipment is

highly competitive.

Many of the health

care products we sell are available to our customers from a number of suppliers.

In addition, our competitors could

obtain exclusive rights from manufacturers to market particular products.

Manufacturers also could seek to sell

directly to end-users, and thereby eliminate or reduce our role and that of other

distributors. In certain parts of the

dental end market, such as those related to dental specialty products,

manufacturers already sell directly to end

customers.

In North America, we compete with other distributors, as well as several

manufacturers, of dental and medical

products, primarily on the basis of price, breadth of product line, e-commerce

capabilities, customer service and

value-added products and services.

In the dental market, our primary competitors in the U.S. are the Patterson

Dental division of Patterson Companies, Inc. and Benco Dental Supply

Company.

In addition, we compete against

a number of other distributors that operate on a national, regional and

local level. Our primary competitors in the

U.S. medical market, which accounts for the large majority of our global medical

sales, are McKesson Corporation

and Medline Industries, Inc., which are national distributors.

We also compete with a number of regional and local

medical distributors, as well as a number of manufacturers that

sell directly to physicians.

With regard to our dental

software, we compete against numerous companies, including the Patterson

Dental division of Patterson

Companies, Inc., Carestream Health, Inc., Open Dental Software, Inc., PlanetDDS

LLC, Good Methods Global Inc.

(d.b.a. CareStack) and Curve Dental, LLC.

In other software end markets, including revenue cycle

management,

patient relationship management and patient demand generation, we

compete with companies such as Vyne

Therapeutics Inc., EDI-Health Group, Inc. (d.b.a. Dental X Change, Inc.),

Weave Communications,

Inc., Solutionreach, Inc., ZocDoc, Inc., LocalMed Inc. and Prosites Inc.

The medical practice management and

electronic medical records market is very fragmented and we compete with

numerous companies such as the

NextGen division of Quality Systems, Inc., eClinicalWorks, Allscripts Healthcare Solutions, Inc., and Epic Systems

Corporation.

Outside of the U.S., we believe we are the only global distributor of supplies

and equipment to dental practices, and

our competitors are primarily local and regional companies.

We also face significant competition internationally,

where we compete on the basis of price and customer service against

several large competitors, including the

GACD Group, Proclinic SA, Lifco AB, Planmeca Oy and Billericay Dental

Supply Co. Ltd., as well as a large

number of other dental and medical product distributors and manufacturers

in international countries and territories

we serve.

Competitive Strengths

We have more than 88 years of experience in distributing products to health care practitioners resulting in strong

awareness of the Henry Schein

brand.

Our competitive strengths include:

A focus on meeting our customers’ unique needs

We are committed to providing customized solutions to our

customers that are driven by our understanding of the end markets we

serve and reflect the technology-driven

products and services best suited for their practice needs. We are committed to continuing to enhance these

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offerings through organic investment in our products and our teams, as well through as

the acquisition of new

products and services that may help us better serve our customers.

Direct sales and marketing expertise.

Our sales and marketing efforts are designed to establish and solidify

customer relationships through personal or virtual visits by field sales representatives,

frequent direct marketing and

telesales contact, emphasizing our broad product lines, including exclusive

distribution agreements, competitive

prices and ease of order placement, particularly through our e-commerce

platforms.

The key elements of our direct

sales and marketing efforts are:

•

Field sales consultants.

We have over 3,450 field sales consultants, including equipment sales specialists,

covering major North American, European and other international

markets.

These consultants complement

our direct marketing and telesales efforts and enable us to better market, service

and support the sale of

more sophisticated products and equipment.

•

Marketing.

During 2020, we marketed to existing and prospective office-based health care

providers

through a combination of owned, earned and paid digital channels, as well

as through catalogs, flyers,

direct mail, and other promotional materials.

Our strategies included an emphasis on educational content

through webinars and content marketing initiatives.

We continue to enhance our marketing technology to

improve our targeting capability and the relevance of messaging and offers.

•

Telesales.

We support our direct marketing effort with approximately 2,250 inbound and outbound

telesales representatives, who facilitate order processing, generate new

sales through direct and frequent

contact with customers and stay abreast of market developments and

the hundreds of new products,

services and technologies introduced each year to educate practice personnel.

•

Electronic commerce solutions.

We provide our customers and sales teams with innovative and

competitive e-commerce solutions. We continue to invest in our e-commerce platform to offer enhanced

content management so customers can more easily find the products

they need and to enable an engaging

purchase experience, supported by excellent customer service.

•

Social media.

Our operating entities and employees engage our customers and

supplier partners through

various social media platforms, which are an important element of our

communications and marketing

efforts. We continue to expand our social media presence to raise awareness about issues, engage

customers beyond a sale and deliver services and solutions to specialized

audiences.

Broad product and service offerings at competitive prices.

We offer

a broad range of products and services to our

customers, at competitive prices, in the following categories:

•

Consumable supplies and equipment.

We offer over 120,000 Stock Keeping Units, or SKUs, to our

customers.

We offer over 180,000 additional SKUs to our customers in the form of special order items.

•

Technology and other value-added products and services.

We sell practice management, patient

engagement, and patient demand creation software solutions to our

dental customers.

Our practice

management solutions provide practitioners with electronic

medical records, patient treatment history,

billing, accounts receivable analyses and management, appointment

calendars, electronic claims processing

and word processing programs, network and hardware services, e-commerce

and electronic marketing

services, sourcing third party patient payment plans, transition services

and training and education

programs for practitioners. We also sell medical software for practice management, certified electronic

health records (“EHR”) and e-Prescribe medications and prescription solutions

through MicroMD®.

have approximately 800 technical representatives supporting customers

using our practice management

solutions and services.

As of December 26, 2020, we had an active user base of approximately

94,500

practices and 374,000 consumers, including users of AxiUm, Dentally®, Dentrix

Ascend®, Dental

Vision®, Dentrix® Dental Systems, Dentrix® Enterprise, Easy Dental®, EndoVision®, Evolution® and

EXACT®, Gesden®, Julie® Software, Oasis, OMSVision®,

Orisline®, PerioVision®,

Power Practice®

Px, PowerDent,

and Viive®

and subscriptions for Demandforce®, Sesame, and Lighthouse360®

for dental

practices and DentalPlans.com®

for dental patients; and MicroMD® for physician practices.

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•

Repair services.

We have over 140 equipment sales and service centers worldwide that provide a variety of

repair, installation and technical services for our health care customers.

Our over 2,000 technicians provide

installation and repair services for: dental handpieces; dental and

medical small equipment; table top

sterilizers; and large dental equipment.

•

Financial services.

We offer our customers solutions in operating their practices more efficiently by

providing access to a number of financial services and products

provided by third party vendors (including

non-recourse financing for equipment, technology and software

products; non-recourse patient financing;

collection services and credit card processing) at rates that we believe are generally

lower than what our

customers would be able to secure independently.

We also provide consulting services, dental practice

valuation and brokerage services.

Commitment to superior customer service

We maintain a strong commitment to providing superior customer

service.

We frequently monitor our customer service through customer surveys, focus groups and statistical

reports.

Our customer service policy primarily focuses on:

•

Exceptional order fulfillment

We ship an average of approximately 128,000 cartons daily.

Historically,

approximately 99% of items have been shipped without back ordering and

were shipped on the same

business day the order is received.

Due to the significant increase in demand for PPE, as a result

COVID-19, during the year ended December 26, 2020, approximately

93% of items ordered were shipped

without back ordering and 90% were shipped on the same business day

the order was received.

As the

demand for PPE stabilizes, we expect our percentage of items shipped without

back ordering and shipped

on the same day to return to historical levels.

•

Comprehensive ordering process

Customers may place orders 24 hours a day, 7 days a week via e-

commerce solutions, telephone, fax, e-mail, and mail.

Integrated management information systems

Our information systems generally allow for centralized management

of key functions, including accounts receivable, inventory, accounts payable, payroll, purchasing, sales,

order

fulfillment and financial and operational reporting.

These systems allow us to manage our growth, deliver superior

customer service, properly target customers, manage financial performance and

monitor daily operational statistics.

Cost-effective purchasing

We believe that cost-effective purchasing is a key element to maintaining and enhancing

our position as a competitively priced provider of health care products.

We continuously evaluate our purchase

requirements and suppliers’ offerings and prices in order to obtain products at the

lowest possible cost.

In 2020,

our top 10 health care distribution suppliers and our single largest supplier accounted for approximately

30% and

4%, respectively, of our aggregate purchases.

Efficient distribution

We distribute our products from our strategically located distribution centers.

We strive to

maintain optimal inventory levels in order to satisfy customer demand

for prompt delivery and complete order

fulfillment.

These inventory levels are managed on a daily basis with

the aid of our management information

systems.

Once an order is entered, it is electronically transmitted to the distribution

center nearest the customer’s

location for order fulfillment.

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Products

The following table sets forth the percentage of consolidated net sales

by principal categories of products offered

through our health care distribution and technology reportable segments:

December 26,

December 28,

December 29,

2020

2019

2018

Health care distribution:

Dental products

(1)

58.4

64.2

67.4

Medical products

(2)

35.8

29.8

28.3

Total

health care distribution

94.2

94.0

95.7

Technology

and value-added services:

Software and related products and

other value-added products

(3)

5.1

5.2

4.3

Total

excluding Corporate TSA revenues

99.3

99.2

100.0

Corporate TSA revenues

(4)

0.7

0.8

Total

100.0

(1)

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

gypsum, acrylics, articulators, abrasives, dental chairs, delivery units and lights, X-ray supplies and equipment, personal protective

equipment, equipment repair and high-tech and digital restoration equipment.

(2)

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

equipment, personal protective equipment, and vitamins.

(3)

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

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

(4)

Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in

connection with the Animal Health spin-off, which ended in December 2020.

Business Strategy

Our objective is to continue to expand as a global value-added provider

of health care products and services to

office-based dental and medical practitioners by increasing their efficiency and success.

To accomplish this, we

will apply our competitive strengths in executing the following strategies:

•

Increase penetration of our existing customer base.

We have over 1 million customers worldwide and we

intend to increase sales to our existing customer base and enhance our position

as their primary supplier.

We believe our offering of a broad range of products, services and support, including software solutions

that can help drive improved workflow efficiency and patient communications for

practices, coupled with

our full-service value proposition, helps us to retain and grow our customer

base.

•

Increase the number of customers we serve.

This strategy includes increasing the productivity of our field

sales consultants and telesales team, as well as using our customer

database to focus our marketing efforts

in all of our operating segments.

In the dental business, we provide products and services to

independent

practices, mid-market groups, and large DSOs as well as community health centers and government

sites of

care.

Leveraging our broad array of assets and capabilities, we offer solutions to address these

new

markets.

In the medical business, we have expanded to serve customers

located in settings outside of the

traditional office, such as urgent care clinics, retail, occupational health and home health settings.

settings of health care shift, we remain committed to serving these practitioners

and providing them with

the products and services they need.

•

Leverage our value-added products and services.

We continue to increase cross-selling efforts for key

product lines utilizing a consultative selling process.

In the dental business, we have significant cross-

selling opportunities between our dental software users and our dental distribution

customers.

In the

medical business, we have opportunities to expand our vaccine, injectables

and other pharmaceuticals sales

to health care practitioners, as well as cross-selling electronic health record

and software when we sell our

core products.

Our strategy extends to providing health systems, integrated

delivery networks and other

large group and multi-site health care organizations, including physician clinics, these same value

added

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products and services.

As physicians and health systems closely align, we have increased

access to

opportunities for cross-marketing and selling our product and service portfolios.

•

Pursue strategic acquisitions and joint ventures.

Our acquisition strategy is focused on investments in

companies that add new customers and sales teams, increase our geographic

footprint (whether entering a

new country, such as emerging markets, or building scale where we have already invested in businesses),

and finally, those that enable us to access new products and technologies.

Markets Served

Demographic trends indicate that our markets are growing, as an

aging U.S. population is increasingly using health

care services.

Between 2020 and 2030, the 45 and older population is expected

to grow by approximately 11%.

Between 2020 and 2040,

this age group is expected to grow by approximately 22%.

This compares with expected

total U.S. population growth rates of approximately 7%

between 2020 and 2030 and approximately 12% between

2020 and 2040.

In the dental industry, there is predicted to be a rise in oral health care expenditures as the 45-and-older segment of

the population increases.

There is increasing demand for new technologies that allow

dentists to increase

productivity, and this is being driven in the U.S. by lower insurance reimbursement rates.

At the same time, there is

an expected increase in dental insurance coverage.

We support our dental professionals through the many SKUs that we offer, as well as through important value-

added services, including practice management software, electronic claims

processing, financial services and

continuing education, all designed to help maximize a practitioner’s efficiency.

In the medical market, there continues to be a migration of procedures from

acute-care settings to physicians’

offices and home health settings,

a trend that we believe provides additional opportunities for us.

There also is the

continuing use of vaccines, injectables and other pharmaceuticals in alternate-care

settings.

We believe we have

established a leading position as a vaccine supplier to the office-based physician

practitioner.

Additionally, we seek to expand our dental full-service model and our medical offerings in countries where

opportunities exist.

Through our “Schein Direct” program, we also have the

capability to provide door-to-door air

package delivery to practitioners in over 190 countries around the world.

For information on revenues and long-lived assets by geographic area, see

Note 18 – Segment and Geographic Data

of “Notes to Consolidated Financial Statements.”

Seasonality and Other Factors Affecting Our Business and Quarterly Results

We experience fluctuations in quarterly earnings.

As a result, we may fail to meet or exceed the expectations of

securities analysts and investors, which could cause our stock price

to decline.

Our business is subject to seasonal and other quarterly fluctuations.

Revenues and profitability generally have been

higher in the third and fourth quarters due to the timing of sales of seasonal

products (including influenza vaccine,

equipment and software products), purchasing patterns of office-based health care practitioners

and year-end

promotions. Revenues and profitability may also be impacted by

the timing of certain annual and biennial dental

tradeshows where equipment promotions are offered. In addition, some dental practices

delay equipment purchases

in the U.S. until year-end due to tax incentives.

Revenues and profitability generally have been lower in the first

quarter, primarily due to increased sales in the prior two quarters.

We expect our historical seasonality of sales to

continue in the foreseeable future.

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Governmental Regulations

We strive to be substantially compliant with the applicable laws, regulations and guidance described below, and

believe we have effective compliance programs and other controls in place to ensure substantial

compliance.

However, compliance is not guaranteed

either now or in the future, as certain laws, regulations and guidance

may

be subject to varying and evolving interpretations that could affect our ability to comply, as well as future changes,

additions, and enforcement approaches, including in light of political changes.

For example, President Biden’s

administration has authorized and encouraged a freeze on certain federal

regulations that have been published but

are not yet effective, as well as a review of all federal regulations issued during President Trump’s administration.

Changes with respect to the applicable laws, regulations and guidance described

below may require us to update or

revise our operations, services, marketing practices, and compliance programs

and controls, and may impose

additional and unforeseen costs on us, pose new or previously immaterial

risks to us, or may otherwise have a

material adverse effect on our business.

Government

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

marketing and sale of, and third party

payment for, pharmaceuticals and medical devices, and in this regard, we are subject to extensive local, state,

federal and foreign governmental laws and regulations, including as applicable

to our wholesale distribution of

pharmaceuticals and medical devices, and as part of our specialty home medical supply

business that distributes and

sells medical equipment and supplies directly to patients.

The federal government and state governments have also

increased enforcement activity in the health care sector, particularly in areas of fraud and abuse, anti-bribery

and

corruption, controlled substances prescribing, medical device regulation, and data

privacy and security standards.

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

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 also generally subject to numerous other laws and regulations

that could impact our financial

performance, including securities, antitrust, consumer protection, anti-bribery

and anti-kickback, customer

interaction transparency, data privacy,

data security, government contracting and other laws and regulations.

Failure to comply with law or regulations could have a material adverse effect on our business.

Operating, Security and Licensure Standards

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

marketing

and sale of, and third party

payment for, pharmaceuticals and medical devices, and in this regard we are subject to various local,

state, federal

and foreign governmental laws and regulations, including as applicable

to our wholesale distribution and sale of

pharmaceuticals and medical devices, and, as part of our specialty home medical

supply business that distributes

and sells medical equipment and supplies directly to patients.

Among the United States federal laws applicable to

us are the Controlled Substances Act, the Federal Food, Drug, and Cosmetic

Act, as amended (“FDC Act”), and

Section 361 of the Public Health Service Act, as well as laws regulating the

billing of and reimbursement from

government programs, such as Medicare and Medicaid, and from commercial payers.

We are also subject to

comparable foreign regulations.

The FDC Act, the Controlled Substances Act, their implementing regulations,

and similar foreign laws generally

regulate the introduction, manufacture, advertising, marketing and promotion,

sampling, pricing and

reimbursement, labeling, packaging, storage, handling, returning or recalling,

reporting, and distribution of, and

record keeping for, pharmaceuticals and medical devices shipped in interstate commerce, and states

may similarly

regulate such activities within the state.

Furthermore, Section 361 of the Public Health Service Act, which

provides

authority to prevent the introduction, transmission or spread of communicable

diseases, serves as the legal basis for

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the United States

Food and Drug Administration’s (“FDA”) regulation of human cells, tissues and cellular and

tissue-based products, also known as “HCT/P products.”

The Federal Drug Quality and Security Act of 2013 brought about significant

changes with respect to

pharmaceutical supply chain requirements.

Title II of this measure, known as the Drug Supply Chain Security Act

(“DSCSA”), is being phased in over a period of ten years, and is intended

to build a national electronic,

interoperable system to identify and trace certain prescription drugs as they

are distributed in the United States.

The law’s track and trace requirements applicable to manufacturers, wholesalers, repackagers and dispensers (e.g.,

pharmacies) of prescription drugs took effect in January 2015, and continues to be

implemented.

The DSCSA

product tracing requirements replace the former FDA drug pedigree requirements

and pre-empt certain state

requirements that are inconsistent with, more stringent than, or in addition

to, the DSCSA requirements.

The DSCSA also establishes certain requirements for the licensing and operation

of prescription drug wholesalers

and third-party logistics providers (“3PLs”), and includes the eventual

creation of national wholesaler and 3PL

licenses in cases where states do not

license such entities.

The DSCSA requires that wholesalers and 3PLs

distribute drugs in accordance with certain standards regarding the recordkeeping,

storage and handling of

prescription drugs.

The DSCSA requires wholesalers and 3PLs to submit annual reports

to the FDA, which include

information regarding each state where the wholesaler or 3PL is licensed, the

name and address of each facility and

contact information.

According to FDA guidance, states are pre-empted from imposing

any licensing requirements

that are inconsistent with, less stringent than, directly related to, or covered

by the standards established by federal

law in this area.

Current state licensing requirements concerning wholesalers will

remain in effect until the FDA

issues new regulations as directed by the DSCSA.

In addition, with respect to our specialty home medical supply

business, we are subject to certain state licensure laws (including state pharmacy

laws), and also certain

accreditation standards, including to qualify for reimbursement from

Medicare and other third-party payers.

The Food and Drug Administration Amendments Act of 2007 and

the Food and Drug Administration Safety and

Innovation Act of 2012 amended the FDC Act to require the FDA to promulgate

regulations to implement a unique

device identification (“UDI”) system.

The UDI rule phased in the implementation of the UDI

regulations,

generally beginning with the highest-risk devices (i.e., Class III medical devices)

and ending with the lowest-risk

devices.

Most compliance dates were reached as of September 24, 2018,

with a final set of requirements for low

risk devices being reached on September 24, 2022, which will complete

the phase in.

The UDI regulations require

“labelers” to include unique device identifiers (“UDIs”), with a content

and format prescribed by the FDA and

issued under a system operated by an FDA-accredited issuing agency, on the labels and packages of medical

devices (including, but not limited to, certain software that qualifies as a medical device

under FDA rules), and to

directly mark certain devices with UDIs.

The UDI regulations also require labelers to submit certain information

concerning UDI-labeled devices to the FDA, much of which information is publicly

available on an FDA database,

the Global Unique Device Identification Database.

The UDI regulations and subsequent FDA guidance regarding

the UDI requirements provide for certain exceptions, alternatives and time extensions.

For example, the UDI

regulations include a general exception for Class I devices exempt from the Quality

System Regulation (other than

record-keeping requirements and complaint files).

Regulated labelers include entities such as device

manufacturers, repackagers, reprocessors and relabelers that cause a device’s label to be applied or modified, with

the intent that the device will be commercially distributed without any subsequent

replacement or modification of

the label, and include certain of our businesses.

Under the Controlled Substances Act, as a distributor of controlled substances,

we are required to obtain and renew

annually registrations for our facilities from the United States Drug Enforcement

Administration (“DEA”)

permitting us to handle controlled substances.

We are also subject to other statutory and regulatory requirements

relating to the storage, sale, marketing, handling, reporting, record-keeping

and distribution of such drugs, in

accordance with the Controlled Substances Act and its implementing regulations,

and these requirements have been

subject to heightened enforcement activity in recent times.

We are subject to inspection by the DEA. Certain of our

businesses are also required to register for permits and/or licenses with, and

comply with operating and security

standards of, the DEA, the FDA, the United States Department of Health

and Human Services (“HHS”), and

various state boards of pharmacy, state health departments and/or comparable state agencies as well as comparable

foreign agencies, and certain accrediting bodies, depending on the type of

operations and location of product

distribution, manufacturing or sale.

These businesses include those that distribute, manufacture and/or repackage

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prescription pharmaceuticals and/or medical devices and/or HCT/P products, or

own pharmacy operations, or

install, maintain or repair equipment.

In addition, Section 301 of the National Organ Transplant Act, and a number of comparable state laws, impose civil

and/or criminal penalties for the transfer of certain human tissue (for example,

human bone products) for valuable

consideration, while generally permitting payments for the reasonable costs

incurred in procuring, processing,

storing and distributing that tissue.

We are also subject to foreign government regulation of such products.

The

DEA, the FDA and state regulatory authorities have broad inspection and enforcement

powers, including the ability

to suspend or limit the distribution of products by our distribution centers,

seize or order the recall of products and

impose significant criminal, civil and administrative sanctions for violations of

these laws and regulations.

Foreign

regulations subject us to similar foreign enforcement powers.

EU Regulation of Medicinal and Dental Products

EU member states regulate their own healthcare systems, as does EU law.

The latter regulates certain matters,

most notably medicinal products and medical devices. Medicinal products are defined,

broadly, as substances or

combinations of substances having certain functionalities and may not include

medical devices. EU “regulations”

apply in all Member States, whereas “directives” are implemented by the

individual laws of member states.

On medicines for humans, we are regulated under Directive No. 2001/83/EC

of 6 November 2001 and EU

Regulation No. 726/2004 of 31 March 2004.

These rules provide for the authorization of products, and regulate

their manufacture, importation, marketing, and distribution.

It implements requirements which may be

implemented without warning, as well as a national pharmacovigilance

system under which marketing

authorizations may be withdrawn, and includes potential sanctions for breaches

of the rules, and on other bases

such as harmfulness or inefficiency.

EU Regulation No. 1223/2009 of 30 November 2009

on cosmetic products

requires that cosmetic products (which

includes dental products) be safe for human health when used under normal

or reasonably foreseeable conditions of

use and comply with certain obligations which apply to manufacturer, importer and distributor. It includes market

surveillance, and non-compliance may result in the recall or withdrawal of

products, along with other sanctions.

In the European Union, the EU Medical Device Regulation No. 2017/745

(“EU MDR”) covers a wide scope of our

activities, from dental material to X-ray machines, and certain software.

It was meant to become applicable three

years after publication (in May 2020). However, on April 23, 2020, to allow European Economic Area

(“EEA”)

national authorities, notified bodies, manufacturers and other actors to focus

fully on urgent priorities related to the

COVID-19 pandemic, the European Council and Parliament adopted Regulation

2020/561, postponing the date of

application of the EU MDR by one year (to May 2021).

In the meantime, rules provided for by Directive No.

90/385/EEC of 20 June 1990

on the approximation of the laws of the member states relating to active implantable

medical devices

remain applicable (in particular to certain software).

The EU MDR significantly modifies and intensifies the regulatory compliance

requirements for the medical device

industry as a whole.

Once applicable, the EU MDR will among other things:

•

Strengthen

the

rules

placing

devices

the

market

and

rein

force

surveillance

once

they

are

available;

•

Establish

explicit

provisions

manufacturers’

responsibilities

for

the

quality,

performance and safety of devices placed on the market;

•

Improve

the

traceability

medical

devices

throughout

the

supply

chain

the

end

user

patient

through

unique identification number;

•

central

database

provide

patients,

healthcare

professionals

and

the

public

with

comprehensive

information on products available in the EU;

•

Strengthen

rules

for

the

assessment

certain

high

risk

devices,

such

implants,

which

may

have

undergo an additional check by experts before they are placed on the market; and

•

Identify importers and distributors and medical device products through

registration in a database

(EudaMed not due until 2022 and after).

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In particular, the EU MDR imposes stricter requirements for the confirmation that a product meets the regulatory

requirements, including regarding a product’s clinical evaluation and a company’s quality systems, and for the

distribution, marketing and sale of medical devices, including post-market surveillance.

Medical devices that have

been assessed and/or certified under the EU Medical Device Directive may

continue to be placed on the market

until 2024 (or until the expiry of their certificates, if applicable and earlier);

however, requirements regarding the

distribution, marketing and sale including quality systems and post-market surveillance

have to be observed by

manufacturers, importers and distributors as of the application date.

Other EU regulations that may apply under appropriate circumstances

include EU Regulation No. 1907/2006 of 18

December 2006

concerning the Registration, Evaluation, Authorisation and

Restriction of Chemicals

, which

requires importers to register substances or mixtures that they import

in the EU beyond certain quantities, and the

EU Regulation No. 1272/2008 of 16 December 2008 on classification, labelling

and packaging of substances and

mixtures (“CLP Regulation”), which sets various obligations with respect

to the labelling and packaging of

concerned substances and mixtures.

Furthermore, compliance with legal requirements has required and may in the future

require us to delay product

release, sale or distribution, or institute voluntary recalls of products we sell,

each of which could result in

regulatory and enforcement actions, financial losses and potential reputational

harm.

Our customers are also

subject to significant federal, state, local and foreign governmental regulation, which

may affect our interactions

with customers, including the design and functionality of our products.

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.

Certain of our businesses also maintain contracts with governmental agencies

and are subject to certain regulatory

requirements specific to government contractors.

Antitrust and Consumer Protection

The federal government of the United States, most U.S. states and many

foreign countries have antitrust laws that

prohibit certain types of conduct deemed to be anti-competitive, as well as consumer

protection laws that seek to

protect consumers from improper business practices.

At the U.S. federal level, the Federal Trade Commission

oversees enforcement of these types of laws, and states have similar government

agencies. Violations of antitrust or

consumer protection laws may result in various sanctions, including criminal

and civil penalties.

Private plaintiffs

may also bring civil lawsuits against us in the United States for alleged

antitrust law violations, including claims for

treble damages.

EU law also regulates competition and provides for detailed rules

protecting consumers.

Health Care Fraud

Certain of our businesses are subject to federal and state (and similar

foreign) health care fraud and abuse, referral

and reimbursement laws and regulations with respect to their operations.

Some of these laws, referred to as “false

claims laws,” prohibit the submission or causing the submission of false or fraudulent

claims for reimbursement to

federal, state and other health care payers and programs.

Other laws, referred to as “anti-kickback laws,” prohibit

soliciting, offering, receiving or paying remuneration in order to induce the referral

of a patient or ordering,

purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing of, items or services

that are

paid for by federal, state and other health care payers and programs.

Certain additional state and federal laws, such

as the federal Physician Self-Referral Law, commonly known as the “Stark Law,” prohibit physicians and other

health professionals from referring a patient to an entity with which the physician

(or family member) has a

financial relationship, for the furnishing of certain designated health services

(for example, durable medical

equipment and medical supplies), unless an exception applies.

The fraud and abuse laws and regulations have been subject to heightened

enforcement activity over the past few

years, and significant enforcement activity has been the result of “relators” who

serve as whistleblowers by filing

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complaints in the name of the United States (and if applicable, particular states)

under applicable false claims laws,

and who may receive up to 30% of total government recoveries.

Penalties under fraud and abuse laws may be

severe, and could result in significant civil and criminal penalties and costs,

including the loss of licenses and the

ability to participate in federal and state health care programs, and could

have a material adverse effect on our

business.

Also, these measures may be interpreted or applied by a prosecutorial,

regulatory or judicial authority in

a manner that could require us to make changes in our operations or incur substantial

defense and settlement

expenses.

Even unsuccessful challenges by regulatory authorities or private

relators could result in reputational

harm and the incurring of substantial costs.

Most states have adopted similar state false claims laws, and these

state

laws have their own penalties, which may be in addition to federal False Claims

Act penalties, as well as other

fraud and abuse laws.

With respect to measures of this type, the United States government (among others) has expressed concerns

about

financial relationships between suppliers on the one hand and physicians

and dentists on the other.

As a result, we

regularly review and revise our marketing practices as necessary to facilitate

compliance.

We also are subject to certain United States and foreign laws and regulations concerning the conduct of our foreign

operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery

Act, German anti-corruption laws

and other anti-bribery laws and laws pertaining to the accuracy of our internal

books and records, which have been

the focus of increasing enforcement activity globally in recent years.

While we believe that we are substantially compliant with applicable fraud and

abuse laws and regulations, and

have adequate compliance programs and controls in place to ensure substantial

compliance, we cannot predict

whether changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in

response to changes in applicable law or interpretation of laws, or failure

to comply with applicable law, could have

a material adverse effect on our business.

Affordable Care Act

The 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”),

increased federal oversight of private

health insurance plans and included a number of provisions designed

to reduce Medicare expenditures and the cost

of health care generally, to reduce fraud and abuse, and to provide access to increased health coverage.

The ACA

also materially expanded the number of individuals in the United States with health

insurance.

The ACA has faced ongoing legal challenges, including litigation seeking

to invalidate and Congressional action

seeking to repeal some of or all of the law or the manner in which it has been

implemented. In 2012, the United

States Supreme Court, in upholding the constitutionality of the

ACA and its individual mandate provision requiring

that people buy health insurance or else face a penalty, simultaneously limited ACA provisions requiring Medicaid

expansion, making such expansion a state-by-state decision. In addition, one of

the major political parties in the

United States remains committed to seeking the ACA’s legislative repeal, but legislative efforts to do so have

previously failed to pass both chambers of Congress.

Under President Trump’s administration, a number of

administrative actions were taken to materially weaken the ACA, including,

without limitation, by permitting the

use of less robust plans with lower coverage and eliminating “premium support”

for insurers providing policies

under the ACA. The Tax Cuts and Jobs Act enacted in 2017 (the “Tax Act”), which contains a broad range of tax

reform provisions that impact the individual and corporate tax rates, international

tax provisions, income tax add-

back provisions and deductions, also effectively repealed the ACA’s

individual mandate by zeroing out the penalty

for non-compliance.

In the most recent ACA litigation, the federal Fifth Circuit Court

of Appeals found the

individual mandate to be unconstitutional, and returned the case to the District Court

for the Northern District of

Texas for consideration of whether the remainder of the ACA could survive the excision of the individual

mandate.

The Fifth Circuit’s decision was appealed to the United States Supreme Court.

The Supreme Court heard

argument on the appeal on November 10, 2020, and a decision is anticipated soon.

Any outcome of this case that

changes the ACA, in addition to future legislation, regulation, guidance

and/or Executive Orders that do the same,

could have a significant impact on the U.S. healthcare industry.

An ACA provision, generally referred to as the Physician Payment Sunshine

Act or Open Payments Program (the

“Sunshine Act”),

imposes annual reporting and disclosure requirements for drug

and device manufacturers and

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distributors with regard to payments or other transfers of value made to certain

covered recipients (including

physicians, dentists and teaching hospitals), and for such manufacturers and distributors

and for group purchasing

organizations, with regard to certain ownership interests held by physicians in the reporting

entity.

The Centers for

Medicare and Medicaid Services (“CMS”) publishes information from these

reports on a publicly available website,

including amounts transferred and physician, dentist and teaching hospital

identities.

Amendments expanded the

law to also require reporting, effective January

1, 2022, of payments or other transfers of value to physician

assistants, nurse practitioners, clinical nurse specialists, certified registered

nurse anesthetists, and certified nurse-

midwives, and this new requirement will be effective for data collected

beginning in calendar year 2021.

The

Sunshine Act pre-empts similar state reporting laws, although we or our subsidiaries

may be required to report

under certain state transparency laws that address circumstances not covered by

the Sunshine Act, and some of

these state laws, as well as the federal law, can be ambiguous.

We are also subject to foreign regulations requiring

transparency of certain interactions between suppliers and their customers.

In the United States, government actions to seek to increase health-related price

transparency may also affect our

business.

Another notable Medicare health care reform initiative, the Medicare Access

and CHIP Reauthorization Act of

2015 (“MACRA”), enacted on April 16, 2015, established a new payment framework,

which modified certain

Medicare payments to “eligible clinicians,” including physicians, dentists and

other practitioners.

Under MACRA,

certain eligible clinicians are required to participate in Medicare through the Merit-Based

Incentive Payment

System (“MIPS”) or Advanced Alternative Payment Models (“APMs”), through

which Medicare reimbursement to

eligible clinicians includes both positive and negative payment adjustments

that take into account quality,

promoting interoperability, cost, and improvement

activities.

Data collected in the first MIPS performance year

(2017) determined payment adjustments that began January 1, 2019.

MACRA standards continue to evolve, and

represent a fundamental change in physician reimbursement that is expected

to provide substantial financial

incentives for physicians to participate in risk contracts, and to increase physician

information technology and

reporting obligations.

The implications of the implementation of MACRA are uncertain

and will depend on future

regulatory activity and physician activity in the marketplace.

New payment and delivery system reform programs,

including those modeled after such federal program, are also increasingly being

rolled out at the state level through

Medicaid administrators, as well as through the private sector, which may further alter the marketplace

and impact

our business.

Recently, in addition to other government efforts to control health care costs, there has been increased scrutiny on

drug pricing and concurrent efforts to control or reduce drug costs by Congress, the

President, executive branch

agencies and various states. At the state level, several states have adopted

laws that require drug manufacturers to

provide advance notice of certain price increases and to report information

relating to those price increases, while

others have taken legislative or administrative action to establish prescription

drug affordability boards or multi-

payer purchasing pools to reduce the cost of prescription drugs.

At the federal level, several related bills have been

introduced and regulations proposed which, if enacted or finalized,

respectively, would impact drug pricing and

related costs.

As a result of political, economic and regulatory influences, the health care distribution

industry in the United

States is under intense scrutiny and subject to fundamental changes.

We cannot predict what further reform

proposals, if any, will be adopted, when they may be adopted, or what impact they may have on us.

EU Directive on the pricing and reimbursement of medicinal products

EU law provides for the regulation of the pricing of medicinal products which are

implemented by EU member

states (Directive No. 89/105/EC of 21 December 1988

relating to the transparency of measures regulating the

pricing of medicinal products for human use and their inclusion in the scope of national health insurance

systems

Member states may, subject notably to transparency conditions and to the statement of reasons based upon

objective and verifiable criteria, regulate the price charged (or its increases) for authorized

medicines and their level

of reimbursement, or they may freeze prices, place controls on the profitability

of persons responsible for placing

medicinal products on the market, and include or exclude the medicine on

the list of products covered by national

health insurance systems.

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EU law does not expressly include provisions like those of the Sunshine Act in

the United States, but a growing

number of EU member states (such as France since 2011) have enacted laws to increase the transparency

relationships in the healthcare sector. The scope of these laws varies from on member state to another and may, for

example, include the relations between healthcare industry players and

physicians or their associations, students

preparing for medical professions or their associations, teachers, health

establishments or publishers of prescription

and dispensing assistance software.

Regulated Software; Electronic Health Records

The FDA has become increasingly active in addressing the regulation of

computer software and digital health

products intended for use in health care settings.

The 21st Century Cures Act (the “Cures Act”), signed into law on

December 13, 2016, among other things, amended the medical device definition

to exclude certain software from

FDA regulation, including clinical decision support software that meets certain

criteria.

On September 27, 2019,

the FDA issued a suite of guidance documents on digital health products, which

incorporated applicable Cures Act

standards, including

regarding the types of clinical decision support tools and other software that are

exempt from

regulation by the FDA as medical devices, and continues to issue new guidance

in this area.

Certain of our

businesses involve the development and sale of software and related products

to support physician and dental

practice management, and it is possible that the FDA or foreign government

authorities could determine that one or

more of our products is a medical device, which could subject us or one

or more of our businesses to substantial

additional requirements with respect to these products.

In addition, our businesses that involve physician and dental practice management

products, and our specialty home

medical supply business, include electronic information

technology systems that store and process personal health,

clinical, financial and other sensitive information of individuals.

These information technology systems may be

vulnerable to breakdown, wrongful intrusions, data breaches and malicious

attack, which could require us to

expend significant resources to eliminate these problems and address related

security concerns and could involve

claims against us by private parties and/or governmental agencies.

For example, we are directly or indirectly

subject to numerous and evolving federal, state, local and foreign laws and

regulations that protect the privacy and

security of personal information, such as the federal Health Insurance Portability

and Accountability Act of 1996,

as amended, and implementing regulations (“HIPAA”), the Controlling the Assault of Non-Solicited Pornography

and Marketing Act, the Telephone Protection and Electronic Protection Act of 1991, Section 5 of the Federal Trade

Commission Act, the California Privacy Act (“CCPA”), and the California Privacy Rights Act (“CPRA”) that

becomes effective on January 1, 2023.

Laws and regulations relating to privacy and data protection are

continually

evolving and subject to potentially differing interpretations. These requirements

may not be harmonized, may be

interpreted and applied in a manner that is inconsistent from one jurisdiction

to another or may conflict with other

rules or our practices.

Our businesses’ failure to comply with these laws and regulations could expose

us to breach

of contract claims, substantial fines, penalties and other liabilities and expenses,

costs for remediation and harm to

our reputation.

Also, evolving laws and regulations in this area could restrict

the ability of our customers to obtain,

use or disseminate patient information, or could require us to incur significant

additional costs to re-design our

products to reflect these legal requirements, which could have a material

adverse effect on our operations.

Also, the European Parliament and the Council of the European Union adopted

the pan-European General Data

Protection Regulation (“GDPR”), effective from May 25, 2018, which increased

privacy rights for individuals in

Europe (“Data Subjects”), including individuals who are our customers, suppliers

and employees.

The GDPR

extended the scope of responsibilities for data controllers and data processors,

and generally imposes increased

requirements and potential penalties on companies, such as us, that offer goods or

services to Data Subjects or

monitor their behavior (including by companies based outside of Europe).

Noncompliance can result in penalties of

up to the greater of EUR 20 million, or 4% of global company revenues, and

Data Subjects may seek damages. EU

member states may individually impose additional requirements and penalties

regarding certain matters, such as

employee personal data.

With respect to the personal data it protects, the GDPR requires, among other things,

company accountability, consents from Data Subjects or other acceptable legal basis to process the personal data,

breach notifications within 72 hours, data integrity and security, and fairness and transparency regarding the

storage, use or other processing of the personal data.

The GDPR also provides rights to Data Subjects relating

notably to information, access, modification, erasure and transporting

of the personal data.

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In the United States, the CCPA, which increases the privacy protections afforded California residents, became

effective January 1, 2020.

The CCPA generally requires companies, such as us, to institute additional protections

regarding the collection, use and disclosure of certain personal information

of California residents.

Compliance

with the new obligations imposed by the CCPA depends in part on how particular regulators interpret and apply

them, and because the CCPA is relatively new,

and its implementing regulations were released in August of

2020,

there remains some uncertainty about how the CCPA will be interpreted by the courts and enforced by the

regulators. If we fail to comply with the CCPA or if regulators assert that we have failed to comply with the CCPA,

we may be subject to certain fines or other penalties and litigation,

any of which may negatively impact our

reputation, require us to expend significant resources, and harm our business.

Furthermore, California voters

approved the CPRA on November 3, 2020, which will amend and

expand the CCPA, including by providing

consumers with additional rights with respect to their personal information,

and creating a new state agency to

enforce the CCPA and the CPRA.

The CPRA will come into effect on January 1, 2023, applying to information

collected by businesses on or after January 1, 2022.

Other states, as well as the federal government, have increasingly

considered the adoption of similarly expansive

personal privacy laws, backed by significant civil penalties for non-compliance.

While we believe we have

substantially compliant programs and controls in place to comply with

the GDPR, CCPA and CPRA requirements,

our compliance with these measures is likely to impose additional costs on us,

and we cannot predict whether the

interpretations of the requirements, or changes in our practices in response

to new requirements or interpretations of

the requirements,

could have a material adverse effect on our business.

We also sell products and services that health care providers, such as physicians and dentists, use to store and

manage patient medical or dental records.

These customers, and we, are subject to laws, regulations and industry

standards, such as HIPAA and the Payment Card Industry Data Security Standards, which require the protection of

the privacy and security of those records, and our products may

also be used as part of these customers’

comprehensive data security programs, including in connection with their efforts to comply with

applicable privacy

and security laws.

Perceived or actual security vulnerabilities in our products or services,

or the perceived or actual

failure by us or our customers who use our products or services to comply

with applicable legal or contractual data

privacy and security requirements, may not only cause us significant reputational

harm, but may also lead to claims

against us by our customers and/or governmental agencies

and involve substantial fines, penalties and other

liabilities and expenses and costs for remediation.

Various

federal initiatives involve the adoption and use by health care

providers of certain electronic health care

records systems and processes.

The

initiatives include, among others, programs that incentivize physicians

and

dentists, through MIPS, to use EHR technology in accordance with certain

evolving requirements, including

regarding quality, promoting interoperability, cost and improvement activities.

Qualification for the MIPS

incentive payments requires the use of EHRs that are certified as having certain

capabilities designated in evolving

standards adopted by CMS and by the Office of the National Coordinator for Health

Information Technology

HHS (“ONC”).

Certain of our businesses involve the manufacture and sale

of such certified EHR systems and

other products linked to government supported incentive programs.

In order to maintain certification of our EHR

products, we must satisfy these changing governmental standards.

If any of our EHR systems do not meet these

standards, yet have been relied upon by health care providers to receive

federal incentive payments, we may be

exposed to risk, such as under federal health care fraud and abuse laws,

including the False Claims Act.

For

example, on May 31, 2017, the U.S. Department of Justice announced a $155

million settlement and 5-year

corporate integrity agreement involving a vendor of certified EHR systems, based

on allegations that the vendor, by

misrepresenting capabilities to the certifying body, caused its health care provider customers to submit false

Medicare and Medicaid claims for meaningful use incentive payments

in violation of the False Claims Act.

Moreover, in order to satisfy our customers, our products may need to incorporate increasingly complex

functionality, such as reporting functionality.

Although we believe we are positioned to accomplish this, the

effort

may involve increased costs, and our failure to implement product

modifications, or otherwise satisfy applicable

standards, could have a material adverse effect on our business.

Other health information standards, such as regulations under HIPAA, establish standards regarding electronic

health data transmissions and transaction code set rules for specific electronic

transactions, such as transactions

involving claims submissions to third party payers.

Failure to abide by these and other electronic health data

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transmission standards could expose us to breach of contract claims,

substantial fines, penalties, and other liabilities

and expenses, costs for remediation and harm to our reputation.

Additionally, as electronic medical devices are increasingly connected to each other and to other technology, the

ability of these connected systems to safely and effectively exchange and use exchanged

information becomes

increasingly important.

For example, on September 6, 2017, the FDA issued final

guidance to assist industry in

identifying specific considerations related to the ability of electronic medical

devices to safely and effectively

exchange and use exchanged information.

As a medical device manufacturer, we must manage risks including

those associated with an electronic interface that is incorporated into a

medical device.

There may be additional legislative or regulatory initiatives in the future

impacting health care.

E-Commerce

Electronic commerce solutions have become an integral part of traditional health

care supply and distribution

relationships.

Our distribution business is characterized by rapid technological

developments and intense

competition.

The continuing advancement of online commerce requires

us to cost-effectively adapt to changing

technologies, to enhance existing services and to develop and introduce a

variety of new services to address the

changing demands of consumers and our customers on a timely basis, particularly

in response to competitive

offerings.

Through our proprietary, technologically-based suite of products, we offer customers a variety of competitive

alternatives.

We believe that our tradition of reliable service, our name recognition and large customer base built

on solid customer relationships, position us well to participate in

this significant aspect of the distribution business.

We continue to explore ways and means to improve and expand our Internet presence and capabilities, including

our online commerce offerings and our use of various social media outlets.

International Transactions

United States and foreign import and export laws and regulations require us to

abide by certain standards relating to

the importation and exportation of products.

We also are subject to certain laws and regulations concerning the

conduct of our foreign operations, including the U.S. Foreign Corrupt Practices

Act, the U.K. Bribery Act, German

anti-corruption laws and other anti-bribery laws and laws pertaining to

the accuracy of our internal books and

records, as well as other types of foreign requirements similar to those

imposed in the United States.

While we believe that we are substantially compliant with the foregoing laws

and regulations promulgated

thereunder and

possess all material permits and licenses required for the conduct

of our business, there can be no

assurance that regulations that impact our business or customers’ practices

will not have a material adverse effect

on our business.

See “

Item 1A. Risk Factors

” for a discussion of additional burdens, risks and regulatory developments

that may

affect our results of operations and financial condition.

Proprietary Rights

We hold trademarks relating to the “Henry Schein

” name and logo, as well as certain other trademarks.

We intend

to protect our trademarks to the fullest extent practicable.

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Employees and Human Capital

At Henry Schein, our employees are our greatest asset.

We employ more than 19,000 full-time equivalent

employees, including approximately 2,250 telesales representatives, over

3,450 field sales consultants, including

equipment sales specialists, 2,000 installation and repair technicians, 3,550 warehouse

employees, 800 computer

programmers and technicians, 675 management employees and 6,300 office, clerical

and administrative employees.

Approximately 49% of our workforce is based in the United States and

approximately 51% is based outside of the

United States.

Approximately 13% of our employees are subject to collective bargaining agreements.

We believe

that our relations with our employees are excellent.

We refer to our employees as Team

Schein Members, or “TSMs.”

Our TSMs are the cornerstone of the Company.

Our success is built on the engagement and commitment of our team, which

is dedicated to meeting the needs of

our customers, supplier partners, fellow TSMs, stockholders and society.

We are committed to supporting the

personal and professional development of our TSMs, as well as providing competitive

benefits and a safe, inclusive

workplace, and believe that these measures help us to retain our TSMs

and attract new TSMs.

As part of this

commitment, we have, among other things:

•

Developed a strong collaborative workplace culture.

We believe our TSMs’ ability to effectively

communicate and cooperate across functional and departmental teams positively

impacts our performance.

Each TSM’s performance is evaluated annually, based on a measure of Team Schein values, with a focus

on open communication.

Our team’s performance as a whole is evaluated via a culture survey, conducted

every two years, distributed to all TSMs, which, among other things,

addresses collaboration.

The results

from our culture surveys are reviewed by senior leaders, reported to the Board

of Directors and used to

implement programs and processes designed to further enhance our culture.

We are currently in the

process of further developing our collaborative culture by, among other things, strengthening our existing

commitment to diversity and inclusion, as further described below.

•

Committed to

enhance our

Diversity

and Inclusion

(“D&I”) initiatives.

believe

diverse workforce

fosters innovation and cultivates an environment filled with unique

perspectives.

As a result, D&I helps us

meet the needs of customers around the world.

We collect feedback through hosting roundtables where our

senior

leaders

actively

listen

our

TSMs

topics

D&I,

and

the

insights

learned

are

used

guide

our

efforts

support

diverse

and

inclusive

environment.

guide

our

efforts

and

education

related to

D&I, we

have established

an Executive

Diversity and

Inclusion Council

with engagement

from

our Board of Directors and Executive Management Committee. This

Council drives the Company’s overall

D&I strategy.

In 2020, we launched

a D&I learning

program to educate our

TSMs on critical

D&I related

topics, and management is incentivized to advance our D&I efforts.

Additionally, we promote engagement

utilizing

our

Employee

Resource

Groups

inclusive

and

diverse

vehicle

for

all

TSMs

share,

connect, learn, and develop both personally and professionally.

We believe that these efforts will serve as a

critical

stepping stone

continue to

strengthen our

D&I

initiatives in

effort

meet

the

evolving

needs of our customers, supplier partners, TSMs, stockholders and society.

•

Committed to the professional development of our TSMs.

We have invested in education and skill building,

and provide formal and informal learning opportunities to our TSMs.

All TSMs globally are offered a

broad suite of talent and professional development training programs

targeted to specific learning

opportunities based on their current and potential future role within

the Company.

We also offer

over 50

organizational and development training courses designed to aid in the overall development

and

advancement of skills and competencies to enable organizational success.

•

Supported talent development and succession planning.

Talent planning efforts are an integral part of our

commitment to ensure a strong leadership pipeline across the organization. We continuously identify a

group of potential management successors as part of our succession planning

process.

Our senior leaders

work to develop our TSMs’ talent and focus the team to execute our

long-term strategic plans.

Our Board

of Directors is provided with periodic updates regarding our

talent development and succession planning

efforts, participates in professional development activities with our TSMs and receives

formal

documentation on these topics annually.

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•

Supported TSM health and safety.

We offer competitive health and wellness programs and other benefits to

eligible TSMs.

In addition to employee health, we are committed to providing

a safe and secure work

environment for all TSMs.

In response to the COVID-19 pandemic, in March 2020, we implemented

certain policy and procedure changes in an effort to protect our TSMs and customers,

and to support

appropriate health and safety protocols.

While TSMs at our manufacturing and distribution facilities, as

well as field sales consultants and equipment service technicians, have

continued to work onsite or in the

field to provide vital services to our customers, most TSMs in administrative

functions have effectively

worked remotely since mid-March.

To support the health and safety of our TSMs, we, among other things,

implemented extensive cleaning and sanitation processes and face

mask policies to protect TSMs at our

manufacturing and distribution facilities, instituted social distancing

and face mask policies for our field

sales consultants and equipment service technicians and adopted broad work-from-home

initiatives for

TSMs in administrative functions. In connection with this shift to remote working,

we made investments in

equipment, technology, and security upgrades to help protect our information and enhance our team’s

ability to work remotely.

Additionally, to help the team manage stress during the pandemic, we, among

other things, established a “COVID-19 Resource Center” to provide a central

location for all

communications to support the health of TSMs and their families, and hold

virtual Global Town Halls for

all TSMs.

Available Information

We make available free of charge through our Internet website,

www.henryschein.com

, our annual report on Form

10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, statements

of beneficial ownership of

securities on Forms 3, 4 and 5 and amendments to these reports and statements

filed or furnished pursuant to

Section 13(a) and Section 16 of the Securities Exchange Act of 1934

as soon as reasonably practicable after such

materials are electronically filed with, or furnished to, the United States Securities

and Exchange Commission, or

SEC.

Our principal executive offices are located at 135 Duryea Road, Melville, New

York

11747, and our

telephone number is (631) 843-5500.

Unless the context specifically requires otherwise, the terms the

“Company,”

“Henry Schein,” “we,” “us” and “our” mean Henry Schein, Inc., a Delaware

corporation, and its consolidated

subsidiaries.

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Information about our Executive Officers

The following table sets forth certain information regarding our executive officers:

Name

Age

Position

Stanley M. Bergman

Chairman, Chief Executive Officer, Director

Gerald A. Benjamin

Executive Vice President, Chief Administrative Officer, Director

James P.

Breslawski

Vice Chairman, President, Director

Michael S. Ettinger

Senior Vice President, Corporate & Legal Affairs and Chief of Staff, Secretary

Mark E. Mlotek

Executive Vice President, Chief Strategic Officer, Director

Steven Paladino

Executive Vice President, Chief Financial Officer, Director

Walter Siegel

Senior Vice President and General Counsel

Stanley M. Bergman

has been our Chairman and Chief Executive Officer since 1989 and a director

since 1982.

Mr. Bergman held the position of President from 1989 to 2005.

Mr. Bergman held the position of Executive Vice

President from 1985 to 1989 and Vice President of Finance and Administration from 1980 to 1985.

Gerald A. Benjamin

has been our Executive Vice President and Chief Administrative Officer since 2000 and a

director since 1994.

Prior to holding his current position, Mr. Benjamin was Senior Vice President of

Administration and Customer Satisfaction since 1993.

Mr. Benjamin was Vice

President of Distribution

Operations from 1990 to 1992 and Director of Materials Management

from 1988 to 1990.

Before joining us in

1988, Mr. Benjamin was employed for 12 years at Estée Lauder, Inc., in various management positions where his

last position was Director of Materials Planning and Control.

James P. Breslawski

has been our Vice Chairman since 2018, President since 2005 and a director since 1992.

Mr.

Breslawski was the Chief Executive Officer of our Henry Schein Global Dental

Group from 2005 to 2018.

Mr.

Breslawski held the position of Executive Vice President and President of U.S. Dental from 1990 to 2005, with

primary responsibility for the North American Dental Group.

Between 1980 and 1990, Mr. Breslawski held

various positions with us, including Chief Financial Officer, Vice President of Finance and Administration and

Corporate Controller.

Michael S. Ettinger

has been our Senior Vice President, Corporate & Legal Affairs, Chief of Staff and Secretary

since 2015.

Prior to his current position, Mr. Ettinger served as Senior Vice President, Corporate & Legal Affairs

and Secretary from 2013 to 2015, Corporate Senior Vice President, General Counsel & Secretary from 2006 to

2013, Vice President, General Counsel and Secretary from 2000 to 2006, Vice President and Associate General

Counsel from 1998 to 2000 and Associate General Counsel from 1994

to 1998.

Before joining us, Mr. Ettinger

served as a senior associate with Bower & Gardner and as a member of

the Tax Department at Arthur Andersen.

Mark E. Mlotek

has been our Executive Vice President and Chief Strategic Officer since 2012.

Mr. Mlotek was

Senior Vice President and subsequently Executive Vice President of the Corporate Business Development Group

between 2000 and 2012.

Prior to that, Mr. Mlotek was Vice President, General Counsel and Secretary from 1994 to

1999 and became a director in 1995.

Prior to joining us, Mr. Mlotek was a partner in the law firm of Proskauer

Rose LLP,

counsel to us, specializing in mergers and acquisitions, corporate reorganizations and tax law from

1989

to 1994.

Steven Paladino

has been our Executive Vice President and Chief Financial Officer since 2000.

Prior to holding

his current position, Mr. Paladino was Senior Vice President and Chief Financial Officer from 1993 to 2000 and

has been a director since 1992.

From 1990 to 1992, Mr. Paladino served as Vice President and Treasurer and from

1987 to 1990 served as Corporate Controller.

Before joining us, Mr. Paladino was employed in public accounting

for seven years, most recently with the international accounting

firm of BDO USA, LLP.

Mr. Paladino is a

certified public accountant.

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Walter Siegel

has been our Senior Vice President and General Counsel since 2013.

Prior to joining us, Mr. Siegel

was employed with Standard Microsystems Corporation, a publicly

traded global semiconductor company from

2005 to 2012, holding positions of increasing responsibility, most recently as Senior Vice President, General

Counsel and Secretary.

Other Executive Management

The following table sets forth certain information regarding other Executive

Management:

Name

Age

Position

David Brous

President, Strategic Business Units Group and

Asia Pacific & Brazil Dental

Brad Connett

President, U.S. Medical Group

Jonathan Koch

Senior Vice President and Chief Executive Officer, Global Dental Group

Lorelei McGlynn

Senior Vice President, Chief Human Resources Officer

James Mullins

Senior Vice President, Global Services

Christopher Pendergast

Senior Vice President and Chief Technology Officer

Michael Racioppi

Senior Vice President, Chief Merchandising Officer

René Willi, Ph.D.

President, Global Dental Surgical Group

David Brous

has been our President, Strategic Business Units Group and Asia

Pacific & Brazil Dental since 2019.

Mr. Brous joined us in 2002 and has held many positions within the organization, including leading and managing

the Corporate Business Development Group and the International Healthcare Group

(managing our International

Animal Health business, International Medical business and Australia

/ New Zealand Dental business).

Brad Connett

has been our President of the U.S. Medical Group since 2018.

Mr. Connett joined us in 1997 and

has held a number of increasingly responsible positions at the Company.

Throughout his career, he has received

numerous industry honors, including the John F. Sasen Leadership Award from the Health Industry Distributors

Association (HIDA), in recognition of his service to the industry, and induction into the Medical Distribution Hall

of Fame by Repertoire Magazine.

Jonathan Koch

has been our Senior Vice President and Chief Executive Officer of our Global Dental Group since

2018.

Prior to joining us, for the years 2006 to 2018, Mr. Koch was a senior executive at Covance,

the drug

development services business of Laboratory Corporation of America.

In his last role at Covance, Mr. Koch was

the Executive Vice President and Group President of Covance Clinical Development & Commercialization

Services.

Prior to that, Mr. Koch was Executive Vice President and Group President of Covance Research and

Development Laboratories from 2015 to 2017.

Mr. Koch was also President of Covance Central Laboratory

Services from 2010 to 2015,

and Vice President at Covance, with various responsibilities, from 2006 to 2010.

Prior

to Covance, Mr. Koch held senior leadership roles of increasing responsibility while employed with Charles River

Laboratories from 1998 to 2006.

Lorelei McGlynn

has been our Senior Vice President, Global Human Resources Officer since 2013.

Since joining

us in 1999, Ms. McGlynn has served as Vice President, Global Human Resources and Financial Operations from

2008 to 2013, Chief Financial Officer, International Group and Vice President of Global Financial Operations from

2002 to 2008 and Vice President, Finance, North America from 1999 to 2002.

Prior to joining us, Ms. McGlynn

served as Assistant Vice President of Finance at Adecco Corporation.

James Mullins

has been our Senior Vice President of Global Services since 2018.

Mr. Mullins joined us in 1988

and has held a number of key positions with increasing responsibility, including Global Chief Customer Service

Officer.

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Christopher Pendergast

has been our Senior Vice President and Chief Technology Officer since 2018.

Prior to

joining us, Mr. Pendergast was the employed by VSP Global from 2008 to 2018, most recently as the Chief

Technology Officer and Chief Information Officer.

Prior to VSP Global, Mr. Pendergast served in roles of

increasing responsibility at Natural Organics, Inc., from 2006 to 2008, IdeaSphere Inc./Twinlab Corporation from

2000 to 2006, IBM Corporation from 1987 to 1994 and 1998 to 2000

and Rohm and Haas from 1994 to 1998.

Michael Racioppi

has been our Senior Vice President, Chief Merchandising Officer since 2008. Prior to holding

his current position, Mr. Racioppi was President of the Medical Division from 2000 to 2008 and Interim President

from 1999 to 2000, and Corporate Vice President from 1994 to 2008, with primary responsibility for the Medical

Group, Marketing and Merchandising departments.

Mr. Racioppi served as Senior Director, Corporate

Merchandising from 1992 to 1994.

Before joining us in 1992, Mr. Racioppi was employed by Ketchum

Distributors, Inc. as the Vice President of Purchasing and Marketing.

He currently serves on the board of National

Distribution and Contracting and previously served on the board of Health

Distribution Management Association

and Health Industry Distributors Association (HIDA).

René Willi, Ph.D.

has been our President, Global Dental Surgical Group, Henry Schein Inc., since 2013.

Prior to

joining Henry Schein, Dr. Willi held senior level roles with Institut Straumann AG as Executive Vice President,

Surgical Business Unit from 2005 to 2013.

Prior to Straumann, he held roles of increasing responsibility

Medtronic Plc’s cardiovascular division from 2003

to 2005 and with McKinsey & Company as a management

consultant from 2000 to 2003.

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ITEM 1A. Risk Factors

Our business operations could be affected by factors that are not presently known

to us or that we currently

consider not to be material to our operations, so you should not consider

the risks disclosed in this section to

necessarily represent a complete statement of all risks and uncertainties.

The Company believes that the following

risks could have a material adverse impact on our business, reputation, financial

results, financial condition and/or

the trading price of our common stock.

The order in which these factors appear does not necessarily reflect

their

relative importance or priority.

COMPANY RISKS

Our business, results of operations, cash flows, financial condition and

liquidity may be negatively impacted by

the effects of disease outbreaks, epidemics, pandemics, or similar wide-spread public

health concerns and other

natural disasters

The COVID-19 pandemic and the responses of governments

to it had, and 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.

Our business, results of operations, cash flows, financial condition and

liquidity may be negatively impacted by the

effects of disease outbreaks, epidemics, pandemics, similar wide-spread public health concerns,

and other natural

disasters. The COVID-19 pandemic has had, and continues to have,

an unprecedented impact on society, worldwide

economic activity, and the health care sector (particularly, the dental market). As a global healthcare solutions

company, the COVID-19 pandemic and the governmental responses to it had, and 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. In March and April 2020, the dental market was severely impacted by

COVID-19, with many, if not a majority, of practices being closed or open on a limited basis only. Although dental

practice openings and patient volume recovery in the United States and

many other countries have rebounded faster

than originally anticipated, patient volumes have remained below pre-COVID-19

levels.

Material uncertainty

remains and the potential for additional significant resurgences of COVID-19

could cause a significant reduction in

dental practice openings and patient volume recovery, or further delay the return to normal operations. Even

after

COVID-19 has subsided, we may again experience material adverse

impacts to our business, results of operations

and cash flows as a result of, among other things, its global economic

impact, including any recession that may

occur in the future, or a prolonged period of economic slowdown or the

reluctance of patients to return for elective

dental or medical care. The impacts and potential impacts from

the COVID-19 pandemic include, but are not

limited to:

•

Significant reductions in demand or significant volatility in demand for certain of our products.

For example, in

March and April 2020, many dental offices in the United States performed only emergency procedures,

and

rescheduled wellness exams and elective procedures. Dental offices in other countries

also experienced closures or

restricted operations, as did medical offices around the world. Such closures and restrictions

impacted our

customers’ spending with us and had, and if reinstated may again have, a material

adverse effect on our business,

results of operations and cash flows. Although dental practice openings and

patient volume recovery have

rebounded faster than originally anticipated, capacity constraints

in offices and demand-side factors may again lead

to reductions in demand or significant volatility in demand for our products. Additionally, significant reduction in

demand for certain of our products or customers’ decisions to delay

the purchase of large equipment may result in

us having increased inventory;

•

Shortage of Certain Personal Protective Equipment (PPE

). Supply chain disruptions for PPE and an increased

demand for these products has resulted, and may continue to result,

in backorders of certain PPE and a potential

scarcity in raw materials to make certain PPE. Prices for certain PPE have been

volatile. Although we believe that

most practices currently are able to access adequate supply, with some exceptions in certain markets depending on

a number of factors, including the progress of the virus and efforts to combat it, we

still may be unable to supply

our customers with the quantity of certain PPE products they demand,

which may lead to our customers seeking

alternative sources of supply. Furthermore, healthcare professionals’ inability to obtain a sufficient quantity of

certain PPE would

adversely impact our business, results of operations and cash flows,

and could materially

adversely affect our financial condition and liquidity. Conversely, we recorded significant charges throughout the

year beginning in the second quarter for PPE inventory due to volatility

of pricing for PPE, and, depending upon

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the course of the pandemic, if PPE pricing or demand decreases, our

margins and the value of certain our PPE

inventory could be further negatively impacted in future periods, which

could result in a material adverse impact on

our business, results of operations and cash flows and our financial condition

and liquidity;

•

Reduction in Peoples’ Ability and Willingness to be in Public.

Restrictions recommended by several public health

organizations, and implemented by many local governments, to slow and limit the transmission

of COVID-19

(including business closures and restrictions, stay-at-home and similar measures)

were implemented and then lifted

or partially lifted in some locations and reinstituted in others. Ongoing

social distancing ordinances and similar

restrictions, and the actual and potential for additional resurgences of COVID-19

has in some locations and may in

other locations result in the re-imposition or tightening of governmental

social distancing and other restrictions,

and/or cause people to be less willing to go to elective medical and dental

appointments, which could again

materially adversely affect demand for our products. A lengthened period of materially

suppressed demand could

again cause material adverse impacts on our business, results of operations

and cash flows and could materially

adversely affect our financial condition and liquidity;

•

Potential delays in customer payments, or defaults on our customer credit arrangements.

We generally sell

products to customers with payment terms. If customers’ cash

flows or operating and financial performance

deteriorate due to the impact of COVID-19, or if they are unable to make scheduled

payments or obtain credit, they

may not be able to pay, or may delay payment to us. Likewise, for similar reasons, suppliers may restrict credit or

impose more stringent payment terms. The inability of current and/or

potential customers to pay us for our products

and/or services or any demands by suppliers for more stringent payment terms

may materially adversely affect our

business, results of operations, cash flows, financial condition and

liquidity and may limit the amounts we can

borrow under our trade accounts receivable securitization;

•

Impact on third parties’ ability to meet their obligations to us; impact on our ability to meet obligations

to third

parties.

Failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors,

contractors (including third-party shippers), banks, joint venture partners

and external business partners, to meet

their obligations to us, or significant disruptions in their ability to do

so, which may be caused by their own

financial or operational difficulties, or by travel restrictions and border closures, may materially

adversely affect

our business, results of operations, cash flows, financial condition and

liquidity. Certain of our contracts with

supply partners contain minimum purchase requirements or include rebate provisions

if we satisfy certain sales or

purchasing targets that, in certain cases we have not been able to satisfy and in other

cases we may not be able to

fully satisfy, due to the impact of the COVID-19 pandemic. Rebate income recognized in fiscal 2020 is less than

rebates earned over the prior fiscal year. Our failure to satisfy such contractual provisions or renegotiate

favorable terms could materially adversely affect our business, results of operations

and cash flows;

•

Negative impact on our workforce and impact of adapted business practices.

The spread of COVID-19 caused us

to implement temporary cost reduction measures (including a payroll

cost reduction plan centered around

furloughs, reduced pay and work hours, voluntary unpaid time off, suspension of Company

contributions to certain

retirement plans and job reductions), all of which have now ended (except

for a small number of TSMs who remain

on furlough), modify our business practices (including employee

travel, employee work locations, and cancellation

of physical participation in meetings, events and conferences), and

we may take further actions as may be required

by government authorities or that we determine are in the best interests

of our employees. As the COVID-19

pandemic continues to unfold, we will continue to evaluate appropriate actions

for our business. Many of our

employees shifted abruptly to working remotely and our non-essential workers

who are able to work from home

continue to do so. An extended period of modified business practices

and remote work arrangements could have a

negative impact on employee morale, strain our business continuity plans,

introduce operational risk (including but

not limited to cybersecurity risks), and impair our ability to efficiently operate our

business;

•

Significant changes in political conditions.

Significant changes in political conditions in markets in which

purchase and distribute our products have occurred and are expected to

continue at least during the pendency of the

pandemic, including quarantines, governmental or regulatory actions, closures

or other restrictions that limit or

close our operating facilities, restrict our employees’ ability to

travel or perform necessary business functions, or

otherwise constrain the operations of our business partners, suppliers, or

customers, which may materially

adversely affect our business, results of operations, cash flows, financial condition

and liquidity;

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•

Potential impact on our ability to meet obligations under credit facilities.

Although in fiscal 2020 we entered into

amendments to our material credit facilities to, among other things,

extend the maturity dates and temporarily

provide additional flexibility under certain covenants, an extended negative

impact of COVID-19 on our business,

results of operations, cash flows, financial condition and liquidity could

impact our ability to meet our obligations

under credit facilities or outstanding long term debt, which contain

maximum leverage ratios, and customary

representations, warranties and affirmative covenants;

•

Volatility

in the financial markets.

Volatility

in the financial markets may materially adversely affect the

availability and cost of credit to us;

•

Refocusing management resources to mitigate effects of COVID-19

. Our management is focused on mitigating the

effects of COVID-19, which has required, and may continue to require for the duration of

the pandemic, a large

investment of time and resources across the Company, and may delay certain strategic and other plans, which could

materially adversely affect our business;

•

Potential

increased costs associated with our self-insured medical insurance programs.

We may incur significant

employee health care costs under our self-insurance medical insurance programs

if a large number of our

employees and/or their covered family members become ill from COVID-19;

and

•

Reputational risk associated with response to COVID-19.

If we do not respond appropriately to the COVID-19

pandemic, or if customers do not perceive our response to be adequate, we could

suffer damage to our reputation

and our brands, which could materially adversely affect our business.

The impact of COVID-19 may also exacerbate other risks discussed below, any of which could have a material

adverse effect on us.

We are dependent upon third parties for the manufacture and supply of substantially all of our products.

We obtain substantially all of the products we distribute from third parties, with whom we generally do not have

long-term contracts. While there is typically more than one source of

supply, some key suppliers, in the aggregate,

supply a significant portion of the products we sell.

In 2020, our top 10 health care distribution suppliers and

our

single largest supplier accounted for approximately 30%

and 4%, respectively, of our aggregate purchases.

Because of our dependence upon such suppliers, our operations are

subject to the suppliers’ ability and willingness

to supply products in the quantities that we require, and the risks include delays

caused by interruption in

production based on conditions outside of our control, including

a supplier’s failure to comply with applicable

government requirements (which may result in product recalls and/or

cessation of sales) or an interruption in the

suppliers’ manufacturing capabilities. In the event of any such

interruption in supply, we would need to identify and

obtain acceptable replacement sources on a timely basis. There is no guarantee

that we would be able to obtain such

alternative sources of supply on a timely basis, if at all, and an extended interruption

in supply, particularly of a

high sales volume product, could result in a significant disruption in our sales

and operations, as well as damage to

our relationships with customers and our reputation.

Our

future

growth

(especially

for

our

technology

and

value-added

services

segment)

dependent

upon

our

ability

develop

acquire

and

maintain

and

protect

new

products

and

technologies

that

achieve

market

acceptance with acceptable margins.

Our future success

depends on our ability

to timely develop (or

obtain the right

to sell) competitive

and innovative

(particularly

for

our

technology

and

value-added

services

segment),

products

and

services

and

market

them

quickly and

cost-effectively.

Our ability

to anticipate

customer needs

and emerging

trends and

develop or

acquire

new products,

services and

technologies at

competitive prices

requires significant

resources, including

employees

with the requisite skills, experience

and expertise, particularly in our

technology segment, including dental practice

management, patient engagement and demand creation software solutions.

The failure to successfully address these

challenges

could

materially

disrupt

our

sales

and

operations.

Additionally,

our

software

and

e-services

products,

software

products generally,

may

contain

undetected errors

bugs

when introduced

new

versions

are

released. Any such defective

software may result in

increased expenses related to the

software and could adversely

affect

our

relationships

with

customers

well

our

reputation.

While

certain

software

and

e-services

that

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develop are protected

under patent law,

we rely primarily

upon copyright, trademark

and trade secret

laws, as well

as contractual and

common law protections and

confidentiality obligations. We

cannot provide assurance that

such

legal protections will be

available, adequate or enforceable in

a timely manner to protect

our software or e-services

products.

Our expansion through acquisitions and joint ventures involves

risks and may not result in the benefits and

revenue growth we expect.

One of our business strategies has been to expand our domestic and

international markets in part through

acquisitions and joint ventures, and we expect to continue to make acquisitions

and enter into joint ventures in the

future. Such transactions require significant management attention,

may place significant demands on our

operations, information systems and financial resources, and there

is risk that one or more may not succeed. We

cannot be sure, for example, that we will achieve the benefits of revenue

growth that we expect from these

acquisitions or joint ventures or that we will avoid unforeseen additional

costs or expenses.

Our ability to

successfully implement our acquisition and joint venture strategy depends

upon, among other things, the following:

•

the availability of suitable acquisition or joint venture candidates at

acceptable prices;

•

our ability to consummate such transactions, which could potentially

be prohibited due to U.S. or

foreign antitrust regulations;

•

the liquidity of our investments and the availability of financing on

acceptable terms;

•

our ability to retain customers or product lines of the acquired businesses or

joint ventures;

•

our ability to retain, recruit and incentivize the management of the companies

we acquire; and

•

our ability to successfully integrate these companies’ operations, services,

products and personnel with

our culture, management policies, internal procedures, working capital

management, financial and

operational controls and strategies.

Furthermore, some of our acquisitions and future acquisitions may give

rise to an obligation to make contingent

payments or to satisfy certain repurchase obligations, which payments

could have material adverse impacts on our

financial results individually or in the aggregate.

Certain provisions in our governing documents and other documents to

which we are a party may discourage

third parties from seeking to acquire us that might otherwise result in

our stockholders receiving a premium

over the market price of their shares.

The provisions of our certificate of incorporation and by-laws may

make it more difficult for a third-party to

acquire us, may discourage acquisition bids and may impact the price

that certain investors might be willing to pay

in the future for shares of our common stock.

These provisions, among other things require:

•

the affirmative vote of the holders of at least 60% of the shares of common stock

entitled to vote to

approve a merger, consolidation, or a sale, lease, transfer or exchange of all or substantially all of our

assets; and

•

the affirmative vote of the holders of at least 66 2/3% of our common stock entitled

to vote to (i)

remove a director; and (ii) to amend or repeal our by-laws, with certain limited

exceptions.

In addition, certain of our employee incentive plans provide for accelerated

vesting of stock options and other

awards upon termination without cause within two years following a change

in control, or grant the plan committee

discretion to accelerate awards upon a change of control.

Further, certain agreements between us and our executive

officers provide for increased severance payments and certain benefits if those

executive officers are terminated

without cause by us or if they terminate for good reason, in each case within

two years following a change in

control or within ninety days prior to the effective date of the change in control

or after the first public

announcement of the pendency of the change in control.

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INDUSTRY RISKS

The health care products distribution industry is highly competitive

(including, without limitation, competition

from third-party online commerce sites) and consolidating, and we may not

be able to compete successfully.

We compete with numerous companies, including several major manufacturers and distributors. Some of our

competitors have greater financial and other resources than we do, which

could allow them to compete more

successfully. Most of our products are available from several sources and our customers tend to have relationships

with several distributors. Competitors could obtain exclusive rights

to market particular products, which we would

then be unable to market. Manufacturers also could increase their

efforts to sell directly to end-users and thereby

eliminate or reduce our role in distribution. Industry consolidation among health

care product distributors and

manufacturers, price competition, product unavailability, whether due to our inability to gain access to products or

to interruptions in manufacturing supply, or the emergence of new competitors, also could increase competition.

Consolidation has also increased among manufacturers of health care

products, which could have a material

adverse effect on our margins and product availability. We

could be subject to charges and financial losses in the

event we fail to satisfy minimum purchase commitments contained

in some of our contracts. Additionally,

traditional health care supply and distribution relationships are being challenged

by electronic online commerce

solutions. The continued advancement of online commerce by third

parties will require us to cost-effectively adapt

to changing technologies, to enhance existing services and to differentiate our business

(including with additional

value-added services) to address changing demands of consumers and

our customers on a timely basis. The

emergence of such potential competition and our inability to anticipate and

effectively respond to changes on a

timely basis could have a material adverse effect on our business.

The repeal or judicial prohibition on implementation of the Affordable Care Act

could materially adversely

affect our business.

The U.S. 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”), greatly expanded

health insurance coverage in the

United States and has been the target of litigation and Congressional reform efforts since its adoption.

The U.S.

Supreme Court, in upholding the constitutionality of the ACA and its

individual mandate provision in 2012,

simultaneously limited ACA provisions requiring Medicaid expansion,

making such expansion a state-by-state

decision.

In 2017, the U.S. Congress effectively repealed the ACA’s

individual mandate provision by eliminating

the financial penalty for non-compliance.

In the most recent ACA litigation, a federal appeals court found

the

individual mandate to be unconstitutional, and returned the case to a lower federal

court for consideration of

whether the remainder of the ACA could survive the excision of the individual

mandate.

This decision was

appealed to the U.S. Supreme Court, and a decision is expected soon.

Any outcome of this case that changes the

ACA, in addition to future legislation, regulation, guidance and/or Executive

Orders that do the same, could have a

significant impact on the U.S. healthcare industry and our operations.

The health care industry is experiencing changes due to political, economic and

regulatory influences that could

materially adversely affect our business.

The health care industry is highly regulated and subject to changing

political, economic and regulatory influences.

In recent years, the health care industry has undergone, and is in the process of undergoing, significant

changes

driven by various efforts to reduce costs, including, among other factors: trends

toward managed care; collective

purchasing arrangements and consolidation among office-based health care practitioners; and

changes in

reimbursements to customers, including increased attention to value-based payment

arrangements, as well as

growing enforcement activities (and related monetary recoveries) by governmental

officials. Both our profitability

and the profitability of our customers may be materially adversely affected by laws

and regulations reducing

reimbursement rates for pharmaceuticals, medical supplies and devices,

and/or medical treatments or services, or

changes to the methodology by which reimbursement levels are determined.

If we are unable to react effectively to

these and other changes in the health care industry, our business could be materially adversely affected.

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Expansion of group purchasing organizations (“GPO”) or provider networks

and the multi-tiered costing

structure may place us at a competitive disadvantage.

The medical products industry is subject to a multi-tiered costing structure,

which can vary by manufacturer and/or

product. Under this structure, certain institutions can obtain more

favorable prices for medical products than we are

able to obtain. The multi-tiered costing structure continues to expand

as many large integrated health care providers

and others with significant purchasing power, such as GPOs, demand more favorable pricing terms.

Additionally,

the formation of provider networks and GPOs may shift purchasing decisions

to entities or persons with whom we

do not have a historical relationship and may threaten our ability to compete

effectively, which could in turn

negatively impact our financial results. Although we are seeking to obtain similar

terms from manufacturers to

access lower prices demanded by GPO contracts or other contracts, and to

develop relationships with existing and

emerging provider networks and GPOs, we cannot guarantee that such terms will

be obtained or contracts executed.

Increases in shipping costs or service issues with our third-party shippers

could harm our business.

Shipping is a significant expense in the operation of our business. We ship almost all of our orders through third-

party delivery services, and typically bear the cost of shipment. Accordingly, any significant increase in shipping

rates could have a material adverse effect on our business, financial condition or operating

results. Similarly, strikes

or other service interruptions by those shippers could cause our operating

expenses to rise and materially adversely

affect our ability to deliver products on a timely basis.

MACRO ECONOMIC AND POLITICAL RISKS

Uncertain global macro-economic and political conditions could

materially adversely affect our results of

operations and financial condition.

Uncertain global macro-economic and political conditions that affect the economy

and the economic outlook of the

United States, Europe, Asia and other parts of the world could materially adversely

affect our results of operations

and financial condition. These uncertainties, include, among other things:

•

election results;

•

changes to laws and policies governing foreign trade (including, without

limitation, the United States-

Mexico-Canada Agreement (USMCA), the EU-UK Trade and Cooperation Agreement of December

2020, and other international trade agreements);

•

greater restrictions on imports and exports;

•

supply chain disruptions due to social issues;

•

changes in laws and policies governing health care or data privacy;

•

tariffs and sanctions;

•

changes to the relationship between the United States and China;

•

sovereign debt levels;

•

the inability of political institutions to effectively resolve actual or perceived

economic, currency or

budgetary crises or issues;

•

consumer confidence;

•

unemployment levels (and a corresponding increase in the uninsured

and underinsured population);

•

changes in regulatory and tax regulations;

•

increases in interest rates;

•

availability of capital;

•

increases in fuel and energy costs;

•

the effect of inflation on our ability to procure products and our ability to increase

prices over time;

•

changes in tax rates and the availability of certain tax deductions;

•

increases in health care costs;

•

the threat or outbreak of war, terrorism or public unrest; and

•

changes in laws and policies governing manufacturing, development and

investment in territories and

countries where we do business.

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Additionally, changes in government, government debt and/or budget crises may lead to reductions in government

spending in certain countries, which could reduce overall health care spending,

and/or higher income or corporate

taxes, which could depress spending overall. Recessionary conditions and depressed

levels of consumer and

commercial spending may also cause customers to reduce, modify, delay or cancel plans to purchase our products

and may cause suppliers to reduce their output or change their terms of sale.

We generally sell products to

customers with payment terms. If customers’ cash flow or operating and

financial performance deteriorate, or if

they are unable to make scheduled payments or obtain credit, they may not

be able to, or may delay, payment to us.

Likewise, for similar reasons suppliers may restrict credit or impose different payment

terms.

REGULATORY

AND LITIGATION RISKS

Failure to comply with existing and future regulatory requirements

could materially adversely affect our

business.

The laws and regulations that govern our business and operations are

subject to varying and evolving

interpretations, future changes, additions, and enforcement approaches

(including in light of political changes, such

as with respect to the new administration of President Biden) that

affect our ability to comply.

For example,

President Biden’s administration has authorized and encouraged a freeze on certain federal regulations

that have

been published but are not yet effective, as well as a review of all federal regulations

issued during President

Trump’s administration.

Changes with respect to the applicable laws and regulations may

require us to update or

revise our operations, services, marketing practices, and compliance programs

and controls, and may impose

additional and unforeseen costs on us, pose new or previously immaterial

risks to us, or may otherwise have a

material adverse effect on our business.

There can be no assurance that current and future government

regulations

will not adversely affect our business, and we cannot predict new regulatory priorities,

the form, content or timing

of regulatory actions, and their impact on the health care industry and on

our business and operations.

Global efforts toward healthcare cost containment continue to exert pressure on

product pricing.

In the United

States, in addition to other government efforts to control health care costs, there has been

increased scrutiny on drug

pricing and concurrent efforts to control or reduce drug costs by Congress, the President,

executive branch agencies

and various states. At the state level, several states have adopted

laws that require drug manufacturers to provide

advance notice of certain price increases and to report information

relating to those price increases, while others

have taken legislative or administrative action to establish prescription drug

affordability boards or multi-payer

purchasing pools to reduce the cost of prescription drugs.

At the federal level, several related bills have been

introduced and regulations proposed which, if enacted or finalized,

respectively, would impact drug pricing and

related costs.

Under the Physician Payment Sunshine Act, we are required to collect

and report detailed information regarding

certain financial relationships we have with covered recipients, such as

physicians, dentists and teaching hospitals.

We or our subsidiaries may be required to report information under certain state transparency laws that address

circumstances not covered by the Physician Payment Sunshine Act, and

some of these state laws, as well as the

federal law, can be ambiguous.

We are also subject to foreign regulations requiring transparency of certain

interactions between suppliers and their customers.

While we believe we have substantially compliant programs

and controls in place satisfying the above laws and requirements,

such compliance imposes additional costs on us

and the requirements are sometimes ambiguous.

In the United States, government actions to seek to increase

health-related price transparency may also affect our business.

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Our business is subject to additional requirements under various local, state,

federal and international laws and

regulations applicable to the sale and distribution of, and third-party

payment for, pharmaceuticals and medical

devices, human cells, tissue and cellular and tissue-based products (“HCT/P products”).

Among the federal laws

with which we must comply are the Controlled Substances Act,

the U.S. Food, Drug, and Cosmetic Act, as

amended (“FDC Act”), the Federal Drug Quality and Security Act, including

Drug Supply Chain Security Act

(“DSCSA”), and Section 361 of the Public Health Services Act. Among

other things, such laws, and the regulations

promulgated thereunder:

•

regulate the storage and distribution, labeling, packaging, handling, reporting,

record keeping,

introduction, manufacturing and marketing of drugs, HCT/P products

and medical devices, including

requirements with respect to unique medical device identifiers;

•

subject us to inspection by the U.S. Food and Drug Administration (“FDA”)

and the U.S. Drug

Enforcement Administration (“DEA”), and similar state authorities;

•

regulate the storage, transportation and disposal of certain of our products

that are considered

hazardous materials;

•

require us to advertise and promote our drugs and devices in accordance

with applicable FDA

requirements;

•

require registration with the FDA and the DEA and various state agencies;

•

require record keeping and documentation of transactions involving drug products;

•

require us to design and operate a system to identify and report suspicious

orders of controlled

substances to the DEA;

•

require us to manage returns of products that have been recalled and subject

us to inspection of our

recall procedures and activities;

•

impose on us reporting requirements if a pharmaceutical, HCT/P product or

medical device causes

serious illness, injury or death;

•

require manufacturers, wholesalers, repackagers and dispensers of prescription

drugs to identify and

trace certain prescription drugs as they are distributed;

•

require the licensing of prescription drug wholesalers and third-party

logistics providers; and

•

mandate compliance with standards for the recordkeeping, storage

and handling of prescription drugs,

and associated reporting requirements.

The FDA has become increasingly active in addressing the regulation of

computer software and digital health

products intended for use in health care settings.

The 21st Century Cures Act (the “Cures Act”), signed into law on

December 13, 2016, among other things, amended the medical device definition

to exclude certain software from

FDA regulation, including certain clinical decision support software.

Certain of our businesses involve the

development and sale of software and related products to support physician

and dental practice management, and it

is possible that the FDA or foreign government authorities could determine

that one or more of our products is

subject to regulation as a medical device, which could subject us or one

or more of our businesses to substantial

additional requirements, costs, and potential enforcement actions or liabilities

for noncompliance with respect to

these products.

Applicable federal, state, local and foreign laws and regulations also may require

us to meet various standards

relating to, among other things, licensure or registration, program eligibility, procurement, third-party

reimbursement, sales and marketing practices, product integrity and

supply tracking to product manufacturers,

product labeling, personnel, privacy and security of health or other personal

information, installation, maintenance

and repair of equipment and the importation and exportation of products.

The FDA and DEA, as well as CMS

(including with respect to complex Medicare reimbursement requirements

applicable to our specialty home medical

supplies business), have recently increased their regulatory and enforcement

activities and, in particular, the DEA

has heightened enforcement activities due to the opioid crisis in the United States.

Our business is also subject to

requirements of similar and other foreign governmental laws and regulations

affecting our operations abroad.

The failure to comply with any of these laws and regulations, or new

interpretations of existing laws and

regulations, or the imposition of any additional laws and regulations,

could materially adversely affect our business.

The costs to us associated with complying with the various applicable

statutes and regulations, as they now exist

and as they may be modified, could be material.

Allegations by a governmental body that we have not complied

with these laws could have a material adverse effect on our businesses.

While we believe that we are substantially

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compliant with applicable laws and regulations, and believe we have adequate

compliance programs and controls in

place to ensure substantial compliance, if it is determined that we have

not complied with these laws, we are

potentially subject to penalties, including warning letters, substantial civil and

criminal penalties, mandatory recall

of product, seizure of product and injunction, consent decrees and suspension

or limitation of product sale and

distribution.

If we enter into settlement agreements to resolve allegations of non-compliance,

we could be required

to make settlement payments or be subject to civil and criminal penalties, including

fines and the loss of licenses.

Non-compliance with government requirements could also adversely affect our ability

to participate in important

federal and state government health care programs, such as Medicare

and Medicaid, and damage our reputation.

The EU Medical Device Regulation may adversely affect our business.

The EU Medical Device Regulation No. 2017/745 (“EU MDR”) was meant

to become applicable three years after

publication (in May 2020). However, on April 23, 2020, to allow EEA national authorities, notified bodies,

manufacturers and other actors to focus fully on urgent priorities related to the COVID-19

pandemic, the European

Council and Parliament adopted Regulation 2020/561, postponing the date

of application of the EU MDR by one

year (to May 2021).

The EU MDR significantly modifies and intensifies the regulatory

compliance requirements

for the medical device industry as a whole.

Once applicable, the EU MDR will among other things:

•

Strengthen the rules on placing devices on the market and reinforce surveillance

once they are

available;

•

Establish explicit provisions on manufacturers’

responsibilities for the follow-up of the quality,

performance and safety of devices placed on the market;

•

Improve the traceability of medical devices throughout the supply chain

to the end-user or patient

through a unique identification number;

•

Set up a central database to provide patients, healthcare professionals and

the public with

comprehensive information on products available in the EU;

•

Strengthen rules for the assessment of certain high-risk devices, such as

implants, which may have to

undergo an additional check by experts before they are placed on the market; and

•

Identify importers and distributors and medical device products through

registration in a database

(EudaMed not due until 2022 and after).

In particular, the EU MDR imposes stricter requirements for the confirmation that a product meets the regulatory

requirements, including regarding a product’s clinical evaluation and a company’s quality systems, and for the

distribution, marketing and sale of medical devices, including post-market surveillance.

Medical devices that have

been assessed and/or certified under the EU Medical Device Directive may

continue to be placed on the market

until 2024 (or until the expiry of their certificates, if applicable and earlier);

however, requirements regarding the

distribution, marketing and sale including quality systems and post-market surveillance

have to be observed by

manufacturers, importers and distributors as of the application date.

The modifications created by the EU MDR may have an impact on the

way we design and manufacture products

and the way we conduct our business in the European Economic Area.

If we fail to comply with laws and regulations relating to health care

fraud or other laws and regulations, we

could suffer penalties or be required to make significant changes to our operations,

which could materially

adversely affect our business.

Certain of our businesses are subject to federal and state (and similar

foreign) health care fraud and abuse, referral

and reimbursement laws and regulations with respect to their operations.

Some of these laws, referred to as “false

claims laws,” prohibit the submission or causing the submission of false or fraudulent

claims for reimbursement to

federal, state and other health care payers and programs.

Other laws, referred to as “anti-kickback laws,” prohibit

soliciting, offering, receiving or paying remuneration in order to induce the referral

of a patient or ordering,

purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing of, items or services

that are

paid for by federal, state and other health care payers and programs.

Certain additional state and federal laws, such

as the federal Physician Self-Referral Law, commonly known as the “Stark Law,” prohibit physicians and other

health professionals from referring a patient to an entity with which the physician

(or family member) has a

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financial relationship, for the furnishing of certain designated health services

(for example, durable medical

equipment and medical supplies), unless an exception applies.

The fraud and abuse laws and regulations have been subject to heightened

enforcement activity over the past few

years, and significant enforcement activity has been the result of “relators” who

serve as whistleblowers by filing

complaints in the name of the United States (and if applicable, particular states)

under applicable false claims laws,

and who may receive up to 30% of total government recoveries.

Penalties under fraud and abuse laws may be

severe, and could result in significant civil and criminal penalties and costs,

including the loss of licenses and the

ability to participate in federal and state health care programs, and could

have a material adverse effect on our

business.

Also, these measures may be interpreted or applied by a prosecutorial,

regulatory or judicial authority in

a manner that could require us to make changes in our operations or incur substantial

defense and settlement

expenses.

Even unsuccessful challenges by regulatory authorities or private

relators could result in reputational

harm and the incurring of substantial costs.

Most states have adopted similar state false claims laws, and these

state

laws have their own penalties which may be in addition to federal False Claims

Act penalties, as well as other fraud

and abuse laws.

With respect to measures of this type, the United States government (among others) has expressed concerns

about

financial relationships between suppliers on the one hand and physicians,

dentists and other health care providers,

on the other.

As a result, we regularly review and revise our marketing practices

as necessary to facilitate

compliance.

In the EU, the Directive No. 2019/1937 of 23 October 2019

on the protection of persons who report breaches of

Union law

which organizes the legal protection of whistleblowers must be implemented by EU

member states by

December 17, 2021. This Directive covers whistleblowers reporting breaches

of certain EU laws, in particular as

regards public health, the above-mentioned Directive No. 2001/83, Regulation

No. 726/2004 or, as regards data

protection, the GDPR. The Directive protects a wide range of people and

includes former employees.

All private

companies with 50 or more employees are required to create effective internal reporting

channels.

We also are subject to certain United States and foreign laws and regulations concerning the conduct of our foreign

operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery

Act, German anti-corruption laws

and other anti-bribery laws and laws pertaining to the accuracy of our internal

books and records, which have been

the focus of increasing enforcement activity globally in recent years.

Our businesses are generally subject to

numerous other laws and regulations that could impact our financial

results, including, without limitation,

securities, antitrust, consumer protection, and marketing laws and regulations.

In the EU, both active and passive bribery are criminalized. The EU Council

Framework Decision 2003/568/JHA

of 22 July 2003

on combating corruption in the private sector

establishes more detailed rules on the liability of

legal persons and deterrent sanctions. However, the liability of legal persons is regulated at a national

level.

Failure to comply with fraud and abuse laws and regulations, and other

laws and regulations, could result in

significant civil and criminal penalties and costs, including the loss of

licenses and the ability to participate in

federal and state health care programs, and could have a material adverse

effect on our business.

We may

determine to enter into settlements, make payments, agree to consent decrees

or enter into other arrangements to

resolve such matters.

Intentional or unintentional failure to comply with consent decrees could

materially adversely

affect our business.

While we believe that we are substantially compliant with applicable fraud and

abuse and other laws and

regulations, and believe we have adequate compliance programs and controls

in place to ensure substantial

compliance, we cannot predict whether changes in applicable law, or interpretation of laws, or changes in our

services or marketing practices in response to changes in applicable law or

interpretation of laws, could have a

material adverse effect on our business.

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If we fail to comply with laws and regulations relating to the confidentiality

of sensitive personal information or

standards in electronic health records or transmissions, we could

be required to make significant changes to our

products, or incur substantial fines, penalties or other liabilities.

Our businesses that involve physician and dental practice management

products, and our specialty home medical

supply business, include electronic information technology systems that

store and process personal health, clinical,

financial and other sensitive information of individuals.

These information technology systems may be vulnerable

to breakdown, wrongful intrusions, data breaches and malicious attack, which

could require us to expend

significant resources to eliminate these problems and address related security

concerns, and could involve claims

against us by private parties and/or governmental agencies.

We are directly or indirectly subject to numerous and evolving federal, state, local and foreign laws and regulations

that protect the privacy and security of personal information, such as the

HIPAA, the Controlling the Assault of

Non-Solicited Pornography and Marketing Act, the Telephone Protection and Electronic Protection Act of 1991,

Section 5 of the Federal Trade Commission Act, the CCPA, and the CPRA that becomes effective on January 1,

2023.

Laws and regulations relating to privacy and data protection are continually

evolving and subject to

potentially differing interpretations. These requirements may not be harmonized,

may be interpreted and applied in

a manner that is inconsistent from one jurisdiction to another or may conflict

with other rules or our practices.

Our

businesses’ failure to comply with these laws and regulations could expose us

to breach of contract claims,

substantial fines, penalties and other liabilities and expenses, costs for remediation

and harm to our reputation.

Also, evolving laws and regulations in this area could restrict the ability

of our customers to obtain, use or

disseminate patient information, or could require us to incur significant

additional costs to re-design our products to

reflect these legal requirements, which could have a material adverse

effect on our operations.

In addition, the European Parliament and the Council of the European Union

have adopted the GDPR, which

increases privacy rights for individuals in Europe, or “Data Subjects”,

including individuals who are our customers,

suppliers and employees.

The GDPR extended the scope of responsibilities for data controllers

and data processors

and generally imposes increased requirements and potential penalties

on companies, such as us, that offer goods or

services to Data Subjects or monitor their behavior (including by

companies based outside of Europe).

Noncompliance can result in penalties of up to the greater of EUR 20

million, or 4% of global company revenues.

Data Subjects also have the right to seek compensation for damages.

EU member states may individually impose

additional requirements and penalties regarding certain matters,

such as employee personal data.

In the United States, the CCPA, which increases the privacy protections afforded California residents, became

effective January 1, 2020.

The CCPA generally requires companies, such as us, to institute additional protections

regarding the collection, use and disclosure of certain personal information

of California residents.

Compliance

with the new obligations imposed by the CCPA depends in part on how particular regulators interpret and apply

them, and because the CCPA is relatively new,

and its implementing regulations were released in August of

2020,

there remains some uncertainty about how the CCPA will be interpreted by the courts and enforced by the

regulators. If we fail to comply with the CCPA or if regulators assert that we have failed to comply with the CCPA,

we may be subject to certain fines or other penalties and litigation,

any of which may negatively impact our

reputation, require us to expend significant resources, and harm our business.

Furthermore, California voters

approved the CPRA on November 3, 2020, which will amend and

expand the CCPA, including by providing

consumers with additional rights with respect to their personal information,

and creating a new state agency to

enforce CCPA and CPRA.

The CPRA will come into effect on January 1, 2023, applying to information collected

by businesses on or after January 1, 2022.

Other states, as well as the federal government, have increasingly

considered the adoption of similarly expansive

personal privacy laws, backed by significant civil penalties for non-compliance.

While we believe we have

substantially compliant programs and controls in place to comply with

the GDPR, CCPA and CPRA requirements,

our compliance with these measures is likely to impose additional costs

on us, and we cannot predict whether the

interpretations of the requirements, or changes in our practices in response

to new requirements or interpretations of

the requirements, could have a material adverse effect on our business.

We also sell products and services that health care providers, such as physicians and dentists, use to store and

manage patient medical or dental records.

These customers and we are subject to laws, regulations and

industry

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standards, such as HIPAA and the Payment Card Industry Data Security Standards, which require the protection of

the privacy and security of those records. Our products or services

may be used as part of these customers’

comprehensive data security programs, including in connection with their

efforts to comply with applicable data

privacy and security laws and contractual requirements.

Perceived or actual security vulnerabilities in our products

or services, or the perceived or actual failure by us or our customers who

use our products or services to comply

with applicable legal or contractual data privacy and security requirements,

may not only cause us significant

reputational harm, but may also lead to claims against us by our customers

and/or governmental agencies and

involve substantial fines, penalties and other liabilities and expenses

and costs for remediation.

Under the EU GDPR, health data belong to the category of “sensitive data”

and benefit from specific protections.

Processing of such data is generally prohibited, except for specific exceptions.

Certain of our businesses involve the manufacture and sale of electronic

health record (“EHR”) systems and other

products linked to government supported incentive programs, where

the EHR systems must be certified as having

certain capabilities designated in evolving standards, such as those adopted

by CMS and by the Office of the

National Coordinator for Health Information

Technology of HHS (“ONC”).

In order to maintain certification of

our EHR products, we must satisfy the changing governmental standards.

If any of our EHR systems do not meet

these standards, yet have been relied upon by health care providers to receive

federal incentive payments, we may

be exposed to risk, such as under federal health care fraud and abuse laws,

including the False Claims Act.

While

we believe we are substantially in compliance with such certifications

and with applicable fraud and abuse laws and

regulations and that we have adequate compliance programs and controls

in place to ensure substantial compliance,

we cannot predict whether changes in applicable law, or interpretation of laws, or resulting changes in our, could

have a material adverse effect on our business.

Moreover, in order to satisfy our customers, our products may need to incorporate increasingly complex

reporting

functionality.

Although we believe we are positioned to accomplish this, the effort may involve

increased costs,

and our failure to implement product modifications, or otherwise satisfy

applicable standards, could have a material

adverse effect on our business.

Additionally, as electronic medical devices are increasingly connected to each other and to other technology, the

ability of these connected systems to safely and effectively exchange and use exchanged

information becomes

increasingly important.

As a medical device manufacturer, we must manage risks including those associated with

an electronic interface that is incorporated into a medical device.

Tax legislation could materially adversely affect our financial results and tax liabilities.

We are subject to the tax laws and regulations of the United States federal, state and local governments, as well as

foreign jurisdictions. From time to time, various legislative initiatives

may be proposed that could materially

adversely affect our tax positions. There can be no assurance that our effective tax rate will not

be materially

adversely affected by legislation resulting from these initiatives. In addition, tax

laws and regulations are extremely

complex and subject to varying interpretations. Although we believe that our

historical tax positions are sound and

consistent with applicable laws, regulations and existing precedent,

there can be no assurance that our tax positions

will not be challenged by relevant tax authorities or that we would be

successful in any such challenge.

We face inherent risk of exposure to product liability, intellectual property infringement and other claims in the

event that the use of the products we sell results in injury.

Our business involves a risk of product liability, intellectual property infringement and other claims in the ordinary

course of business, and from time to time we are named as a defendant

in cases as a result of our distribution of

products. Additionally, we own interests in companies that manufacture certain dental products. As a result, we

could be subject to the potential risk of product liability, intellectual property infringement or other claims relating

to the manufacture and distribution of products by those entities. In addition,

as our private-label business continues

to grow, purchasers of such products may increasingly seek recourse directly from us, rather than the ultimate

product manufacturer, for product-related claims. Another potential risk we face in the distribution of our products

is liability resulting from counterfeit or tainted products infiltrating the supply

chain.

In addition, some of the

products that we transport and sell are considered hazardous

materials. The improper handling of such materials or

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accidents involving the transportation of such materials could subject us

to liability or at least legal action that

could harm our reputation.

GENERAL RISKS

Security risks generally associated with our information systems and our

technology products and services could

materially adversely affect our business, and our results of operations could be

materially adversely affected if

such products, services or systems (or third-party systems we rely on) are interrupted,

damaged by unforeseen

events, are subject to cyberattacks or fail for any extended period of

time.

We rely on information systems (IS) in our business to obtain, rapidly process, analyze, manage and store customer,

product, supplier and employee data to, among other things:

•

maintain and manage worldwide systems to facilitate the purchase and

distribution of thousands of

inventory items from numerous distribution centers;

•

receive, process and ship orders on a timely basis;

•

manage the accurate billing and collections for thousands of

customers;

•

process payments to suppliers; and

•

provide products and services that maintain certain of our customers’ electronic

medical or dental

records (including protected health information of their patients).

Information security risks have generally increased in recent years, and a

cyberattack that bypasses our IS security

systems (including third-party systems we rely on) causing an IS security breach

may lead to a material disruption

of our IS business systems (including third-party systems we rely on) and/or

the loss of business information, as

well as claims against us by affected parties and/or governmental agencies, and involve

fines and penalties, costs

for remediation, and substantial defense and settlement expenses. In addition,

we develop products and provide

services to our customers that are technology-based, and a cyberattack

that bypasses the IS security systems of our

products or services causing a security breach and/or perceived security

vulnerabilities in our products or services

could also cause significant loss of business and reputational harm, and actual

or perceived vulnerabilities may lead

to claims against us by our customers and/or governmental agencies.

In particular, certain of our practice

management products and services purchased by health care providers, such

as physicians and dentists, are used to

store and manage patient medical or dental records.

These customers are subject to laws and regulations which

require that they protect the privacy and security of those records, and our

products may be used as part of these

customers’ comprehensive data security programs, including in connection

with their efforts to comply with

applicable privacy and security laws. Perceived or actual security vulnerabilities

in our products or services, or the

perceived or actual failure by us or our customers who use our products

to comply with applicable legal

requirements, may not only cause reputational harm and loss of business,

but may also lead to claims against us by

our customers and/or governmental agencies and involve damages, fines and

penalties, costs for remediation, and

substantial defense and settlement expenses. In addition, a cyberattack

on a third-party that we use to manage a

portion of our information systems could result in the same effects.

Additionally, legislative or regulatory action

related to cybersecurity may increase our costs to develop or implement

new technology products and services.

Furthermore, procedures and safeguards must continually evolve to meet new

IS challenges, and enhancing

protections, and conducting investigations and remediation, may impose additional

costs on us.

Finally, our business may be interrupted by shortfalls of IS systems providers engaged by our customers, such

Internet-based services upon which our customers depend to access certain of

our products.

Our global operations are subject to inherent risks that could materially

adversely affect our business.

Our global operations are subject to risks that may materially adversely affect our business. The

risks that our

global operations are subject to include, among other things:

•

difficulties and costs relating to staffing and managing foreign operations;

•

difficulties and delays inherent in sourcing products, establishing channels of distribution and

contract

manufacturing in foreign markets;

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•

fluctuations in the value of foreign currencies (including, without limitation,

in connection with

Brexit);

•

uncertainties relating to the EU-UK Trade and Cooperation Agreement of December 2020, including

for example potential implementation problems such as border delays, as

well as potential changes to

the U.K. regulatory scheme to replace EU requirements;

•

longer payment cycles of foreign customers and difficulty of collecting receivables

in foreign

jurisdictions;

•

repatriation of cash from our foreign operations to the United States;

•

regulatory requirements, including without limitation, anti-bribery, anti-corruption and laws pertaining

to the accuracy of our internal books and records;

•

unexpected difficulties in importing or exporting our products and import/export

tariffs, quotas,

sanctions or penalties;

•

limitations on our ability under local laws to protect our intellectual

property;

•

unexpected regulatory, legal, economic and political changes in foreign markets;

•

changes in tax regulations that influence purchases of capital equipment;

•

civil disturbances, geopolitical turmoil, including terrorism, war or political

or military coups; and

•

public health emergencies, including COVID-19.

Our future success is substantially dependent upon our senior

management, and our revenues and profitability

depend on our relationships with capable sales personnel as well as

customers, suppliers and manufacturers of

the products that we distribute.

Our future success is substantially dependent upon the efforts and abilities of

members of our existing senior

management, particularly Stanley M. Bergman, Chairman and Chief Executive Officer. The loss of the services of

Mr. Bergman could have a material adverse effect on our business. We have an employment agreement with Mr.

Bergman. We do not currently have “key man” life insurance policies on any of our employees. Competition for

senior management is intense and we may not be successful in attracting

and retaining key personnel. Additionally,

our future revenues and profitability depend on our ability to

maintain satisfactory relationships with qualified sales

personnel as well as customers, suppliers and manufacturers. If we

fail to maintain our existing relationships with

such persons or fail to acquire relationships with such key persons in the

future, our business may be materially

adversely affected.

Disruptions in the financial markets may materially adversely

affect the availability and cost of credit to us.

Our ability to make scheduled payments or refinance our obligations with

respect to indebtedness will depend on

our operating and financial performance, which in turn is subject to prevailing

economic conditions and financial,

business and other factors beyond our control. Disruptions in the financial

markets may materially adversely affect

the availability and cost of credit to us.

Item 1B.

Unresolved Staff Comments

We have no unresolved comments from the staff of the SEC that were issued 180 days or more preceding the end of

our 2020 fiscal year.

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ITEM 2.

Properties

We own or lease the following properties with more than 100,000 square feet:

Own or

Approximate

Lease Expiration

Property

Location

Lease

Square Footage

Date

Corporate Headquarters

Melville, NY

Lease

185,000

July 2036

Corporate Headquarters

Melville, NY

Own

105,000

N/A

Office and Distribution Center

Fiumana-Predappio, Italy

Own

183,000

N/A

Office and Distribution Center

Tours, France

Own

166,000

N/A

Office and Distribution Center

Gillingham, United Kingdom

Lease/Own

165,000

June 2033

Office and Distribution Center

Eastern Creek, New South Wales, Australia

Lease

161,000

July 2030

Office and Distribution Center

Niagara on the Lake, Canada

Lease

128,000

September 2021

Office and Distribution Center

Bastian, VA

Own

108,000

N/A

Office and Distribution Center

West Allis, WI

Lease

106,000

October 2027

Office and Distribution Center

Greer, SC

Lease

102,000

December 2028

Distribution Center

Denver, PA

Lease

624,000

December 2032

Distribution Center

Indianapolis, IN

Lease

380,000

March 2022

Distribution Center

Sparks, NV

Lease

370,000

December 2021

Distribution Center

Indianapolis, IN

Own

287,000

N/A

Distribution Center

Grapevine, TX

Lease

242,000

July 2023

Distribution Center

Gallin, Germany

Own

215,000

N/A

Distribution Center

Jacksonville, FL

Lease

212,000

February 2026

Distribution Center

Heppenheim, Germany

Lease

194,000

March 2030

The properties listed in the table above are our principal properties primarily

used by our health care distribution

segment.

In addition, we lease numerous other distribution, office, showroom, manufacturing

and sales space in

locations including the United States, Australia, Austria, Belgium, Brazil,

Canada, Chile, China, the Czech

Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia,

the Netherlands, New Zealand, Poland, Portugal, Singapore, South Africa,

Spain, Sweden, Switzerland, Thailand,

United Arab Emirates and the United Kingdom.

We believe that our properties are in good condition, are well maintained and are suitable and adequate to carry on

our business.

We have additional operating capacity at certain distribution center facilities.

ITEM 3.

Legal Proceedings

For a discussion of Legal Proceedings, see

Note 20 – Commitments and Contingencies

of the Notes to the

Consolidated Financial Statements included under Item 8.

ITEM 4.

Mine Safety Disclosures

Not applicable.

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PART

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Our common stock is traded on the Nasdaq Global Select Market tier of

the Nasdaq Stock Market, or Nasdaq,

under the symbol HSIC.

On February 8, 2021, there were approximately 235 holders of record of our common

stock and the last reported

sales price was $70.78.

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 $3.7 billion, authorized by our Board of Directors,

to the repurchase program provide for a total

of $3.8 billion of shares of our common stock to be repurchased under this program.

As of December 26, 2020,

we had repurchased approximately $3.6 billion of common stock (75,563,289

shares)

under these initiatives, with $201.2 million available for future common stock

share repurchases.

As a result of the COVID-19 pandemic, as previously announced, we have

temporarily suspended our share

repurchase program in an effort to preserve cash and exercise caution in this uncertain

period and due to certain

restrictions related to financial covenants in our credit facilities.

During the fiscal quarter ended December 26, 2020, we did not make any

repurchases of our common stock.

The

maximum number of shares that could 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.

The maximum number of shares that could be

repurchased as of October 31, 2020, November 28, 2020, and December

26, 2020 were 3,164,694, 3,159,724 and

3,056,528, respectively.

Dividend Policy

We have not declared any cash or stock dividends on our common stock during fiscal years 2020 or 2019.

currently do not anticipate declaring any cash or stock dividends on our common

stock in the foreseeable future.

We intend to retain earnings to finance the expansion of our business and for general corporate purposes, including

our share repurchase program.

Any declaration of dividends will be at the discretion of our Board of

Directors and

will depend upon the earnings, financial condition, capital requirements,

level of indebtedness, contractual

restrictions with respect to payment of dividends and other factors.

Stock Performance Graph

The graph below compares the cumulative total stockholder return

on $100 invested, assuming the reinvestment of

all dividends, on December 26, 2015, the last trading day before the

beginning of our 2016 fiscal year, through the

end of our 2020 fiscal year with the cumulative total return on $100

invested for the same period in the Dow Jones

U.S. Health Care Index and the Nasdaq Stock Market Composite Index.

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COMPARISON OF 5-YEAR CUMULATIVE TOTAL

RETURN

ASSUMES $100 INVESTED ON DECEMBER 26, 2015

ASSUMES DIVIDENDS REINVESTED

December 26,

December 31,

December 30,

December 29,

December 28,

December 26,

2015

2016

2017

2018

2019

2020

Henry Schein, Inc.

100.00

96.58

88.97

99.20

109.44

108.21

Dow Jones U.S. Health

Care Index

100.00

97.04

119.21

124.84

154.14

175.81

NASDAQ Stock Market

Composite Index

100.00

108.00

140.01

134.97

186.63

267.70

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ITEM 6.

Selected Financial Data

The following selected financial data, with respect to our financial position

and results of operations for each of the

five fiscal years in the period ended December 26, 2020, set forth below, has been derived from, should be read in

conjunction with and is qualified in its entirety by reference to, our consolidated

financial statements and notes

thereto.

The selected financial data presented below should also be read

in conjunction with

ITEM 7

“

Management's Discussion and Analysis of Financial Condition

and Results of Operations

” and

ITEM 8

“

Financial Statements and Supplementary Data

.”

Years ended

December 26,

December 28,

December 29,

December 30,

December 31,

2020

2019

2018

2017

2016

(in thousands, except per share data)

Income Statement Data:

Net sales

10,119,141

9,985,803

9,417,603

8,883,438

8,218,885

Gross profit

2,814,343

3,090,886

2,910,747

2,746,662

2,605,907

Selling, general and administrative expenses

2,246,947

2,357,920

2,217,273

2,071,576

1,975,445

Litigation settlements

38,488

5,325

Restructuring costs (1)

32,093

14,705

54,367

38,621

Operating income

535,303

718,261

600,619

669,761

591,841

Other expense, net

(35,408)

(37,954)

(63,783)

(39,967)

(18,705)

Income from continuing operations before taxes, equity

in earnings of affiliates and noncontrolling interests

499,895

680,307

536,836

629,794

573,136

Income taxes (2)

(95,374)

(159,515)

(107,432)

(308,975)

(169,311)

Equity in earnings of affiliates

12,344

17,900

21,037

15,293

17,110

Net gain (loss) on sale of equity investments (3)

1,572

186,769

(17,636)

Net income from continuing operations

418,437

725,461

450,441

318,476

420,935

Income (loss) from discontinued operations

986

(6,323)

111,685

140,817

135,460

Net income

419,423

719,138

562,126

459,293

556,395

Less: Net income attributable to noncontrolling interests

(15,629)

(24,770)

(19,724)

(25,304)

(19,651)

Less: Net (income) loss attributable to noncontrolling

interests from discontinued operations

366

(6,521)

(27,690)

(29,966)

Net income attributable to Henry Schein, Inc.

403,794

694,734

535,881

406,299

506,778

Amounts attributable to Henry Schein, Inc.:

Continuing operations

402,808

700,691

430,717

293,172

401,284

Discontinued operations

986

(5,957)

105,164

113,127

105,494

Net income attributable to Henry Schein, Inc.

403,794

694,734

535,881

406,299

506,778

Earnings (loss) per share attributable to

Henry Schein, Inc.:

From continuing operations:

Basic

2.83

4.74

2.82

1.87

2.48

Diluted

2.81

4.69

2.80

1.85

2.45

From discontinued operations:

Basic

0.01

(0.04)

0.69

0.72

0.65

Diluted

0.01

(0.04)

0.68

0.72

0.64

Earnings per share attributable to Henry Schein, Inc.:

Basic

2.83

4.70

3.51

2.59

3.14

Diluted

2.82

4.65

3.49

2.57

3.10

Weighted-average common shares outstanding:

Basic

142,504

147,817

152,656

156,787

161,641

Diluted

143,404

149,257

153,707

158,208

163,723

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Years ended

December 26,

December 28,

December 29,

December 30,

December 31,

2020

2019

2018

2017

2016

(in thousands)

Net Sales by Market Data:

Health care distribution (4):

Dental

5,912,593

6,415,865

6,347,998

6,047,811

5,554,296

Medical

3,617,017

2,973,586

2,661,166

2,497,994

2,337,661

Total health care distribution

9,529,610

9,389,451

9,009,164

8,545,805

7,891,957

Technology and value-added services (5)

514,258

515,085

408,439

337,633

326,928

Total excluding Corporate TSA revenues

10,043,868

9,904,536

9,417,603

8,883,438

8,218,885

Corporate TSA revenues (6)

75,273

81,267

Total

10,119,141

9,985,803

9,417,603

8,883,438

8,218,885

As of

December 26,

December 28,

December 29,

December 30,

December 31,

2020

2019

2018

2017

2016

(in thousands)

Balance Sheet Data:

Total assets

7,772,532

7,151,101

8,500,527

7,863,995

6,811,763

Long-term debt

515,773

622,908

980,344

884,227

689,626

Redeemable noncontrolling interests

327,699

287,258

219,724

465,584

285,567

Stockholders' equity

3,984,385

3,630,137

3,541,788

2,824,410

2,800,804

Restructuring costs for the year ended December 26, 2020 consist primarily of severance costs, including severance pay and benefits

of $25.8 million, facility closing costs of $5.9 million and other costs of $0.4 million.

Restructuring costs for the year ended

December 28, 2019 consist primarily of severance costs, including severance pay and benefits of $13.8 million and facility closing

costs of $0.9 million.

Restructuring costs for the year ended December 29, 2018 consist primarily of severance costs, including

severance pay and benefits of $50.2 million, facility closing costs of $3.2 million and other costs of $1.0 million.

Restructuring costs

for the year ended December 31, 2016 consist primarily of severance costs, including severance pay and benefits of $33.8 million,

facility closing costs of $3.2 million and other costs of $1.6 million.

See “Management’s Discussion and Analysis of Financial

Condition and Results of Operations – Plans of Restructuring” herein and the consolidated financial statements and related notes

contained in ITEM 8.

(2)

In 2018 we recorded (a) a $10.0 million net credit to income tax representing a change in our estimate of the transition tax on

deemed repatriated foreign earnings, (b) a one-time income tax charge of $3.9 million to income tax as a result of a reorganization of

legal entities related to Henry Schein One, (c) an income tax credit of $13.9 million ($10.6 million attributable to Henry Schein, Inc.)

resulting from a legal entity reorganization outside of the United States and (d) a one-time income tax charge of $3.1 million as a

result of the reorganization of legal entities completed in preparation for the Animal Health Spin-off.

In 2017 we recorded a one-

time income tax charge of $140 million related to the transition tax on deemed repatriated foreign earnings and a one-time income

tax charge of $3.0 million for the revaluation of deferred taxes associated with U.S. tax reform legislation.

(3)

During the fourth quarter of 2019, we sold an equity investment in Hu-Friedy Mfg. Co., LLC, a manufacturer of dental instruments

and infection prevention solutions.

In the fourth quarter of 2020 we received contingent proceeds of $2.1 million from the 2019 sale

of Hu-Friedy resulting in the recognition of an additional after-tax gain of $1.6 million.

Our investment was non-controlling, we

were not involved in running the business and had no representation on the board of directors.

During the fourth quarter of 2019, we

also sold certain other equity investments.

During 2017 we sold our equity ownership in E4D Technologies resulting in a loss of

approximately $17.6 million.

There was no tax benefit recognized related to this loss.

(4)

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

generic pharmaceuticals, vaccines, surgical products, diagnostic tests, personal protective equipment, infection-control products and

vitamins.

(5)

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

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

services.

(6)

Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in

connection with the Animal Health Spin-off, which ended in December 2020.

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ITEM 7.

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

this Annual Report on Form 10-K, and in particular the risks discussed under

the caption “Risk Factors” in Item 1A

of this report and those that may be discussed in other documents we file with

the Securities and Exchange

Commission (SEC).

Forward looking statements include the overall impact of the Novel Coronavirus

Disease 2019

(COVID-19) on the Company, its 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 personal protective equipment

(“PPE”) and COVID-19 related product sales and inventory levels and whether

additional resurgences of the virus

will adversely impact the resumption of normal operations, the impact

of restructuring programs as well as of any

future acquisitions, and more generally current expectations regarding

performance in current and future periods.

Forward looking statements also include the (i) ability of the Company

to make additional testing available, the

nature of those tests and the number of tests intended to be made available

and the timing for availability, the nature

of the target market, as well as the efficacy or relative efficacy of the test results given that the test efficacy has

not

been, or will not have been, independently verified under normal FDA procedures

and (ii) potential for the

Company 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,

as well as other disease outbreaks, epidemics,

pandemics, or similar wide spread public health concerns and other natural

disasters or acts of terrorism; 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; 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; effects of a highly competitive (including, without

limitation, competition from third-

party online commerce sites) and consolidating market; the potential 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 macro-economic and political

conditions, including

international trade agreements and potential trade barriers; 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 confidentiality of sensitive personal information or standards in electronic

health records or transmissions;

changes in tax legislation; litigation risks; new or unanticipated litigation

developments and the status of litigation

matters; cyberattacks or other privacy or data security breaches; risks associated

with our global operations; our

dependence on our senior management, as well as employee hiring and retention;

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.

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

COVID-19 Pandemic

In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has

negatively impacted the global economy, disrupted global supply chains and created significant volatility and

disruption of global financial markets. In response, many countries implemented

business closures and restrictions,

stay-at-home and social distancing ordinances and similar measures

to combat the pandemic, which significantly

impacted global business and dramatically reduced demand for dental

products and certain medical products

beginning in the second quarter

of 2020. Demand increased in the second half of 2020 resulting

in slight growth

over the prior year driven by sales of PPE and COVID-19 related products.

Our consolidated financial statements reflect estimates and assumptions

made by us that affect, among other things,

our goodwill, long-lived asset and definite-lived intangible asset valuation;

inventory valuation; equity investment

valuation; assessment of the annual effective tax rate; valuation of deferred income

taxes and income tax

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

rebates; measurement of

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

plans; and pension plan

assumptions.

Due to the significant uncertainty surrounding the future impact of

COVID-19, our judgments

regarding estimates and impairments could change in the future.

In addition, the impact of COVID-19 had a

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

the second quarter of

2020.

In the latter half of the second quarter, dental and medical practices began to re-open worldwide, and

continued to do so during the second half of 2020.

However, patient volumes have remained below pre-COVID-19

levels and certain regions in the U.S. and internationally are experiencing an

increase in COVID-19 cases.

As such,

there is an ongoing risk that the COVID-19 pandemic may again materially

adversely effect 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.

As part of a broad-based effort to support plans for the long-term health of our business

and to strengthen our

financial flexibility, we implemented cost reduction measures that included certain reductions in payroll,

substantially decreased capital expenditures, reduced corporate spending

and eliminated certain non-strategic

targeted expenditures. As our markets began to recover,

we substantially ended most of those temporary expense-

reduction initiatives during the second half of 2020.

Corporate Transactions

During the fourth quarter of 2019, we sold an equity investment

in Hu-Friedy Mfg. Co., LLC (“Hu-Friedy”), a

manufacturer of dental instruments and infection prevention solutions.

Our investment was non-controlling, we

were not involved in running the business and had no representation

on the board of directors.

During the fourth

quarter of 2019, we also sold certain other equity investments.

In the aggregate, the sales of these investments

resulted in a pre-tax gain in 2019 of approximately $250.2 million and an after-tax

gain of approximately $186.8

million.

In the fourth quarter of 2020 we received contingent proceeds of

$2.1 million from the 2019 sale of Hu-

Friedy resulting in the recognition of an additional after-tax gain of $1.6

million.

On February 7, 2019 (the “Distribution Date”), we completed the separation

(the “Separation”) and subsequent

merger of our animal health business (the “Henry Schein Animal Health Business”)

with Direct Vet Marketing, Inc.

(d/b/a Vets

First Choice, “Vets First Choice”) (the “Merger”).

This was accomplished by a series of transactions

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among us, Vets

First Choice, Covetrus, Inc. (f/k/a HS Spinco, Inc. “Covetrus”), a

wholly owned subsidiary of ours

prior to the Distribution Date, and HS Merger Sub, Inc., a wholly owned subsidiary

of Covetrus (“Merger

Sub”).

In connection with the Separation, we contributed, assigned

and transferred to Covetrus certain applicable

assets, liabilities and capital stock or other ownership interests relating

to the Henry Schein Animal Health

Business.

On the Distribution Date, we received a tax-free distribution of $1,120

million from Covetrus pursuant to

certain debt financing incurred by Covetrus.

On the Distribution Date and prior to the Animal Health Spin-off,

Covetrus issued shares of Covetrus common stock to certain institutional

accredited investors (the “Share Sale

Investors”) for $361.1 million (the “Share Sale”).

The proceeds of the Share Sale were paid to Covetrus and

distributed to us.

Subsequent to the Share Sale, we distributed, on a pro rata basis,

all of the shares of the common

stock of Covetrus held by us to our stockholders of record as of the close of

business on January 17, 2019 (the

“Animal Health Spin-off”).

After the Share Sale and Animal Health Spin-off, Merger Sub consummated the

Merger whereby it merged with and into Vets

First Choice, with Vets First Choice surviving the Merger as a

wholly owned subsidiary of Covetrus.

Immediately following the consummation of the Merger, on a fully diluted

basis, (i) approximately 63% of the shares of Covetrus common stock were (a) owned

by our stockholders and the

Share Sale Investors, and (b) held by certain employees of the Henry Schein

Animal Health Business (in the form

of certain equity awards), and (ii) approximately 37% of the shares of Covetrus

common stock were (a) owned by

stockholders of Vets

First Choice immediately prior to the Merger, and (b) held by certain employees of Vets First

Choice (in the form of certain equity awards).

After the Separation and the Merger, we no longer beneficially

owned any shares of Covetrus common stock and, following the Distribution

Date, will not consolidate the

financial results of Covetrus for the purpose of our financial reporting.

Following the Separation and the Merger,

Covetrus was an independent, publicly traded company on the Nasdaq Global Select

Market.

Executive-Level Overview

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.

We serve more than one million customers worldwide

including dental practitioners and laboratories and physician practices, as well

as government, institutional health

care clinics and other alternate care clinics.

We believe that we have a strong brand identity due to our more than

88 years of experience distributing health care products.

We are headquartered in Melville, New York,

employ more than 19,000 people (of which more than 9,800 are

based outside the United States) and have operations or affiliates in 31 countries and territories,

including the

United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China,

the Czech Republic, France, Germany,

Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, the Netherlands, New

Zealand, Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland,

Thailand, United Arab Emirates

and the United Kingdom.

We have established strategically located distribution centers 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.

Our infrastructure also allows us to provide convenient ordering

and rapid, accurate and

complete order fulfillment.

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.

The health care distribution reportable segment aggregates our global dental

and medical operating segments.

This

segment distributes consumable products, small equipment, laboratory products,

large equipment, equipment repair

services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic

tests, infection-control

products and vitamins.

Our global dental group serves office-based dental practitioners, dental laboratories, schools

and other institutions.

Our global medical group serves office-based medical practitioners, ambulatory

surgery

centers, other alternate-care settings and other institutions.

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

technology and other value-added

services to health care practitioners.

Our technology group offerings include practice management software

systems for dental and medical practitioners.

Our value-added practice solutions include financial services on a

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non-recourse basis, e-services, practice technology, network and hardware services, as well as continuing education

services for practitioners.

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.

We 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.

Our current and future results have been and could be impacted by the current

economic environment and

uncertainty, particularly impacting overall demand for our products and services.

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.

We 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 trend with regard 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.

We 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.

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

candidates for merger and joint

venture or acquisition and intend to continue to seek opportunities to expand

our role as a provider of products and

services to the health care industry.

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

any such

opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or

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

can be no assurance that the

integration efforts associated with any such transaction would be successful.

In response to the COVID-19

pandemic, we had taken a range of actions to preserve cash, including

the temporary suspension of significant

acquisition activity.

During the third and fourth quarters of 2020, as global conditions

improved, we resumed our

acquisition strategy.

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 Data Base, in 2020 there were more than six and a half`

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 36%

during the same time 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 Projections 2019-2028”

indicating that total national health care

spending reached approximately $3.6 trillion in 2018, or 17.7% 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 $6.2 trillion in 2028,

approximately 19.7%

of the nation’s projected gross

domestic product.

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Results of Operations

The following tables summarize the significant components of our operating

results and cash flows from continuing

operations for each of the three years ended December 26, 2020, December

28, 2019 and December 29, 2018 (in

thousands):

Years

Ended

December 26,

December 28,

December 29,

2020

2019

2018

Operating results:

Net sales

10,119,141

9,985,803

9,417,603

Cost of sales

7,304,798

6,894,917

6,506,856

Gross profit

2,814,343

3,090,886

2,910,747

Operating expenses:

Selling, general and administrative

2,246,947

2,357,920

2,217,273

Litigation settlements

38,488

Restructuring costs

32,093

14,705

54,367

Operating income

535,303

718,261

600,619

Other expense, net

(35,408)

(37,954)

(63,783)

Net gain on sale of equity investments

1,572

186,769

Net income from continuing operations

418,437

725,461

450,441

Income (loss) from discontinued operations

986

(6,323)

111,685

Net income attributable to Henry Schein, Inc.

403,794

694,734

535,881

Years

Ended

December 26,

December 28,

December 29,

2020

2019

2018

Cash flows:

Net cash provided by operating activities from continuing operations

593,519

820,478

450,955

Net cash used in investing activities from continuing operations

(115,019)

(422,309)

(164,324)

Net cash used in financing activities from continuing operations

(181,794)

(363,351)

(402,173)

Plans of Restructuring

On July 9, 2018, we committed to an initiative to rationalize our operations and

provide expense

efficiencies.

These actions allowed us to execute on our plan to reduce our cost structure

and fund new initiatives

to drive growth under our 2018 to 2020 strategic plan.

This initiative resulted in the elimination of approximately

4% of our workforce and the closing of certain facilities.

On November 20, 2019, we committed to a contemplated initiative, intended

to mitigate stranded costs associated

with the Animal Health Spin-off and to rationalize operations and to provide expense efficiencies.

These activities

were originally expected to be completed by the end of 2020.

As a result of the business environment brought on

by the COVID-19 pandemic, we are continuing our restructuring activities

into 2021. 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 in 2021, 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 years ended December 26, 2020, December 28, 2019, and December

29, 2018 we recorded restructuring

charges of $32.1 million, $14.7 million and $54.4 million, respectively.

The costs associated with these

restructurings are included in a separate line item, “Restructuring costs” within

our consolidated statements of

income.

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2020 Compared to 2019

Net Sales

Net sales for 2020 and 2019 were as follows (in thousands):

% of

Increase / (Decrease)

2020

Total

2019

Total

Health care distribution

(1)

Dental

5,912,593

58.4

6,415,865

64.2

(503,272)

(7.8)

Medical

3,617,017

35.8

2,973,586

29.8

643,431

21.6

Total health care distribution

9,529,610

94.2

9,389,451

94.0

140,159

1.5

Technology and value-added services

(2)

514,258

5.1

515,085

5.2

(827)

(0.2)

Total excluding Corporate TSA revenues

10,043,868

99.3

9,904,536

99.2

139,332

1.4

Corporate TSA revenues

(3)

75,273

0.7

81,267

0.8

(5,994)

(7.4)

Total

10,119,141

100.0

9,985,803

100.0

133,338

1.3

(1)

Consists of consumable 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 and vitamins.

(2)

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

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

(3)

Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in connection

with the Animal Health Spin-off, which ended in December 2020.

The 1.3% increase in net sales for the year ended December 26, 2020

includes an increase of 1.4% local currency

growth (0.8% increase in internally generated revenue and 0.6% growth

from acquisitions) partially offset by a

decrease of 0.1% related to foreign currency exchange.

Excluding sales of products under the transition services

agreement with Covetrus, our net sales increased 1.4%, including local

currency growth of 1.5% (0.9% increase in

internally generated revenue and 0.6%

growth from acquisitions) partially offset by a decrease of 0.1% related

foreign currency exchange.

Sales for the year ended December 26, 2020 benefited from sales of

PPE and COVID-

19 related products of approximately $1,298 million, an increase of approximately

208% versus the prior year.

Future PPE and COVID-19 related product sales may be lower than what

we have experienced in 2020, which were

driven by rising positive COVID-19 cases and practices seeking to ensure

adequate supply.

The 7.8% decrease in dental net sales for the year ended December

26, 2020 includes a decrease of 7.6% in local

currencies (8.0% decrease in internally generated revenue,

partially offset by 0.4%

growth from acquisitions) and a

decrease of 0.2% related to foreign currency exchange.

The 7.6% decrease in local currency sales was due to

decreases in dental equipment sales and service revenues of 12.5%,

all of which is attributable to a decrease in

internally generated revenue and a decrease in dental consumable merchandise

sales of 6.1% (6.5% decrease in

internally generated revenue,

partially offset by 0.4% growth from acquisitions).

The COVID-19 pandemic

adversely impacted our dental business beginning in mid-March of 2020

as many dental offices progressively

closed or began seeing a limited number of patients, resulting in a decrease

of 41.2% in second quarter dental

revenues versus the same period in the prior year.

However, in the second half of the year ended December 26,

2020, our dental sales began to improve as dental practices resumed activities

and patient traffic increased.

Global

dental sales for the year ended December 26, 2020 benefited from sales of

PPE and COVID-19 related products of

approximately $491 million, an increase of approximately 72% versus the

prior year.

The 21.6% increase in medical net sales for the year ended December

26, 2020 includes an increase of 21.6% local

currency growth (20.7% increase in internally generated revenue and 0.9%

growth from acquisitions).

The

COVID-19 pandemic adversely impacted our medical business beginning in

mid-March of 2020, but not as

significantly as our dental business as the decrease in second quarter

medical revenues was only 11.2% versus the

same period in the prior year. Our medical business rebounded strongly in the second half of the year in part

due to

continued strong sales of PPE, such as masks, gowns and face shields,

and COVID-19 related products, such as

diagnostic test kits.

Global medical sales for the year ended December 26, 2020 benefited

from sales of PPE and

COVID-19 related products of approximately $807 million, an

increase of approximately 490% versus the prior

year.

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The 0.2% decrease in technology and value-added services net sales

for the year ended December 26, 2020 includes

a decrease of 0.3% local currency growth (3.2% decrease in internally generated

revenue, partially offset by 2.9%

growth from acquisitions) partially offset by an increase of 0.1% related to foreign

currency exchange.

The closure

of dental and medical offices beginning in mid-March of 2020 due to the COVID-19 pandemic

resulted in a

decrease of 15.9% in second quarter technology and value-added services

revenues versus the same period in the

prior year.

As dental and medical practice operations, resumed in the second

half of the year, the trend for

transactional software revenues improved as more patients visited practices

worldwide.

Although dental and medical practices continued to re-open globally

in the second half of the year, patient volumes

remain below pre-COVID-19 levels.

As such, there is an ongoing risk that the COVID-19 pandemic may

again

have a material adverse effect on our net sales in future periods.

Gross Profit

Gross profit and gross margins for 2020 and 2019 by segment and in total were as follows

(in thousands):

Gross

Decrease

2020

Margin %

2019

Margin %

Health care distribution

2,448,991

25.7

2,717,574

28.9

(268,583)

(9.9)

Technology and value-added services

363,245

70.6

370,887

72.0

(7,642)

(2.1)

Total excluding Corporate TSA revenues

2,812,236

28.0

3,088,461

31.2

(276,225)

(8.9)

Corporate TSA revenues

2,107

2.8

2,425

3.0

(318)

(13.1)

Total

2,814,343

27.8

3,090,886

31.0

(276,543)

(8.9)

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

throughout our

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

Additionally, we

realize substantially higher gross margin percentages in our technology 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.

In connection with the completion of the Animal Health Spin-off (see

Note 2 – Discontinued Operations

for

additional details), we entered into a transition services agreement with

Covetrus, pursuant to which Covetrus

purchased certain products from us.

The agreement, which ended in December 2020, provided that these products

would be sold to Covetrus at a mark-up that ranged from 3% to 6%

of our product cost to cover handling costs.

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 pharmaceutical products are generally

at lower gross profit margins

than other products.

Conversely, sales of our private label products achieve gross profit margins that are higher

than average.

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 at greater frequencies.

Health care distribution gross profit decreased $268.6 million, or 9.9%,

for the year ended December 26, 2020

compared to the prior year period, due primarily to the COVID-19

pandemic.

Health care distribution gross profit

margin decreased to 25.7% for the year ended December 26, 2020 from 28.9% for the comparable

prior year

period.

The overall decrease in our health care distribution gross profit is

attributable to a $232.2 million decline in

gross profit due to the decrease in the gross margin rates and a $48.3 million gross profit

decrease in internally

generated revenue, partially offset by $11.9 million of additional gross profit from acquisitions.

Gross profit

margin was negatively affected by significant adjustments recorded for PPE inventory and COVID-19

products caused by volatility of pricing and demand experienced during the

year, which conditions may recur and

adversely impact gross profit margins in future periods, although we do not expect

material inventory adjustments

to continue into 2021.

During the year, we continued to earn lower vendor rebates, due to lower purchase volumes,

in our health care distribution segment, which also contributes to the lower gross

profit margin.

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Technology and value-added services gross profit decreased $7.6 million, or 2.1%, for the year ended December

26, 2020 compared to the prior year period.

Technology

and value-added services gross profit margin decreased to

70.6% for the year ended December 26, 2020 from 72.0%

for the comparable prior year period.

The overall

decrease in our Technology and value-added services gross profit is attributable to a decrease of $11.5 million in

internally generated revenue and a decrease of $8.8 million in gross profit

due to the decrease in the gross margin

rates, partially offset by $12.7 million additional gross profit from acquisitions.

Selling, General and Administrative

Selling, general and administrative expenses by segment and in

total for 2020 and 2019 were as follows (in

thousands):

% of

Respective

Increase / (Decrease)

2020

Net Sales

2019

Net Sales

Health care distribution

2,014,925

21.1

2,128,595

22.7

(113,670)

(5.3)

Technology and value-added services

264,115

51.4

244,030

47.4

20,085

8.2

Total

2,279,040

22.5

2,372,625

23.8

(93,585)

(3.9)

Selling, general and administrative expenses (including restructuring costs

in the years ended December 26, 2020

and December 28, 2019) decreased $93.6 million, or 3.9%, to $2,279.0 million

for the year ended December 26,

2020 from the comparable prior year period.

The $113.7 million decrease in selling, general and administrative

expenses within our health care distribution segment for the year ended December

26, 2020 as compared to the

prior year period was attributable to a reduction of $151.5 million of operating

costs, primarily as a result of cost-

saving measures taken in response to the COVID-19 pandemic, partially offset by

$20.8 million of additional costs

from acquired companies and an increase of $17.0 million in restructuring

costs.

The $20.1 million increase in

selling, general and administrative expenses within our technology and value-added

services segment for the year

ended December 26, 2020 as compared to the prior year period was

attributable to $10.5 million of additional costs

from acquired companies and an increase of $9.6 million of operating costs.

As a percentage of net sales, selling,

general and administrative expenses decreased to 22.5% from 23.8% for

the comparable prior year period. The cost

savings achieved from measures taken in response to the COVID-19

pandemic are expected to diminish in future

periods as most of these measures were temporary and substantially ended

during the second half of 2020.

As a component of total selling, general and administrative expenses, selling

expenses decreased $86.4 million, or

5.9%, to $1,375.2 million for the year ended December 26, 2020 from

the comparable prior year period, primarily

as a result of cost-saving measures taken in response to the COVID-19

pandemic.

As a percentage of net sales,

selling expenses decreased to 13.6% from 14.7% for the comparable prior

year period.

As a component of total selling, general and administrative expenses, general

and administrative expenses

decreased $7.2 million, or 0.8%, to $903.8 million for the year ended

December 26, 2020 from the comparable

prior year period.

As a percentage of net sales, general and administrative expenses

decreased to 8.9% from 9.1%

for the comparable prior year period.

Other Expense, Net

Other expense, net for the years ended 2020 and 2019 was as follows

(in thousands):

Variance

2020

2019

Interest income

9,842

15,757

(5,915)

(37.5)

Interest expense

(41,377)

(50,792)

9,415

18.5

Other, net

(3,873)

(2,919)

(954)

(32.7)

Other expense, net

(35,408)

(37,954)

2,546

6.7

Interest income decreased $5.9 million primarily due to lower interest rates

and reduced late fee income.

Interest

expense decreased $9.4 million primarily due to lower interest rates and

lower average debt balances for the year

ended December 26, 2020 as compared to the prior year.

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Income Taxes

For the year ended December 26, 2020, our effective tax rate was 19.1%

compared to 23.4%

for the prior year

period.

In 2020, our effective tax rate was primarily impacted by the agreement with the U.S Internal

Revenue

Service on our Advanced Pricing Agreement (APA), other audit resolutions, and state and foreign income taxes and

interest expense.

In 2019, our effective tax rate was primarily impacted by state and

foreign income taxes and

interest expense.

Net Gain on Sale of Equity Investments

In the fourth quarter of 2020 we received contingent proceeds of $2.1

million from the 2019 sale of Hu-Friedy

resulting in the recognition of an additional after-tax gain of $1.6 million.

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2019 Compared to 2018

Net Sales

Net sales for 2019 and 2018 were as follows (in thousands):

% of

Increase

2019

Total

2018

Total

Health care distribution

(1)

Dental

6,415,865

64.2

6,347,998

67.4

67,867

1.1

Medical

2,973,586

29.8

2,661,166

28.3

312,420

11.7

Total health care distribution

9,389,451

94.0

9,009,164

95.7

380,287

4.2

Technology and value-added services

(2)

515,085

5.2

408,439

4.3

106,646

26.1

Total excluding Corporate TSA revenues

9,904,536

99.2

9,417,603

100.0

486,933

5.2

Corporate TSA revenues

(3)

81,267

0.8

81,267

Total

9,985,803

100.0

9,417,603

100.0

568,200

6.0

(1)

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

pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

(2)

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

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

(3)

Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in

connection with the Animal Health Spin-off, which ended in December 2020.

The 6.0% increase in net sales for the year ended December 28, 2019

includes an increase of 7.7% local currency

growth (4.4% increase in internally generated revenue and 3.3% growth

from acquisitions) partially offset by a

decrease of 1.7% related to foreign currency exchange.

Excluding sales of products under the transition services

agreement with Covetrus, our net sales increased 5.2%, including local

currency growth of 6.9% (3.5% increase in

internally generated revenue and 3.4% growth from acquisitions) partially

offset by a decrease of 1.7% related to

foreign currency exchange.

The 1.1% increase in dental net sales for the year ended December 28, 2019

includes an increase of 3.4% in local

currencies (2.0% increase in internally generated revenue and 1.4% growth

from acquisitions) partially offset by a

decrease of 2.3% related to foreign currency exchange.

The 3.4% increase in local currency sales was due to

increases in dental equipment sales and service revenues of 1.0%, all of which

is attributable to an increase in

internally generated revenue and dental consumable merchandise sales growth

of 4.2% (2.3% increase in internally

generated revenue and 1.9% growth from acquisitions).

The 11.7% increase in medical net sales for the year ended December 28, 2019 includes an

increase of 11.9% local

currency growth (7.0% increase in internally generated revenue and

4.9% growth from acquisitions) partially offset

by a decrease of 0.2% related to foreign currency exchange.

The 26.1% increase in technology and value-added services net sales for the

year ended December 28, 2019

includes an increase of 27.0% local currency growth (4.3% increase in

internally generated revenue and 22.7%

growth from acquisitions) partially offset by a decrease of 0.9% related to foreign

currency exchange.

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Gross Profit

Gross profit and gross margins for 2019 and 2018 by segment and in total were as follows

(in thousands):

Gross

Increase

2019

Margin %

2018

Margin %

Health care distribution

2,717,574

28.9

2,628,767

29.2

88,807

3.4

Technology and value-added services

370,887

72.0

281,980

69.0

88,907

31.5

Total excluding Corporate TSA revenues

3,088,461

31.2

2,910,747

30.9

177,714

6.1

Corporate TSA revenues

2,425

3.0

2,425

Total

3,090,886

31.0

2,910,747

30.9

180,139

6.2

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

throughout our

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

Additionally, we

realize substantially higher gross margin percentages in our technology 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.

In connection with the completion of the Animal Health Spin-off (see

Note 2 – Discontinued Operations

for

additional details), we entered into a transition services agreement with

Covetrus, pursuant to which Covetrus

purchased certain products from us.

The agreement, which ended in December 2020, provided that these products

would be sold to Covetrus at a mark-up that ranged from 3% to 6%

of our product cost to cover handling costs.

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 pharmaceutical products are generally

at lower gross profit margins

than other products.

Conversely, sales of our private label products achieve gross profit margins that are higher

than average.

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 at greater frequencies.

Health care distribution gross profit increased $88.8 million, or 3.4%, for

the year ended December 28, 2019

compared to the prior year period.

Health care distribution gross profit margin decreased to 28.9% for the year

ended December 28, 2019 from 29.2% for the comparable prior year period.

The overall increase in our health care

distribution gross profit is attributable to $73.1 million of additional gross

profit from acquisitions and $30.9

million gross profit increase from growth in internally generated revenue.

These increases were partially offset by

a $15.2 million decline in gross profit due to the decrease in the gross

margin rates.

Technology and value-added services gross profit increased $88.9 million, or 31.5%, for the year ended December

28, 2019 compared to the prior year period.

Technology and value-added services gross profit margin increased to

72.0% for the year ended December 28, 2019 from 69.0% for the comparable

prior year period.

Acquisitions

accounted for $80.2 million of our gross profit increase within our technology

and value-added services segment

for the year ended December 28, 2019 compared to the prior year period

and also accounted for the increase in the

gross profit margin. The remaining increase of $8.7 million in our technology

and value-added services segment

gross profit was primarily attributable to growth in internally generated

revenue.

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Selling, General and Administrative

Selling, general and administrative expenses by segment and in

total for 2019 and 2018 were as follows (in

thousands):

% of

Respective

Increase / (Decrease)

2019

Net Sales

2018

Net Sales

Health care distribution

2,128,595

22.7

2,137,779

23.7

(9,184)

(0.4)

Technology and value-added services

244,030

47.4

172,349

42.2

71,681

41.6

Total

2,372,625

23.8

2,310,128

24.5

62,497

2.7

Selling, general and administrative expenses (including restructuring

costs in the years ended December 28, 2019

and December 29, 2018, and litigation settlements in the year ended December

29, 2018) increased $62.5 million,

or 2.7%, to $2,372.6 million for the year ended December 28, 2019 from

the comparable prior year period.

The

$9.2 million decrease in selling, general and administrative expenses within

our health care distribution segment for

the year ended December 28, 2019 as compared to the prior year period was

attributable to a reduction of $73.7

million of operating costs (primarily due to $38.5 million of litigation

settlement costs recorded in 2018 and a $39.7

million decrease in restructuring costs) partially offset by $64.5 million of additional

costs from acquired

companies.

The $71.7 million increase in selling, general and administrative

expenses within our technology and

value-added services segment for the year ended December 28, 2019 as

compared to the prior year period was

attributable to $70.5 million of additional costs from acquired companies and $1.2

million of additional operating

costs.

As a percentage of net sales, selling, general and administrative expenses

decreased to 23.8% from 24.5%

for the comparable prior year period.

As a component of total selling, general and administrative expenses, selling

expenses increased $33.5 million, or

2.3%, to $1,461.6 million for the year ended December 28, 2019 from

the comparable prior year period.

As a

percentage of net sales, selling expenses decreased to 14.7%

from 15.1% for the comparable prior year period.

As a component of total selling, general and administrative expenses, general

and administrative expenses

decreased $29.0 million, or 3.3%, to $911.0 million for the year ended December 28, 2019 from

the comparable

prior year period primarily due to $38.5 million of litigation settlement

costs recorded in 2018 and a $39.7 million

decrease in restructuring costs partially offset by increases in general and administrative

expenses.

As a percentage

of net sales, general and administrative expenses decreased to 9.1% from 9.4%

for the comparable prior year

period.

Other Expense, Net

Other expense, net for the years ended 2019 and 2018 was as follows

(in thousands):

Variance

2019

2018

Interest income

15,757

15,491

266

1.7

Interest expense

(50,792)

(76,016)

25,224

33.2

Other, net

(2,919)

(3,258)

339

10.4

Other expense, net

(37,954)

(63,783)

25,829

40.5

Interest expense decreased $25.2 million primarily due to decreased

borrowings under our bank credit lines.

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Income Taxes

For the year ended December 28, 2019, our effective tax rate was 23.4% compared to 20.0%

for the prior year

period.

In 2019, our effective tax rate was primarily impacted by state and foreign income

taxes and interest

expense.

In 2018, our effective tax rate was primarily impacted by a reduction in the estimate

of our transition tax

associated with the Tax Cuts and Jobs Act, tax charges and credits associated with legal entity reorganizations

outside the U.S., and state and foreign income taxes and interest expense.

Within our consolidated balance sheets, transition tax of $9.9 million was included in “Accrued taxes” for 2019

and

2018, and $94.9 million and $104.2 million were included in “Other liabilities”

for 2019 and 2018 respectively.

Net Gain on Sale of Equity Investments

On October 1, 2019, we sold an equity investment in Hu-Friedy, a manufacturer of dental instruments and infection

prevention solutions.

Our investment was non-controlling, we were not involved in

running the business and had

no representation on the board of directors.

During the fourth quarter of 2019, we also sold certain other investments.

In the aggregate, the sales of these

investments resulted in a pre-tax gain of approximately $250.2 million

and an after-tax gain of approximately

$186.8 million.

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 (which have been temporarily suspended).

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 third and fourth quarters 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.

The pandemic and the governmental responses to it had a material adverse

effect on our cash flows in the second

quarter of 2020.

In the latter half of the second quarter and continuing

through year-end, dental and medical

practices began to re-open worldwide. However, patient volumes remain below pre-COVID-19 levels and certain

regions in the U.S. and internationally are experiencing an increase in COVID-19

cases.

As such, there is an

ongoing risk that the COVID-19 pandemic may again have a material

adverse effect on our cash flows in future

periods 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.

As part of a broad-based effort to support plans for the long-term health of our business

and to strengthen our

financial flexibility, we implemented cost reduction measures that included certain reductions in payroll,

substantially decreased capital expenditures, reduced corporate

spending and the elimination of certain non-

strategic targeted expenditures. As our markets have begun to recover, we ended most of those temporary expense-

reduction initiatives during the second half of 2020.

As the COVID-19 pandemic continues to unfold, we will

continue to evaluate appropriate actions for the business.

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

placements.

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.

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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.

We have no off-balance sheet arrangements.

On February 7, 2019, we completed the Animal Health Spin-off.

On the Distribution Date we received a tax free

distribution of $1,120 million from Covetrus, which has been used to

pay down our debt, thereby generating

additional debt capacity that can be used for general corporate purposes, including

share repurchases and mergers

and acquisitions.

Net cash provided by operating activities was $593.5 million for the

year ended December 26, 2020, compared to

$820.5 million for the prior year.

The net change of $227.0 million was primarily attributable to lower net income

and lower distributions from equity affiliates,

both resulting from the sale of our equity investment in Hu-Friedy

the fourth quarter of 2019, and increased working capital requirements,

specifically an increase in inventories due

to stocking of PPE and COVID-19 related products, and an increase in accounts

receivable due to higher sales

volume.

These working capital increases were partially offset by greater growth

in accounts payable and accrued

expenses.

Net cash used in investing activities was $115.0 million for the year ended December 26, 2020,

compared to $422.3

million for the prior year.

The net change of $307.3 million was primarily due to decreased payments

for equity

investments and business acquisitions, partially offset by decreased proceeds from

sales of equity investments.

Net cash used in financing activities was $181.8 million for the

year ended December 26, 2020, compared to

$363.4 million for the prior year.

The net change of $181.6 million was primarily

due to increased net proceeds

from bank borrowings and lower repurchases of our common stock,

partially offset by proceeds received during the

prior year related to the Animal Health Spin-off.

The following table summarizes selected measures of liquidity and capital

resources (in thousands):

December 26,

December 28,

2020

2019

Cash and cash equivalents

421,185

106,097

Working

capital

(1)

1,508,313

1,188,133

Debt:

Bank credit lines

73,366

23,975

Current maturities of long-term debt

109,836

109,849

Long-term debt

515,773

622,908

Total debt

698,975

756,732

Leases:

Current operating lease liabilities

64,716

65,349

Non-current operating lease liabilities

238,727

176,267

(1)

Includes $0.0 million and $127.0 million of accounts receivable which serve as security for U.S. trade accounts receivable

securitization at December 26, 2020 and December 28, 2019, 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 turnover

Our accounts receivable days sales outstanding from operations

increased to 46.0 days as of December 26, 2020

from 44.5 days as of December 28, 2019.

During the years ended December 26, 2020 and December 28,

2019, we

wrote off approximately $7.8 million and $5.9 million, respectively, of fully reserved accounts receivable against

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our trade receivable reserve.

Our inventory turnover from operations was 5.1 as of December

26, 2020 and 5.0 as

of December 28, 2019.

Our working capital accounts may be impacted by current

and future economic conditions.

Contractual obligations

The following table summarizes our contractual obligations related

to fixed and variable rate long-term debt and

finance lease obligations,

including interest (assuming a weighted average interest

rate of 3.3%), as well as

inventory purchase commitments and operating lease obligations as of December

26, 2020:

Payments due by period (in thousands)

< 1 year

2 - 3 years

4 - 5 years

> 5 years

Total

Contractual obligations:

Long-term debt, including interest

125,797

43,994

126,464

435,219

731,474

Inventory purchase commitments

208,200

110,800

319,000

Operating lease obligations

71,801

98,719

55,046

110,228

335,794

Transition tax obligations

9,895

43,291

30,923

84,109

Finance lease obligations, including interest

2,503

2,138

632

920

6,193

Total

418,196

298,942

213,065

546,367

1,476,570

Bank Credit Lines

Bank credit lines consisted of the following:

December 26,

December 28,

2020

2019

Revolving credit agreement

Other short-term bank credit lines

73,366

23,975

Total

73,366

23,975

Revolving Credit Agreement

On April 18, 2017, we entered into a $750 million revolving credit

agreement (the “Credit Agreement”), which

matures 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.

We expect the LIBOR rate to be discontinued at some point

during 2021, which will require an amendment to our debt agreements to

reflect a new reference rate. 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 also requires, among other

things, that we maintain 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 December 26, 2020 and December 28, 2019, we had no borrowings

on this

revolving credit facility.

As of December 26, 2020 and December 28, 2019, there

were $9.5 million and $9.6

million of letters of credit, respectively, provided to third parties under the credit facility.

On April 17, 2020, we amended the Credit Agreement to, among other

things, (i) modify the financial covenant

from being based on total leverage ratio to net leverage ratio, (ii) adjust

the pricing grid to reflect the net leverage

ratio calculation, and (iii) increase the maximum maintenance leverage ratio

through March 31, 2021.

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364-Day Credit Agreement

On April 17, 2020, we entered into a new $700 million 364-day credit agreement,

with JPMorgan Chase Bank,

N.A. and U.S. Bank National Association as joint lead arrangers and joint

bookrunners.

This facility matures on

April 16, 2021.

As of December 26, 2020, we had no borrowings under this credit

facility.

We have the ability to

borrow up to an additional $200 million, from the original facility amount

of $700 million, under this credit facility

on a revolving basis as needed, subject to the terms and conditions of

the credit agreement.

The interest rate for

borrowings under this facility will fluctuate based on our net leverage

ratio.

At December 26, 2020, the interest

rate on this facility was 2.50%.

The proceeds from this facility can be used for working capital requirements

and

general corporate purposes, including, but not limited to, permitted refinancing

of existing indebtedness.

Under the

terms of this agreement, we are prohibited from repurchasing our common stock

until we report our financial

results for the second quarter of 2021.

Other Short-Term Credit

Lines

As of December 26, 2020 and December 28, 2019, we had various other

short-term bank credit lines available, of

which $73.4 million and $24.0 million, respectively, were outstanding.

At December 26, 2020 and December 28,

2019, borrowings under all of these credit lines had a weighted average

interest rate of 4.14% and 3.45%,

respectively.

Long-term debt

Long-term debt consisted of the following:

December 26,

December 28,

2020

2019

Private placement facilities

613,498

621,274

U.S. trade accounts receivable securitization

100,000

Note payable due in 2025 with an interest rate of 3.1%

at December 26, 2020

1,554

Various

collateralized and uncollateralized loans payable with interest,

in varying installments through 2023 at interest rates

ranging from 2.62% to 4.27% at December 26, 2020 and

ranging from 2.56% to 10.5% at December 28, 2019

4,596

6,089

Finance lease obligations (see Note 7)

5,961

5,394

Total

625,609

732,757

Less current maturities

(109,836)

(109,849)

Total long-term debt

515,773

622,908

Private Placement Facilities

Our private placement facilities, with three insurance companies, have a

total facility amount of $1 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 June 23, 2023.

The facilities allow us to issue senior promissory notes to the

lenders at a fixed

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

the time of issuance.

The term of each

possible issuance will be selected by us and can range from five to

15 years (with an average life no longer than 12

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.

On June 29, 2018, we amended and restated the above private placement

facilities to, among other things, (i) permit

the consummation of the Animal Health Spin-off and (ii) provide for the issuance

of notes in Euros, British Pounds

and Australian Dollars, in addition to U.S. Dollars.

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.

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On June 23, 2020, we amended the private placement facilities to, among

other things, (i) temporarily modify the

financial covenant from being based on total leverage ratio to net leverage

ratio until March 31, 2021, (ii) increase

the maximum maintenance leverage ratio through March 31, 2021, but with

a 1.00% interest rate increase on the

outstanding notes if the net leverage ratio exceeds 3.0x, which will remain

in effect until we deliver financials for a

four-quarter period ending on or after June 30, 2021 showing compliance with

the total leverage ratio requirement,

and (iii) make certain other changes conforming to the Credit Agreement, dated

as of April 18, 2017, as amended.

The components of our private placement facility borrowings as

of December 26, 2020 are presented in the

following table (in thousands):

Amount of

Date of

Borrowing

Outstanding

Rate

Due Date

January 20, 2012

(1)

14,286

3.09

January 20, 2022

January 20, 2012

50,000

3.45

January 20, 2024

December 24, 2012

50,000

3.00

December 24, 2024

June 2, 2014

100,000

3.19

June 2, 2021

June 16, 2017

100,000

3.42

June 16, 2027

September 15, 2017

100,000

3.52

September 15, 2029

January 2, 2018

100,000

3.32

January 2, 2028

September 2, 2020

(2)

100,000

2.35

September 2, 2030

Less: Deferred debt issuance costs

(788)

613,498

(1)

Annual repayments of approximately $7.1 million for this borrowing commenced on January 20, 2016.

(2)

On September 2, 2020, we refinanced our $100 million private placement borrowing at 3.79%, originally due on September 2, 2020,

with a similar 10-year borrowing at 2.35% maturing on September 2, 2030.

U.S. Trade Accounts Receivable Securitization

We have a facility agreement with a bank, as agent, 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 to three years.

Our current facility, which has a purchase limit of $350 million, was scheduled to expire on April 29, 2022.

June 22, 2020, the expiration date for this facility was extended to

June 12, 2023 and was amended to adjust certain

covenant levels for 2020.

As of December 26, 2020 and December 28, 2019, the borrowings outstanding

under this

securitization facility were $0.0 million and $100 million, respectively.

At December 26, 2020, the interest rate on

borrowings under this facility was based on the asset-backed commercial

paper rate of 0.22% plus 0.95%, for a

combined rate of 1.17%.

At December 28, 2019, the interest rate on borrowings under this facility

was based on

the asset-backed commercial paper rate of 1.90% plus 0.75%, for a combined

rate of 2.65%.

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 25 to 45 basis points depending upon program utilization.

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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 16 years, some

of which may

include options to extend the leases for up to 10 years.

As of December 26, 2020, our right-of-use assets related to

operating leases were $288.8 million and our current and non-current operating

lease liabilities were $64.7 million

and $238.7 million, respectively.

Stock Repurchases

From June 21, 2004 through December 26, 2020, we repurchased $3.6

billion, or 75,563,289 shares, under our

common stock repurchase programs, with $201.2 million available as of

December 26, 2020 for future common

stock share repurchases.

On October 30, 2019, our Board of Directors authorized the repurchase of

up to an additional $400 million in

shares of our common stock.

As a result of the COVID-19 pandemic, as previously announced, we have

temporarily suspended our share

repurchase program in an effort to preserve cash and exercise caution during this

uncertain period and due to

certain restrictions related to financial covenants in our credit facilities.

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.

Account Standards Codification (“ASC”) 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling interest

holder under the terms of a put

option contained in contractual agreements.

The components of the change in the Redeemable noncontrolling

interests for the years ended December 26, 2020, December 28, 2019 and December

29, 2018 are presented in the

following table:

December 26,

December 28,

December 29,

2020

2019

2018

Balance, beginning of period

287,258

219,724

465,585

Decrease in redeemable noncontrolling interests due to

redemptions

(17,241)

(2,270)

(287,767)

Increase in redeemable noncontrolling interests due to

business acquisitions

28,387

74,865

4,655

Net income attributable to redeemable noncontrolling interests

13,363

14,838

15,327

Dividends declared

(12,631)

(10,264)

(8,206)

Effect of foreign currency translation loss attributable to

redeemable noncontrolling interests

(4,279)

(2,335)

(11,330)

Change in fair value of redeemable securities

32,842

(7,300)

41,460

Balance, end of period

327,699

287,258

219,724

Changes in the estimated redemption amounts of the noncontrolling

interests subject to put options are adjusted at

each reporting period with a corresponding adjustment to Additional paid-in

capital.

Future reductions in the

carrying amounts are subject to a floor amount that is equal to

the fair value of the redeemable noncontrolling

interests at the time they were originally recorded.

The recorded value of the redeemable noncontrolling interests

cannot go below the floor level.

These adjustments do not impact the calculation of earnings per

share.

Additionally, some prior owners of such acquired subsidiaries are eligible to receive additional purchase price cash

consideration if certain financial targets are met.

Any adjustments to these accrual amounts are recorded in our

consolidated statement of income.

For the years ended December 26, 2020 and December 28, 2019,

there were no

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material adjustments recorded in our consolidated statements of income

relating to changes in estimated contingent

purchase price liabilities.

On July 1, 2018, we closed on a joint venture with Internet Brands,

a provider of web presence and online

marketing software, to create a newly formed entity, Henry Schein One, LLC.

The joint venture includes Henry

Schein Practice Solutions products and services, as well as Henry Schein’s international dental practice

management systems and the dental businesses of Internet Brands.

Internet Brands originally held a 26%

noncontrolling interest in Henry Schein One, LLC that is accounted

for within stockholders’ equity, as well as a

freestanding and separately exercisable right to put its noncontrolling

interest to Henry Schein, Inc. for fair value

following the fifth anniversary of the effective date of the formation of the joint venture.

Beginning with the

second anniversary of the effective date of the formation of the joint venture, Henry

Schein One began issuing a

fixed number of additional interests to Internet Brands, which increased

Internet Brands interest to 27% effective

July 1, 2020.

Henry Schein One will continue issuing additional interests

to Internet Brands annually through the

fifth anniversary, ultimately increasing Internet Brands’ ownership to approximately 33.6%.

Internet Brands is also

entitled to receive a fixed number of additional interests, in the aggregate up

to approximately 1.6% of the joint

venture’s ownership, if certain operating targets are met by the joint venture in its fourth, fifth and sixth operating

years.

These additional shares are considered contingent consideration

that are accounted for within stockholders’

equity; however, these shares will not be allocated any net income of Henry Schein One until the

shares vest or are

earned by Internet Brands.

A Monte Carlo simulation was utilized to value the additional contingent

interests that

are subject to operating targets.

Key assumptions that were applied to derive the fair value of

the contingent

interests include an assumed equity value of Henry Schein One, LLC

at its inception date, a risk-free interest rate

based on U.S. treasury yields, an assumed future dividend yield, a risk-adjusted

discount rate applied to projected

future cash flows, an assumed equity volatility based on historical stock price

returns of a group of guideline

companies, and an estimated correlation of annual cash flow returns to

equity returns.

As a result of this transaction

with Internet Brands, we recorded $567.6 million of noncontrolling

interest within stockholders’ equity.

Noncontrolling Interests

Noncontrolling interests represent our less than 50% ownership interest

in an acquired subsidiary. Our net income

is reduced by the portion of the subsidiaries net income that is attributable

to noncontrolling interests.

Unrecognized tax benefits

As more fully disclosed in Note 14 of “Notes to Consolidated Financial

Statements,” we cannot reasonably estimate

the timing of future cash flows related to the unrecognized tax benefits,

including accrued interest, of $84.0 million

as of December 26, 2020.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to

make estimates and judgments that affect the

reported amounts of assets, liabilities, revenues and expenses and

related disclosures of contingent assets and

liabilities.

We base our estimates on historical data, when available, experience, industry and market trends, and on

various other assumptions that are believed to be reasonable under the circumstances,

the combined results of

which form the basis for making judgments about the carrying values

of assets and liabilities that are not readily

apparent from other sources.

However, by their nature, estimates are subject to various assumptions and

uncertainties.

Reported results are therefore sensitive to any changes in our assumptions,

judgments and estimates,

including the possibility of obtaining materially different results if different assumptions were

to be applied.

Our financial results for the year ended December 26, 2020 were

affected by certain estimates we made due to the

adverse business environment brought on by the COVID-19 pandemic.

During the year ended December 26, 2020,

we recorded incremental bad debt reserves of approximately $10.0

million for our global dental business.

Our

stock compensation expense during the year ended December 26, 2020

was lower than in the years ended

December 28, 2019 and December 29, 2018 due to our estimate that a lower amount

of performance shares granted

in 2018, 2019 or 2020 would ultimately vest as a result of the lower-than-normal earnings

in 2020.

Additionally, in

the year ended December 26, 2020, we recorded total impairment charges on intangible assets

of approximately

$20.3 million.

Although our selling, general and administrative expenses

for the year ended December 26, 2020

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represent management's best estimates and assumptions that affect the reported

amounts, our judgment could

change in the future due to the significant uncertainty surrounding the macroeconomic

effect of the COVID-19

pandemic.

Furthermore, during the year ended December 26, 2020, our gross profit

margin was negatively affected by

significant adjustments recorded for PPE inventory and COVID-19 related

products reflecting changes in our

estimates of net realizable value brought on by volatility of pricing and changes

in demand experienced during the

year. Such conditions may recur and adversely impact gross profit margins in future periods, although we do not

expect material inventory adjustments to continue into 2021.

We believe that the following critical accounting policies, which have been discussed with the Audit Committee of

the Board of Directors, affect the significant estimates and judgments used in the

preparation of our financial

statements:

Revenue Recognition

We generate revenue from the sale of dental and medical consumable products, equipment (health care distribution

revenues), software products and services and other sources (technology

and value-added services revenues).

Provisions for discounts, rebates to customers, customer returns and other

contra revenue adjustments are included

in the transaction price at contract inception by estimating the most likely

amount based upon historical data and

estimates and are provided for in the period in which the related sales are

recognized.

Revenue derived from the sale of consumable products is recognized at a point

in time when control transfers to the

customer.

Such sales typically entail high-volume, low-dollar orders shipped

using third-party common carriers.

We believe that the shipment date is the most appropriate point in time indicating control has transferred to the

customer because we have no post-shipment obligations and this is when

legal title and risks and rewards of

ownership transfer to the customer and the point at which we have an

enforceable right to payment.

Revenue derived from the sale of equipment is recognized when control

transfers to the customer. This occurs

when the equipment is delivered.

Such sales typically entail scheduled deliveries of large equipment primarily

equipment service technicians. Some equipment sales require minimal

installation, which is typically completed at

the time of delivery. Our product generally carries standard warranty terms provided by the manufacturer, however,

in instances where we provide warranty labor services, the warranty

costs are accrued in accordance with ASC 460

“Guarantees”.

Revenue derived from the sale of software products is recognized when

products are shipped to customers or made

available electronically. Such software is generally installed by customers and does not require extensive training

due to the nature of its design. Revenue derived from post-contract customer

support for software, including annual

support and/or training, is generally recognized over time using time elapsed

as the input method that best depicts

the transfer of control to the customer.

Revenue derived from other sources, including freight charges, equipment repairs

and financial services, is

recognized when the related product revenue is recognized or when

the services are provided.

We apply the

practical expedient to treat shipping and handling activities performed after

the customer obtains control as

fulfillment activities, rather than a separate performance obligation in the contract.

Sales, value-add and other taxes we collect concurrent with revenue-producing

activities are excluded from

revenue.

Certain of our revenue is derived from bundled arrangements that include

multiple distinct performance obligations

which are accounted for separately.

When we sell software products together with related services (i.e.,

training

and technical support), we allocate revenue to software using the residual

method, using an estimate of the

standalone selling price to estimate the fair value of the undelivered

elements.

There are no cases where revenue is

deferred due to a lack of a standalone selling price. Bundled arrangements that

include elements that are not

considered software consist primarily of equipment and the related installation

service.

We allocate revenue for

such arrangements based on the relative selling prices of the goods or services. If

an observable selling price is not

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available (i.e., we do not sell the goods or services separately), we use one

the following techniques to estimate

the standalone selling price:

adjusted market approach; cost-plus approach; or the residual

method.

There is no

specific hierarchy for the use of these methods, but the estimated selling

price reflects our best estimate of what the

selling prices of each deliverable would be if it were sold regularly on

a standalone basis taking into consideration

the cost structure of our business, technical skill required, customer

location and other market conditions.

Accounts Receivable

Accounts receivable are generally recognized when health care distribution

and technology and value-added

services revenues are recognized.

In accordance with the “expected credit loss” model, the carrying amount

accounts receivable is reduced by a valuation allowance that reflects

our best estimate of the amounts that will not

be collected.

In addition to reviewing delinquent accounts receivable, we consider

many factors in estimating our

reserve, including types of customers and their credit worthiness, experience

and historical data adjusted for current

conditions and reasonable supportable forecasts.

Sales Returns

Sales returns are recognized as a reduction of revenue by the amount

of expected returns and are recorded as refund

liability within current liabilities. We estimate the amount of revenue expected to be reversed to calculate the sales

return liability based on historical data for specific products, adjusted

as necessary for new products.

The

allowance for returns is presented gross as a refund liability and we

record an inventory asset (and a corresponding

adjustment to cost of sales) for any products that we expect to be returned.

Inventories and Reserves

Inventories consist primarily of finished goods and are valued at

the lower of cost or market.

Cost is determined by

the first-in, first-out method for merchandise or actual cost for large equipment and

high tech equipment.

accordance with our policy for inventory valuation, we consider many

factors including the condition and salability

of the inventory, historical sales, forecasted sales and market and economic trends.

From time to time, we may adjust our assumptions for anticipated changes

in any of these or other factors expected

to affect the value of inventory.

Although we believe our judgments, estimates and/or

assumptions related to

inventory and reserves are reasonable, making material changes to such

judgments, estimates and/or assumptions

could materially affect our financial results.

Acquisitions

We account for business acquisitions and combinations under the acquisition method of accounting, where the net

assets of businesses purchased are recorded at their fair value at

the acquisition date and our consolidated financial

statements include their results of operations from that date.

Any excess of acquisition consideration over the fair

value of identifiable net assets acquired is recorded as goodwill.

The major classes of assets and liabilities that we

generally allocate purchase price to, excluding goodwill, include identifiable

intangible assets (i.e., trademarks and

trade names, customer relationships and lists, non-compete agreements and

product development), property, plant

and equipment, deferred taxes and other current and long-term assets and

liabilities.

The estimated fair value of

identifiable intangible assets is based on critical estimates, judgments

and assumptions derived from: analysis of

market conditions; discount rates; discounted cash flows; customer

retention rates; and estimated useful lives.

Some prior owners of such acquired subsidiaries are eligible to receive additional

purchase price cash consideration

if certain financial targets are met.

While we use our best estimates and assumptions to accurately value

those

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, during the measurement period we

may record adjustments to the assets acquired and liabilities assumed with

the corresponding offset to goodwill

within our consolidated balance sheets.

At the end of the measurement period or final determination

of the values

of such assets acquired or liabilities assumed, whichever comes first,

any subsequent adjustments are recognized in

our consolidated statements of operations.

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Goodwill

Goodwill is not amortized, but is subject to impairment analysis at least

once annually, or if an event occurs or

circumstances change that would more likely than not reduce the fair value

of a reporting unit below its carrying

value.

Such impairment analyses for goodwill require a comparison of the

fair value to the carrying value of

reporting units.

We regard our reporting units to be our operating segments: global dental, global medical,

and

technology and value-added services.

Goodwill was allocated to such reporting units, for the purposes

of preparing

our impairment analyses, based on a specific identification basis.

Application of the goodwill impairment test requires judgment, including

the identification of reporting units,

assignment of assets and liabilities that are considered shared services

to the reporting units, and ultimately the

determination of the fair value of each reporting unit. The fair value of

each reporting unit is calculated by applying

the discounted cash flow methodology and confirming with a market approach.

This analysis requires judgments,

including estimation of detailed future cash flows based on budget

expectations, and determination of comparable

companies to develop a weighted average cost of capital for each reporting

unit. The estimates used to calculate the

fair value of a reporting unit change from year to year based on operating results,

market conditions, and other

factors. Changes in these estimates and assumptions could materially affect the determination

of fair value and

goodwill impairment for each reporting unit.

Supplier Rebates

Supplier rebates are included as a reduction of cost of sales and are recognized

over the period they are earned.

The

factors we consider in estimating supplier rebate accruals include forecasted

inventory purchases and sales in

conjunction with supplier rebate contract terms which generally provide

for increasing rebates based on either

increased purchase or sales volume.

Although we believe our judgments, estimates and/or assumptions

related to

supplier rebates are reasonable, making material changes to such judgments,

estimates and/or assumptions could

materially affect our financial results.

Long-Lived Assets

Long-lived assets, other than goodwill and other definite-lived intangibles,

are evaluated for impairment whenever

events or changes in circumstances indicate that the carrying amount

of the assets may not be recoverable through

the estimated undiscounted future cash flows to be derived from such

assets.

Definite-lived intangible assets primarily consist of non-compete agreements,

trademarks, trade names, customer

relationships and lists, and product development.

For long-lived assets used in operations, impairment losses

are

only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted

future cash flows.

We measure the impairment loss based on the difference between the carrying amount and the

estimated fair value.

When an impairment exists, the related assets are written down to fair value.

Although we

believe our judgments, estimates and/or assumptions used in estimating

cash flows and determining fair value are

reasonable, making material changes to such judgments, estimates and/or

assumptions could materially affect such

impairment analyses and our financial results.

During the year ended December 26, 2020, we recorded total impairment charges

on intangible assets of

approximately $20.3 million, nearly all of which was recorded in our

technology and value-added services segment.

Stock-Based Compensation

Stock-based compensation represents the cost related to stock-based awards granted

to employees and non-

employee directors.

We measure stock-based compensation at the grant date, based on the estimated fair value of

the award, and recognize the cost (net of estimated forfeitures) as compensation

expense on a straight-line basis

over the requisite service period.

Our stock-based compensation expense is reflected in selling, general

and

administrative expenses in our consolidated statements of income.

Stock-based awards are provided to certain employees and non-employee directors

under the terms of our 2020

Stock Incentive Plan (formerly known as the 2013 Stock Incentive Plan),

and our 2015 Non-Employee Director

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

The Plans are administered by the Compensation Committee of

the

Board of Directors.

Equity-based awards are granted solely in the form of restricted

stock units, with the exception

of providing stock options to employees pursuant to certain pre-existing

contractual obligations.

Grants of restricted stock units are stock-based awards granted to recipients with

specified vesting provisions.

the case of restricted stock units, common stock is generally delivered

on or following satisfaction of vesting

conditions.

We issue restricted stock units that vest solely based on the recipient’s continued service over time

(primarily four year cliff vesting, except for grants made under the 2015 Non-Employee

Director Stock Incentive

Plan, which are primarily 12 month cliff vesting) and restricted stock units that vest

based on our achieving

specified performance measurements and the recipient’s continued service over time (primarily three year cliff

vesting).

With respect to time-based restricted stock units, we estimate the fair value on the date of grant based on

our

closing stock price.

With respect to performance-based restricted stock units, 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 of

the Board of Directors.

Although there is no

guarantee that performance targets will be achieved, we estimate the fair value of performance-based

restricted

stock units based on our closing stock price at time of grant.

The Plans provide for adjustments to the performance-based restricted

stock units targets for significant events,

including, without limitation, acquisitions, divestitures, new business ventures,

certain capital transactions

(including share repurchases), restructuring costs, if any, certain litigation settlements or payments, if any, changes

in tax rates in certain countries, changes in accounting principles or in applicable

laws or regulations and foreign

exchange fluctuations.

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.

Although we believe our judgments, estimates and/or assumptions

related to stock-based compensation are

reasonable, making material changes to such judgments, estimates and/or

assumptions could materially affect our

financial results.

Unrecognized Tax

Benefits

ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in the financial statements in

accordance with other provisions contained within this guidance.

This topic prescribes a recognition threshold and

a measurement attribute for the financial statement recognition and measurement

of tax positions taken or expected

to be taken in a tax return.

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

than not to be

sustained upon examination by the taxing authorities.

The amount recognized is measured as the largest amount of

benefit that is greater than 50% likely of being realized upon ultimate audit

settlement.

In the normal course of

business, our tax returns are subject to examination by various taxing

authorities.

Such examinations may result in

future tax and interest assessments by these taxing authorities for uncertain

tax positions taken in respect of certain

tax matters.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted in the future, please see

Note 1 – Significant Accounting Policies

included under Item 8.

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ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks as well as changes in foreign currency exchange rates as measured against the U.S.

dollar and each other, and changes to the credit markets.

We attempt to minimize these risks by primarily using

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

These hedging activities provide

only limited protection against currency exchange and credit risks.

Factors that could influence the effectiveness of

our hedging programs include currency markets and availability of hedging

instruments and liquidity of the credit

markets.

All foreign currency forward contracts that we enter into are components

of hedging programs and are

entered into for the sole purpose of hedging an existing or anticipated

currency exposure.

We do not enter into such

contracts for speculative purposes and we manage our credit risks by diversifying

our investments, maintaining a

strong balance sheet and having multiple sources of capital.

Foreign Currency Agreements

The value of certain foreign currencies as compared to the U.S. dollar

and the value of certain underlying functional

currencies of the Company, including its foreign subsidiaries, may affect our financial results.

Fluctuations in

exchange rates may positively or negatively affect our revenues, gross margins, operating expenses

and retained

earnings, all of which are expressed in U.S. dollars.

Where we deem it prudent, we engage in hedging programs

using primarily foreign currency forward contracts aimed at limiting

the impact of foreign currency exchange rate

fluctuations on earnings.

We purchase short-term (i.e., generally 18 months or less) foreign currency forward

contracts to protect against currency exchange risks associated with intercompany

loans due from our international

subsidiaries and the payment of merchandise purchases to foreign

suppliers.

We do not hedge the translation of

foreign currency profits into U.S. dollars, as we regard this as an accounting

exposure, not an economic

exposure.

A hypothetical 5% change in the average value of the U.S. dollar

in 2020 compared to foreign currencies

would have changed our 2020 reported Net income attributable to Henry

Schein, Inc. by approximately $1.3

million.

As of December 26, 2020, we had forward foreign currency exchange

agreements, which expire through November

16, 2023, which include a mark-to-market loss of $9.9 million as determined

by quoted market prices. Included in

the forward foreign currency exchange agreements, Henry Schein, Inc.

had EUR/USD forward contracts notionally

totaling an amount of approximately €200 million, with a reported fair value

of these contracts as a net liability of

$9.6 million.

A 5% increase in the value of the Euro to the USD from December 26,

2020, with all other variables

held constant, would have had an unfavorable effect on the fair value of these forward contracts

by decreasing the

value of these instruments by $11.9 million.

Total

Return Swaps

On March 20, 2020, we entered into a total return swap for the purpose

of economically hedging our unfunded non-

qualified supplemental retirement plan (“SERP”) and our deferred compensation

plan (“DCP”).

This swap will

offset changes in our SERP and DCP liabilities.

At the inception, the notional value of the investments in these

plans was $43.4 million.

At December 26, 2020, the notional value of the investments

in these plans was $67.6

million.

At December 26, 2020 the financing rate for this swap was

based on LIBOR of 0.15% plus 0.38%, for a

combined rate of 0.53%.

From March 20, 2020, the effective date of the swap, to December 26, 2020, we have

recorded a gain, within the selling, general and administrative line item

in our consolidated statement of income, of

approximately $21.2 million, net of transaction costs, related to this undesignated

swap for the year ended

December 26, 2020.

This gain was offset by the change in fair value adjustment in deferred compensation,

resulting in a neutral impact to our results of operations.

This swap is expected to be renewed on an annual basis.

Short-Term Investments

We limit our credit risk with respect to our cash equivalents, short-term investments and derivative instruments, by

monitoring the credit worthiness of the financial institutions who are

the counterparties to such financial

instruments.

As a risk management policy, we limit the amount of credit exposure by diversifying and utilizing

numerous investment grade counterparties.

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Variable

Interest Rate Debt

As of December 26, 2020, we had variable interest rate exposure for certain

of our revolving credit facilities and

our U.S. trade accounts receivable securitization.

Our revolving credit facility which we entered into on April 18, 2017

and expires on April 18, 2022, has an interest

rate that is based on the U.S. Dollar LIBOR plus a spread based on our

leverage ratio at the end of each financial

reporting quarter.

As of December 26, 2020, there was $0.0 million outstanding under

this revolving credit

facility.

During the year ended December 26, 2020, the average outstanding

balance under this revolving credit

facility was approximately $21.4 million.

Based upon our average outstanding balance for this revolving

credit

facility, for each hypothetical increase of 25 basis points, our interest expense thereunder would have increased by

less than $0.1 million.

Our U.S trade accounts receivable securitization, which we entered into

on April 17, 2013 and was scheduled to

expire on April 29, 2022, has an interest rate that is based upon the asset-backed

commercial paper rate.

On June

22, 2020, the expiration date for this facility was extended to June 12, 2023.

As of December 26, 2020, the

commercial paper rate was 0.22% plus 0.95%, for a combined rate of

1.17%. At December 26, 2020 the

outstanding balance was $0.0 million under this securitization facility.

During the year ended December 26, 2020,

the average outstanding balance under this securitization facility was approximately

$92.3 million.

Based upon our

average outstanding balance for this securitization facility, for each hypothetical increase of 25 basis points, our

interest expense thereunder would have increased by $0.2 million.

Table of Contents

ITEM 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

HENRY SCHEIN, INC.

Page

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements

Balance Sheets as of December 26, 2020 and December 28, 2019

Statements of Income for the years ended December 26, 2020,

December 28, 2019 and December 29, 2018

Statements of Comprehensive Income for the years ended December 26, 2020,

December 28, 2019 and December 29, 2018

Statements of Changes in Stockholders’ Equity for the years ended

December 26, 2020, December 28, 2019 and December 29, 2018

Statements of Cash Flows for the years ended December 26, 2020,

December 28, 2019 and December 29, 2018

Notes to Consolidated Financial Statements

Note 1 – Significant Accounting Policies

Note 2 – Discontinued Operations

Note 3 – Property and Equipment, Net

Note 4 – Goodwill and Other Intangibles, Net

Note 5 – Investments and Other

Note 6 – Debt

Note 7 – Leases

Note 8 – Redeemable Noncontrolling Interests

Note 9 – Comprehensive Income

100

Note 10 – Fair Value Measurements

101

Note 11 – Business Acquisitions Divestitures

104

Note 12 – Plans of Restructuring

105

Note 13 – Earnings Per Share

106

Note 14 – Income Taxes

106

Note 15 – Concentrations of Risk

110

Note 16 – Derivatives and Hedging Activities

111

Note 17 – Revenue from Contracts with Customers

112

Note 18 – Segment and Geographic Data

113

Note 19 – Employee Benefit Plans

115

Note 20 – Commitments and Contingencies

119

Note 21 – Quarterly Information (Unaudited)

122

Note 22 – Supplemental Cash Flow Information

123

Note 23 – Related Party Transactions

123

Schedule II - Valuation and Qualifying Accounts for the years ended December 26, 2020,

December 28, 2019 and December 29, 2018

138

All other schedules are omitted because the required information is either

inapplicable or is included in the consolidated

financial statements or the notes thereto.

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Henry Schein, Inc.

Melville, NY

Opinion on the Consolidated Financial Statements

have

audited

the

accompanying

consolidated

balance

sheets

Henry

Schein,

Inc.

(the

“Company”)

December 26, 2020 and December 28, 2019, the related consolidated statements of income, comprehensive income,

stockholders’ equity,

and cash flows for each

of the three years in

the period ended December 26, 2020,

the related

notes

and

schedule

(collectively

referred

the

“consolidated

financial

statements”).

our

opinion,

the

consolidated financial

statements present

fairly,

all material

respects, the

financial position

the

Company at

December 26, 2020 and December 28, 2019, and the results of its operations and its cash flows for each of the three

years in

the period

ended December

26, 2020,

in conformity

with accounting

principles generally

accepted in

the

United States of America.

also

have

audited,

accordance

with

the

standards

the

Public

Company

Accounting

Oversight

Board

(United

States)

(“PCAOB”),

the

Company's

internal

control

over

financial

reporting

December

26,

2020,

based

criteria

established

Internal

Control

–

Integrated

Framework

(2013)

issued

the

Committee

Sponsoring

Organizations

the

Treadway

Commission

(“COSO”)

and

our

report

dated

February

2021

expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements,

effective on December 30, 2018, the Company

changed its method of accounting for leases due to the adoption of Accounting

Standards Codification Topic

842,

Leases

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s

management.

Our responsibility is

express an

opinion on

the

Company’s

consolidated financial

statements based

our

audits.

are

a public

accounting

firm

registered

with

the

PCAOB

and

are

required

independent

with

respect

the

Company

accordance

with

the

U.S.

federal

securities

laws

and

the

applicable

rules

and

regulations

the

Securities

and

Exchange Commission and the PCAOB.

conducted our

audits in

accordance with

the standards

of the

PCAOB.

Those standards

require that

we plan

and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of

material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks

material

misstatement

the

consolidated

financial

statements,

whether

due

error

fraud,

and

performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the

amounts

and

disclosures

the

consolidated

financial

statements.

Our

audits

also

included

evaluating

the

accounting

principles

used

and

significant

estimates

made

management,

well

evaluating

the

overall

presentation of the consolidated financial

statements.

believe that our audits provide

a reasonable basis for our

opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated

financial statements that was communicated or

required to be communicated to the

Audit Committee

of the

Board

Directors

and

that:

(1)

relates

accounts

disclosures

that

are

material

the

consolidated

financial

statements; and (2) involved our especially challenging, subjective or complex judgments. The communication of

critical audit

matters does

not

alter in

any way

our opinion

on the

consolidated financial

statements, taken

as a

whole,

and

are

not,

communicating

the

critical

audit

matter

below,

providing

separate

opinion

the

critical audit matter or on the accounts or disclosures to which it relates.

Table of Contents

Uncertain Tax Position

As described

in Note

14 of

the consolidated

financial statements the

Company operates in

multiple jurisdictions

and

subject

transfer

pricing

compliance

for

intercompany

transactions

that

are

subject

audit

taxing

authorities. The resolution

of these audits may span multiple

years.

identified

the

determination

uncertain

tax

positions

transfer

pricing

from

intercompany

transactions

critical

audit

matter.

The

principal

considerations

for

our

determination

included

complex

judgments

to:

(i)

auditing

assumptions

applied

the

interpretation

tax

laws

and

legal

rulings

multiple

tax

paying

jurisdictions, (ii)

determining

whether

transfer

pricing

tax

position’s

technical merits

are

more-likely-than-not

sustained

when

measuring

the

amount

tax

benefits

that

qualifies

for

recognition,

(iii)

assessing

whether

intercompany

transactions

are

based

the

arm’s

length

standard

that

may

produce

range of

arm’s

length outcomes,

and (iv)

assessing the

adjustments to

the liability

for unrecognized

tax benefits

associated

with

tax

settlements

agreements.

Auditing

these

elements

involved

especially

subjective

auditor

judgment and

an increased

level

of audit

effort,

including involvement

of personnel

with specialized

skills and

knowledge.

The primary procedures we performed to address this critical audit matter

included:

●

Assessing the design and implementation and testing operating effectiveness of

certain controls over

the recognition and measurement of uncertain tax positions related

to transfer pricing.

●

Utilizing personnel with specialized knowledge and skill in taxation to evaluate

the appropriateness of

management’s methods and assumptions used to estimate uncertain tax positions related to transfer

pricing by: (i) verifying our understanding of the relevant facts by

reading the Company’s

correspondence with the relevant tax authorities and third-party advice obtained

by the Company, (ii)

evaluating the reasonableness of technical merits, management’s judgments and assumptions and

assessing the overall reasonableness of conclusions reached, (iii)

evaluating the ranges of arm’s length

outcomes and pricing conclusions reached within management’s transfer pricing studies, and (iv)

reviewing settlement activity or agreements with income tax authorities.

/s/ BDO USA, LLP

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

New York,

February 17, 2021

Table of Contents

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

December 26,

December 28,

2020

2019

ASSETS

Current assets:

Cash and cash equivalents

421,185

106,097

Accounts receivable, net of reserves of $

88,030

and $

60,002

1,424,787

1,246,246

Inventories, net

1,512,499

1,428,799

Prepaid expenses and other

432,944

445,360

Total current assets

3,791,415

3,226,502

Property and equipment, net

342,004

329,645

Operating lease right-of-use assets, net

288,847

231,662

Goodwill

2,504,392

2,462,495

Other intangibles, net

479,429

572,878

Investments and other

366,445

327,919

Total assets

7,772,532

7,151,101

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

1,005,655

880,266

Bank credit lines

73,366

23,975

Current maturities of long-term debt

109,836

109,849

Operating lease liabilities

64,716

65,349

Accrued expenses:

Payroll and related

295,329

265,206

Taxes

138,671

165,171

Other

595,529

528,553

Total current liabilities

2,283,102

2,038,369

Long-term debt

515,773

622,908

Deferred income taxes

30,065

64,989

Operating lease liabilities

238,727

176,267

Other liabilities

392,781

331,173

Total liabilities

3,460,448

3,233,706

Redeemable noncontrolling interests

327,699

287,258

Commitments and contingencies

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,

142,462,571

outstanding on December 26, 2020 and

143,353,459

outstanding on December 28, 2019

1,425

1,434

Additional paid-in capital

47,768

Retained earnings

3,454,831

3,116,215

Accumulated other comprehensive loss

(108,084)

(167,373)

Total Henry Schein, Inc. stockholders' equity

3,348,172

2,998,044

Noncontrolling interests

636,213

632,093

Total stockholders' equity

3,984,385

3,630,137

Total liabilities, redeemable noncontrolling

interests and stockholders' equity

7,772,532

7,151,101

Table of Contents

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF INCOME

(in thousands, except per share data)

Years

Ended

December 26,

December 28,

December 29,

2020

2019

2018

Net sales

10,119,141

9,985,803

9,417,603

Cost of sales

7,304,798

6,894,917

6,506,856

Gross profit

2,814,343

3,090,886

2,910,747

Operating expenses:

Selling, general and administrative

2,246,947

2,357,920

2,217,273

Litigation settlements

38,488

Restructuring costs

32,093

14,705

54,367

Operating income

535,303

718,261

600,619

Other income (expense):

Interest income

9,842

15,757

15,491

Interest expense

(41,377)

(50,792)

(76,016)

Other, net

(3,873)

(2,919)

(3,258)

Income from continuing operations before taxes, equity in

earnings of affiliates and noncontrolling interests

499,895

680,307

536,836

Income taxes

(95,374)

(159,515)

(107,432)

Equity in earnings of affiliates

12,344

17,900

21,037

Net gain on sale of equity investments

1,572

186,769

Net income from continuing operations

418,437

725,461

450,441

Income (loss) from discontinued operations, net of tax

986

(6,323)

111,685

Net Income

419,423

719,138

562,126

Less: Net income attributable to noncontrolling interests

(15,629)

(24,770)

(19,724)

Less: Net (income) loss attributable to noncontrolling interests

from discontinued operations

366

(6,521)

Net income attributable to Henry Schein, Inc.

403,794

694,734

535,881

Amounts attributable to Henry Schein Inc.:

Continuing operations

402,808

700,691

430,717

Discontinued operations

986

(5,957)

105,164

Net income attributable to Henry Schein, Inc.

403,794

694,734

535,881

Earnings per share from continuing operations attributable to

Henry Schein, Inc.:

Basic

2.83

4.74

2.82

Diluted

2.81

4.69

2.80

Earnings (loss) per share from discontinued operations attributable to

Henry Schein, Inc.:

Basic

0.01

(0.04)

0.69

Diluted

0.01

(0.04)

0.68

Earnings per share attributable to Henry Schein, Inc.:

Basic

2.83

4.70

3.51

Diluted

2.82

4.65

3.49

Weighted

-average common shares outstanding:

Basic

142,504

147,817

152,656

Diluted

143,404

149,257

153,707

Table of Contents

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(in thousands)

Years

Ended

December 26,

December 28,

December 29,

2020

2019

2018

Net income

419,423

719,138

562,126

Other comprehensive income (loss), net of tax:

Foreign currency translation gain (loss)

63,094

(4,070)

(136,356)

Unrealized gain (loss) from foreign currency hedging activities

(7,456)

(3,876)

626

Unrealized investment gain (loss)

(5)

(3)

Pension adjustment gain (loss)

143

(5,924)

3,033

Other comprehensive income (loss), net of tax

55,776

(13,858)

(132,700)

Comprehensive income

475,199

705,280

429,426

Comprehensive income attributable to noncontrolling interests:

Net income

(15,629)

(24,404)

(26,245)

Foreign currency translation loss

3,513

1,848

13,996

Comprehensive income attributable to noncontrolling interests

(12,116)

(22,556)

(12,249)

Comprehensive income attributable to Henry Schein, Inc.

463,083

682,724

417,177

Table of Contents

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share and per share data)

Accumulated

Common Stock

Additional

Other

Total

$.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income (Loss)

Interests

Equity

Balance, December 30, 2017

153,690,146

1,537

2,940,029

(130,067)

12,911

2,824,410

Cumulative impact of adopting new accounting standards

2,594

Net income (excluding $

21,848

attributable to Redeemable

noncontrolling interests)

535,881

4,397

540,278

Foreign currency translation loss (excluding loss of $

13,031

attributable to Redeemable noncontrolling interests)

(122,360)

(965)

(123,325)

Unrealized gain from foreign currency hedging activities,

net of tax benefit of $

396

626

Unrealized investment loss, net of tax benefit of $

(3)

Pension adjustment gain, net of tax of $

1,179

3,033

Dividends paid

(656)

Other adjustments

(19)

713

694

Purchase of noncontrolling interests

(214)

Change in fair value of redeemable securities

(148,919)

Initial noncontrolling interests and adjustments related to

business acquisitions

564,270

Repurchase and retirement of common stock

(2,518,387)

(25)

(36,206)

(163,769)

(200,000)

Stock issued upon exercise of stock options

153,516

3,075

3,076

Stock-based compensation expense

340,794

36,236

36,240

Shares withheld for payroll taxes

(267,772)

(3)

(18,140)

(18,143)

Settlement of stock-based compensation awards

3,371

(727)

Deferred tax benefit arising from acquisition of

noncontrolling interest in partnership

58,554

Transfer of charges in excess of capital

106,146

(106,146)

Balance, December 29, 2018

151,401,668

1,514

3,208,589

(248,771)

580,456

3,541,788

Cumulative impact of adopting new accounting standards

(274)

Net income (excluding $

14,838

attributable to Redeemable

noncontrolling interests from continuing operations

and ($

366

from discontinued operations)

694,734

9,932

704,666

Foreign currency translation loss (excluding loss of $

2,335

attributable to Redeemable noncontrolling interests

and ($

592

gain from discontinued operations)

(2,222)

(105)

(2,327)

Unrealized loss from foreign currency hedging activities,

net of tax benefit of $

1,035

(3,876)

Unrealized investment gain, net of tax of $

Pension adjustment loss, net of tax benefit of $

1,806

(5,924)

Dividends paid

(535)

Other adjustments

(3)

Change in fair value of redeemable securities

7,300

Initial noncontrolling interests and adjustments related to

business acquisitions

42,345

Adjustment for Animal Health Spin-off

87,629

Repurchase and retirement of common stock

(8,173,912)

(82)

(79,785)

(445,133)

(525,000)

Stock issued upon exercise of stock options

2,526

Stock-based compensation expense

215,408

45,243

45,245

Shares withheld for payroll taxes

(179,860)

(1)

(10,844)

(10,845)

Settlement of stock-based compensation awards

160

Share Sale related to Animal Health business

361,090

Separation of Animal Health business

(73,970)

(543,158)

93,408

(523,720)

Transfer of charges in excess of capital

(201,457)

201,457

Balance, December 28, 2019

143,353,459

1,434

47,768

3,116,215

(167,373)

632,093

3,630,137

Cumulative impact of adopting new accounting standards

(412)

Net income (excluding $

13,363

attributable to Redeemable

noncontrolling interests from continuing operations)

403,794

2,266

406,060

Foreign currency translation gain (excluding loss of $

4,279

attributable to Redeemable noncontrolling interests )

66,607

766

67,373

Unrealized loss from foreign currency hedging activities,

net of tax benefit of $

2,768

(7,456)

Unrealized investment loss, net of tax benefit of $

(5)

Pension adjustment gain, including tax benefit of $

676

143

Dividends paid

(1,086)

Purchase of noncontrolling interests

(1,597)

(701)

(2,298)

Change in fair value of redeemable securities

(32,842)

Initial noncontrolling interests and adjustments related to

business acquisitions

2,875

Repurchase and retirement of common stock

(1,200,000)

(12)

(10,949)

(62,828)

(73,789)

Stock-based compensation expense

545,864

8,783

8,788

Shares withheld for payroll taxes

(236,752)

(2)

(14,475)

(14,477)

Settlement of stock-based compensation awards

(275)

Separation of Animal Health business

1,649

Transfer of charges in excess of capital

1,938

(1,938)

Balance, December 26, 2020

142,462,571

1,425

3,454,831

(108,084)

636,213

3,984,385

Table of Contents

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

(in thousands, except per share data) (unaudited)

Years Ended

December 26,

December 28,

December 29,

2020

2019

2018

Cash flows from operating activities:

Net income

419,423

719,138

562,126

Income (loss) from discontinued operations

986

(6,323)

111,685

Income from continuing operations

418,437

725,461

450,441

Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization

185,538

184,942

143,630

Impairment charge on intangible assets

20,275

Gain on sale of equity investments

(2,096)

(250,167)

Stock-based compensation expense

8,788

44,920

32,621

Provision for losses on trade and other accounts receivable

35,137

12,612

14,384

Benefit from deferred income taxes

(52,977)

(4,057)

(25,388)

Equity in earnings of affiliates

(12,344)

(17,900)

(21,037)

Distributions from equity affiliates

16,002

71,469

20,386

Changes in unrecognized tax benefits

(24,881)

1,941

(1,169)

Benefit from transition tax

(10,000)

Other

5,012

5,684

369

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(189,349)

(72,689)

(127,201)

Inventories

(31,817)

14,702

(41,042)

Other current assets

(6,479)

(57,291)

(165,645)

Accounts payable and accrued expenses

224,273

160,851

180,606

Net cash provided by operating activities from continuing

operations

593,519

820,478

450,955

Net cash provided by (used in) operating activities from

discontinued operations

5,391

(166,391)

233,751

Net cash provided by operating activities

598,910

654,087

684,706

Cash flows from investing activities:

Purchases of fixed assets

(48,829)

(76,219)

(71,283)

Payments related to equity investments and business

acquisitions, net of cash acquired

(60,173)

(655,879)

(53,240)

Proceeds from sale of equity investment

14,020

307,251

1,000

Repayments from (borrowings for) loan to affiliate

(1,243)

16,713

(25,700)

Other

(18,794)

(14,175)

(15,101)

Net cash used in investing activities from continuing operations

(115,019)

(422,309)

(164,324)

Net cash used in investing activities from discontinued operations

(2,064)

(28,630)

Net cash used in investing activities

(115,019)

(424,373)

(192,954)

Cash flows from financing activities:

Net change in bank borrowings

45,082

(927,912)

210,741

Proceeds from issuance of long-term debt

501,421

741

115,000

Principal payments for long-term debt

(611,216)

(260,944)

(24,735)

Debt issuance costs

(3,879)

(391)

(501)

Debt extinguishment costs

(401)

Proceeds from issuance of stock upon exercise of stock options

3,076

Payments for repurchases of common stock

(73,789)

(525,000)

(200,000)

Payments for taxes related to shares withheld for employee

taxes

(14,299)

(10,814)

(18,023)

Distribution received related to Animal Health Spin-off

1,120,000

Proceeds related to Animal Health Share Sale

361,090

Proceeds from (distributions to) noncontrolling shareholders

(7,886)

51,498

(7,351)

Acquisitions of noncontrolling interests in subsidiaries

(19,538)

(2,358)

(287,635)

Proceeds from (payments) to Henry Schein Animal Health

Business

2,711

(169,295)

(192,745)

Net cash used in financing activities from continuing operations

(181,794)

(363,351)

(402,173)

Net cash provided by (used in) financing activities from

discontinued operations

(5,391)

147,371

(201,603)

Net cash used in financing activities

(187,185)

(215,980)

(603,776)

Effect of exchange rate changes on cash and cash equivalents from continuing

operations

18,382

14,394

14,425

Effect of exchange rate changes on cash and cash equivalents from discontinued

operations

(2,240)

3,150

Net change in cash and cash equivalents from continuing

operations

315,088

49,212

(101,117)

Net change in cash and cash equivalents from discontinued

operations

(23,324)

6,668

Cash and cash equivalents, beginning of period

106,097

56,885

158,002

Cash and cash equivalents, end of period

421,185

106,097

56,885

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 1 –Significant Accounting Policies

Nature of Operations

We distribute health care products and services primarily to office-based health care practitioners with operations or

affiliates in the United States, Australia, Austria, Belgium, Brazil, Canada, Chile,

China, the Czech Republic,

France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, the

Netherlands, New Zealand, Poland, Portugal, Singapore, South Africa, Spain,

Sweden, Switzerland, Thailand,

United Arab Emirates and the United Kingdom.

Principles of Consolidation

Our consolidated financial statements include the accounts of Henry

Schein, Inc. and all of our controlled

subsidiaries.

All intercompany accounts and transactions are eliminated in

consolidation.

Investments in

unconsolidated affiliates, which are greater than or equal to 20% and less than or equal

to 50% owned or

investments in unconsolidated affiliates of less than 20% 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.

We consolidate a Variable

Interest Entity (“VIE”) where we hold a variable interest

and are the primary

beneficiary.

The VIE is a trade accounts receivable securitization.

We are the primary beneficiary because 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.

The results of operations and financial position of this VIE

are

included in our consolidated financial statements.

For the consolidated 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.

At December 26,

2020 and December 28, 2019, trade accounts receivable that can only

be used to settle obligations of this VIE were

0.0

million and $

127

million, respectively, and the liabilities of the VIE where the creditors have recourse to us

were $

0.0

million and $

100

million, respectively.

Use of Estimates

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.

In March 2020, the World Health Organization declared the Novel Coronavirus Disease 2019 (“COVID-19”) a

pandemic. The COVID-19 pandemic has negatively impacted the global

economy, disrupted global supply chains

and created significant volatility and disruption of global financial markets.

In response, many countries

implemented business closures and restrictions, stay-at-home and social

distancing ordinances and similar measures

to combat the pandemic, which significantly impacted global business

and dramatically reduced demand for dental

products and certain medical products in the second quarter of 2020.

Demand increased in the second half of the

year resulting in growth over the prior year driven by sales of personal

protective equipment (PPE) and COVID-19

related products.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Our consolidated financial statements reflect estimates and assumptions

made by us that affect, among other things,

our goodwill, long-lived asset and indefinite-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; vendor

rebates; measurement of

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

plans; and pension plan

assumptions.

Due to the significant uncertainty surrounding the future impact

of COVID-19, our judgments

regarding estimates and impairments could change in the future.

In addition, the impact of COVID-19 had a

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

second quarter of 2020. In the

latter half of the year, dental and medical practices began to re-open worldwide, and continued to do so

during the

remainder of the year.

However, patient volumes remain below pre-COVID-19 levels and certain regions in the

U.S. and internationally are experiencing an increase in COVID-19

cases.

As such, there is an ongoing risk that 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.

Fiscal Year

We report our results of operations and cash flows on a

week basis ending on the last Saturday of December.

The years ended December 26, 2020, December 28, 2019 and December

29, 2018 consisted of

weeks.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods

or services in an amount that reflects the

consideration that we expect to receive for those goods or services.

To recognize revenue, we do the following:

•

identify the contract(s) with a customer;

•

identify the performance obligations in the contract;

•

determine the transaction price;

•

allocate the transaction price to the performance obligations in the contract;

and

•

recognize revenue when, or as, the entity satisfies a performance obligation.

We generate revenue from the sale of dental and medical consumable products, equipment (Health care distribution

revenues), software products and services and other sources (Technology and value-added services revenues).

Provisions for discounts, rebates to customers, customer returns and other

contra revenue adjustments are included

in the transaction price at contract inception by estimating the most likely

amount based upon historical data and

estimates and are provided for in the period in which the related sales are

recognized.

Revenue derived from the sale of consumable products is recognized at a point

in time when control transfers to the

customer.

Such sales typically entail high-volume, low-dollar orders shipped

using third-party common carriers.

We believe that the shipment date is the most appropriate point in time indicating control has transferred to the

customer because we have no post-shipment obligations and this is when

legal title and risks and rewards of

ownership transfer to the customer and the point at which we have an

enforceable right to payment.

Revenue derived from the sale of equipment is recognized when control

transfers to the customer.

This occurs

when the equipment is delivered.

Such sales typically entail scheduled deliveries of large equipment primarily

equipment service technicians.

Some equipment sales require minimal installation, which

is typically completed at

the time of delivery.

Our product generally carries standard warranty terms provided

by the manufacturer,

however, in instances where we provide warranty labor services, the warranty costs are accrued

in accordance with

Accounting Standards Codification (“ASC”) 460 “Guarantees”.

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Revenue derived from the sale of software products is recognized when products

are shipped to customers or made

available electronically.

Such software is generally installed by customers and does

not require extensive training

due to the nature of its design.

Revenue derived from post-contract customer support for software,

including annual

support and/or training, is generally recognized over time using time elapsed

as the input method that best depicts

the transfer of control to the customer.

Revenue derived from other sources, including freight charges, equipment repairs

and financial services, is

recognized when the related product revenue is recognized or when

the services are provided.

We apply the

practical expedient to treat shipping and handling activities performed after the

customer obtains control as

fulfillment activities, rather than a separate performance obligation in the

contract.

Sales, value-add and other taxes we collect concurrent with revenue-producing

activities are excluded from

revenue.

Certain of our revenue is derived from bundled arrangements that include

multiple distinct performance obligations,

which are accounted for separately.

When we sell software products together with related services (i.e.,

training

and technical support), we allocate revenue to software using the residual

method, using an estimate of the

standalone selling price to estimate the fair value of the undelivered

elements.

There are no cases where revenue is

deferred due to a lack of a standalone selling price.

Bundled arrangements that include elements that are not

considered software consist primarily of equipment and the related

installation service.

We allocate revenue for

such arrangements based on the relative selling prices of the goods or services.

If an observable selling price is not

available (i.e., we do not sell the goods or services separately), we

use one of the following techniques to estimate

the standalone selling price:

adjusted market approach; cost-plus approach; or the residual

method.

There is no

specific hierarchy for the use of these methods, but the estimated selling

price reflects our best estimate of what the

selling prices of each deliverable would be if it were sold regularly on

a standalone basis taking into consideration

the cost structure of our business, technical skill required, customer

location and other market conditions.

See

Note 17 – Revenue from Contracts with Customers

for additional disclosures of disaggregated net sales and

Note 18 – Segment and Geographic Data

for disclosures of net sales by segment and geographic data.

Contract Balances

Contract balances represent amounts presented in our consolidated balance

sheet when either we have transferred

goods or services to the customer or the customer has paid consideration to us

under the contract.

These contract

balances include accounts receivable, contract assets and contract liabilities.

Accounts Receivable

Accounts receivable are generally recognized when health care distribution

and technology and value-added

services revenues are recognized.

In accordance with the “expected credit loss” model, the carrying amount

accounts receivable is reduced by a valuation allowance that reflects

our best estimate of the amounts that we do

not expect to collect.

In addition to reviewing delinquent accounts receivable, we consider many

factors in

estimating our reserve, including types of customers and their credit worthiness,

experience and historical data

adjusted for current conditions and reasonable supportable forecasts.

Contract Assets

Contract assets include amounts related to any conditional right to consideration

for work completed but not billed

as of the reporting date and generally represent amounts owed to us by

customers, but not yet billed. Contract assets

are transferred to accounts receivable when the right becomes unconditional.

The contract assets primarily relate to

our bundled arrangements for the sale of equipment and consumables and

sales of term software licenses.

Current

contract assets are included in Prepaid expenses and other and the non-current

contract assets are included in

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Investments and other within our consolidated balance sheets.

Current and non-current contract asset balances as of

December 26, 2020 and December 28, 2019 were not material.

Contract Liabilities

Contract liabilities are comprised of advance payments and upfront payments

for service arrangements provided

over time that are accounted for as deferred revenue amounts.

Contract liabilities are transferred to revenue once

the performance obligation has been satisfied.

Current contract liabilities are included in Accrued expenses:

Other

and the non-current contract liabilities are included in Other liabilities within

our consolidated balance sheets.

December 28, 2019, the current portion of contract liabilities of $

70.8

million was reported in Accrued expenses:

Other, and $

6.2

million related to non-current contract liabilities were reported

in Other liabilities.

During the year

ended December 26, 2020,

we recognized substantially all of the current contract liability amounts

that were

previously deferred at December 28, 2019.

At December 26, 2020, the current and non-current portion of contract

liabilities were $

71.5

million and $

8.2

million, respectively.

Deferred Commissions

Sales commissions earned by our sales force that relate to long term

arrangements are capitalized as costs to obtain

a contract when the costs incurred are incremental and are expected to be recovered.

Deferred sales commissions

are amortized over the estimated customer relationship period.

We apply the practical expedient related to the

capitalization of incremental costs of obtaining a contract, and recognize such costs as an expense when incurred if

the amortization period of the assets that we would have recognized is one year or less.

Our deferred commission

balances as of December 26, 2020 and December 28, 2019 were not

material.

Sales Returns

Sales returns are recognized as a reduction of revenue by the amount

of expected returns and are recorded as refund

liability within current liabilities.

We estimate the amount of revenue expected to be reversed to calculate the sales

return liability based on historical data for specific products, adjusted

as necessary for new products.

The

allowance for returns is presented gross as a refund liability and we

record an inventory asset (and a corresponding

adjustment to cost of sales) for any products that we expect to be returned.

Inventories and Reserves

Inventories consist primarily of finished goods and are valued at

the lower of cost or net realizable value.

Cost is

determined by the first-in, first-out method for merchandise or actual cost

for large equipment and high tech

equipment.

In accordance with our policy for inventory valuation, we

consider many factors including the

condition and salability of the inventory, historical sales, forecasted sales and market and economic trends.

From

time to time, we adjust our assumptions for anticipated changes in any

of these or other factors expected to affect

the value of inventory.

Cash and Cash Equivalents

We consider all highly liquid short-term investments with an original maturity of three months or less to be cash

equivalents.

Due to the short-term maturity of such investments, the

carrying amounts are a reasonable estimate of

fair value.

Outstanding checks in excess of funds on deposit of $

1.3

million and $

29.5

million, primarily related to

payments for inventory, were classified as accounts payable as of December 26, 2020 and December 28, 2019.

Direct Shipping and Handling Costs

Freight and other direct shipping costs are included in cost of sales.

Direct handling costs, which represent

primarily direct compensation costs of employees who pick, pack and otherwise

prepare, if necessary, merchandise

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

for shipment to our customers are reflected in selling, general and administrative

expenses.

Direct shipping and

handling costs were $

79.2

million, $

73.8

million and $

70.6

million for the years ended December 26, 2020,

December 28, 2019 and December 29, 2018.

Advertising and Promotional Costs

We generally expense advertising and promotional costs as incurred.

Total advertising and promotional expenses

were $

30.8

million, $

25.2

million and $

12.9

million for the years ended December 26, 2020, December 28, 2019

and December 29, 2018.

Supplier Rebates

Supplier rebates are included as a reduction of cost of sales and are recognized

over the period they are earned.

The

factors we consider in estimating supplier rebate accruals include forecasted

inventory purchases and sales, in

conjunction with supplier rebate contract terms, which generally provide

for increasing rebates based on either

increased purchase or sales volume.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation or amortization.

Depreciation is

computed primarily under the straight-line method

(see

Note 3 – Property and Equipment, Net

for estimated useful

lives).

Amortization of leasehold improvements is computed using

the straight-line method over the lesser of the

useful life of the assets or the lease term.

Capitalized software costs consist of costs to purchase and develop

software.

Costs incurred during the application

development stage for software bought and further customized by outside suppliers

for our use and software

developed by a supplier for our proprietary use are capitalized.

Costs incurred for our own personnel who are

directly associated with software development are capitalized.

Income Taxes

We account for income taxes under an asset and liability approach that requires the recognition of deferred income

tax assets and liabilities for the expected future tax consequences of events

that have been recognized in our

financial statements or tax returns.

In estimating future tax consequences, we generally consider all expected

future

events other than enactments of changes in tax laws or rates.

The effect on deferred income tax assets and

liabilities of a change in tax rates is recognized as income or expense in

the period that includes the enactment date.

We file a consolidated U.S. federal income tax return with our

% or greater owned U.S. subsidiaries.

Foreign Currency Translation

and Transactions

The financial position and results of operations of our foreign subsidiaries

are determined using local currency as

the functional currency.

Assets and liabilities of these subsidiaries are translated at the exchange

rate in effect at

each year-end.

Income statement accounts are translated at the average rate

of exchange prevailing during the year.

Translation adjustments arising from the use of differing exchange rates from period to period are included

Accumulated other comprehensive income in stockholders’ equity.

Gains and losses resulting from foreign

currency transactions are included in earnings.

Risk Management and Derivative Financial Instruments

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

Our

objective is to manage the impact that foreign currency exchange rate fluctuations

could have on recognized asset

and liability fair values, earnings and cash flows, as well as our net

investments in foreign subsidiaries.

Our risk

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

management policy requires that derivative contracts used as hedges be

effective at reducing the risks associated

with the exposure being hedged and be designated as a hedge at the inception

of the contract.

We do not enter into

derivative instruments for speculative purposes.

Our derivative instruments primarily include foreign currency

forward agreements related to certain intercompany loans, certain forecasted

inventory purchase commitments with

foreign suppliers and foreign currency forward contracts to hedge a portion of our

euro-denominated foreign

operations which are designated as net investment hedges.

Foreign currency forward agreements related to forecasted inventory

purchase commitments with foreign suppliers

and foreign currency swaps related to foreign currency denominated debt are designated

as cash flow hedges.

For

derivatives that are designated and qualify as cash flow hedges, the

changes in the fair value of the derivative is

recorded as a component of Accumulated other comprehensive income

in stockholders’ equity and subsequently

reclassified into earnings in the period(s) during which the hedged transaction

affects earnings.

We classify the

cash flows related to our hedging activities in the same category on our consolidated

statements of cash flows as the

cash flows related to the hedged item.

Foreign currency forward contracts related to our euro-denominated

foreign operations are designated as net

investment hedges.

For derivatives that are designated and qualify as net investment

hedges, the changes in the fair

value of the derivative is recorded in the foreign currency translation

gain (loss) component of Accumulated other

comprehensive income in stockholders’ equity until the net investment

is sold or substantially liquidated.

Our foreign currency forward agreements related to foreign currency

balance sheet exposure provide economic

hedges but are not designated as hedges for accounting purposes.

For agreements not designated as hedges, changes in the value of the derivative,

along with the transaction gain or

loss on the hedged item, are recorded in earnings.

Total return swaps are entered into for the purpose of economically hedging our unfunded non-qualified

supplemental retirement plan (“SERP”) and our deferred compensation

plan (“DCP”).

This swap will offset

changes in our SERP and DCP liabilities. This swap is expected

to be renewed on an annual basis.

Acquisitions

We account for business acquisitions and combinations under the acquisition method of accounting, where the net

assets of businesses purchased are recorded at their fair value at

the acquisition date and our consolidated financial

statements include their results of operations from that date.

Any excess of acquisition consideration over the fair

value of identifiable net assets acquired is recorded as goodwill.

The major classes of assets and liabilities that we

generally allocate purchase price to, excluding goodwill, include identifiable

intangible assets (i.e., trademarks and

trade names, customer relationships and lists, non-compete agreements and

product development), property, plant

and equipment, deferred taxes and other current and long-term assets and

liabilities.

The estimated fair value of

identifiable intangible assets is based on critical estimates, judgments and assumptions

derived from: analysis of

market conditions; discount rates; discounted cash flows; customer

retention rates; and estimated useful lives.

Some prior owners of such acquired subsidiaries are eligible to receive additional

purchase price cash consideration

if certain financial targets are met.

While we use our best estimates and assumptions to accurately value

those

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, during the measurement period we

may record adjustments to the assets acquired and liabilities assumed with

the corresponding offset to goodwill

within our consolidated balance sheets.

At the end of the measurement period or final determination

of the values

of such assets acquired or liabilities assumed, whichever comes first, any subsequent

adjustments are recognized in

our consolidated statements of operations.

For the years

ended December 26, 2020, December 28, 2019 and

December 29, 2018, there were no material adjustments recorded in our consolidated

statement of income relating

to changes in subsequent adjustments or estimated contingent purchase price

liabilities.

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

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.

Their interests in these subsidiaries are classified outside

permanent equity on our consolidated balance sheets and are carried

at the estimated redemption amounts.

The

redemption amounts have been estimated based on expected future earnings

and cash flow and, if such earnings and

cash flow are not achieved, the value of the redeemable noncontrolling

interests might be impacted.

Changes in the

estimated redemption amounts of the noncontrolling interests subject

to put options are reflected at each reporting

period with a corresponding adjustment to Additional paid-in capital.

Future reductions in the carrying amounts are

subject to a “floor” amount that is equal to the fair value of the redeemable

noncontrolling interests at the time they

were originally recorded.

The recorded value of the redeemable noncontrolling interests cannot

go below the floor

level.

These adjustments do not impact the calculation of earnings

per share.

Noncontrolling Interests

Noncontrolling interests represent our less than 50% ownership interest

in an acquired subsidiary.

Our net income

is reduced by the portion of the subsidiaries net income that is attributable

to noncontrolling interests.

Goodwill

Goodwill is not amortized, but is subject to impairment analysis annually or

more frequently if there is a triggering

event or if an event occurs or circumstances change that would

more likely than not reduce the fair value of a

reporting unit below its carrying value.

Such impairment analyses for goodwill requires a comparison of

the fair

value to the carrying value of reporting units.

We regard our reporting units to be our operating segments: global

dental; global medical;

and technology and value-added services.

Goodwill was allocated to such reporting units,

for the purposes of preparing our impairment analyses, based on a specific

identification basis.

On December 29, 2019 we adopted Account Standards Update (“ASU”)

2017-04 Intangibles-Goodwill and Other

(Topic 350): Simplifying the Test

for Goodwill Impairment, which eliminated step two from the goodwill

impairment test, thereby eliminating the requirement to calculate the

implied fair value of a reporting unit.

perform our annual goodwill impairment test by comparing the fair value of

our reporting units to the carrying

value of those units.

Goodwill as of December 26, 2019 and December 29, 2018

were tested under the prior

standard.

For the year ended December 26, 2020 we tested goodwill for impairment,

on the first day of the fourth quarter,

using a quantitative analysis comparing the carrying value of our reporting

units, including goodwill, to the

estimated fair value of our reporting units using a discounted cash flow

methodology. If the fair value of a reporting

unit exceeds its carrying amount, goodwill of the reporting unit is considered

not impaired.

Conversely,

impairment loss would be equivalent to the excess of a reporting unit’s carrying value over its fair value limited

the total amount of goodwill allocated to that reporting unit.

For the years ended December 26, 2019 and December 29, 2018 we tested

goodwill for impairment on the first day

of the fourth quarter, using a quantitative analysis which consisted of a two-step approach.

The first step of our

quantitative analysis consisted of a comparison of the carrying value of

our reporting units, including goodwill, to

the estimated fair value of our reporting units using a discounted cash

flow methodology. If step one resulted in the

carrying value of the reporting unit exceeding the fair value of such reporting

unit, we would have then proceeded

to step two which would have required us to calculate the amount of impairment

loss, if any, that we would have

recorded for such reporting unit.

The calculation of the impairment loss in step two would have been

equivalent to

the reporting unit’s carrying value of goodwill less the implied fair value of such goodwill.

Our use of a discounted cash flow methodology includes estimates of future

revenue based upon budget projections

and growth rates which take into account estimated inflation rates.

We also develop estimates for future levels of

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

gross and operating profits and projected capital expenditures.

Our methodology also includes the use of estimated

discount rates based upon industry and competitor analysis as well as

other factors. The estimates that we use in our

discounted cash flow methodology involve many assumptions by

management that are based upon future growth

projections.

Some factors we consider important that could trigger an interim

impairment review include:

significant underperformance relative to expected historical or projected

future operating results; significant

changes in the manner of our use of acquired assets or the strategy for

our overall business (e.g., decision to divest a

business); or significant negative industry or economic trends.

If we determine through the impairment review process that goodwill

is impaired, we record an impairment charge

in our consolidated statements of income.

For the years ended December 28, 2019 and December 29, 2018,

the

results of our goodwill impairment analysis did

t result in any impairments.

Long-Lived Assets

Long-lived assets, other than goodwill and other definite-lived intangibles,

are evaluated for impairment whenever

events or changes in circumstances indicate that the carrying amount

of the assets may not be recoverable through

the estimated undiscounted future cash flows to be derived from such

assets.

Definite-lived intangible assets primarily consist of non-compete agreements,

trademarks, trade names, customer

lists, customer relationships and intellectual property.

For long-lived assets used in operations, impairment losses

are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted

future cash flows.

We measure the impairment loss based on the difference between the carrying amount and the

estimated fair value.

When an impairment exists, the related assets are written down to fair value.

During the year ended December 26, 2020, we recorded total impairment

charges on intangible assets of

approximately $

20.3

million, nearly all of which was recorded in our technology and

value-added services segment.

Cost of Sales

The primary components of cost of sales include the cost of the product

(net of purchase discounts, supplier

chargebacks and rebates) and inbound and outbound freight charges.

Costs related to purchasing, receiving,

inspections, warehousing, internal inventory transfers and other costs of

our distribution network are included in

selling, general and administrative expenses along with other operating

costs.

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.

Total distribution

network costs were $

71.7

million, $

72.3

million and $

69.6

million for the years ended December 26, 2020,

December 28, 2019 and December 29, 2018.

Comprehensive Income

Comprehensive income includes certain gains and losses that, under accounting

principles generally accepted in the

United States, are excluded from net income as such amounts are recorded

directly as an adjustment to

stockholders’ equity.

Our comprehensive income is primarily comprised of net income,

foreign currency

translation gain (loss), unrealized gain (loss) from foreign currency

hedging activities, unrealized investment gain

(loss) and pension adjustment gain (loss).

Leases

On December 30, 2018, we adopted ASC Topic 842, Leases, using a modified retrospective approach, whereby

we continue to apply existing lease guidance during the comparative

periods and apply the new lease

requirements through a cumulative-effect adjustment in the period of adoption. We elected the package of

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

practical expedients permitted under the transition guidance within

the new standard, which, among other things,

allowed us to carry forward the historical lease classification. Information

related to leases as of December 28,

2019 is presented under Topic 842, while prior period amounts are not adjusted and continue to be reported under

legacy guidance in ASC Topic 840, Leases.

The most significant impact was the recognition of ROU assets and lease liabilities

for operating leases, while our

accounting for finance leases remained substantially unchanged. Adoption

of the new standard resulted in the

recording of additional net operating lease assets of $

259.9

million and operating lease liabilities of $

267.3

million,

and a decrease of $

1.1

million and $

8.5

million in prepaid rent and deferred rent liabilities, respectively. The

standard did not materially impact our consolidated net income and had

no impact on cash flows.

We determine if an arrangement contains a lease at inception.

An arrangement contains a lease if it implicitly or

explicitly identifies an asset to be used and conveys the right to control

the use of the identified asset in exchange

for consideration.

As a lessee, we include operating leases in Operating lease right-of-use

(“ROU”) assets,

Operating lease liabilities, and Non-current operating lease liabilities in our

consolidated balance sheet.

Finance

leases are included in Property and equipment, Current maturities of

long-term debt, and Long-term debt in our

consolidated balance

sheet.

ROU assets represent our right to use an underlying asset for the lease

term and lease liabilities represent our

obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized

upon commencement of the lease based on the present value of the lease payments

over the lease term.

As most of

our leases do not provide an implicit interest rate, we generally use our incremental

borrowing rate based on the

estimated rate of interest for fully collateralized and fully amortizing borrowings

over a similar term of the lease

payments at commencement date to determine the present value of

lease payments.

When readily determinable, we

use the implicit rate.

Our lease terms may include options to extend or terminate the lease when it is reasonably

certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line

basis

over the lease term.

Expenses associated with operating leases and finance leases

are included in “Selling, general

and administrative” and “Interest expense”, respectively within our Consolidated

Statement of Income.

Leases

with a lease term of 12 months or less are not capitalized.

We have lease agreements with lease and non-lease components, which are generally accounted for as a single

lease component, except non-lease components for leases of vehicles, which

are accounted for separately.

When a

vehicle lease contains both lease and non-lease components, we allocate

the transaction price based on the relative

standalone selling price.

Accounting Pronouncements Adopted

On December 29, 2019, we adopted ASU No. 2017-04, “Intangibles-Goodwill

and Other” (Topic 350) (“ASU

2017-04”).

ASU 2017-04 eliminates step two from the goodwill impairment

test, thereby eliminating the

requirement to calculate the implied fair value of a reporting unit.

ASU 2017-04 requires us to perform our annual

goodwill impairment test by comparing the fair value of our reporting

units to the carrying value of those units.

the carrying value exceeds the fair value, we will be required to recognize

an impairment charge; however, the

impairment charge should not exceed the amount of goodwill allocated to such reporting

unit.

Our adoption of

ASU 2017-04 did not have a material impact on our consolidated

financial statements.

On December 29, 2019, we adopted ASU No. 2016-13, "Financial Instruments-Credit

Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments" which requires the

measurement and recognition of

expected credit losses for financial assets held at amortized cost.

We adopted Topic

326 using the modified-

retrospective method and recorded an immaterial cumulative-effect adjustment

to the opening balance of retained

earnings.

Based upon the level and makeup of our financial asset portfolio,

including accounts receivable, past loan

loss activity and current known activity regarding our outstanding loans,

the adoption of this ASU resulted in a

decrease of $

0.4

million to retained earnings.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Recently Issued Accounting Standards

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes” (Topic

740): Simplifying the Accounting

for Income Taxes (“ASU 2019-12”).

ASU 2019-12 will simplify the accounting for income taxes by

removing

certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of

and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

ASU 2019-12

is effective for fiscal years beginning after December 15, 2020.

We do not expect that the requirements of this

ASU will have a material impact on our consolidated financial statements.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06, “Debt—Debt with

Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging—

in Entity’s Own Equity”

(Subtopic 815-40): Accounting for Convertible Instruments and Contracts

in an Entity’s Own Equity (“ASU 2020-

06”).

ASU 2020-06 simplifies the accounting for convertible instruments.

In addition to eliminating certain

accounting models, this ASU includes improvements to the disclosures

for convertible instruments and earnings-

per-share (EPS) guidance and amends the guidance for the derivatives scope exception

for contracts in an entity’s

own equity.

ASU 2020-06 is effective for fiscal years beginning after December

15, 2021.

We do not expect that

the requirements of this ASU will have a material impact on our consolidated

financial statements.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 2 – Discontinued Operations

Animal Health Spin-off

On February 7, 2019 (the “Distribution Date”), we completed the separation

(the “Separation”) and subsequent

merger (“Merger”) of our animal health business (the “Henry Schein Animal Health Business”) with Direct

Vet

Marketing, Inc. (d/b/a Vets First Choice, “Vets

First Choice”).

This was accomplished by a series of transactions

among us, Vets

First Choice, Covetrus, Inc. (f/k/a HS Spinco, Inc. “Covetrus”), a

wholly owned subsidiary of ours

prior to the Distribution Date, and HS Merger Sub, Inc., a wholly owned subsidiary

of Covetrus (“Merger

Sub”).

In connection with the Separation, we contributed, assigned

and transferred to Covetrus certain applicable

assets, liabilities and capital stock or other ownership interests relating

to the Henry Schein Animal Health

Business.

On the Distribution Date, we received a tax-free distribution of $

1,120

million from Covetrus pursuant to

certain debt financing incurred by Covetrus.

On the Distribution Date and prior to the Animal Health Spin-off,

Covetrus issued shares of Covetrus common stock to certain institutional

accredited investors (the “Share Sale

Investors”) for $

361.1

million (the “Share Sale”).

The proceeds of the Share Sale were paid to Covetrus and

distributed to us.

Subsequent to the Share Sale, we distributed, on a pro rata basis,

all of the shares of the common

stock of Covetrus held by us to our stockholders of record as of the close of

business on January 17, 2019 (the

“Animal Health Spin-off”).

After the Share Sale and Animal Health Spin-off, Merger Sub consummated the

Merger whereby it merged with and into Vets

First Choice, with Vets First Choice surviving the Merger as a

wholly owned subsidiary of Covetrus.

Immediately following the consummation of the Merger, on a fully diluted

basis, (i) approximately

% of the shares of Covetrus common stock were (a) owned by our stockholders

and the

Share Sale Investors, and (b) held by certain employees of the Henry Schein

Animal Health Business (in the form

of certain equity awards), and (ii) approximately

% of the shares of Covetrus common stock were (a) owned by

stockholders of Vets

First Choice immediately prior to the Merger, and (b) held by certain employees of Vets First

Choice (in the form of certain equity awards).

After the Separation and the Merger, we no longer beneficially

owned any shares of Covetrus common stock and, following the Distribution

Date, will not consolidate the

financial results of Covetrus for the purpose of our financial reporting.

Following the Separation and the Merger,

Covetrus was an independent, publicly traded company on the Nasdaq Global Select

Market.

In connection with the completion of the Animal Health Spin-off, we entered into

a transition services agreement,

which ended in December 2020, with Covetrus under which we agreed to provide

certain transition services for up

to twenty-four months in areas such as information technology, finance and accounting,

human resources, supply

chain, and real estate and facility services.

As a result of the Separation, the financial position and results of operations

of the Henry Schein Animal Health

Business are presented as discontinued operations and have been excluded

from continuing operations and segment

results for all periods presented. The accompanying Notes to the Consolidated

Financial Statements have been

revised to reflect the effect of the Separation and all prior year balances have been

revised accordingly to reflect

continuing operations only. The historical statements of Comprehensive Income

(Loss) and Shareholders' Equity

have not been revised to reflect the Separation and instead reflect the Separation

as an adjustment to the balances at

December 26, 2020.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Summarized financial information for our discontinued operations

is as follows:

Years

Ended

December 26,

December 28,

December 29,

2020

2019

2018

Net sales

319,522

3,784,392

Cost of goods sold

260,097

3,100,055

Gross profit

59,425

684,337

Selling, general and administrative

2,347

68,919

531,905

Operating income (loss)

(2,347)

(9,494)

152,432

Income tax expense (benefit)

(3,333)

(2,181)

48,060

Income (loss) from discontinued operations

986

(6,323)

111,685

Net (income) loss attributable to noncontrolling interests

366

(6,521)

Net income (loss) from discontinued operations

attributable to Henry Schein, Inc.

986

(5,957)

105,164

The operating loss from discontinued operations for the year ended

December 26, 2020 was primarily attributable

to costs directly related to the Animal Health Spin-off.

See

Note 23 – Related Party Transactions

for additional

information.

The net income from discontinued operations for the year ended December

26, 2020 was primarily attributable to a

reduction in a liability for tax indemnification and a tax refund received

during 2020 by a holding company

previously part of our Animal Health legal structure and other

favorable tax resolutions.

The financial information above, for the year ended December

28, 2019, represents activity of the discontinued

operations during year-to-date through the Distribution Date.

The loss from discontinued operations for the year

ended December 28, 2019 was primarily attributable to the inclusion of

the transaction costs directly related to the

Animal Health Spin-off.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

The following are the amounts of assets and liabilities that were

transferred to Covetrus as of February 7, 2019.

February 7,

2019

Cash and cash equivalents

6,815

Accounts receivable, net

432,812

Inventories, net

536,637

Prepaid expenses and other

120,546

Total current

assets of discontinued operations

1,096,810

Property and equipment, net

69,790

Operating lease right-of-use asset, net

57,012

Goodwill

742,931

Other intangibles, net

205,793

Investments and other

120,518

Total long-term assets of

discontinued operations

1,196,044

Total assets of discontinued

operations

2,292,854

Accounts payable

316,162

Current maturities of long-term debt

657

Operating lease liabilities

18,951

Accrued expenses:

Payroll and related

36,847

Taxes

24,060

Other

80,400

Total current

liabilities of discontinued operations

477,077

Long-term debt

1,176,105

Deferred income taxes

17,019

Operating lease liabilities

38,668

Other liabilities

29,209

Total long-term liabilities

of discontinued operations

1,261,001

Total liabilities of discontinued

operations

1,738,078

Redeemable noncontrolling interests

28,270

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 3 – Property and Equipment, Net

Property and equipment, including related estimated useful lives, consisted

of the following:

December 26,

December 28,

2020

2019

Land

20,297

18,030

Buildings and permanent improvements

145,160

121,823

Leasehold improvements

107,753

104,089

Machinery and warehouse equipment

142,437

124,640

Furniture, fixtures and other

108,041

99,083

Computer equipment and software

344,494

330,926

868,182

798,591

Less accumulated depreciation

(526,178)

(468,946)

Property and equipment, net

342,004

329,645

Estimated Useful

Lives (in years)

Buildings and permanent improvements

Machinery and warehouse equipment

Furniture, fixtures and other

Computer equipment and software

Property and equipment related depreciation expense for the years

ended December 26, 2020, December 28, 2019

and December 29, 2018 was $

64.3

million, $

64.4

million and $

58.1

million.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 4 – Goodwill and Other Intangibles, Net

The changes in the carrying amount of goodwill for the years ended December

26, 2020 and December 28, 2019

were as follows:

Health Care

Distribution

Technology

and

Value-Added

Services

Total

Balance as of December 29, 2018

1,433,412

647,617

2,081,029

Adjustments to goodwill:

Acquisitions

50,276

338,352

388,628

Foreign currency translation

(6,969)

(193)

(7,162)

Balance as of December 28, 2019

1,476,719

985,776

2,462,495

Adjustments to goodwill:

Acquisitions

14,230

12,101

26,331

Foreign currency translation

9,888

5,678

15,566

Balance as of December 26, 2020

1,500,837

1,003,555

2,504,392

Other intangible assets consisted of the following:

December 26, 2020

December 28, 2019

Accumulated

Cost

Amortization

Net

Cost

Amortization

Net

Non-compete agreements

30,993

(11,480)

19,513

34,553

(9,327)

25,226

Trademarks / trade names - definite lived

95,382

(50,893)

44,489

99,314

(44,134)

55,180

Customer relationships and lists

652,605

(283,469)

369,136

715,630

(274,330)

441,300

Product Development

94,216

(54,451)

39,765

85,211

(42,326)

42,885

Other

14,188

(7,662)

6,526

26,237

(17,950)

8,287

Total

887,384

(407,955)

479,429

960,945

(388,067)

572,878

Non-compete agreements represent amounts paid primarily to key employees

and prior owners of acquired

businesses, as well as certain sales persons, in exchange for placing restrictions

on their ability to pose a

competitive risk to us.

Such amounts are amortized, on a straight-line basis over the

respective non-compete

period, which generally commences upon termination of employment

or separation from us.

The weighted-average

non-compete period for agreements currently being amortized was approximately

5.1

years as of December 26,

2020.

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

business acquisitions.

Definite-lived trademarks and trade names are amortized on a straight-line

basis over a weighted-average period of

approximately

8.1

years as of December 26, 2020.

Customer relationships and customer lists are definite-lived

intangible assets that are amortized on a straight-line basis over a weighted-average

period of approximately

10.0

years as of December 26, 2020.

Product development is a definite-lived intangible asset that is amortized

on a

straight-line basis over a weighted-average period of approximately

8.5

years as of December 26, 2020.

Amortization expense related to definite-lived intangible assets for the years ended

December 26, 2020, December

28, 2019 and December 29, 2018 was $

105.9

million, $

108.3

million and $

75.3

million.

During the year ended

December 26, 2020, we recorded total impairment charges on intangible assets of

approximately $

20.3

million.

The annual amortization expense expected to be recorded for existing

intangibles assets for the years 2021 through

2025 is $

99.3

million, $

85.5

million, $

78.0

million, $

54.8

million and $

43.2

million.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 5 – Investments and Other

Investments and other consisted of the following:

December 26,

December 28,

2020

2019

Investment in unconsolidated affiliates

169,382

164,659

Non-current deferred foreign, state and local income taxes

42,594

23,625

Notes receivable

(1)

34,760

43,544

Capitalized costs for internally generated software for resale

47,650

42,445

Security deposits

1,752

534

Acquisition-related indemnification

49,401

38,464

Other long-term assets

20,906

14,648

Total

366,445

327,919

(1)

Long-term notes receivable carry interest rates ranging from

.0% to

.0%

and are due in varying installments through

September 30, 2027

Amortization expense related to other long-term assets for the years ended December

26, 2020, December 28, 2019

and December 29, 2018 was $

15.3

million, $

12.3

million and $

10.2

million.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 6 – Debt

Bank Credit Lines

Bank credit lines consisted of the following:

December 26,

December 28,

2020

2019

Revolving credit agreement

Other short-term bank credit lines

73,366

23,975

Total

73,366

23,975

Revolving Credit Agreement

April 18, 2017

, we entered into a $

750

million revolving credit agreement (the “Credit Agreement”), which

matures 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.

We expect the LIBOR rate to be discontinued at some point

during 2021, which will require an amendment to our debt agreements to

reflect a new reference rate. 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 also requires, among other

things, that we maintain 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 December 26, 2020 and December 28, 2019, we had

borrowings on this

revolving credit facility.

As of December 26, 2020 and December 28, 2019, there

were $

9.5

million and $

9.6

million of letters of credit, respectively,

provided to third parties under the credit facility.

On April 17, 2020, we amended the Credit Agreement to, among other

things, (i) modify the financial covenant

from being based on total leverage ratio to net leverage ratio, (ii) adjust

the pricing grid to reflect the net leverage

ratio calculation, and (iii) increase the maximum maintenance leverage ratio

through March 31, 2021.

364-Day Credit Agreement

April 17, 2020

, we entered into a new $

700

million

364

-day credit agreement, with JPMorgan Chase Bank,

N.A. and U.S. Bank National Association as joint lead arrangers and joint

bookrunners.

This facility matures on

April 16, 2021

As of December 26, 2020, we had

borrowings under this credit facility.

We have the ability to

borrow up to an additional $

200

million, from the original facility amount of $

700

million, under this credit facility

on a revolving basis as needed, subject to the terms and conditions of

the credit agreement.

The interest rate for

borrowings under this facility will fluctuate based on our net leverage ratio. At December 26, 2020, the interest

rate on this facility was 2.50%. The proceeds from this facility can be used for working capital requirements and

general corporate purposes, including, but not limited to, permitted refinancing of existing indebtedness

Under the

terms of this agreement, we are prohibited from repurchasing our common stock

until we report our financial

results for the second quarter of 2021.

Other Short-Term Credit

Lines

As of December 26, 2020 and December 28, 2019, we had various other

short-term bank credit lines available, of

which $

73.4

million and $

24.0

million, respectively, were outstanding.

At December 26, 2020 and December 28,

2019, borrowings under all of these credit lines had a weighted average

interest rate of

4.14

% and

3.45

respectively.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Long-term debt

Long-term debt consisted of the following:

December 26,

December 28,

2020

2019

Private placement facilities

613,498

621,274

U.S. trade accounts receivable securitization

100,000

Note payable due in

2025

with an interest rate of

3.1

at December 26, 2020

1,554

Various

collateralized and uncollateralized loans payable with interest,

in varying installments through

2023

at interest rates

ranging from

2.62

% to

4.27

% at December 26, 2020 and

ranging from

2.56

% to

10.5

% at December 28, 2019

4,596

6,089

Finance lease obligations (see Note 7)

5,961

5,394

Total

625,609

732,757

Less current maturities

(109,836)

(109,849)

Total long-term debt

515,773

622,908

Private Placement Facilities

Our private placement facilities, with three insurance companies, have a

total facility amount of $

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

June 23, 2023

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.

On June 29, 2018, we amended and restated the above private placement

facilities to, among other things, (i) permit

the consummation of the Animal Health Spin-off and (ii) provide for the issuance

of notes in Euros, British Pounds

and Australian Dollars, in addition to U.S. Dollars.

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.

On June 23, 2020, we amended the private placement facilities to, among other things, (i) temporarily modify the

financial covenant from being based on total leverage ratio to net leverage ratio until March 31, 2021, (ii) increase

the maximum maintenance leverage ratio through March 31, 2021, but with a 1.00% interest rate increase on the

outstanding notes if the net leverage ratio exceeds 3.0x, which will remain in effect until we deliver financials for a

four-quarter period ending on or after June 30, 2021 showing compliance with the total leverage ratio requirement,

and (iii) make certain other changes conforming to the Credit Agreement, dated as of April 18, 2017, as amended.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

The components of our private placement facility borrowings as

of December 26, 2020 are presented in the

following table (in thousands):

Amount of

Date of

Borrowing

Outstanding

Rate

Due Date

January 20, 2012

(1)

14,286

3.09

January 20, 2022

January 20, 2012

50,000

3.45

January 20, 2024

December 24, 2012

50,000

3.00

December 24, 2024

June 2, 2014

100,000

3.19

June 2, 2021

June 16, 2017

100,000

3.42

June 16, 2027

September 15, 2017

100,000

3.52

September 15, 2029

January 2, 2018

100,000

3.32

January 2, 2028

September 2, 2020

(2)

100,000

2.35

September 2, 2030

Less: Deferred debt issuance costs

(788)

613,498

(1)

Annual

repayments of approximately $

7.1

million for this borrowing commenced on

January 20, 2016

(2)

September 2, 2020

, we refinanced our $

100

million private placement borrowing at

3.79

%, originally due on September 2, 2020,

with a similar

10-year borrowing

2.35

% maturing on

September 2, 2030

U.S. Trade Accounts Receivable Securitization

We have a facility agreement with a bank, as agent, 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 to

three years

Our current facility, which has a purchase limit of $

350

million, was scheduled to expire on

April 29, 2022

June 22, 2020, the expiration date for this facility was extended to

June 12, 2023

and was amended to adjust certain

covenant levels for 2020.

As of December 26, 2020 and December 28, 2019, the borrowings outstanding

under this

securitization facility were $

0.0

million and $

100

million, respectively.

At December 26, 2020, the interest rate on

borrowings under this facility was based on the asset-backed commercial

paper rate of

0.22

% plus

0.95

%, for a

combined rate of

1.17

At December 28, 2019, the interest rate on borrowings under

this facility was based on

the asset-backed commercial paper rate of

1.90

% plus

0.75

%, for a combined rate of

2.65

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 CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

As of December 26, 2020,

the aggregate amounts of long-term debt, including finance lease obligations

and net of

deferred debt issuance costs of $

0.8

million, maturing in each of the next five years and thereafter are

as follows:

2021

109,836

2022

11,607

2023

1,916

2024

100,303

2025

1,839

Thereafter

400,108

Total

625,609

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 7 – Leases

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

16 years

, some of

which may include options to extend the leases for

up to 10 years

The components of lease expense were as

follows:

Years

Ended

December 26,

December 28,

2020

2019

Operating lease cost:

(1) (2)

86,800

88,246

Finance lease cost:

Amortization of right-of-use assets

2,209

1,154

Interest on lease liabilities

115

131

Total finance

lease cost

2,324

1,285

(1)

Includes variable lease expenses.

(2)

Operating lease cost for each of the years ended December 26, 2020, and December 28, 2019, includes amortization of right-of-use

assets of $

0.6

million, related to facility leases recorded in “Restructuring costs” within our consolidated statements of income.

Supplemental balance sheet information related to leases is as follows:

Years

Ended

December 26,

December 28,

2020

2019

Operating Leases:

Operating lease right-of-use assets

288,847

231,662

Current operating lease liabilities

64,716

65,349

Non-current operating lease liabilities

238,727

176,267

Total operating lease liabilities

303,443

241,616

Finance Leases:

Property and equipment, at cost

10,683

10,268

Accumulated depreciation

(4,277)

(4,581)

Property and equipment, net of accumulated depreciation

6,406

5,687

Current maturities of long-term debt

2,420

1,736

Long-term debt

3,541

3,658

Total finance

lease liabilities

5,961

5,394

Weighted Average

Remaining Lease Term in

Years:

Operating leases

7.5

5.5

Finance leases

4.3

5.0

Weighted Average

Discount Rate:

Operating leases

2.8

3.4

Finance leases

1.9

2.2

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Supplemental cash flow information related to leases is as follows:

Years

Ended

December 26,

December 28,

2020

2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

76,985

79,699

Operating cash flows for finance leases

101

Financing cash flows for finance leases

2,148

1,413

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

120,148

297,800

Finance leases

2,947

2,940

Maturities of lease liabilities are as follows:

December 26, 2020

Operating

Finance

Leases

2021

71,801

2,503

2022

58,049

1,542

2023

40,670

596

2024

28,899

327

2025

26,147

305

Thereafter

110,228

920

Total future

lease payments

335,794

6,193

Less imputed interest

(32,351)

(232)

Total

303,443

5,961

As of December 26, 2020, we have additional operating leases with total lease

payments of $

13.5

million

for

buildings and vehicles

that have not yet commenced.

These operating leases will commence subsequent to

December 26, 2020, with lease terms of

two years

10 years

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 8 – Redeemable Noncontrolling Interests

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

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

ASC 480-10 is applicable for noncontrolling interests where

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

interest in a consolidated subsidiary from

the noncontrolling interest holder under the terms of a put option

contained in contractual agreements.

The

components of the change in the Redeemable noncontrolling interests for the years

ended December 26, 2020,

December 28, 2019 and December 29, 2018 are presented in the following table:

December 26,

December 28,

December 29,

2020

2019

2018

Balance, beginning of period

287,258

219,724

465,585

Decrease in redeemable noncontrolling interests due to

redemptions

(17,241)

(2,270)

(287,767)

Increase in redeemable noncontrolling interests due to

business acquisitions

28,387

74,865

4,655

Net income attributable to redeemable noncontrolling interests

13,363

14,838

15,327

Dividends declared

(12,631)

(10,264)

(8,206)

Effect of foreign currency translation loss attributable to

redeemable noncontrolling interests

(4,279)

(2,335)

(11,330)

Change in fair value of redeemable securities

32,842

(7,300)

41,460

Balance, end of period

327,699

287,258

219,724

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

100

Note 9 – 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:

December 26,

December 28,

December 29,

2020

2019

2018

Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment

(24,617)

(20,338)

(18,595)

Attributable to noncontrolling interests:

Foreign currency translation adjustment

235

(531)

(426)

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

(76,565)

(143,172)

(234,799)

Unrealized loss from foreign currency hedging activities

(11,488)

(4,032)

(156)

Unrealized investment gain (loss)

(6)

Pension adjustment loss

(20,032)

(20,175)

(13,810)

Accumulated other comprehensive loss

(108,084)

(167,373)

(248,771)

Total Accumulated

other comprehensive loss

(132,466)

(188,242)

(267,792)

The following table summarizes the components of comprehensive income, net of

applicable taxes as follows:

December 26,

December 28,

December 29,

2020

2019

2018

Net income

419,423

719,138

562,126

Foreign currency translation gain (loss)

63,094

(4,070)

(136,356)

Tax effect

Foreign currency translation gain (loss)

63,094

(4,070)

(136,356)

Unrealized gain (loss) from foreign currency hedging activities

(10,224)

(4,911)

1,022

Tax effect

2,768

1,035

(396)

Unrealized gain (loss) from foreign currency hedging activities

(7,456)

(3,876)

626

Unrealized investment gain (loss)

(6)

(3)

Tax effect

(2)

Unrealized investment gain (loss)

(5)

(3)

Pension adjustment gain (loss)

(533)

(7,730)

4,212

Tax effect

676

1,806

(1,179)

Pension adjustment gain (loss)

143

(5,924)

3,033

Comprehensive income

475,199

705,280

429,426

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

101

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 (loss) during the years ended December

26, 2020, December 28, 2019 and

December 29, 2018 was impacted by changes in foreign currency exchange

rates of the Euro, Brazilian Real,

British Pound and Australian Dollar

The following table summarizes our total comprehensive income, net of

applicable taxes as follows:

December 26,

December 28,

December 29,

2020

2019

2018

Comprehensive income attributable to

Henry Schein, Inc.

463,083

682,724

417,177

Comprehensive income attributable to

noncontrolling interests

3,032

9,827

3,432

Comprehensive income attributable to

Redeemable noncontrolling interests

9,084

12,729

8,817

Comprehensive income

475,199

705,280

429,426

Note 10 – 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 hierarchy for determining that 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

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;

however, we believe the carrying amounts are a reasonable estimate of fair value based on the interest rates

in the

applicable markets.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

102

Debt

The fair value of our debt (including bank credit lines) is classified as

Level 3 within the fair value hierarchy and as

of December 26, 2020 and December 28, 2019 was estimated at $

699.0

million and $

756.7

million, respectively.

Factors that we considered when estimating the fair value of our debt

include market conditions, such as interest

rates and credit spreads.

Derivative contracts

Derivative contracts are valued using quoted market prices and

significant other observable and unobservable

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 and 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

SERP and our DCP.

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.

See

Note 16 – Derivatives and Hedging

Activities

for additional information.

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 8 – Redeemable Noncontrolling

Interests

for additional information.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

103

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

recognized at fair value on a recurring

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

December 26, 2020 and December 28,

2019:

December 26, 2020

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts

1,868

Total return

swaps

1,565

Total assets

3,433

Liabilities:

Derivative contracts

11,765

Total liabilities

11,765

Redeemable noncontrolling interests

327,699

December 28, 2019

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts

567

Total assets

567

Liabilities:

Derivative contracts

5,795

Total liabilities

5,795

Redeemable noncontrolling interests

287,258

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

104

Note 11 – Business Acquisitions and Divestitures

The operating results of all acquisitions are reflected in our financial statements from their

respective acquisition

dates.

We completed acquisitions during the year ended December 26, 2020, which were immaterial to our financial

statements individually.

In the aggregate, these transactions resulted in consideration of $

57.8

million in 2020

related to business combinations, for net assets amounting to $

32.8

million.

As of December 26, 2020, we had

recorded $

36.9

million of identifiable intangibles, $

23.9

million of goodwill and $

26.4

million of non-controlling

interest, related to these acquisitions.

Some prior owners of acquired subsidiaries are eligible to receive additional

purchase price cash consideration if

certain financial targets are met.

We have accrued liabilities for the estimated fair value of additional purchase

price consideration at the time of the acquisition,

none of which are material.

Any adjustments to these accrual

amounts are recorded in our consolidated statements of income.

For the years ended December 26, 2020,

December 28, 2019 and December 29, 2018, there were no material adjustments

recorded in our consolidated

statement of income relating to changes in estimated contingent purchase

price liabilities.

Divestitures of Investments

During the fourth quarter of 2019, we sold an equity investment

in Hu-Friedy Mfg. Co., LLC, a manufacturer of

dental instruments and infection prevention solutions.

Our investment was non-controlling, we were not involved

in running the business and had no representation on the board of directors.

During the fourth quarter of 2019, we

also sold certain other equity investments.

In the aggregate, the sales of these investments resulted in a pre-tax

gain

of approximately $

250.2

million, net of taxes of approximately $

63.4

million.

In the fourth quarter of 2020 we

received contingent proceeds of $

2.1

million from the 2019 sale of Hu-Friedy resulting in the recognition of an

additional after-tax gain of $1.6 million.

For the years ended December 28, 2019 and December 29,

2018, we

recognized approximately $

6.0

million and $

10.4

million of equity in earnings from these affiliates.

Acquisition Costs

During the years ended December 26, 2020, December 28, 2019, and December

29, 2018 we incurred $

5.9

million,

4.5

million and $

7.3

million in acquisition costs from continuing operations.

In February 2019, we completed the Animal Health Spin-off.

During the years ended December 26, 2020,

December 28, 2019, and December 29, 2018, we incurred $

0.1

million, $

23.6

million and $

38.9

million in

transaction costs associated with this transaction.

do not expect to incur additional spin-off related transaction

costs after December 26, 2020.

All transaction costs related to the Animal Health Spin-off have been included

results from discontinued operations.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

105

Note 12 – Plans of Restructuring

On July 9, 2018, we committed to an initiative to rationalize our operations and

provide expense

efficiencies.

These actions allowed us to execute on our plan to reduce our cost structure

and fund new initiatives

to drive growth under our 2018 to 2020 strategic plan.

This initiative resulted in the elimination of approximately

% of our workforce and the closing of certain facilities.

On November 20, 2019, we committed to a contemplated initiative, intended

to mitigate stranded costs associated

with the Animal Health Spin-off and to rationalize operations and to provide expense efficiencies.

These activities

were originally expected to be completed by the end of 2020.

As a result of the business environment brought on

by the COVID-19 pandemic, we are continuing our restructuring activities

into 2021. 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 in 2021, 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 years ended December 26, 2020, December 28, 2019, and December

29, 2018 we recorded restructuring

charges of $

32.1

million, $

14.7

million and $

54.4

million, respectively.

The costs associated with these

restructurings are included in a separate line item, “Restructuring costs” within

our consolidated statements of

income.

The following table shows the amounts expensed and paid for restructuring

costs that were incurred during our

2020, 2019 and 2018 fiscal years and the remaining accrued balance

of restructuring costs as of December 26,

2020, which is included in Accrued expenses: Other and Other liabilities

within our consolidated balance sheet:

Facility

Severance

Closing

Costs

Other

Total

Balance, December 30, 2017

3,087

1,315

4,426

Provision

50,197

3,153

1,017

54,367

Payments and other adjustments

(23,320)

(2,865)

(883)

(27,068)

Balance, December 29, 2018

29,964

1,603

158

31,725

Provision

13,741

937

14,705

Payments and other adjustments

(30,794)

(1,714)

(112)

(32,620)

Balance, December 28, 2019

12,911

826

13,810

Provision

25,855

5,878

360

32,093

Payments and other adjustments

(26,152)

(6,309)

(329)

(32,790)

Balance, December 26, 2020

12,614

395

104

13,113

The following table shows,

by reportable segment, the amounts expensed and paid for restructuring costs

that were

incurred during our 2020, 2019 and 2018 fiscal years and the remaining accrued

balance of restructuring costs as of

December 26, 2020:

Technology

and

Health Care

Value-Added

Distribution

Services

Total

Balance, December 30, 2017

4,426

Provision

50,824

3,543

54,367

Payments and other adjustments

(24,959)

(2,109)

(27,068)

Balance, December 29, 2018

30,291

1,434

31,725

Provision

13,935

770

14,705

Payments and other adjustments

(30,853)

(1,767)

(32,620)

Balance, December 28, 2019

13,373

437

13,810

Provision

30,935

1,158

32,093

Payments and other adjustments

(31,484)

(1,306)

(32,790)

Balance, December 26, 2020

12,824

289

13,113

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

106

Note 13 – 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

restricted stock and restricted stock units and upon exercise of stock options,

using the treasury stock method in

periods in which they have a dilutive effect.

A reconciliation of shares used in calculating earnings per basic and

diluted share follows:

Years

Ended

December 26,

December 28,

December 29,

2020

2019

2018

Basic

142,504

147,817

152,656

Effect of dilutive securities:

Stock options, restricted stock and restricted stock units

900

1,440

1,051

Diluted

143,404

149,257

153,707

Note 14 – Income Taxes

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

Years

ended

December 26,

December 28,

December 29,

2020

2019

2018

Domestic

430,838

507,003

405,289

Foreign

69,057

173,304

131,547

Total

499,895

680,307

536,836

The provisions for income taxes were as follows:

Years

ended

December 26,

December 28,

December 29,

2020

2019

2018

Current income tax expense:

U.S. Federal

82,912

93,418

71,854

State and local

24,640

28,150

22,533

Foreign

40,799

42,004

38,433

Total current

148,351

163,572

132,820

Deferred income tax expense (benefit):

U.S. Federal

(18,032)

5,633

206

State and local

(4,889)

1,597

(1,622)

Foreign

(30,056)

(11,287)

(23,972)

Total deferred

(52,977)

(4,057)

(25,388)

Total provision

95,374

159,515

107,432

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

107

The tax effects of temporary differences that give rise to our deferred income tax asset (liability) were

as follows:

Years

Ended

December 26,

December 28,

2020

2019

Deferred income tax asset:

Investment in partnerships

(6,294)

1,420

Net operating losses and other carryforwards

64,297

43,663

Inventory, premium

coupon redemptions and accounts receivable

valuation allowances

56,668

23,808

Stock-based compensation

4,858

14,075

Uniform capitalization adjustment to inventories

6,895

7,259

Operating lease right of use asset

74,674

56,780

Other asset

49,260

33,311

Total deferred income

tax asset

250,358

180,316

Valuation

allowance for deferred tax assets

(1)

(40,496)

(20,699)

Net deferred income tax asset

209,862

159,617

Deferred income tax liability

Intangibles amortization

(118,165)

(135,754)

Operating lease liability

(71,343)

(54,672)

Property and equipment

(7,820)

(10,555)

Total deferred tax

liability

(197,328)

(200,981)

Net deferred income tax asset (liability)

12,534

(41,364)

(1)

Primarily relates to operating losses , the benefits of which are uncertain.

Any future reductions of such valuation allowances will be

reflected as a reduction of income tax expense.

The assessment of the amount of value assigned to our deferred tax assets under

the applicable accounting rules is

judgmental.

We are required to consider all available positive and negative evidence in evaluating the likelihood

that we will be able to realize the benefit of our deferred

tax assets in the future.

Such evidence includes scheduled

reversals of deferred tax liabilities, projected future taxable income, tax planning

strategies and the results of recent

operations.

Since this evaluation requires consideration of events that

may occur some years into the future, there

is an element of judgment involved.

Realization of our deferred tax assets is dependent on generating sufficient

taxable income in future periods.

We believe that it is more likely than not that future taxable income will be

sufficient to allow us to recover substantially all of the value assigned to our deferred

tax assets.

However, if future

events cause us to conclude that it is not more likely than not that we will be

able to recover all of the value

assigned to our deferred tax assets, we will be required to adjust our valuation

allowance accordingly.

As of December 26, 2020, we had federal, state, and foreign net operating

loss carryforwards of approximately

29.8

million, $

31.6

million and $

200.5

million, respectively. The federal, state and foreign net operating loss

carryforwards will begin to expire in various years from

2024

through

2040

The amounts of state and foreign net

operating losses that can be carried forward indefinitely are $

10.6

million and $

199.3

million, respectively.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

108

The tax provisions differ from the amount computed using the federal statutory income

tax rate as follows:

Years

ended

December 26,

December 28,

December 29,

2020

2019

2018

Income tax provision at federal statutory rate

104,977

142,865

112,735

State income tax provision, net of federal income tax effect

13,015

16,539

15,872

Foreign income tax benefit

(428)

(4,580)

(2,558)

Pass-through noncontrolling interest

(2,681)

(3,931)

(2,700)

Valuation

allowance

659

(79)

2,017

Unrecognized tax benefits and audit settlements

(17,722)

3,671

2,126

Interest expense related to loans

(11,098)

(5,498)

(11,700)

Excess tax benefits related to stock compensation

778

(86)

(1,008)

Transition tax on deemed repatriation of

foreign earnings

(10,000)

Revaluation of deferred tax assets and liabilities

(1,676)

Tax on global

intangible low-taxed income ("GILTI")

2,365

3,917

7,599

Tax benefit related

to legal entity reorganization outside the U.S.

(5,823)

(13,852)

Tax charge

related to reorganization of legal entities related

to forming Henry Schein One

3,914

Tax charge

(credit) related to reorganization of legal entities

completed in preparation for the Animal Health spin-off

(1,333)

3,135

Other

11,332

8,030

3,528

Total income

tax provision

95,374

159,515

107,432

For the year ended December 26, 2020, our effective tax rate was

19.1

% compared to

23.4

% for the prior year

period.

Our effective tax rate in 2020 was primarily impacted by an Advance Pricing

Agreement (“APA”) with the

U.S Internal Revenue Service (the “IRS”) in the U.S., other audit resolutions,

state and foreign income taxes and

interest expense. The positive effect of the APA and the other audit resolutions are not expected to be recurring and,

as a result, we expect our effective tax rate in future periods to be higher.

In 2019, our effective tax rate of

23.4

% was primarily impacted by state and foreign income taxes and interest

expense.

In 2018, our effective tax rate of

20.0

% was primarily impacted by a reduction in the estimate of our

transition tax associated with the Tax Act, tax charges and credits associated with legal entity reorganizations

outside the U.S., and state and foreign income taxes and interest expense.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act

(“CARES Act”) was enacted in

response to the COVID-19 pandemic.

The CARES Act includes, but is not limited to, certain income tax

provisions that modify the Section 163(j) limitation of business interest and Net

Operating Loss (“NOL”) carryover

and carryback rules.

The modifications to Section 163(j) increase the allowable business

interest deduction from

% of adjusted taxable income to

% of adjusted taxable income for years beginning in 2019 and 2020.

The

CARES Act eliminated the NOL income limitation for years beginning

before 2021 and it extended the carryback

period to five years for losses incurred in 2018, 2019 and 2020.

We have analyzed the income tax provisions of the

CARES Act and have accounted for the impact in the year ended December 26,

2020, which did not have a

material impact on our consolidated financial statements.

There are certain other non-income tax benefits available

to us under the CARES Act that require further clarification or interpretation

that may affect our consolidated

financial statements in the future.

On December 27, 2020, the Consolidated Appropriations Act was

enacted into

law and extended certain non-income tax benefits under the CARES

Act.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

109

On July 20, 2020, the IRS issued final regulations related to the Tax Act.

The final regulations concern the global

intangible low-taxed income (“GILTI”) and subpart F income provisions of the Tax Act.

To provide flexibility to

taxpayers, the IRS is permitting the application of these final regulations to

prior tax years, if the taxpayer elects to

do so.

We have analyzed the final regulations, which do not have a material impact to our consolidated financial

statements.

On December 22, 2017, the U.S. government passed the Tax Act.

The Tax Act is comprehensive tax legislation

that implemented complex changes to the U.S. tax code including, but not

limited to, the reduction of the corporate

tax rate from

% to

%, modification of accelerated depreciation, the repeal of the domestic

manufacturing

deduction and changes to the limitations of the deductibility of interest.

Additionally, the Tax

Act moved from a

global tax regime to a modified territorial regime, which requires U.S. companies

to pay a mandatory one-time

transition tax on historical offshore earnings that have not been repatriated to the U.S.

The transition tax is payable

over eight years.

In the fourth quarter of 2017, we recorded provisional amounts

for any items that could be

reasonably estimated at the time.

This included the one-time transition tax that we estimated to

be $

140.0

million

and a net deferred tax expense of $

3.0

million attributable to the revaluation of deferred taxes due to the lower

enacted federal income tax rate of 21%.

We completed our analysis in the year ended December 29, 2018 and

recorded a net $

10.0

million reduction to the one-time transition tax and an additional $

1.7

million net deferred tax

benefit from the revaluation of deferred

taxes to reflect the new tax rate.

Within our consolidated balance sheets, transition tax of $

9.9

million was included in “Accrued taxes” for 2020 and

2019 and $

74.5

million and $

94.9

million were included in “Other liabilities” for 2020 and 2019, respectively.

The FASB Staff Q&A, Topic

740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity

can make an accounting policy election to either recognize deferred

taxes for temporary differences expected to

reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred.

elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

We recorded a current

tax expense for the GILTI provision of $

2.4

million $

3.9

million and $

7.6

million for 2020, 2019, and 2018,

respectively.

Due to the one-time transition tax and the imposition of the GILTI provisions, all previously unremitted earnings

will no longer be subject to U.S. federal income tax; however, there could be U.S. state and/or foreign withholding

taxes upon distribution of such unremitted earnings.

Determination of the amount of unrecognized deferred tax

liability with respect to such earnings is not practicable.

ASC 740 prescribes the accounting for uncertainty in income taxes recognized

in the financial statements in

accordance with other provisions contained within this guidance.

This topic prescribes a recognition threshold and

a measurement attribute for the financial statement recognition and measurement

of tax positions taken or expected

to be taken in a tax return.

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

than not to be

sustained upon examination by the taxing authorities.

The amount recognized is measured as the largest amount of

benefit that is greater than 50% likely of being realized upon ultimate audit

settlement.

In the normal course of

business, our tax returns are subject to examination by various taxing

authorities.

Such examinations may result in

future tax and interest assessments by these taxing authorities for uncertain

tax positions taken in respect to certain

tax matters.

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

liabilities” within our consolidated

balance sheets as of December 26, 2020 was approximately $

84.0

million, of which $

70.1

million would affect the

effective tax rate if recognized.

It is possible that the amount of unrecognized tax benefits

may change in the next

12 months, which may result in a material impact on our consolidated statement of

income.

The tax years subject to examination by major tax jurisdictions include

the years 2012 and forward by the IRS, as

well as the years 2008 and forward for certain states and certain foreign

jurisdictions.

All tax returns audited by the

IRS are officially closed through 2011 and 2014 through 2016.

All IRS audit fieldwork has been completed for the

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

110

years 2012 and 2013.

In the quarter ended December 28, 2019, we reached a settlement with

the U.S. Competent

Authority to resolve certain transfer pricing issues related to 2012 and 2013.

For all remaining outstanding issues

for 2012 and 2013, we have provided all necessary documentation to

the Appellate Division to date and are waiting

for responses.

We do not believe the final resolution will have a material impact to our consolidated financial

statements.

During the quarter ended September 26, 2020 we finalized negotiations

with the Advance Pricing

Division and reached an agreement on an appropriate transfer pricing

methodology for the years 2014-2025.

The

objective of this resolution is to mitigate future transfer pricing audit

adjustments.

In the fourth quarter of 2020, we

reached a favorable resolution with the IRS relating to select audit years.

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

the provision for income taxes.

The

amount of tax interest expense (credit) was approximately $(

3.3

) million, $

2.2

million, and $

3.6

million in 2020,

2019 and 2018, respectively.

The total amount of accrued interest is included in “Other liabilities”, and was

approximately $

14.0

million as of December 26, 2020 and $

18.0

million as of December 28, 2019.

penalties

were accrued for the periods presented.

The following table provides a reconciliation of unrecognized tax benefits:

December 26,

December 28,

December 29,

2020

2019

2018

Balance, beginning of period

91,100

77,800

83,200

Additions based on current year tax positions

4,900

5,000

Additions based on prior year tax positions

7,900

17,300

9,400

Reductions based on prior year tax positions

(1,000)

(1,600)

Reductions resulting from settlements with taxing authorities

(18,600)

(4,200)

(1,600)

Reductions resulting from lapse in statutes of limitations

(14,300)

(3,700)

(16,600)

Balance, end of period

70,000

91,100

77,800

Note 15 – Concentrations of Risk

Certain financial instruments potentially subject us to concentrations of credit

risk.

These financial instruments

consist primarily of cash equivalents, trade receivables, long-term investments,

notes receivable and derivative

instruments.

In all cases, our maximum exposure to loss from credit

risk equals the gross fair value of the financial

instruments.

We routinely maintain cash balances at financial institutions in excess of insured amounts. We have

not experienced any loss in such accounts and we manage this risk through

maintaining cash deposits and other

highly liquid investments in high quality financial institutions.

We continuously assess the need for reserves for

such losses, which have been within our expectations.

We do not require collateral or other security to support

financial instruments subject to credit risk, except for long-term notes receivable.

We limit our credit risk with respect to our cash equivalents, short-term and long-term investments and derivative

instruments, by monitoring the credit worthiness of the financial institutions who are

the counter-parties to such

financial instruments.

As a risk management policy, we limit the amount of credit exposure by diversifying and

utilizing numerous investment grade counter-parties.

With respect to our trade receivables, our credit risk is somewhat limited due to a relatively large customer base

and

its dispersion across different types of health care professionals and geographic areas.

For the year ended

December 26, 2020, two customers accounted for slightly more than

% of our net sales from continuing

operations.

For the year ended December 28, 2019, one customer accounted

for slightly less than

% of our net

sales from continuing operations.

With respect to our sources of supply, our top 10 health care distribution

suppliers from continuing operations and our single largest supplier from continuing

operations accounted for

approximately

% and

%, respectively, of our aggregate purchases in 2020 and approximately

% and

respectively, of our aggregate purchases in 2019.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

111

Our long-term notes receivable primarily represent strategic financing arrangements

with certain industry affiliates

and amounts owed to us from sales of certain businesses.

Generally, these notes are secured by certain assets of the

counterparty; however, in most cases our security is subordinate to other commercial financial institutions.

While

we have exposure to credit loss in the event of non-performance by these counter-parties,

we conduct ongoing

assessments of their financial and operational performance.

Note 16 – Derivatives and Hedging Activities

We are exposed to market risks as well as changes in foreign currency exchange rates as measured against the U.S.

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

We attempt to minimize these

risks by primarily using foreign currency forward contracts and by

maintaining counter-party credit limits.

These

hedging activities provide only limited protection against currency exchange

and credit risks.

Factors that could

influence the effectiveness of our hedging programs include currency markets and

availability of hedging

instruments and liquidity of the credit markets.

All foreign currency forward contracts that we enter into are

components of hedging programs and are entered into for the sole purpose

of hedging an existing or anticipated

currency exposure.

We do not enter into such contracts for speculative purposes and we manage our credit risks by

diversifying our counterparties, maintaining a strong balance sheet and having

multiple sources of capital.

During 2019 we entered into foreign currency forward contracts to hedge a portion of our euro-denominated

foreign operations which are designated as net investment hedges.

These net investment hedges offset the change

in the U.S dollar value of our investment in certain euro-functional currency subsidiaries due to fluctuating foreign

exchange rates.

Gains and losses related to these net investment hedges are recorded

Accumulated other

comprehensive loss

within our consolidated balance sheets.

Amounts excluded from the assessment of hedge

effectiveness are included in interest expense within our consolidated statements

of income.

The aggregate

notional value of this net investment hedge, which matures on

November 16, 2023

, is approximately €

200

million.

During the years ended December 26, 2020 and December 28, 2019 we

recognized approximately $

4.7

million and

0.6

million, respectively, of interest savings as a result of this net investment hedge.

March 20, 2020

we entered into a total return swap for the purpose of economically hedging our unfunded non-

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

At the inception, the

notional value of the investments in these plans was $

43.4

million.

At December 26, 2020, the notional value of

the investments in these plans was $

67.6

million.

At December 26, 2020, the financing rate for this swap is based

on LIBOR of

0.15

% plus

0.38

%, for a combined rate of

0.53

From March 20, 2020, the effective date of the

swap, to December 26, 2020, we have recorded a gain, within the selling,

general and administrative line item in

our consolidated statement of income, of approximately $

21.2

million, net of transaction costs, related to this

undesignated swap for the year ended December 26, 2020.

This gain was partially offset by the change in fair

value adjustment of $

10.6

million in the SERP and the DCP, which occurred prior to the inception of the swap on

March 20, 2020.

This swap is expected to be renewed on an annual basis and

is expected to result in a neutral

impact to our results of operations.

See

Note 19 – Employee Benefit Plans

for additional information.

Fluctuations in the value of certain foreign currencies as compared

to the U.S. dollar may positively or negatively

affect our revenues, gross margins, operating expenses and retained earnings, all of which are expressed

in U.S.

dollars.

Where we deem it prudent, we engage in hedging programs using primarily

foreign currency forward

contracts aimed at limiting the impact of foreign currency exchange

rate fluctuations on earnings.

We purchase

short-term (i.e., generally

18 months

or less) foreign currency forward contracts to protect against

currency

exchange risks associated with intercompany loans due from our international

subsidiaries and the payment of

merchandise purchases to our foreign suppliers.

We do not hedge the translation of foreign currency profits into

U.S. dollars, as we regard this as an accounting exposure, not an

economic exposure.

Our hedging activities have

historically not had a material impact on our consolidated financial statements.

Accordingly, additional disclosures

related to derivatives and hedging activities required by ASC 815 have

been omitted.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

112

Note 17 – Revenue from Contracts with Customers

Revenue (Net sales) is recognized in accordance with the policies discussed

Note 1 – Significant Accounting

Policies

Disaggregation of Net sales

The following table disaggregates our Net sales by reportable segment and

geographic area:

Year

Ended

December 26, 2020

North America

International

Global

Revenues:

Health care distribution

Dental

3,471,521

2,441,072

5,912,593

Medical

3,514,670

102,347

3,617,017

Total health care distribution

6,986,191

2,543,419

9,529,610

Technology

and value-added services

446,830

67,428

514,258

Total excluding

Corporate TSA revenues

(1)

7,433,021

2,610,847

10,043,868

Corporate TSA revenues

(1)

75,273

Total revenues

7,433,021

2,686,120

10,119,141

Year

Ended

December 28, 2019

North America

International

Global

Revenues:

Health care distribution

Dental

3,911,746

2,504,119

6,415,865

Medical

2,894,137

79,449

2,973,586

Total health care distribution

6,805,883

2,583,568

9,389,451

Technology

and value-added services

445,317

69,768

515,085

Total excluding

Corporate TSA revenues

(1)

7,251,200

2,653,336

9,904,536

Corporate TSA revenues

(1)

4,098

77,169

81,267

Total revenues

7,255,298

2,730,505

9,985,803

(1)

Corporate TSA revenues represents sales of certain animal health products to Covetrus under the transition services agreement

entered into in connection with the Animal Health Spin-off, which ended in December 2020.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

113

Note 18 – Segment and Geographic Data

We conduct our business through

two

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

and

value-added services.

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

The health care distribution reportable segment aggregates our global dental

and medical operating segments.

This

segment distributes consumable products, small equipment, laboratory products,

large equipment, equipment repair

services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic

tests, infection-control

products and vitamins.

Our global dental group serves office-based dental practitioners, dental laboratories, schools

and other institutions.

Our global medical group serves office-based medical practitioners, ambulatory

surgery

centers, other alternate-care settings and other institutions.

Our global dental and medical groups serve

practitioners in

countries worldwide.

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

technology and other value-added

services to health care practitioners.

Our technology group offerings include practice management software

systems for dental and medical practitioners.

Our value-added practice solutions include financial services on a

non-recourse basis, e-services, practice technology, network and hardware services, as well as continuing education

services for practitioners.

The following tables present information about our reportable and operating

segments:

Years

Ended

December 26,

December 28,

December 29,

2020

2019

2018

Net Sales:

Health care distribution

(1)

Dental

5,912,593

6,415,865

6,347,998

Medical

3,617,017

2,973,586

2,661,166

Total health care distribution

9,529,610

9,389,451

9,009,164

Technology

and value-added services

(2)

514,258

515,085

408,439

Total excluding

Corporate TSA revenues

10,043,868

9,904,536

9,417,603

Corporate TSA revenues

(3)

75,273

81,267

Total

10,119,141

9,985,803

9,417,603

(1)

Consists of consumable 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 and

vitamins.

(2)

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

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

(3)

Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in

connection with the Animal Health Spin-off, which ended in December 2020.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

114

Years

ended

December 26,

December 28,

December 29,

2020

2019

2018

Operating Income:

Health care distribution

436,173

591,404

490,988

Technology

and value-added services

99,130

126,857

109,631

Total

535,303

718,261

600,619

Income from continuing operations before

taxes

and equity in earnings of affiliates:

Health care distribution

400,343

553,181

429,429

Technology

and value-added services

99,552

127,126

107,407

Total

499,895

680,307

536,836

Depreciation and Amortization:

Health care distribution

142,712

146,960

122,767

Technology

and value-added services

42,826

37,982

20,863

Total

185,538

184,942

143,630

Interest Income:

Health care distribution

9,736

15,352

15,106

Technology

and value-added services

106

405

385

Total

9,842

15,757

15,491

Interest Expense:

Health care distribution

41,307

50,666

76,006

Technology

and value-added services

126

Total

41,377

50,792

76,016

Income Tax

Expense:

Health care distribution

71,206

129,381

53,660

Technology

and value-added services

24,168

30,134

53,772

Total

95,374

159,515

107,432

Purchases of Fixed Assets:

Health care distribution

43,511

69,095

68,577

Technology

and value-added services

5,318

7,124

2,706

Total

48,829

76,219

71,283

As of

December 26,

December 28,

December 29,

2020

2019

2018

Total

Assets:

Health care distribution

6,503,089

5,821,468

5,288,662

Technology

and value-added services

1,269,443

1,329,633

995,192

Discontinued operations

2,216,673

Total

7,772,532

7,151,101

8,500,527

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

115

The following table presents information about our operations by geographic

area as of and for the three years

ended December 26, 2020.

Net sales by geographic area are based on the respective locations

of our subsidiaries.

No country, except for the United States, generated net sales greater than

% of consolidated net sales.

There

were no material amounts of sales or transfers among geographic areas

and there were no material amounts of

export sales.

2020

2019

2018

Net Sales

Long-Lived

Assets

Net Sales

Long-Lived

Assets

Net Sales

Long-Lived

Assets

United States

7,090,206

2,362,823

6,876,194

2,400,733

6,411,558

1,753,697

Other

3,028,935

1,251,849

3,109,609

1,195,947

3,006,045

1,017,584

Consolidated total

10,119,141

3,614,672

9,985,803

3,596,680

9,417,603

2,771,281

Note 19 – Employee Benefit Plans

Stock-based Compensation

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

compensation expense of $

8.8

million ($

7.1

million after-tax) for the year ended December 26, 2020, and pre-tax share-based

expense of $

44.9

million ($

34.4

million after-tax) and $

32.6

million ($

25.3

million after-tax) for the years ended December 28, 2019

and December 29, 2018.

Our accompanying 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.

In the

accompanying consolidated statements of cash flows, there were

benefits associated with tax deductions in

excess of recognized compensation as a cash inflow from financing

activities for the years ended December 26,

2020, December 28, 2019 and December 29, 2018.

Stock-based compensation represents the cost related to stock-based awards granted

to employees and non-

employee directors.

We measure stock-based compensation at the grant date, based on the estimated fair value of

the award, and recognize the cost (net of estimated forfeitures) as compensation

expense on a straight-line basis

over the requisite service period.

Our stock-based compensation expense is reflected in selling, general

and

administrative expenses in our consolidated statements of income.

Stock-based awards are provided to certain employees and non-employee directors

under the terms of our 2020

Stock Incentive Plan (formerly known as the 2013 Stock Incentive Plan),

and our 2015 Non-Employee Director

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

The Plans are administered by the Compensation Committee of

the

Board of Directors.

Equity-based awards are granted solely in the form of restricted

stock units, with the exception

of providing stock options to employees pursuant to certain pre-existing

contractual obligations.

As of December

26, 2020, there were

65,243

shares authorized and

5,812

shares available to be granted under the 2020 Stock

Incentive Plan and

1,893

shares authorized and

265

shares available to be granted under the 2015 Non-Employee

Director Stock Incentive Plan.

Grants of restricted stock units are stock-based awards granted to recipients with

specified vesting provisions.

the case of restricted stock units, common stock is generally delivered

on or following satisfaction of vesting

conditions.

We issue restricted stock units that vest solely based on the recipient’s continued service over time

(primarily four year cliff vesting, except for grants made under the 2015 Non-Employee

Director Stock Incentive

Plan, which are primarily

12 month

cliff vesting) and restricted stock units that vest based on our achieving

specified performance measurements and the recipient’s continued service over time (primarily three year cliff

vesting).

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

116

With respect to time-based restricted stock units, we estimate the fair value on the date of grant based on

our

closing stock price.

With respect to performance-based restricted stock units, 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 of

the Board of Directors.

Although there is no

guarantee that performance targets will be achieved, we estimate the fair value of

performance-based restricted

stock units based on our closing stock price at time of grant.

The Plans provide for adjustments to the performance-based restricted

stock units targets for significant events,

including, without limitation, acquisitions, divestitures, new business ventures,

certain capital transactions

(including share repurchases), restructuring costs, if any, certain litigation settlements or payments, if any, changes

in tax rates in certain countries, changes in accounting principles or

in applicable laws or regulations and foreign

exchange fluctuations.

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.

As a result of the Separation, the number of our unvested (as of the

date of the Separation) equity-based awards

from previous grants made under our Long-term Incentive Program under the

Plans was increased by a factor of

approximately

1.2633

, along with a corresponding

decrease

in our price per share.

We record deferred income tax assets for awards that will result in future deductions on our income tax returns

based on the amount of compensation cost recognized and our statutory tax

rate in the jurisdiction in which we will

receive a deduction.

Stock-based compensation grants for the three years ended December 26,

2020 consisted of restricted stock/unit

grants.

Certain stock-based compensation granted may require us

to settle in the form of a cash payment.

During

the year ended December 26, 2020, we recorded a liability of $

0.8

million relating to the grant date fair value of

stock-based compensation to be settled in cash.

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

granted before forfeitures was $

60.23

, $

56.83

and $

71.38

per share during the years ended December 26, 2020,

December 28, 2019 and December 29, 2018.

Total unrecognized compensation cost related to non-vested awards as of December 26, 2020 was $

42.2

million,

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

approximately

2.3

years.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

117

A summary of the stock option activity under the Plans is presented below:

Years

Ended

December 26,

December 28,

December 29,

2020

2019

2018

Weighted

Average

Exercise

Price

Outstanding at beginning of year

13.63

155

29.65

Granted

Exercised

(3)

13.63

(152)

29.81

Forfeited

Outstanding at end of year

17.22

Options exercisable at end of year

17.22

The following table represents the intrinsic values of:

As of

December 26,

December 28,

December 29,

2020

2019

2018

Stock options outstanding

121

Stock options exercisable

121

The total cash received as a result of stock option exercises for the year ended

December 29, 2018 was

approximately $

3.1

million.

In connection with these exercises, we did

t realize any tax benefits for the years

ended December 26, 2020, December 28, 2019 and December 29, 2018.

We settle employee stock option exercises

with newly issued common shares.

The total intrinsic value per share of restricted stock/units that vested

was $

61.49

, $

64.31

and $

76.48

during the

years ended December 26, 2020, December 28, 2019 and December

29, 2018.

The following table summarizes the

status of our non-vested restricted stock/units for the year ended December

26, 2020:

Time-Based Restricted Stock/Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share

Outstanding at beginning of period

1,417

58.72

Granted

391

60.19

Vested

(298)

65.91

Forfeited

(51)

59.71

Outstanding at end of period

1,459

57.61

65.83

Performance-Based Restricted Stock/Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share

Outstanding at beginning of period

1,459

61.41

Granted

(954)

56.52

Vested

(327)

67.48

Forfeited

(42)

57.82

Outstanding at end of period

136

53.52

65.83

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

118

401(k) Plans

We offer

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

As determined by our Board

of Directors, matching contributions to these plans generally do not

exceed

100

% of the participants’ contributions

up to

% of their base compensation, subject to applicable legal limits.

Matching contributions consist of cash and

were allocated entirely to the participants’ investment elections on file,

subject to a

% allocation limit to the

Henry Schein Stock Fund.

Due to the impact of COVID-19, as part of our initiative to generate cash savings,

suspended the matching contribution for the second half of 2020.

Forfeitures attributable to participants whose

employment terminates prior to becoming fully vested are used to

reduce our matching contributions and offset

administrative expenses of the 401(k) plans.

Assets of the 401(k) and other defined contribution plans are held

in self-directed accounts enabling participants to

choose from various investment fund options.

Matching contributions related to these plans charged to operations

during the years ended December 26, 2020, December 28, 2019 and December

29, 2018 amounted to $

19.9

million,

34.9

million and $

35.0

million, respectively.

Supplemental Executive Retirement Plan

We offer

an unfunded, non-qualified SERP to eligible employees.

This plan generally covers officers and certain

highly compensated employees after they have reached the maximum

IRS allowed pre-tax 401(k) contribution

limit.

Our contributions to this plan are equal to the 401(k) employee-elected

contribution percentage applied to

base compensation for the portion of the year in which such employees are

not eligible to make pre-tax

contributions to the 401(k) plan.

Due to the impact of COVID-19, as part of our initiative to

generate cash savings,

we suspended contributions under the SERP for the second half of

2020.

The amounts charged to operations during

the years ended December 26, 2020, December 28, 2019 and December

29, 2018 amounted to $

2.8

million, $

4.0

million and $

0.4

million, respectively.

Please see

Note 16 – Derivatives and Hedging Activities

for additional

information.

Deferred Compensation Plan

During 2011, we began to offer DCP to a select group of management or highly compensated employees of

the

Company and certain subsidiaries.

This plan allows for the elective deferral of base salary, bonus and/or

commission compensation by eligible employees.

The amounts charged (credited) to operations during the years

ended December 26, 2020, December 28, 2019 and December 29, 2018 were

approximately $

7.8

million, $

8.3

million and $

(2.3)

million, respectively.

Please see

Note 16 – Derivatives and Hedging Activities

for additional

information.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

119

Note 20 – Commitments and Contingencies

Purchase Commitments

In our health care distribution business, we sometimes enter into long-term purchase

commitments to ensure the

availability of products for distribution.

Future minimum annual payments for inventory purchase commitments

of December 26, 2020 were:

2021

208,200

2022

110,800

2023

2024

2025

Thereafter

Total minimum

inventory purchase commitment payments

319,000

Employment, Consulting and Non-Compete Agreements

We have definite-lived employment, consulting and non-compete agreements that have varying base aggregate

annual payments for the years 2021 through 2025 and thereafter of approximately

16.9

million, $

6.8

million, $

1.0

million, $

0.9

million, $

0.9

million, and $

0.9

million, respectively.

We also have lifetime consulting agreements

that provide for current compensation of $

0.4

million per year, increasing $

every fifth year with the next

increase in 2022.

In addition, some agreements have provisions for additional

incentives and compensation.

Litigation

August 31, 2012

Archer and White Sales, Inc. (“Archer”)

filed a complaint against

Henry Schein, Inc. as well

as Danaher Corporation and its subsidiaries Instrumentarium Dental, Inc., Dental Equipment, LLC, Kavo Dental

Technologies, LLC and Dental Imaging Technologies Corporation (collectively, the “Danaher Defendants”)

in the

U.S. District Court for the Eastern District of Texas, Civil Action No. 2:12-CV-00572-JRG, styled as an antitrust

action under Section 1 of the Sherman Act, and the Texas Free Enterprise Antitrust Act.

Archer alleges a

conspiracy between Henry Schein, an unnamed company and the Danaher Defendants to terminate or limit

Archer’s distribution rights

August 1, 2017

Archer

filed an amended complaint, adding

Patterson Companies,

Inc. (“Patterson”) and Benco Dental Supply Co. (“Benco”)

as defendants, and

alleging that Henry Schein,

Patterson, Benco and Burkhart Dental Supply conspired to fix prices and refused to compete with each other for

sales of dental equipment to dental professionals and agreed to enlist their common suppliers, the Danaher

Defendants, to join a price-fixing conspiracy and boycott by reducing the distribution territory of, and eventually

terminating, their price-cutting competing distributor Archer.

Archer seeks damages in an amount to be proved at

trial, to be trebled with interest and costs, including attorneys’ fees, jointly and severally, as well as injunctive

relief.

October 30, 2017

Archer

filed a second amended complaint,

to add additional allegations that it believes

support its claims. The named parties and causes of action are the same as the August 1, 2017 amended complaint.

On October 1, 2012, we filed a motion for an order: (i) compelling Archer

to arbitrate its claims against us; (2)

staying all proceedings pending arbitration; and (3) joining the Danaher

Defendants’ motion to arbitrate and stay.

On May 28, 2013, the Magistrate Judge granted the motions to arbitrate

and stayed proceedings pending arbitration.

On June 10, 2013, Archer moved for reconsideration before the District Court

judge.

On December 7, 2016, the

District Court Judge granted Archer’s motion for reconsideration and lifted the stay.

Defendants appealed the

District Court’s order.

On December 21, 2017, the U.S. Court of Appeals for the Fifth Circuit

affirmed the District

Court’s order denying the motions to compel arbitration.

On June 25, 2018, the Supreme Court of the United States

granted defendants’ petition for writ of certiorari.

On October 29, 2018, the Supreme Court heard oral arguments.

On January 8, 2019, the Supreme Court issued its published decision vacating

the judgment of the Fifth Circuit and

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

120

remanding the case to the Fifth Circuit for further proceedings consistent with

the Supreme Court’s opinion.

April 2, 2019, the District Court stayed the proceeding in the trial court pending

resolution by the Fifth Circuit.

The

Fifth Circuit heard oral argument on May 1, 2019 on whether the case should be arbitrated.

The Fifth Circuit

issued its opinion on August 14, 2019 affirming the District Court’s order denying defendants’ motions to compel

arbitration.

Defendants filed a petition for rehearing en banc before the Fifth

Circuit.

The Fifth Circuit denied that

petition.

On October 1, 2019, the District Court set the case for trial

on February 3, 2020, which was subsequently

moved to January 29, 2020.

On January 24, 2020 the Supreme Court granted our motion to stay

the District Court

proceedings, pending the disposition of our petition for writ of certiorari, which

was filed on January 31, 2020.

Archer conditionally cross petitioned for certiorari on an arbitration issue

on March 2, 2020.

On June 15, 2020, the

Supreme Court granted our petition for writ of certiorari, and denied Archer’s conditional

petition for certiorari, and

thus the District Court proceedings remained stayed.

After briefing from the parties and several amici, the case was

argued before the Supreme Court on December 8, 2020.

On January 25, 2021, the Supreme Court dismissed the

writ of certiorari as improvidently granted.

That action dissolved the stay the Supreme Court had previously

granted, and thus the trial of the lawsuit may proceed.

The U.S. District Court for the Eastern District of Texas has

scheduled a Status Conference for February 19, 2021.

Patterson and the Danaher Defendants settled with Archer

and they have been dismissed from the case with prejudice.

Benco is still a defendant. We intend to defend

ourselves vigorously against this action.

May 29, 2018

, an amended complaint was filed in the MultiDistrict Litigation (“MDL”)

proceeding In Re

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

in an action entitled

The County of

Summit, Ohio et al

. v. Purdue Pharma, L.P.,

et al., Civil Action No. 1:18-op-45090-DAP (“County of

Summit

Action”), in the U.S. District Court for the Northern District of Ohio, adding Henry

Schein, Inc.,

Henry Schein

Medical Systems, Inc. and others as defendants

Summit County alleged that 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 Henry Schein Medical Systems, Inc.) reaped

financial rewards by refusing or otherwise failing to monitor appropriately and restrict the improper distribution of

those drugs.

On October 29, 2019, the Company was dismissed with prejudice from this lawsuit. Henry Schein,

working with Summit County, donated $1 million to a foundation and paid $250,000 of Summit County’s

expenses, as described in our prior filings with the SEC.

In addition to the County of Summit Action,

Henry Schein and/or one or more of its affiliated companies

have been

named as a defendant in multiple lawsuits (currently less than one-hundred

and fifty (

150

)), which

allege claims

similar to those alleged in the County of Summit Action.

These actions consist of some that have been consolidated

within the MDL and are currently abated for discovery purposes, and others which

remain pending in state courts

and are proceeding independently and outside of the MDL.

On October 9, 2020, the Circuit Court of the 17th

Judicial Circuit in and for Broward County, Florida, Case No. CACE19018882, granted Henry Schein’s motion to

dismiss the claims brought against it in the action filed by North Broward

Hospital District et. al.

The Florida court

gave plaintiffs until November 24, 2020 to replead their claims against Henry Schein.

On January 8, 2021, Henry

Schein filed a motion to dismiss the Amended Complaint. An action filed by Tucson Medical Center et

al. was

previously scheduled for trial beginning on June 1, 2021 but the court has vacated

that trial date.

At this time, the

only case set for trial is the action filed by West Virginia

University Hospitals, Inc. et al., which is currently

scheduled for a non-jury liability trial on Plaintiffs’ public nuisance claims on November 1,

2021.

Of Henry

Schein’s 2020 revenue of approximately $

10.1

billion from continuing operations, sales of opioids represented

less

than one-tenth of

percent.

Opioids represent a negligible part of our business.

We intend to defend ourselves

vigorously against these actions.

September 30, 2019

, the

City of Hollywood Police Officers Retirement System, individually and on behalf of

all others similarly situated

, filed a putative class action complaint for violation of the federal

securities laws

against

Henry Schein, Inc., Covetrus, Inc., and Benjamin Shaw and Christine Komola (Covetrus’s then Chief

Executive Officer and Chief Financial Officer, respectively)

in the U.S. District Court for the Eastern District of

New York,

Case No. 2:19-cv-05530-FB-RLM.

The complaint seeks to certify a class consisting of all persons and

entities who, subject to certain exclusions, purchased or otherwise acquired Covetrus common stock from February

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

121

8, 2019 through August 12, 2019. The case relates to the Animal Health Spin-off and Merger of the Henry Schein

Animal Health Business with Vets First Choice in February 2019. The complaint alleges violations of Sections

10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 and asserts that defendants’ statements in the offering

documents and after the transaction were materially false and misleading

because they purportedly overstated

Covetrus’s capabilities as to inventory management and supply-chain services, understated the costs of integrating

the Henry Schein Animal Health Business and Vets First Choice, understated Covetrus’s separation costs from

Henry Schein, and understated the impact on earnings from online competition

and alternative distribution channels

and from the loss of an allegedly large customer in North America just before the Separation and

Merger.

The

complaint seeks unspecified monetary damages and a jury trial.

Pursuant to the provisions of the PSLRA, the court

appointed lead plaintiff and lead counsel on December 23, 2019.

Lead plaintiff filed a Consolidated Class Action

Complaint on February 21, 2020.

Lead plaintiff added Steve Paladino, our Chief Financial Officer, as a defendant

in the action.

Lead plaintiff filed an Amended Consolidated Class Action Complaint on May 21, 2020,

in which it

added a claim that Mr. Paladino is a “control person” of Covetrus.

We intend to defend ourselves vigorously

against this action.

November 15, 2019

Frank Finazzo

filed a putative shareholder derivative action on behalf of Henry

Schein,

Inc. against various present and former directors and officers of Henry Schein in

the U.S. District Court for the

Eastern District of New York, Case No. 1:19-cv-6485-LDH-JO.

The named defendants in the action were Stanley

M. Bergman, Steven Paladino, Timothy J. Sullivan, Barry J. Alperin, Lawrence S. Bacow, Gerald A. Benjamin,

James P. Breslawski, Paul Brons, Shira Goodman, Joseph L. Herring, Donald J. Kabat, Kurt Kuehn, Philip A.

Laskawy, Anne H. Margulies, Karyn Mashima, Norman S. Matthews, Mark E. Mlotek, Carol Raphael, E. Dianne

Rekow, Bradley T. Sheares, and Louis W. Sullivan, with Henry Schein named as a nominal defendant.

The

Complaint asserted claims under the federal securities laws and state law

relating to the allegations in the antitrust

actions, the In re Henry Schein, Inc. Securities Litigation, and the City of Hollywood

securities class action

described in our prior filings with the SEC and/or above.

The complaint sought declaratory, injunctive, and

monetary relief on behalf of Henry Schein.

On January 6, 2020, one of the two law firms that filed the Finazzo

case filed another, virtually identical putative shareholder derivative action on behalf of Henry Schein

against the

same defendants, asserting the same claims and seeking the same relief.

That case, captioned Mark Sloan v.

Stanley M. Bergman, et al., was also filed in the U.S. District Court for the Eastern

District of New York, Case No.

1:20-cv-0076.

On January 24, 2020, the court consolidated the Finazzo and Sloan

cases under the new caption In

re Henry Schein, Inc. Derivative Litigation, No. 1:19-cv-06485-LDH-JO, and appointed the

two law firms that filed

the Finazzo case as co-lead counsel for the consolidated action.

The parties agreed to a resolution of this matter

subject to various conditions, including court approval.

The settlement involves the adoption of certain procedures

but does not involve the payment of any money except a fee to the

plaintiffs’ attorneys that is immaterial.

After the

court referred the motion to approve the settlement to a Magistrate Judge,

the parties consented to having the case

assigned to the Magistrate Judge for all purposes.

The Magistrate Judge to which the matter was ultimately

assigned held a fairness hearing and issued an order and judgment approving

the settlement.

The order and

judgment approving the settlement have become final.

On February 5, 2021, Jack Garnsey filed a putative shareholder derivative

action on behalf of Covetrus, Inc. in the

U.S. District Court for the Eastern District of New York, naming as defendants Benjamin Shaw, Christine T.

Komola, Steven Paladino, Betsy Atkins, Deborah G. Ellinger, Sandra L. Helton, Philip A. Laskaway, Mark J.

Manoff, Edward M. McNamara, Ravi Sachdev, David E. Shaw, Benjamin Wolin,

and Henry Schein, Inc., with

Covetrus, Inc. named as a nominal defendant.

The complaint alleges that the individual defendants breached

their

fiduciary duties under state law in connection with the same allegations

asserted in the City of Hollywood securities

class action described above and further alleges that Henry Schein aided

and abetted such breaches. The complaint

also asserts claims for contribution under the federal securities laws against

Henry Schein and other defendants,

also arising out of the allegations in the City of Hollywood lawsuit.

The complaint seeks declaratory, injunctive,

and monetary relief. We intend to defend ourselves vigorously against this action.

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

including, without limitation, product

liability claims, employment matters, commercial disputes, governmental

inquiries and investigations (which may

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

122

in some cases involve our

entering into settlement arrangements or consent decrees), and other

matters arising out

of the ordinary course of our business.

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

in our opinion none of these other pending matters are currently anticipated

to have a material adverse effect on our

consolidated financial position, liquidity or results of operations.

As of December 26, 2020, 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.

Note 21 – Quarterly Information (Unaudited)

The following tables present certain quarterly financial data:

Quarters ended

March 28,

June 27,

September 26,

December 26,

2020

Net sales

2,428,871

1,684,399

2,840,146

3,165,725

Gross profit

746,039

454,294

754,299

859,711

Restructuring costs

(1)

4,787

15,934

6,992

4,380

Operating income (loss)

173,865

(7,433)

187,671

181,200

Net gain on sale of equity investments

(2)

1,572

Net income (loss) from continuing operations

133,847

(13,852)

151,813

146,629

Amounts attributable to Henry Schein, Inc.

from continuing operations:

Net income (loss)

130,543

(11,382)

141,726

141,921

Earnings (loss) per share attributable to

Henry Schein, Inc. from continuing operations:

Basic

0.91

(0.08)

1.00

Diluted

0.91

(0.08)

0.99

Quarters ended

March 30,

June 29,

September 28,

December 28,

2019

Net sales

2,360,268

2,447,827

2,508,767

2,668,941

Gross profit

751,690

767,431

761,167

810,598

Restructuring costs (credits)

(1)

4,641

11,925

(802)

(1,059)

Operating income

172,441

162,288

187,198

196,334

Net gain on sale of equity investments

(2)

186,769

Net income from continuing operations

123,640

121,417

143,212

337,192

Amounts attributable to Henry Schein, Inc.

from continuing operations:

Net income

118,413

116,753

134,916

330,609

Earnings per share attributable to Henry Schein, Inc.

from continuing operations:

Basic

0.79

0.92

2.27

Diluted

0.78

0.91

2.25

(1) See

Note 12 – Plans of Restructuring

for details of the restructuring costs (credits) incurred during our 2020 and 2019

fiscal years.

(2) See

Note 11 – Business Acquisitions Divestitures

for details of the net gain on sale of equity investments.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

123

Note 22 – Supplemental Cash Flow Information

Cash paid for interest and income taxes was:

Years

ended

December 26,

December 28,

December 29,

2020

2019

2018

Interest

43,123

54,685

69,371

Income taxes

206,796

177,277

236,479

For the years ended December 26, 2020, December 28, 2019 and December

29, 2018, we had $

(10.2)

million,

(4.9)

million and $

1.0

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

currency hedging

activities, respectively.

During the third quarter of 2018, we formed Henry Schein One, LLC

with Internet Brands through a non-cash

transaction resulting in approximately $

390.3

million of noncontrolling interest representing Internet Brands’

current

% minority interest and $

160.6

million of deferred additional ownership interests of Internet Brands

Henry Schein One, representing up to an additional

9.2

% ownership interests at December 26, 2020, a portion of

which is contingent upon the achievement of certain operating targets.

During the third quarter of 2020, the Internet

Brands ownership interest in Henry Schein One, LLC increased to

Note 23 – Related Party Transactions

In connection with the completion of the Animal Health Spin-off during our 2019

fiscal year, we entered into a

transition services agreement with Covetrus under which we have agreed

to provide certain transition services for

up to twenty-four months in areas such as information technology, finance and accounting, human resources,

supply chain, and real estate and facility services

(see

Note 2 – Discontinued Operations

for additional details).

For the years ended December 26, 2020 and December 28, 2019, we recorded approximately

13.0

million and

17.5

million of fees for these services, respectively.

Pursuant to the transition services agreement, Covetrus

purchased certain products from us.

During the years

ended December 26, 2020 and December 28, 2019, net sales

to Covetrus under the transition services agreement were approximately

75.3

million and $

81.3

million,

respectively.

Sales to Covetrus under the transition services

agreement ended in December 2020.

At December 26,

2020 we had $

0.3

million payable to Covetrus under this transition services agreement.

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 $31.0 million annually for the use of their intellectual property.

During 2020, 2019

and 2018, we recorded $

31.0

, million, $

31.0

million and $

15.5

million, respectively in connection with costs related

to this royalty agreement.

As of December 26, 2020 and December 28, 2019, Henry Schein One, LLC

had a net

receivable balance due from Internet Brands of $

4.7

million and $

9.4

million, respectively, comprised of amounts

related to the royalty agreement and other management fees.

During our normal course of business, we have interests in entities that we account for under the equity accounting

method.

During our fiscal years ended 2020, 2019 and 2018, we recorded

net sales of $

59.6

million, $

93.2

million,

and $

27.0

million, respectively, to such entities.

During our fiscal years ended 2020, 2019 and 2018, we purchased

12.6

million, $

11.8

million, and $

10.8

million, respectively, from such entities.

At December 26, 2020 and

December 28, 2019, we had in the aggregate $

36.4

million and $

31.0

million, due from our equity affiliates, and

8.6

million and $

4.9

million due to our equity affiliates, respectively.

Table of Contents

124

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure

None.

ITEM 9A.

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 annual 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 December 26,

2020 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 acquisitions and continued acquisition integrations undertaken

during the quarter and carried

over from prior quarters as well as changes to the operating methods of some

of our internal controls over financial

reporting due to the COVID-19 pandemic, when considered in the aggregate,

represents a material change in our

internal control over financial reporting.

During the quarter ended December 26, 2020,

we completed the acquisition of a dental business in North America

with approximate aggregate annual revenues of approximately $20

million.

In addition, post-acquisition integration

related activities continued for our global dental and North American

medical businesses acquired during prior

quarters, representing aggregate annual revenues of approximately $370 million.

These acquisitions, the majority

of which utilize separate information and financial accounting systems, have

been included in our consolidated

financial statements since their respective dates of acquisition.

All acquisitions and continued acquisition integrations involve necessary

and appropriate change-management

controls that are considered in our annual assessment of the design and operating effectiveness of

our internal

control over financial reporting.

In addition, as a result of a combination of continued governmental imposed

and Company directed closures of

some of our facilities due to the COVID-19 pandemic, we have had

to maintain a number of changes to the

operating methods of some of our internal controls. For example, moving

from manual sign-offs and in-person

meetings to electronic sign-offs and electronic communications such as email and

telephonic or video conference

due to out-of-office working arrangements. However, the design of our internal control framework and objectives

over financial reporting remains unchanged and we do not believe that

these changes have materially affected, or

are reasonably likely to materially affect, the effectiveness of our internal control over financial

reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate

internal control over financial reporting,

as such term is defined in Exchange Act Rule 13a-15(f).

Our internal control system is designed to provide

reasonable assurance to our management and Board of Directors regarding the

preparation and fair presentation of

published financial statements.

Under the supervision and with the participation of our

management, including our

principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our

internal control over financial reporting based on the

framework in Internal Control-Integrated Framework (2013),

updated and reissued by the Committee of Sponsoring Organizations, or the COSO

Framework. Based on our

Table of Contents

125

evaluation under the COSO Framework, our management concluded that our

internal control over financial

reporting was effective at a reasonable assurance level as of December 26, 2020.

The effectiveness of our internal control over financial reporting as of December 26,

2020 has been independently

audited by BDO USA, LLP, an independent registered public accounting firm, and their attestation is included

herein.

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

126

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Henry Schein, Inc.

Melville, NY

Opinion on Internal Control over Financial Reporting

have audited Henry

Schein, Inc.’s

(the “Company’s”)

internal control over

financial reporting as

of December

26, 2020, based on criteria established in

Internal Control – Integrated Framework (2013)

issued by the Committee

Sponsoring

Organizations

the

Treadway

Commission

(the

“COSO

criteria”).

our

opinion,

the

Company

maintained,

all

material

respects,

effective

internal

control

over

financial

reporting

December

26,

2020,

based on the COSO criteria.

also

have

audited,

accordance

with

the

standards

the

Public

Company

Accounting

Oversight

Board

(United

States)

(“PCAOB”),

the

consolidated

balance

sheets

the

Company

December

26,

2020

and

December

28,

2019, the

consolidated statements

income, comprehensive

income,

stockholders’ equity,

and

cash

flows

for

each

the

three

years

the

period

ended

December

26,

2020,

and

the

notes

and

schedule and our report dated February 17, 2021 expressed an unqualified

opinion thereon.

Basis for Opinion

The Company’s

management is

responsible for

maintaining effective

internal control

over financial

reporting and

for

its

assessment

the

effectiveness

internal

control

over

financial

reporting,

included

the

accompanying

“Item 9A, Management’s

Report on Internal

Control over Financial Reporting”. Our

responsibility is to express

opinion on the

Company’s internal

control over financial

reporting based on

our audit. We

are a public

accounting

firm

registered

with

the

PCAOB and

are

required

independent

with

respect

the

Company in

accordance

with

U.S.

federal

securities

laws

and

the

applicable

rules

and

regulations

the

Securities

and

Exchange

Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require

that we plan

and perform the

audit to

obtain reasonable assurance

about whether effective

internal

control

over

financial

reporting

was

maintained

all

material

respects.

Our

audit

included

obtaining

understanding

internal

control

over

financial

reporting,

assessing

the

risk

that

material

weakness

exists,

and

testing

and

evaluating

the

design

and

operating

effectiveness

internal

control

based

the

assessed

risk.

Our

audit also included performing

such other procedures as we

considered necessary in the

circumstances. We

believe

that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

company’s

internal

control

over

financial

reporting

process

designed

provide

reasonable

assurance

regarding the

reliability of

financial reporting

and the

preparation of

financial statements

for external

purposes in

accordance

with

generally

accepted

accounting

principles.

company’s

internal

control

over

financial

reporting

includes

those

policies

and

procedures

that

(1)

pertain

the

maintenance

records

that,

reasonable

detail,

accurately and

fairly reflect

the transactions

and dispositions

of the

assets of

the company;

(2) provide

reasonable

assurance

that

transactions

are

recorded

necessary

permit

preparation

financial

statements

accordance

with generally

accepted accounting

principles, and

that receipts

and expenditures

of the

company are

being made

only

accordance with

authorizations of

management and

directors of

the

company; and

(3) provide

reasonable

assurance

regarding

prevention

timely

detection

unauthorized

acquisition,

use,

disposition

the

company’s assets that could have a material effect on the financial statements.

Because

its

inherent

limitations,

internal

control

over

financial

reporting

may

not

prevent

detect

misstatements.

Also,

projections

any

evaluation

effectiveness

future

periods

are

subject

the

risk

that

controls

may

become

inadequate

because

changes

conditions,

that

the

degree

compliance

with

the

policies or procedures may deteriorate.

/s/ BDO USA, LLP

New York

February 17, 2021

Table of Contents

127

ITEM 9B.

Other Information

Not applicable.

PART

III

ITEM 10.

Directors, Executive Officers and Corporate Governance

Information required by this item regarding our directors and executive

officers and our corporate governance is

hereby incorporated by reference to the Section entitled “Election of Directors,”

with respect to directors, and the

first paragraph of the Section entitled “Corporate Governance - Board

of Directors Meetings and Committees -

Audit Committee,” with respect to corporate governance, in each case

in our definitive 2021 Proxy Statement to be

filed pursuant to Regulation 14A and to the Section entitled “Information

about our Executive Officers” in Part I of

this report, with respect to executive officers.

There have been no changes to the procedures by which stockholders

may recommend nominees to our Board of

Directors since our last disclosure of such procedures, which appeared

in our definitive 2020 Proxy Statement filed

pursuant to Regulation 14A on April 7, 2020.

Information required by this item concerning compliance with Section

16(a) of the Securities Exchange Act of

1934 is hereby incorporated by reference to the Section entitled “Delinquent

Section 16(a) Reports” in our

definitive 2021 Proxy Statement to be filed pursuant to Regulation 14A,

to the extent responsive disclosure is

required.

We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer, Chief

Accounting Officer and Controller.

We make available free of charge through our Internet website,

www.henryschein.com

, under the “About Henry Schein--Corporate Governance Highlights”

caption, our Code of

Ethics.

We intend to disclose on our Web

site any amendment to, or waiver of, a provision of the Code

of Ethics.

ITEM 11.

Executive Compensation

The information required by this item is hereby incorporated by reference

to the Sections entitled “Compensation

Discussion and Analysis,” “Compensation Committee Report” (which information

shall be deemed furnished in

this Annual Report on Form 10-K), “Executive and Director Compensation”

and “Compensation Committee

Interlocks and Insider Participation” in our definitive 2021 Proxy Statement

to be filed pursuant to Regulation 14A.

Table of Contents

128

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder

Matters

We maintain several stock incentive plans for the benefit of certain officers, directors and employees.

All active

plans have been approved by our stockholders.

Descriptions of these plans appear in the notes to our consolidated

financial statements.

The following table summarizes information relating to these plans as

of December 26, 2020:

Number of Common

Shares to be Issued Upon

Weighted-

Average

Number of Common

Exercise of Outstanding

Exercise Price of

Shares Available

for

Plan Category

Options and Rights

Outstanding Options

Future Issuances

Plans Approved by Stockholders

6,077,548

Plans Not Approved by Stockholders

Total

6,077,548

The other information required by this item is hereby incorporated by

reference to the Section entitled “Security

Ownership of Certain Beneficial Owners and Management” in our definitive

2021 Proxy Statement to be filed

pursuant to Regulation 14A.

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

The information required by this item is hereby incorporated by reference

to the Section entitled “Certain

Relationships and Related Transactions” and “Corporate Governance – Board of Directors Meetings and

Committees – Independent Directors” in our definitive 2021 Proxy Statement

to be filed pursuant to Regulation

14A.

ITEM 14.

Principal Accounting Fees and Services

The information required by this item is hereby incorporated by reference

to the Section entitled “Independent

Registered Public Accounting Firm Fees and Pre-Approval Policies and

Procedures” in our definitive 2021 Proxy

Statement to be filed pursuant to Regulation 14A.

PART

ITEM 15.

Exhibits, Financial Statement Schedules

(a)

List of Documents Filed as a Part of This Report:

Financial Statements:

Our Consolidated Financial Statements filed as a part of this report

are listed on the index on

Page 69.

Financial Statement Schedules:

Schedule II – Valuation of Qualifying Accounts

No other schedules are required.

Index to Exhibits:

See exhibits listed under Item 15(b) below.

Table of Contents

129

(b)

Exhibits

2.1

Contribution and Distribution Agreement, dated as of April 20, 2018, by and among us, HS

Spinco, Inc., Direct Vet Marketing, Inc. and Shareholder Representative Services LLC.

(Incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on April 23,

2018 (film no. 18767875).)*

2.2

Agreement and Plan of Merger, dated as of April 20, 2018, by and among us, HS Spinco, Inc,

HS Merger Sub, Inc., Direct Vet Marketing, Inc. and Shareholder Representative Services LLC.

(Incorporated by reference to Exhibit 2.2 to our Current Report on Form 8-K filed on April 23,

2018 (film no. 18767875).)*

2.3

Letter Agreement, Amendment No. 1 to Contribution and Distribution Agreement and

Amendment No. 1 to Agreement and Plan of Merger, dated as of September 14, 2018, by and

among us, HS Spinco, Inc., HS Merger Sub, Inc., Direct Vet Marketing, Inc. and Shareholder

Representative Services LLC.( Incorporated by reference to Exhibit 2.3 to our Annual Report

on Form 10-K for the fiscal year ended December 29, 2018 filed on February 20, 2019.)

2.4

Letter Agreement and Amendment No. 2 to Contribution and Distribution Agreement, dated as

of November 30, 2018, by and among us, HS Spinco, Inc., Direct Vet Marketing, Inc. and

Shareholder Representative Services LLC. (Incorporated by reference to Exhibit 2.4 to our

Annual Report on Form 10-K for the fiscal year ended December 29, 2018 filed on February

20, 2019.)

2.5

Letter Agreement and Amendment No. 3 to Contribution and Distribution Agreement and

Amendment No. 2 to Agreement and Plan of Merger, dated as of December 25, 2018, by and

among us, HS Spinco, Inc., HS Merger Sub, Inc., Direct Vet Marketing, Inc. and Shareholder

Representative Services LLC.(Incorporated by reference to Exhibit 2.5 to our Annual Report on

Form 10-K for the fiscal year ended December 29, 2018 filed on February 20, 2019.)

2.6

Letter Agreement and Amendment No. 4 to Contribution and Distribution Agreement, dated as

of January 15, 2019, by and among us, HS Spinco, Inc., Direct Vet Marketing, Inc. and

Shareholder Representative Services LLC.(Incorporated by reference to Exhibit 2.6 to our

Annual Report on Form 10-K for the fiscal year ended December 29, 2018 filed on February

20, 2019.)

3.1

Second Amended and Restated Certificate of Incorporation of Henry Schein, Inc. (Incorporated

by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on June 1, 2018.)

3.2

Second Amended and Restated By-Laws of Henry Schein, Inc. (Incorporated by reference to

Exhibit 3.2 to our Current Report on Form 8-K filed on June 1, 2018.)

4.1

Second Amended and Restated Multicurrency Master Note Purchase Agreement dated as of

June 29, 2018, by and among us, Metropolitan Life Insurance Company, MetLife Investment

Advisors Company, LLC and each MetLife affiliate which becomes party thereto. (Incorporated

by reference to Exhibit 4.3 to our Current Report on Form 8-K filed on July 2, 2018.)

Table of Contents

130

4.2

First Amendment to Second Amended and Restated Multicurrency Master Note Purchase

Agreement, dated as of June 23, 2020, by and among us, Metropolitan Life Insurance Company,

MetLife Investment Management, LLC and each MetLife affiliate which becomes party thereto.

(Incorporated by reference to Exhibit 4.3 to our Current Report on Form 8-K filed on June 25,

2020.)

4.3

Second Amended and Restated Master Note Facility dated as of June 29, 2018, by and among

us, NYL

Investors

LLC and each New York Life affiliate which becomes party thereto.

(Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on July 2,

2018.)

4.4

First Amendment to Second Amended and Restated Master Note Facility, dated as of June 23,

2020, by and among us, NYL Investors LLC and each New York Life affiliate which becomes

party thereto. (Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed

on June 25, 2020.)

4.5

Second Amended and Restated Multicurrency Private Shelf Agreement dated as of June 29,

2018, by and

among

us, PGIM, Inc. and each Prudential affiliate which becomes party thereto.

(Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on July 2,

2018.)

4.6

First Amendment to Second Amended and Restated Multicurrency Private Shelf Agreement,

dated as of June 23, 2020, by and among us, PGIM, Inc. and each Prudential affiliate which

becomes party thereto. (Incorporated by reference to Exhibit 4.1 to our Current Report on Form

8-K filed on June 25, 2020.)

4.7

Description of Securities. (Incorporated by reference to Exhibit 4.4 to our Annual Report on

Form 10-K for the fiscal year ended December 28, 2019 filed on February 20, 2020.)

10.1

Henry Schein, Inc. 2013 Stock Incentive Plan, as amended and restated effective as of May 14,

2013. (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on

May 16, 2013.)**

10.2

Form of 2017 Restricted Stock Unit Agreement for time-based restricted stock awards pursuant

to the Henry Schein, Inc. 2013 Stock Incentive Plan (as amended and restated effective as of

May 14, 2013). (Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-

Q for the fiscal quarter ended April 1, 2017 filed on May 9, 2017.)**

10.3

Form of 2018 Restricted Stock Unit Agreement for time-based restricted stock unit awards

pursuant to the Henry Schein, Inc. 2013 Stock Incentive Plan (as amended and restated effective

as of May 14, 2013). (Incorporated by reference to Exhibit 10.4 to our Quarterly Report on

Form 10-Q for the fiscal quarter ended March 31, 2018 filed on May 8, 2018.)**

10.4

Form of 2018 Restricted Stock Unit Agreement for performance-based restricted stock unit

awards pursuant to the Henry Schein, Inc. 2013 Stock Incentive Plan (as amended and restated

effective as of May 14, 2013). (Incorporated by reference to Exhibit 10.5 to our Quarterly

Report on Form 10-Q for the fiscal quarter ended March 31, 2018 filed on May 8, 2018.)**

Table of Contents

131

10.5

Form of 2019 Restricted Stock Unit Agreement for time-based restricted stock unit awards

pursuant to the Henry Schein, Inc. 2013 Stock Incentive Plan (as amended and restated effective

as of May 14, 2013). (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on

Form 10-Q for the fiscal quarter ended March 30, 2019 filed on May 7, 2019.)**

10.6

Form of 2019 Restricted Stock Unit Agreement for performance-based restricted stock unit

awards pursuant to the Henry Schein, Inc. 2013 Stock Incentive Plan (as amended and restated

effective as of May 14, 2013). (Incorporated by reference to Exhibit 10.2 to our Quarterly

Report on Form 10-Q for the fiscal quarter ended March 30, 2019 filed on May 7, 2019.)**

10.7

Henry Schein, Inc. 2020 Stock Incentive Plan, as amended and restated effective as of May 21,

2020. (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on

May 26, 2020.)

10.8

Henry Schein, Inc. 2015 Non-Employee Director Stock Incentive Plan. (Incorporated by

reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended

June 27, 2015 filed on July 29, 2015.)**

10.9

Form of 2018 Restricted Stock Unit Agreement for time-based restricted stock unit awards

pursuant to the Henry Schein, Inc. 2015 Non-Employee Director Stock Incentive Plan (as

amended and restated effective as of June 22, 2015). (Incorporated by reference to Exhibit 10.6

to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018 filed on May

8, 2018.)**

10.10

Henry Schein, Inc. Supplemental Executive Retirement Plan, amended and restated effective as

of January 1, 2014. (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on

Form 10-Q for the fiscal quarter ended September 28, 2013 filed on November 5, 2013.)**

10.11

Amendment Number One to the Henry Schein, Inc. Supplemental Executive Retirement Plan,

amended and restated effective as of January 1, 2014. . (Incorporated by reference to Exhibit

10.18 to our Annual Report on Form 10-K for the fiscal year ended December 28, 2020 filed on

February 20, 2020.)**

10.12

Amendment Number Two to the Henry Schein, Inc. Supplemental Executive Retirement Plan,

amended and restated effective as of January 1, 2014. (Incorporated by reference to Exhibit 10.3

to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2020 filed on May

5, 2020.)**

10.13

Amendment Number Three to the Henry Schein, Inc. Supplemental Executive Retirement Plan,

amended and restated effective as of January 1, 2014. (Incorporated by reference to Exhibit 10.2

to our Quarterly Report on Form 10-Q for the fiscal quarter ended September 26, 2020 filed on

November 2, 2020.)**

10.14

Henry Schein, Inc. 2004 Employee Stock Purchase Plan, effective as of May 25, 2004.

(Incorporated by reference to Exhibit D to our definitive 2004 Proxy Statement on

Schedule 14A, filed on April 27, 2004.)**

Table of Contents

132

10.15

Henry Schein, Inc. Non-Employee Director Deferred Compensation Plan, amended and restated

effective as of January 1, 2005. (Incorporated by reference to Exhibit 10.11 to our Annual

Report on Form 10-K for the fiscal year ended December 27, 2008 filed on February 24,

2009.)**

10.16

Henry Schein, Inc. Deferred Compensation Plan. (Incorporated by reference to Exhibit 10.23 to

our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 filed on

February 22, 2011.)**

10.17

Amendment to the Henry Schein, Inc. Deferred Compensation Plan. (Incorporated by reference

to Exhibit 10.26 to our Annual Report on Form 10-K for the fiscal year ended December 31,

2011 filed on February 15, 2012.)**

10.18

Amendment Number Two to the Henry Schein, Inc. Deferred Compensation

Plan. (Incorporated by reference to Exhibit 10.20 to our Annual Report on Form 10-K for the

fiscal year ended December 28, 2013 filed on February 11, 2014.)**

10.19

Amendment Number Three to the Henry Schein, Inc. Deferred Compensation Plan.

(Incorporated by reference to Exhibit 10.21 to our Annual Report on Form 10-K for the fiscal

year ended December 28, 2013 filed on February 11, 2014.)**

10.20

Amendment Number Four to the Henry Schein, Inc. Deferred Compensation Plan.

(Incorporated by reference to Exhibit 10.46 to our Annual Report on Form 10-K for the fiscal

year ended December 31, 2016 filed on February 21, 2017.)**

10.21

Amendment Number Five to the Henry Schein, Inc. Deferred Compensation Plan. (Incorporated

by reference to Exhibit 10.32 to our Annual Report on Form 10-K for the fiscal year ended

December 28, 2020 filed on February 20, 2020.)**

10.22

Amendment Number Six to the Henry Schein, Inc. Deferred Compensation Plan. (Incorporated

by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the fiscal quarter ended

March 28, 2020 filed on May 5, 2020.)**

10.23

Henry Schein Management Team Performance Incentive Plan and Plan Summary, effective as

of January 1, 2014. (Incorporated by reference to Exhibit 10.7 to our Quarterly Report on

Form 10-Q for the fiscal quarter ended March 29, 2014 filed on May 6, 2014.)**

10.24

Henry Schein, Inc. 2020 Recovery Performance Plan. (Incorporated by reference to Exhibit

10.1 to our Current Report on Form 8-K filed on August 12, 2020.)**

10.25

Amended and Restated Employment Agreement dated as of August 8, 2019, by and between

Henry Schein, Inc. and Stanley M. Bergman. (Incorporated by reference to Exhibit 10.1 to our

Current Report on Form 8-K filed on August 9, 2019.)**

http://www.sec.gov/Archives/edgar/data/1000228/000119312519217405/d770264dex101.htm

10.26

Voluntary Salary Waiver effective April 6, 2020, by and between Henry Schein, Inc. and

Stanley M. Bergman. (Incorporated by reference to Exhibit 10.5 to our Quarterly Report on

Form 10-Q for the fiscal quarter ended March 28, 2020 filed on May 5, 2020.)**

Table of Contents

133

10.27

Voluntary Salary Waiver effective June 19, 2020, by and between Henry Schein, Inc. and

Stanley M. Bergman. (Incorporated by reference to Exhibit 10.9 to our Quarterly Report on

Form 10-Q for the fiscal quarter ended June 27, 2020 filed on August 4, 2020.)**

10.28

Form of Performance-Based RSU Award Agreement for Stanley M. Bergman Pursuant to the

Henry Schein, Inc. 2013 Stock Incentive Plan (as Amended and Restated as of May 14, 2013).

(Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on August

9, 2019.)**

10.29

Form of Time-Based RSU Award Agreement for Stanley M. Bergman Pursuant to the Henry

Schein, Inc. 2013 Stock Incentive Plan (as Amended and Restated as of May 14, 2013).

(Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on August

9, 2019.)**

10.30

Form of Amended and Restated Change in Control Agreement dated December 12, 2008

between us and certain executive officers who are a party thereto (Gerald Benjamin, James

Breslawski, Michael S. Ettinger, Mark Mlotek and Steven Paladino, respectively). (Incorporated

by reference to Exhibit 10.15 to our Annual Report on Form 10-K for the fiscal year ended

December 27, 2008 filed on February 24, 2009.)**

10.31

Form of Amendment to Amended and Restated Change in Control Agreement effective January

1, 2012 between us and certain executive officers who are a party thereto (Gerald Benjamin,

James Breslawski, Michael S. Ettinger, Mark Mlotek and Steven Paladino, respectively).

(Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January

20, 2012.)**

10.32

Form of Change in Control Agreement between us and certain executive officers who are a

party thereto (Walter Siegel). (Incorporated by reference to Exhibit 10.3 to our Quarterly

Report on Form 10-Q for the fiscal quarter ended March 30, 2019 filed on May 7, 2019.)

10.33

Credit Agreement, dated as of April 17, 2020, among us, the several lenders parties thereto,

JPMorgan Chase Bank, N.A., as administrative agent, joint lead arranger and joint bookrunner,

and U.S. Bank National Association, as joint lead arranger and joint bookrunner. (Incorporated

by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 20, 2020.)

10.34

Credit Agreement, dated as of April 18, 2017, among the Company, the several lenders parties

thereto, JPMorgan Chase Bank, N.A., as administrative agent, joint lead arranger and joint

bookrunner, U.S. Bank National Association, as syndication agent, joint lead arranger and joint

bookrunner, together with the exhibits and schedules thereto. (Incorporated by reference to

Exhibit 10.1 to our Current Report on Form 8-K filed on April 19, 2017.)

10.35

First Amendment, dated as of June 29, 2018, among us, the several lenders parties thereto, and

JPMorgan Chase Bank, N.A., as administrative agent, lead arranger and lead bookrunner.

(Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 2,

2018.)

10.36

Second Amendment, dated as of April 17, 2020, among us, the several lenders parties thereto,

and JPMorgan Chase Bank, N.A., as administrative agent. (Incorporated by reference to Exhibit

10.2 to our Current Report on Form 8-K filed on April 20, 2020.)

Table of Contents

134

10.37

Receivables Purchase Agreement, dated as of April 17, 2013, by and among us, as servicer,

HSFR, Inc., as seller, The Bank of Tokyo -Mitsubishi UFJ, Ltd., as agent and the various

purchaser groups from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to

our Current Report on Form 8-K filed on April 19, 2013.)

10.38

Amendment No. 1 dated as of September 22, 2014 to the Receivables Purchase Agreement,

dated as of April 17, 2013, by and among us, as servicer, HSFR, Inc., as seller, The Bank of

Tokyo-Mitsubishi UFJ, LTD., New York Branch, as agent and the various purchaser groups

from time to time party thereto, as amended. (Incorporated by reference to Exhibit 10.2 to our

Current Report on Form 8-K filed on September 26, 2014.)

10.39

Amendment No. 2 dated as of April 17, 2015 to Receivables Purchase Agreement, dated as of

April 17, 2013, by and among us, as performance guarantor, HSFR, Inc., as seller, The Bank of

Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as agent and the various purchaser groups

party thereto. (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q

for the fiscal quarter ended June 25, 2016 filed on August 4, 2016.)

10.40

Amendment No. 3 dated as of June 1, 2016 to Receivables Purchase Agreement, dated as of

April 17, 2013, by and among us, as performance guarantor, HSFR, Inc., as seller, The Bank of

Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as agent and the various purchaser groups

party thereto. (Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q

for the fiscal quarter ended June 25, 2016 filed on August 4, 2016.)

10.41

Amendment No. 4 dated as of July 6, 2017 to Receivables Purchase Agreement, dated as of

April 17, 2013, by and among us, as performance guarantor, HSFR, Inc., as seller, The Bank of

Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as agent and the various purchaser groups

party thereto. (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q

for the fiscal quarter ended September 30, 2017 filed on November 6, 2017.)

10.42

Amendment No. 5 dated as of May 13, 2019 to Receivables Purchase Agreement, dated as of

April 17, 2013, by and among us, as performance guarantor, HSFR, Inc., as seller, The Bank of

Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as agent and the various purchaser groups

party thereto. (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q

for the fiscal quarter ended June 29, 2019 filed on August 6, 2019.)

10.43

Amendment No. 6 dated as of June 22, 2020 to the Receivables Purchase Agreement, dated as

of April 17, 2013, by and among us, as servicer, HSFR, Inc., as seller, lender, as agent and the

various purchaser groups from time to time party thereto, as amended. (Incorporated by

reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 25, 2020.)

10.44

Limited Waiver dated as of May 22, 2020 to Receivables Purchase Agreement, dated as of

April 17, 2013, by and among us, as servicer, HSFR, Inc., as seller, lender, as agent and the

various purchaser groups from time to time party thereto, as amended. (Incorporated by

reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q for the fiscal quarter ended

June 27, 2020 filed on August 4, 2020.)

Table of Contents

135

10.45

Omnibus Amendment No. 1, dated July 22, 2013, to Receivables Purchase Agreement dated as

of April 17, 2013, by and among us, as servicer, HSFR, Inc., as seller, The Bank of Tokyo-

Mitsubishi UFJ, Ltd., as agent, and the various purchaser groups from time to time party thereto

and Receivables Sales Agreement, dated as of April 17, 2013, by and among us, certain of our

wholly-owned subsidiaries and HSFR, Inc., as buyer. (Incorporated by reference to Exhibit

10.5 to our Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2013 filed on

August 6, 2013.)

10.46

Omnibus Amendment No. 2, dated April 21, 2014, to Receivables Purchase Agreement dated as

of April 17, 2013, as amended, by and among us, as servicer, HSFR, Inc., as seller, The Bank of

Tokyo-Mitsubishi UFJ, Ltd., as agent, and the various purchaser groups from time to time party

thereto and Receivables Sales Agreement, dated as of April 17, 2013, by and among us, certain

of our wholly-owned subsidiaries and HSFR, Inc., as buyer. (Incorporated by reference to

Exhibit 10.8 to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2014

filed on May 6, 2014.)

10.47

Receivables Sale Agreement, dated as of April 17, 2013, by and among us, certain of our

wholly-owned subsidiaries and HSFR, Inc., as buyer. (Incorporated by reference to Exhibit

10.2 to our Current Report on Form 8-K filed on April 19, 2013.)

10.48

Form of Indemnification Agreement between us and certain directors and executive officers

who are a party thereto (Mohamed Ali, Barry J. Alperin, Ph.D., Paul Brons, Deborah Derby,

Shira Goodman, Joseph L. Herring, Kurt P. Kuehn, Philip A. Laskawy, Anne H. Margulies,

Carol Raphael, E. Dianne Rekow, DDS, Ph.D., Bradley T. Sheares, Ph.D., Gerald A. Benjamin,

Stanley M. Bergman, James P. Breslawski, Michael S. Ettinger, Mark E. Mlotek, Steven

Paladino, and Walter Siegel, respectively). (Incorporated by reference to Exhibit 10.1 to our

Quarterly Report on Form 10-Q for the fiscal quarter ended September 26, 2015 filed on

November 4, 2015.)**

21.1

List of our Subsidiaries.+

23.1

Consent of BDO USA, LLP.+

31.1

Certification of our Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002.+

31.2

Certification of our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

of 2002.+

32.1

Certification of our Chief Executive Officer and Chief Financial Officer pursuant to Section 906

of the Sarbanes-Oxley Act of 2002.+

Table of Contents

136

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 Annual Report on Form 10-K

for the year ended December 26, 2020, formatted in Inline XBRL

(included within Exhibit 101 attachments).+

_________

Filed or furnished herewith.

* Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company

hereby agrees to furnish supplementally a copy of any of the omitted schedules and exhibits upon request

by the U.S. Securities and Exchange Commission.

Indicates management contract or compensatory plan or agreement.

ITEM 16.

Form 10-K Summary

None.

Table of Contents

137

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

By: /s/ STANLEY M. BERGMAN

Stanley M. Bergman

Chairman and Chief Executive Officer

February 17, 2021

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

report has been signed below by the

following persons on behalf of the Registrant and in the capacities and on

the dates indicated.

Signature

Capacity

Date

/s/ STANLEY M. BERGMAN

Chairman, Chief Executive Officer

February 17, 2021

Stanley M. Bergman

and Director (principal executive officer)

/s/ STEVEN PALADINO

Executive Vice President,

Chief Financial Officer

February 17, 2021

Steven Paladino

and Director (principal financial and accounting officer)

/s/ JAMES P.

BRESLAWSKI

Vice Chairman, President

and Director

February 17, 2021

James P.

Breslawski

/s/ GERALD A. BENJAMIN

Director

February 17, 2021

Gerald A. Benjamin

/s/ MARK E. MLOTEK

Director

February 17, 2021

Mark E. Mlotek

/s/ MOHAMAD ALI

Director

February 17, 2021

Mohamad Ali

/s/ BARRY J. ALPERIN

Director

February 17, 2021

Barry J. Alperin

/s/ PAUL

BRONS

Director

February 17, 2021

Paul Brons

/s/ DEBORAH DERBY

Director

February 17, 2021

Deborah Derby

/s/ SHIRA GOODMAN

Director

February 17, 2021

Shira Goodman

/s/ JOSEPH L. HERRING

Director

February 17, 2021

Joseph L. Herring

/s/ KURT P.

KUEHN

Director

February 17, 2021

Kurt P.

Kuehn

/s/ PHILIP A. LASKAWY

Director

February 17, 2021

Philip A. Laskawy

/s/ ANNE H. MARGULIES

Director

February 17, 2021

Anne H. Margulies

/s/ CAROL RAPHAEL

Director

February 17, 2021

Carol Raphael

/s/ E. DIANNE REKOW

Director

February 17, 2021

E. Dianne Rekow,

DDS, Ph.D.

/s/ BRADLEY T. SHEARES,

PH. D.

Director

February 17, 2021

Bradley T. Sheares,

Ph. D.

Table of Contents

138

Schedule II

Valuation

and Qualifying Accounts

(in thousands)

Additions (Reductions)

Charged

Balance at

Charged to

(credited) to

Balance at

beginning of

statement of

other

end of

Description

period

income (1)

accounts (2)

Deductions (3)

period

Year

ended December 26, 2020:

Allowance for doubtful accounts

and other

60,002

35,137

730

(7,839)

88,030

Yea

ended December 28, 2019:

Allowance for doubtful accounts

and other

53,121

12,612

134

(5,865)

60,002

Yea

ended December 29, 2018:

Allowance for doubtful accounts

and other

46,261

14,384

(1,158)

(6,366)

53,121

(1)

Represents amounts charged to bad debt expense.

(2)

Amounts charged (credited) to other accounts primarily relate to provision for late fees and the impact

of foreign currency exchange rates and

the adoption of ASU No. 2016-13 effective December 29, 2019.

(3)

Deductions primarily consist of fully reserved accounts receivable that have been written off.

exhibit211

Exhibit 21.1

List of Subsidiaries

Subsidiary

Jurisdiction of incorporation or organization

ACE Surgical Supply Co.

Massachusetts

BioHorizons, Inc.

Delaware

Camlog USA, Inc.

Delaware

Exan Enterprises Inc.

Nevada

General Injectables & Vaccines,

Inc.

Virginia

Handpiece Parts & Repairs, Inc.

Delaware

Henry Schein Europe, Inc.

Delaware

Henry Schein Latin America Pacific Rim, Inc.

Delaware

Henry Schein Medical Systems, Inc.

Ohio

Henry Schein Practice Solutions Inc.

Utah

HS Brand Management Inc.

Delaware

HS TM Holdings, LLC

Delaware

HSFR, Inc.

Delaware

Prism Medical Products LLC

Delaware

Project Helium Holdings, LLC

Delaware

Project Spartan Holdings Corp.

Delaware

SG Healthcare Corp.

Delaware

TDSC, Inc.

Delaware

ACE Surgical

Supply Co.,

Inc. is the

parent company

of two consolidated,

wholly-owned subsidiaries,

each of

which

operate in the health care manufacturing and distribution industry in the United

States.

BioHorizons, Inc. is the

parent, holding company

of 13 consolidated, wholly-owned

subsidiaries, six of which

operate

within the United

States and seven

of which operate

outside of the

United States, and

all of which

operate in the

dental

implant and

distribution industries.

BioHorizons, Inc.

also owns

a majority

interest in

BioHorizons Camlog

Italia SRL

which operates outside the United States in the dental implant and distribution

industries.

Camlog

USA,

Inc.

the

parent,

holding

company

two

consolidated,

wholly-owned

subsidiaries,

one

which

operates in the dental

implant and distribution

industries within the United

States, and one of

which operates a financial

support services business for health care practitioners in and outside of

the United States.

Exan Enterprises Inc.

is the parent, holding

company of one consolidated,

wholly-owned subsidiary which

operates in

the dental management software industry within the United States.

General

Injectables

Vaccines,

Inc.

the

parent,

holding

company

one

consolidated,

wholly-owned

subsidiary

which operates in the medical distribution industry in the United States.

Henry Schein Europe, Inc. is the parent, holding company

of 63 consolidated, wholly-owned subsidiaries, five of which

operate within the United States and 58 of which operate outside the United States, and all of which operate in the health

care distribution

industry.

Henry Schein

Europe, Inc.

also owns

a majority

interest in

the following

companies,

all of

which

operate

outside

the

United

States

the

health

care

distribution

industry:

Cliniclands

AB,

Dental

Trey

S.r.l.,

Infomed Servicios Informáticos,

S.L., Marrodent Sp.

z o.o.,

MediEstates Ltd., MediFinancial

Ltd., Mediholdings Limited,

Mega Dental SNC, Newshelf

1223 Proprietary Limited,

Henry Schein Dental Warehouse

(PTY) Ltd., BA International

Proprietary Limited,

Henry Schein

España, S.L.,

Servimed Técnicos,

S.L.U., Spain

Dental Express

S.A.U., and

Henry

Schein Portugal, Unipessoal LDA.

Henry

Schein

Latin

America

Pacific

Rim,

Inc.

the

parent,

holding

company

consolidated,

wholly-owned

subsidiaries, two

of which

operate within the

United States and

nine of which

operate outside of

the United States,

and

all of which

operate in the

health care distribution

industry.

Henry Schein

Latin America Pacific

Rim, Inc. also

owns a

majority interest in the following companies, all of which operate outside the United States in the health care distribution

industry:

Accord Corporation Limited, BA Pro

Repair Ltd., Hangzhou Lixue Henry Schein

Medical Instrument Co., Ltd.,

Henry

Schein

China

Management

Co.

Ltd.,

Henry

Schein

China

Services

Limited,

Henry

Schein

Hemao

Guangzhou

Medical Device Co., Ltd., Henry

Schein Hong Kong Holdings

Limited, Henry Schein Hong Kong Limited,

Henry Schein

Jiahu (Shanghai) Co. Ltd., Henry Schein

Regional Limited, Henry Schein Regional Pty Ltd

as the Trustee for the Henry

Schein Regional

Trust, Henry

Schein Regional

Trust, HSR

Holdings Pty

Limited,

Henry Schein

Shvadent (2009)

Ltd.,

Henry

Schein

Sunshine

(Beijing)

Medical

Device

Co.

Ltd.,

Henry

Schein

Trading

(Shanghai)

Co.,

Ltd.,

Medi-

Consumables PTY Limited, Ningbo

Buyinghall Medical Equipment Co.,

Ltd., Wuhan Hongchang

Henry Schein Dental

Instrument Co., Ltd., and Zhengzhou Yifeng

Henry Schein Dental Instrument Co., Ltd.

Henry Schein

Practice Solutions

Inc. is

the parent,

holding company

of 19

consolidated, wholly

-owned subsidiaries,

two of which operate within

the United States,

and 17 of which

operate outside the United

States, and all of

which operate

in the digital

dental products and

solutions industry.

Henry Schein Practice

Solutions Inc. also

owns a majority

interest

in Henry Schein One, LLC and Lighthouse 360, Inc. which operate within the United States

in the digital dental products

and

solutions

industry.

Additionally,

Henry

Schein

Practice

Solutions

Inc.

owns

majority

interest

the

following

companies, all

of which

operate outside

the United

States, in

the digital

dental products

and solutions

industry: Axium

Solutions ULC,

Dental Cremer

Produtos Odontológicos

S.A., D-Net

S.r.l.,

Elite Computer

Italia S.r.l.,

Elite Computer

Point S.r.l., Green Support S.r.l.,

Henry Schein One Australia, Henry Schein One New Zealand, Infomed Software, S.L.,

Julie Solutions SAS, Kopfwerk Datensysteme GmbH, Medentis Medical GmbH, Orisline Espana S.L., Orisline Portugal

Unipessoal Lda, Quantity

Serviços e Comércio de

Produtos para a Saúde

S.A., Simples Dental Software

S.A., Software

of Excellence

Practice Solutions

Coöperatief U.A.,

Software of

Excellence United

Kingdom Limited,

and Transportes

Hasse Ltda.

HS TM Holdings,

LLC is the

parent, holding

company of one

consolidated, wholly-owned

subsidiary which

operates

within the United States, in the health care industry.

Project Helium

Holdings, LLC

is the

parent, holding

company of

one consolidated,

wholly-owned subsidiary

which

operates within the United States, in the dental handpiece repair and

sales industry.

Project Spartan Holdings

Corp. is the

parent, holding company

of two consolidated,

wholly-owned subsidiaries,

both

of which operate within the United

States, in the health care

industry. Project Spartan Holding Corp. also owns a majority

interest in the following companies, all of which

operate within the United States, in the health care distribution industry:

NAR (HSI)

Holdings, LLC,

NAR Blocker,

Inc., NAR

Training,

LLC, North

American Rescue

Holdings, LLC,

North

American Rescue, LLC, and NAR Medical Depot,

LLC.

SG Healthcare

Corp.

is the

parent,

holding

company

of six

consolidated,

wholly-owned subsidiaries,

five of

which

operate within the United

States, and one of

which operates outside of

the United States, and

all of which operate

in the

health care distribution industry.

exhibit231

Table of Contents

Consent of Independent Registered Public Accounting Firm

Henry Schein, Inc.

Melville, New York

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-212994,

333-192788, 333-171400, 333-164360, 333-111914, 333-91778, 333-35144, 333-39893, 333-33193, and 333-

05453) of Henry Schein, Inc. of our reports dated February17,

2021, relating to the consolidated financial

statements and the effectiveness of Henry Schein, Inc.’s internal control over financial reporting, which appear in

this Annual Report on Form 10-K.

/s/ BDO USA, LLP

New York,

February 17,

2021

exhibit311

Exhibit 31.1

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

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT

TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Stanley M. Bergman, certify that:

I have reviewed this annual report on Form

K of Henry Schein, Inc.

(the “registrant”)

;

Based

on my

knowledge, this

report

does

not

contain any

untrue statement

a material

fact or

omit to

state a

material

fact

necessary

make

the

statements

made,

light

the

circumstances

under

which

such

statements

were

made, not misleading with respect to the period covered by this report;

Based on

knowledge, the

financial statements,

and other

financial information

included in

this report,

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;

The registrant’s

other certifying officer

and I are

responsible for establishing

and ma

intaining 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 Rules 13a-15(f) and 15d-15(f)) for the

registrant and have:

designed such d

isclosure controls and procedures, or caused such disclosure controls and procedures to be

designed

under

our

supervision,

ensure

that

material

information

relating

the

registrant,

including

its

consolidated subsidiaries,

made

known to

us by

others

within those

entities, particularly

during the

period in

which this report is being prepared;

designed

such

internal

control

over

financial

reporting,

caused

such

internal

control

over

financial

reporting

designed

under

our

supervision,

provide

reasonable

assurance

regarding

the

reliability

financial reporting and the

preparation of financial

statements for external purposes

in accordance with

generally

accepted accounting principles;

evaluated

the

effectiveness

the

registrant’s

isclosure

controls

and

procedures

and

presented

this

report

our

conclusions

about

the

effectiveness

the

disclosure

controls

and

procedures,

the

end

the

period covered by this report based on such evaluation; and

disclosed

this

report

any

change

the

registrant’s

internal

control

over

financial

reporting

that

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,

reasonably

likely

materially

affect,

the

registrant’s

internal

control over financial reporting; and

The

registrant’s

other

certifying

officer

and

have

disclosed,

based

our

most

recent

evaluation

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):

all

significant

deficiencies

and

material

weaknesses

the

design

operation

internal

control

over

financial

reporting

which

are

reasonably

likely

adversely

affect

the

registrant’s

ability

record,

process,

summarize and report financial information; and

any fraud, whether

or not material,

that involves management

or other employees

who have a

significant

role in the registrant’s internal control over financial reporting.

Dated:

February 17,

2021

/s/ Stanley M. Bergman

Stanley M. Bergman

Chairman and Chief Executive Officer

exhibit312

Exhibit 31.2

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

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT

TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Steven Paladino, certify that:

I have reviewed this annual report on Form

K of Henry Schein, Inc.

(the “registrant”)

;

Based

on my

knowledge, this

report

does

not

contain any

untrue statement

a material

fact or

omit to

state a

material

fact

necessary

make

the

statements

made,

light

the

circumstances

under

which

such

statements

were

made, not misleading with respect to the period covered by this report;

Based on

knowledge, the

financial statements,

and other

financial information

included in

this report,

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;

The registrant’s

other certifying officer

and I are

responsible for establishing

and ma

intaining 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 Rules 13a-15(f) and 15d-15(f)) for the

registrant and have:

designed such d

isclosure controls and procedures, or caused such disclosure controls and procedures to be

designed

under

our

supervision,

ensure

that

material

information

relating

the

registrant,

including

its

consolidated subsidiaries,

made

known to

us by

others

within those

entities, particularly

during the

period in

which this report is being prepared;

designed

such

internal

control

over

financial

reporting,

caused

such

internal

control

over

financial

reporting

designed

under

our

supervision,

provide

reasonable

assurance

regarding

the

reliability

financial reporting and the

preparation of financial

statements for external purposes

in accordance with

generally

accepted accounting principles;

evaluated

the

effectiveness

the

registrant’s

isclosure

controls

and

procedures

and

presented

this

report

our

conclusions

about

the

effectiveness

the

disclosure

controls

and

procedures,

the

end

the

period covered by this report based on such evaluation; and

disclosed

this

report

any

change

the

registrant’s

internal

control

over

financial

reporting

that

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,

reasonably

likely

materially

affect,

the

registrant’s

internal

control over financial reporting; and

The

registrant’s

other

certifying

officer

and

have

disclosed,

based

our

most

recent

evaluation

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):

all

significant

deficiencies

and

material

weaknesses

the

design

operation

internal

control

over

financial

reporting

which

are

reasonably

likely

adversely

affect

the

registrant’s

ability

record,

process,

summarize and report financial information; and

any fraud, whether

or not material,

that involves management

or other employees

who have a

significant

role in the registrant’s internal control over financial reporting.

Dated:

February 17,

2021

/s/ Steven Paladino

Steven Paladino

Executive Vice President and

Chief Financial Officer

exhibit321

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 annual report on Form 10-K of Henry Schein, Inc. (the

“Company”) for the period ended December 26, 2020, 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, Steven Paladino,

Executive 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:

February 17, 2021

/s/ Stanley M. Bergman

Stanley M. Bergman

Chairman and Chief Executive Officer

Dated:

February 17, 2021

/s/ Steven Paladino

Steven Paladino

Executive 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.