Henry Schein (HSIC) 10-Q 2022 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒

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

OF 1934

For the

quarterly

period ended

September 24, 2022

or

☐

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

OF 1934

For the transition period from ____________ to ____________

Commission File Number:

0-27078

HENRY SCHEIN, INC.

(Exact name of registrant as specified in its charter)

Delaware

11-3136595

(State or other jurisdiction of

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

incorporation or organization)

135 Duryea Road

Melville

,

New York

(Address of principal executive offices)

11747

(Zip Code)

(

631

)

843-5500

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

HSIC

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such

reports), and (2) has been subject to such filing requirements for thepast 90 days.

Yes

☒

No

☐

Indicate bycheck markwhether the registranthas submittedelectronically every InteractiveData Filerequired tobe submitted

pursuanttoRule405ofRegulationS-Tduringthepreceding12months(orforsuchshorterperiodthattheregistrantwas

required to submit such files).

Yes

☒

No

☐

Indicate bycheck markwhether theregistrant isa largeaccelerated filer,an acceleratedfiler,a non-acceleratedfiler,a smaller

reportingcompany,oranemerginggrowthcompany.Seethedefinitionsof“largeacceleratedfiler,”“acceleratedfiler,”

“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 periodfor

complying with any new or revised financial accounting standards providedpursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as definedin Rule 12b-2 of the Exchange Act).

Yes

☐

No

☒

As of October 24, 2022,

there were

135,547,575

shares of the registrant’s common stock outstanding.

HENRY SCHEIN, INC.

INDEX

Page

3

4

5

6

7

8

9

9

10

11

12

13

15

17

19

20

21

24

24

26

27

28

28

29

46

46

47

47

47

48

49

See accompanying notes.

3

PARTI. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions,except share data)

September 24,

December 25,

2022

2021

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

123

$

118

Accounts receivable, net of reserves of $

63

and $

67

1,507

1,452

Inventories, net

1,818

1,861

Prepaid expenses and other

509

413

Total current assets

3,957

3,844

Property and equipment, net

354

366

Operating lease right-of-use assets

319

325

Goodwill

2,870

2,854

Other intangibles, net

635

668

Investments and other

399

424

Total assets

$

8,534

$

8,481

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

957

$

1,054

Bank credit lines

107

51

Current maturities of long-term debt

4

11

Operating lease liabilities

72

76

Accrued expenses:

Payroll and related

330

385

Taxes

127

137

Other

549

593

Total current liabilities

2,146

2,307

Long-term debt

934

811

Deferred income taxes

37

42

Operating lease liabilities

271

268

Other liabilities

338

377

Total liabilities

3,726

3,805

Redeemable noncontrolling interests

563

613

Commitments and contingencies

(nil)

(nil)

Stockholders' equity:

Preferred stock, $

0.01

par value,

1,000,000

shares authorized,

none

outstanding

-

-

Common stock, $

0.01

par value,

480,000,000

shares authorized,

135,258,887

outstanding on September 24, 2022 and

137,145,558

outstanding on December 25, 2021

1

1

Additional paid-in capital

-

-

Retained earnings

3,922

3,595

Accumulated other comprehensive loss

(312)

(171)

Total Henry Schein, Inc. stockholders' equity

3,611

3,425

Noncontrolling interests

634

638

Total stockholders' equity

4,245

4,063

Total liabilities, redeemable noncontrollinginterests and stockholders' equity

$

8,534

$

8,481

See accompanying notes.

4

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTSOF INCOME

(unaudited, in millions, except share and per share data)

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

2022

2021

2022

2021

Net sales

$

3,067

$

3,178

$

9,276

$

9,070

Cost of sales

2,153

2,266

6,444

6,376

Gross profit

914

912

2,832

2,694

Operating expenses:

Selling, general and administrative

648

657

2,010

1,906

Depreciation and amortization

45

44

137

133

Restructuring and integration costs

10

-

10

4

Operating income

211

211

675

651

Other income (expense):

Interest income

4

2

9

5

Interest expense

(11)

(7)

(27)

(20)

Other, net

1

-

1

1

Income before taxes, equity in earnings of affiliates

and noncontrolling interests

205

206

658

637

Income taxes

(46)

(50)

(155)

(154)

Equity in earnings of affiliates

3

6

12

18

Gain on sale of equity investment

-

7

-

7

Net income

162

169

515

508

Less: Net income attributable to noncontrolling interests

(12)

(7)

(24)

(24)

Net income attributable to Henry Schein, Inc.

$

150

$

162

$

491

$

484

Earnings per share attributable to Henry Schein, Inc.:

Basic

$

1.10

$

1.16

$

3.59

$

3.44

Diluted

$

1.09

$

1.15

$

3.55

$

3.40

Weighted-average commonshares outstanding:

Basic

135,608,678

139,377,237

136,731,413

140,661,182

Diluted

137,084,049

141,079,337

138,488,254

142,178,702

See accompanying notes.

5

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTSOF COMPREHENSIVE INCOME

(unaudited, in millions)

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

2022

2021

2022

2021

Net income

$

162

$

169

$

515

$

508

Other comprehensive loss, net of tax:

Foreign currency translation loss

(89)

(40)

(176)

(40)

Unrealized gain from foreign currency hedging

activities

11

4

20

5

Pension adjustment gain

1

-

1

1

Other comprehensive loss, net of tax

(77)

(36)

(155)

(34)

Comprehensive income

85

133

360

474

Comprehensive income attributable to noncontrolling

interests:

Net income

(12)

(7)

(24)

(24)

Foreign currency translation loss

6

5

14

4

Comprehensive income attributable to noncontrolling

interests

(6)

(2)

(10)

(20)

Comprehensive income attributable to Henry Schein, Inc.

$

79

$

131

$

350

$

454

See accompanying notes.

6

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTOF CHANGES IN

STOCKHOLDERS’ EQUITY

(unaudited, in millions, except share and per share data)

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Shares

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, June 25, 2022

136,439,560

$

1

$

-

$

3,834

$

(241)

$

633

$

4,227

Net income (excluding $

10

attributable to Redeemable

noncontrolling interests)

-

-

-

150

-

2

152

Foreign currency translation loss (excluding loss of $

6

attributable to Redeemable noncontrolling interests)

-

-

-

-

(83)

-

(83)

Unrealized gain from foreign currency hedging activities,

net of tax of $

4

-

-

-

-

11

-

11

Pension adjustment gain, net of tax of $

1

-

-

-

-

1

-

1

Dividends paid

-

-

-

-

-

(1)

(1)

Change in fair value of redeemable securities

-

-

11

-

-

-

11

Repurchases and retirement of common stock

(1,183,729)

-

(12)

(78)

-

-

(90)

Stock-based compensation expense

3,640

-

17

-

-

-

17

Stock issued upon exercise of stock options

597

-

-

-

-

-

-

Shares withheld for payroll taxes

(1,194)

-

(1)

-

-

-

(1)

Settlement of stock-based compensation awards

13

-

1

-

-

-

1

Transfer of charges in excess ofcapital

-

-

(16)

16

-

-

-

Balance, September 24, 2022

135,258,887

$

1

$

-

$

3,922

$

(312)

$

634

$

4,245

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Shares

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, June 26, 2021

139,780,841

$

1

$

-

$

3,466

$

(107)

$

646

$

4,006

Net income (excluding $

5

attributable to Redeemable

noncontrolling interests)

-

-

-

162

-

2

164

Foreign currency translation loss (excluding loss of $

5

attributable to Redeemable noncontrolling interests)

-

-

-

-

(35)

-

(35)

Unrealized gain from foreign currency hedging activities,

net of tax of $

1

-

-

-

-

4

-

4

Change in fair value of redeemable securities

-

-

(11)

-

-

-

(11)

Repurchases and retirement of common stock

(651,289)

-

(7)

(43)

-

-

(50)

Stock-based compensation expense

11

-

28

-

-

-

28

Shares withheld for payroll taxes

(20)

-

-

-

-

-

-

Transfer of charges in excess ofcapital

-

-

(10)

10

-

-

-

Balance, September 25, 2021

139,129,543

$

1

$

-

$

3,595

$

(138)

$

648

$

4,106

See accompanying notes.

7

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTOF CHANGES IN

STOCKHOLDERS' EQUITY

(unaudited, in millions, except share and per share data)

Accumulated

Common Stock

Additional

Other

Total

$.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Shares

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, December 25, 2021

137,145,558

$

1

$

-

$

3,595

$

(171)

$

638

$

4,063

Net income (excluding $

19

attributable to Redeemable

noncontrolling interests)

-

-

-

491

-

5

496

Foreign currency translation loss (excluding loss of $

13

attributable to Redeemable noncontrolling interests)

-

-

-

-

(162)

(1)

(163)

Unrealized gain from foreign currency hedging activities,

net of tax of $

7

-

-

-

-

20

-

20

Pension adjustment gain, net of tax of $

1

-

-

-

-

1

-

1

Dividends paid

-

-

-

-

-

(1)

(1)

Purchase of noncontrolling interests

-

-

-

-

-

(7)

(7)

Change in fair value of redeemable securities

-

-

18

-

-

-

18

Repurchases and retirement of common stock

(2,529,126)

-

(28)

(172)

-

-

(200)

Stock-based compensation expense

958,539

-

44

-

-

-

44

Stock issued upon exercise of stock options

30,424

-

2

-

-

-

2

Shares withheld for payroll taxes

(343,541)

-

(30)

-

-

-

(30)

Settlement of stock-based compensation awards

(2,967)

-

2

-

-

-

2

Transfer of charges in excess ofcapital

-

-

(8)

8

-

-

-

Balance, September 24, 2022

135,258,887

$

1

$

-

$

3,922

$

(312)

$

634

$

4,245

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Shares

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, December 26, 2020

142,462,571

$

1

$

-

$

3,455

$

(108)

$

636

$

3,984

Net income (excluding $

19

attributable to Redeemable

noncontrolling interests)

-

-

-

484

-

5

489

Foreign currency translation loss (excluding loss of $

4

attributable to Redeemable noncontrolling interests)

-

-

-

-

(36)

-

(36)

Unrealized gain from foreign currency hedging activities,

net of tax of $

2

-

-

-

-

5

-

5

Pension adjustment gain, net of tax of $

0

-

-

-

-

1

-

1

Change in fair value of redeemable securities

-

-

(144)

-

-

-

(144)

Initial noncontrolling interests and adjustments related to

business acquisitions

-

-

-

-

-

7

7

Repurchases and retirement of common stock

(3,518,846)

-

(34)

(217)

-

-

(251)

Stock-based compensation expense

299,572

-

58

-

-

-

58

Shares withheld for payroll taxes

(113,754)

-

(7)

-

-

-

(7)

Transfer of charges in excess ofcapital

-

-

127

(127)

-

-

-

Balance, September 25, 2021

139,129,543

$

1

$

-

$

3,595

$

(138)

$

648

$

4,106

See accompanying notes.

8

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS

(unaudited, in millions)

Nine Months Ended

September 24,

September 25,

2022

2021

Cash flows from operating activities:

Net income

$

515

$

508

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

Depreciation and amortization

160

151

Gain on sale of equity investment

-

(10)

Stock-based compensation expense

44

58

Provision for (benefit from) losses on trade and other accounts receivable

2

(9)

Benefit from deferred income taxes

(20)

(1)

Equity in earnings of affiliates

(12)

(18)

Distributions from equity affiliates

12

15

Changes in unrecognized tax benefits

1

(6)

Other

(25)

-

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(93)

(83)

Inventories

(9)

(208)

Other current assets

(96)

(41)

Accounts payable and accrued expenses

(131)

77

Net cash provided by operating activities

348

433

Cash flows from investing activities:

Purchases of fixed assets

(67)

(49)

Payments related to equity investments and business

acquisitions, net of cash acquired

(127)

(415)

Proceeds from sale of equity investments

-

10

Proceeds from (payments for) loan to affiliate

9

(6)

Other

(26)

(19)

Net cash used in investing activities

(211)

(479)

Cash flows from financing activities:

Net change in bank borrowings

51

(13)

Proceeds from issuance of long-term debt

165

200

Principal payments for long-term debt

(58)

(122)

Debt issuance costs

-

(2)

Proceeds from issuance of stock upon exercise of stock options

2

-

Payments for repurchases and retirement of common stock

(200)

(251)

Payments for taxes related to shares withheld for employee taxes

(30)

(7)

Distributions to noncontrolling shareholders

(18)

(9)

Acquisitions of noncontrolling interests in subsidiaries

(33)

(50)

Net cash used in financing activities

(121)

(254)

Effect of exchange rate changes on cash and cash equivalents

(11)

(2)

Net change in cash and cash equivalents

5

(302)

Cash and cash equivalents, beginning of period

118

421

Cash and cash equivalents, end of period

$

123

$

119

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

9

Note 1 – Basis of Presentation

Our condensed consolidated financial statements include the accounts of HenrySchein, Inc. and all of our

controlled subsidiaries (“we”, “us” or “our”).All intercompany accounts and transactions are eliminatedin

consolidation.Investments in unconsolidated affiliates in which we have the ability toinfluence 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.

Our accompanying unaudited condensed consolidated financial statementshave been prepared in accordance with

accounting principles generally accepted in the United States(“U.S. GAAP”) for interim financial information and

with the instructions to Form 10-Q and Article 10 of Regulation S-X.Accordingly, they do not include all of the

information and footnote disclosures required by U.S. GAAP for completefinancial statements.

The unaudited interim condensed consolidated financial statements should beread in conjunction with the audited

consolidated financial statements and notes to the consolidated financialstatements contained in our Annual Report

on Form 10-K for the year ended December 25, 2021 and with the informationcontained in our other publicly-

available filings with the Securities and Exchange Commission.The condensed consolidated financial statements

reflect all adjustments considered necessary for a fair presentation ofthe consolidated results of operations and

financial position for the interim periods presented.All such adjustments are of a normal recurring nature.

The preparation of financial statements in conformity with accounting principlesgenerally accepted in the United

States requires us to make estimates and assumptions that affect the reported amounts ofassets and liabilities and

disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of

revenues and expenses during the reporting period.Actual results could differ from those estimates.The results of

operations for the nine months ended September 24, 2022 are not necessarilyindicative of the results to be expected

for any other interim period or for the year ending December 31, 2022.

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

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

direct activities that most significantly affect the economic performance and havethe obligation to absorb the

majority of the losses or benefits.For this VIE, the trade accounts receivable transferred to the VIEare pledged as

collateral to the related debt.The creditors have recourse to us for losses on these trade accountsreceivable.At

September 24, 2022 and December 25, 2021, certain trade accounts receivablethat can only be used to settle

obligations of this VIE were $

313

million and $

138

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

creditors have recourse to us were $

225

million and $

105

million, respectively.

Our condensed consolidated financial statements reflect estimates andassumptions made by us that affect, among

other things, our goodwill, long-lived asset and definite-lived intangibleasset valuation; inventory valuation; equity

investment valuation; assessment of the annual effective tax rate; valuation ofdeferred income taxes and income

tax contingencies; the allowance for doubtful accounts; hedging activity;supplier rebates; measurement of

compensation cost for certain share-based performance awards and cash bonusplans; and pension plan

assumptions.Due to the significant uncertainty surrounding the future impact ofCOVID-19, our judgments

regarding estimates and impairments could change in the future.There is an ongoing risk that the COVID-19

pandemic may again have a material adverse effect on our business, results of operationsand 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

.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

10

Note 2 – Critical Accounting Policies, Accounting Pronouncements Adoptedand Recently Issued Accounting

Standards

Critical Accounting Policies

There have been no material changes in our critical accounting policiesduring the nine months ended September

24, 2022, as compared to the critical accounting policies described in Item 7of our Annual Report on Form 10-K

for the year ended December 25, 2021.

Accounting Pronouncements Adopted

On

December 26, 2021

we adopted Accounting Standards Update (“ASU”) No. 2021 – 08, “Accountingfor

Contract Assets and Contract Liabilities from Contracts with Customers”(Subtopic 805).ASU 2021 – 08 requires

an acquirer to recognize and measure contract assets and contract liabilities acquiredin a business combination in

accordance with Topic 606.At the acquisition date, an acquirer should account for the related revenuecontracts in

accordance with Topic 606 as if it had originated the contracts.To achieve this, an acquirer may assess how the

acquiree applied Topic 606 to determine what to record for the acquired revenue contracts.Generally, this should

result in an acquirer recognizing and measuring the acquired contract assetsand contract liabilities consistent with

how they were recognized and measured in the acquiree’s financial statements.Our

adoption

of ASU 2021 - 08 did

not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, “Reference Rate

Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides

optional expedients and exceptions for applying U.S. GAAP to contracts,hedging relationships and other

transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) orby another

reference rate expected to be discontinued because of reference rate reform.The guidance was effective beginning

March 12, 2020 and can be applied prospectively through December 31,2022.In January 2021, the FASB issued

ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”).ASU 2021-01 provides temporary

optional expedients and exceptions to certain guidance in U.S. GAAPto ease the financial reporting burdens related

to the expected market transition from LIBOR and other interbank offered ratesto alternative reference rates, such

as the Secured Overnight Financing Rate.The guidance is effective upon issuance, on January 7, 2021, and can be

applied through December 31, 2022.We do not expect that the requirements of this guidance will have a material

impact on our consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-01, “Derivatives and Hedging (Topic 815): Fair ValueHedging –

Portfolio Layer Method,” which will expand companies' abilitiesto hedge the benchmark interest rate risk of

portfolios of financial assets (or beneficial interests) in a fair value hedge.This ASU expands the use of the

portfolio layer method (previously referred to as the last-of-layermethod) to allow multiple hedges of a single

closed portfolio of assets using spot starting, forward starting and amortizing-notionalswaps.It also permits both

prepayable and non-prepayable financial assets to be included in the closedportfolio of assets hedged in a portfolio

layer hedge.This ASU further requires that basis adjustments not be allocatedto individual assets for active

portfolio layer method hedges, but rather be maintained on the closed portfolioof assets as a whole.ASU 2022 –

01 is effective for fiscal years beginning after December 15, 2022, including interim periodswithin those fiscal

years.Early adoption is permitted for any entity that has adopted the amendmentsin ASU 2017-12.We do not

expect that the requirements of this guidance will have a material impacton our consolidated financial statements.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

11

Note 3 – Revenue from Contracts with Customers

Revenue is recognized in accordance with policies disclosed in Item 8 of ourAnnual Report on Form 10-K for

the year ended December 25, 2021.

Disaggregation of Net Sales

The following table disaggregates our Net sales by reportable segment and geographicarea:

Three Months Ended

Nine Months Ended

September 24, 2022

September 24, 2022

North

America

International

Global

North

America

International

Global

Net Sales:

Health care distribution

Dental

$

1,131

$

654

$

1,785

$

3,360

$

2,106

$

5,466

Medical

1,088

18

1,106

3,215

59

3,274

Total health care distribution

2,219

672

2,891

6,575

2,165

8,740

Technologyand value-added services

155

21

176

469

67

536

Total revenues

$

2,374

$

693

$

3,067

$

7,044

$

2,232

$

9,276

Three Months Ended

Nine Months Ended

September 25, 2021

September 25, 2021

North

America

International

Global

North

America

International

Global

Net Sales:

Health care distribution

Dental

$

1,115

$

708

$

1,823

$

3,289

$

2,235

$

5,524

Medical

1,162

23

1,185

3,000

78

3,078

Total health care distribution

2,277

731

3,008

6,289

2,313

8,602

Technologyand value-added services

149

21

170

404

64

468

Total revenues

$

2,426

$

752

$

3,178

$

6,693

$

2,377

$

9,070

At December 25, 2021, the current portion of contract liabilities of $

89

million was reported in Accrued expenses:

Other, and $

10

million related to non-current contract liabilities was reportedin Other liabilities.During the nine

months ended September 24, 2022, we recognized in net sales $

70

million of the amounts that were previously

deferred at December 25, 2021.At September 24, 2022, the current and non-current portion of contractliabilities

were $

76

million and $

9

million, respectively.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

12

Note 4

–

Segment Data

We conduct our business through

two

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

value-added services.These segments offer different products and services to the same customer base. Ourglobal

dental businesses serve office-based dental practitioners, dental laboratories, schools andother institutions.Our

global medical businesses serve office-based medical practitioners, ambulatorysurgery centers, other alternate-care

settings and other institutions.Our global dental and medical groups serve practitioners in

32

countries worldwide.

The health care distribution reportable segment aggregates our globaldental and medical operating segments.This

segment distributes consumable products, dental specialty products,small equipment, laboratory products, large

equipment, equipment repair services, branded and generic pharmaceuticals,vaccines, surgical products, diagnostic

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

Our global technology and value-added services reportable segment providessoftware, technology and other value-

added services to health care practitioners.Our technology offerings include practice management software

systems for dental and medical practitioners.Our value-added practice solutions include practice consultancy,

education, revenue cycle management and financial services on a non-recoursebasis, 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 operatingsegments:

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

2022

2021

2022

2021

Net Sales:

Health care distribution

Dental

$

1,785

$

1,823

$

5,466

$

5,524

Medical

1,106

1,185

3,274

3,078

Total health care distribution

2,891

3,008

8,740

8,602

Technologyand value-added services

176

170

536

468

Total

$

3,067

$

3,178

$

9,276

$

9,070

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

2022

2021

2022

2021

Operating Income:

Health care distribution

$

179

$

179

$

579

$

558

Technologyand value-added services

32

32

96

93

Total

$

211

$

211

$

675

$

651

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

13

Note 5

–

Business Acquisitions

2022 Acquisitions

We completed several acquisitions during the nine months ended September 24, 2022,which were immaterial to

our condensed consolidated financial statements.Our acquired ownership interest ranged between

80

% to

100

%.

Acquisitions within our healthcare distribution segment includedcompanies that specialize in the distribution of

dental products.Within our technology and value-added services segment, we acquired a company that educates

and connects dental office managers, practice administrators and dental businessleaders across North America.

The following table aggregatesthe estimated fair value, as of the date of acquisition, of considerationpaid and net

assets acquired for acquisitions during the nine months ended September 24,2022.While we use our best

estimates and assumptions to accurately value those assets acquired andliabilities assumed at the acquisition date

as well as contingent consideration, where applicable, our estimates areinherently uncertain and subject to

refinement.As a result, during the measurement period we may record adjustmentsto the assets acquired and

liabilities assumed with the corresponding offset to goodwill within our condensed consolidated balancesheets.

Approximately half of the acquired goodwill is deductible for tax purposes.

2022

Acquisition consideration:

Cash

$

132

Deferred consideration

1

Fair value of previously held equity method investment

16

Redeemable noncontrolling interests

4

Total consideration

$

153

Identifiable assets acquired and liabilities assumed:

Current assets

36

Intangible assets

70

Other noncurrent assets

7

Current liabilities

(23)

Deferred income taxes

(5)

Other noncurrent liabilities

(5)

Total identifiablenet assets

80

Goodwill

73

Total net assets acquired

$

153

The following table summarizes the identifiable intangible assets acquiredduring the nine months ended September

24, 2022 and their estimated useful lives as of the date of the acquisition:

2022

Estimated Useful Lives (in years)

Customer relationships and lists

$

56

10

Trademarks/ Tradenames

10

5

Non-compete agreements

2

2

-

5

Other

2

10

Total

$

70

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

14

2021 Acquisitions

We completed several acquisitions during the nine months ended September 25, 2021 which were immaterial to our

financial statements.Our acquired ownership interest ranged between approximately

51

% to

100

%.Acquisitions

within our health care distribution segment includedcompanies that specialize in the distribution and

manufacturing of dental and medical products, a provider of homemedical supplies, and product kitting and sterile

packaging.Within our technology and value-added services segment, we acquired companies that focus on dental

marketing and website solutions, practice transition services, and businessanalytics and intelligence software.

The following table aggregatesthe estimated fair value, as of the date of acquisition, of consideration paidand net

assets acquired for acquisitions during the nine months ended September 25,2021.While we use our best

estimates and assumptions to accurately value those assets acquiredand liabilities assumed at the acquisition date

as well as contingent consideration, where applicable, our estimates areinherently uncertain and subject to

refinement.As a result, during the measurement period we may record adjustmentsto the assets acquired and

liabilities assumed with the corresponding offset to goodwill within our condensed consolidatedbalance sheets.

Approximately half of the acquired goodwill is deductible for tax purposes.

2021

Acquisition consideration:

Cash

$

424

Deferred consideration

11

Fair value of previously held equity method investment

8

Redeemable noncontrolling interests

179

Total consideration

$

622

Identifiable assets acquired and liabilities assumed:

Current assets

159

Intangible assets

259

Other noncurrent assets

39

Current liabilities

(62)

Deferred income taxes

(18)

Other noncurrent liabilities

(39)

Total identifiablenet assets

338

Goodwill

284

Total net assets acquired

$

622

The following table summarizes the identifiable intangible assets acquiredduring the nine months ended September

25, 2021 and their estimated useful lives as of the date of the acquisition:

2021

Estimated Useful Lives (in years)

Customer relationships and lists

$

175

6

-

12

Trademarks / Tradenames

42

5

-

10

Non-compete agreements

6

5

Product development

21

5

-

10

Other

15

18

Total

$

259

The major classes of assets and liabilities that we generally allocate purchaseprice to, excluding goodwill, include

identifiable intangible assets (i.e., customer relationships and lists, trademarksand trade names, product

development and non-compete agreements), inventory and accountsreceivable, property, plant and equipment,

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

15

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 assumptionsderived from analysis of market

conditions, discount rates, discounted cash flows, customer retention ratesand estimated useful lives.

Some prior owners of acquired subsidiaries are eligible to receive additionalpurchase 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.Any adjustments to these accrual amounts are recorded in our

condensed consolidated statements of income.For the nine months ended September 24, 2022 and September 25,

2021, there were no material adjustments recorded in our condensed consolidatedstatements of income relating to

changes in estimated contingent purchase price liabilities.

During the nine months ended September 24, 2022 and September 25, 2021 weincurred $

6

million and $

6

million,

respectively, in acquisition costs.

Note 6 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset orpaid to transfer a liability in an orderly

transaction between market participants at the measurement date.The fair value hierarchy distinguishes between

(1) market participant assumptions developed based on market data obtainedfrom independent sources (observable

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

information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives thehighest priority to unadjusted quoted prices

in active markets for identical assets or liabilities (Level 1) and the lowest priorityto 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 orliabilities that are accessible at the

measurement date.

•Level 2— Inputs other than quoted prices included within Level 1 that areobservable for the asset or liability,

either directly or indirectly.Level 2 inputs include: quoted prices for similar assets or liabilitiesin active markets;

quoted prices for identical or similar assets or liabilities in marketsthat are not active; inputs other than quoted

prices that are observable for the asset or liability; and inputs that are derivedprincipally 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 instrumentsand the methodologies that we used to

measure their fair values.

Investments and notes receivable

There are no quoted market prices available for investments in unconsolidatedaffiliates and notes receivable;

however, we believe the carrying amounts are a reasonable estimate of fair value based on the interestrates in the

applicable markets.

Debt

The fair value of our debt (including bank credit lines) is classified asLevel 3 within the fair value hierarchy, and

as of September 24, 2022 and December 25, 2021 was estimated at$

1,045

million and $

873

million, respectively.

Factors that we considered when estimating the fair value of our debtincluded market conditions, such as interest

rates and credit spreads.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

16

Derivative contracts

Derivative contracts are valued using quoted market prices andsignificant other observable inputs.We use

derivative instruments to minimize our exposure to fluctuations in foreigncurrency exchange rates.Our derivative

instruments primarily include foreign currency forward agreements relatedto certain intercompany loans, certain

forecasted inventory purchase commitments with foreign suppliers,foreign currency forward contracts to hedge a

portion of our euro-denominated foreign operations which are designated as netinvestment hedges and a total

return swap for the purpose of economically hedging our unfundednon-qualified supplemental executive retirement

plan and our deferred compensation plan.

The fair values for the majority of our foreign currency derivative contracts areobtained by comparing our contract

rate to a published forward price of the underlying market rates, whichis based on market rates for comparable

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

Redeemable noncontrolling interests

The values for Redeemable noncontrolling interests are classified withinLevel 3 of the fair value hierarchy and are

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

for additional information.

The following table presents our assets and liabilities that are measured andrecognized at fair value on a recurring

basis classified under the appropriate level of the fair value hierarchy as of September24, 2022 and December 25,

2021:

September 24, 2022

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

$

-

$

40

$

-

$

40

Derivative contracts undesignated

-

4

-

4

Total assets

$

-

$

44

$

-

$

44

Liabilities:

Derivative contracts designated as hedges

$

-

$

3

$

-

$

3

Derivative contracts undesignated

-

7

-

7

Total returnswaps

-

7

-

7

Total liabilities

$

-

$

17

$

-

$

17

Redeemable noncontrolling interests

$

-

$

-

$

563

$

563

December 25, 2021

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

$

-

$

8

$

-

$

8

Derivative contracts undesignated

-

1

-

1

Total returnswaps

-

1

-

1

Total assets

$

-

$

10

$

-

$

10

Liabilities:

Derivative contracts designated as hedges

$

-

$

1

$

-

$

1

Derivative contracts undesignated

-

2

-

2

Total liabilities

$

-

$

3

$

-

$

3

Redeemable noncontrolling interests

$

-

$

-

$

613

$

613

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

17

Note 7 – Debt

Bank Credit Lines

Bank credit lines consisted of the following:

September 24,

December 25,

2022

2021

Revolving credit agreement

$

-

$

-

Other short-term bank credit lines

107

51

Total

$

107

$

51

Revolving Credit Agreement

On

August 20, 2021

, we entered into a $

1

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

facility which matures on

August 20, 2026

replaced our $

750

million revolving credit facility which was scheduled

to mature in April 2022.The interest rate is based on the USD LIBOR plus a spread based on ourleverage ratio at

the end of each financial reporting quarter.Most LIBOR rates have been discontinued after December 31,2021,

while the remaining LIBOR rates will be discontinued immediatelyafter June 30, 2023.We do not expect the

discontinuation of LIBOR as a reference rate in our debt agreementsto 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 certain maximum leverage ratios.Additionally, the Credit Agreement contains customary

representations, warranties and affirmative covenants as well as customary negativecovenants, subject to

negotiated exceptions, on liens, indebtedness, significant corporate changes(including mergers), dispositions and

certain restrictive agreements.As of September 24, 2022 and December 25, 2021, wehad

no

borrowings under this

revolving credit facility.As of September 24, 2022 and December 25, 2021, therewere $

9

million and $

9

million

of letters of credit, respectively, provided to third parties under the credit facility.

Other Short-Term Bank CreditLines

As of September 24, 2022 and December 25, 2021, we had various othershort-term bank credit lines available, of

which $

107

million and $

51

million, respectively, were outstanding.At September 24, 2022 and December 25,

2021, borrowings under all of these credit lines had a weighted averageinterest rate of

9.35

% and

10.44

%,

respectively.

Long-term debt

Long-term debt consisted of the following:

September 24,

December 25,

2022

2021

Private placement facilities

$

699

$

706

U.S. trade accounts receivable securitization

225

105

Variouscollateralized and uncollateralized loans payable with interest,

in varying installments through 2023 at interest rates

ranging from

0.00

% to

3.50

% at September 24, 2022 and

ranging from

2.62

% to

4.27

% at December 25, 2021

7

4

Finance lease obligations

7

7

Total

938

822

Less current maturities

(4)

(11)

Total long-term debt

$

934

$

811

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

18

Private Placement Facilities

Our private placement facilities were amended on

October 20, 2021

to include

four

(previously

three

) insurance

companies, have a total facility amount of $

1.5

billion (previously $

1.0

billion), and are available on an

uncommitted basis at fixed rate economic terms to be agreed upon atthe time of issuance, from time to time

through

October 20, 2026

(previously

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 applicabletreasury notes at the time of

issuance.The term of each possible issuance will be selected by us andcan 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 forgeneral

corporate purposes, including working capital and capital expenditures,to refinance existing indebtedness, and/or

to fund potential acquisitions.The agreements provide, among other things, that we maintaincertain 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 wepay

off the facilities prior to the applicable due dates.

The components of our private placement facility borrowings asof September 24, 2022 are presented in the

following table:

Amount of

Borrowing

Borrowing

Date of Borrowing

Outstanding

Rate

Due Date

January 20, 2012

$

50

3.45

%

January 20, 2024

December 24, 2012

50

3.00

December 24, 2024

June 16, 2017

100

3.42

June 16, 2027

September 15, 2017

100

3.52

September 15, 2029

January 2, 2018

100

3.32

January 2, 2028

September 2, 2020

100

2.35

September 2, 2030

June 2, 2021

100

2.48

June 2, 2031

June 2, 2021

100

2.58

June 2, 2033

Less: Deferred debt issuance costs

(1)

Total

$

699

U.S. Trade Accounts Receivable Securitization

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

an asset-backed securitization program with pricing committed for upto

three years

.On October 20, 2021, we

extended the expiration date of this facility agreement to

October 18, 2024

and increased the purchase limit under

the facility from $

350

million to $

450

million with

two

banks as agents.As of September 24, 2022 and December

25, 2021, the borrowings outstanding under this securitization facility were$

225

million and $

105

million,

respectively.At September 24, 2022, the interest rate on borrowingsunder this facility was based on the asset-

backed commercial paper rate of

2.89

% plus

0.75

%, for a combined rate of

3.64

%.At December 25, 2021, the

interest rate on borrowings under this facility was based on the asset-backedcommercial paper rate of

0.19

% plus

0.75

%, for a combined rate of

0.94

%.

If our accounts receivable collection pattern changes due to customers eitherpaying late or not making payments,

our ability to borrow under this facility may be reduced.

We are required to pay a commitment fee of

30

to

35

basis points depending upon program utilization.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

19

Note 8 – Income Taxes

For the nine months ended September 24, 2022 our effective tax rate was

23.5

% compared to

24.2

% for the prior

year period.The difference between our effective tax rate and the federal statutory tax rate for the ninemonths

ended September 24, 2022 primarily relates to state and foreign income taxesand interest expense as well as share-

based compensation.The difference between our effective tax rate and the federal statutory tax rate for the nine

months ended September 25, 2021 primarily relates to state and foreignincome taxes, interest expense and tax

charges and credits associated with legal entity reorganizations.

On August 16, 2022, the Inflation Reduction Act (H.R. 5376) (“IRA”) was signedinto law in the United States.

Among other things, the IRA imposes a 15% corporate alternativeminimum tax for tax years beginning after

December 31, 2022 and levies a 1% excise tax on net stock repurchases afterDecember 31, 2022.We are still in

the process of analyzing the provisions of the IRA.

The total amount of unrecognized tax benefits, which are included in“Other liabilities” within our condensed

consolidated balance sheets, as of September 24, 2022 and December 25,2021 was $

84

million and $

84

million,

respectively, of which $

71

million and $

69

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

It is possible that the amount of unrecognized tax benefits willchange in the next 12 months, which may result in a

material impact on our condensed consolidated statements of income.

All tax returns audited by the IRS are officially closed through 2016.The tax years subject to examination by the

IRS include years 2017 and forward.During the year ended December 25, 2021, we were notified bythe IRS that

tax year 2019 was selected for examination.

During the quarter ended September 26, 2020 we reached an agreementwith the Advanced Pricing Division on an

appropriate transfer pricing methodology for the years 2014-2025.The objective of this resolution was to mitigate

future transfer pricing audit adjustments.

The total amounts of interest and penalties are classified as a componentof the provision for income taxes.The

amount of tax interest expense/(credit) was $

1

million for the nine months ended September 24, 2022, and

$

(2)

million for the nine months ended September 25, 2021.The total amount of accrued interest is included in

“Other liabilities,” and was $

14

million as of September 24, 2022 and $

12

million as of December 25, 2021.

No

penalties were accrued for the periods presented.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

20

Note 9 – Legal Proceedings

Henry Schein, Inc. has been named as a defendant in multiple lawsuits(currently less than one-hundred and fifty

(

150

); in less than half of those cases one or more of Henry Schein,Inc.’s subsidiaries is also named as a

defendant).Generally, the lawsuits allege that the manufacturers of prescription opioid drugs engaged in a false

advertising campaign to expand the market for such drugs and their own marketshare and that the entities in the

supply chain (including Henry Schein, Inc. and its affiliated companies) reapedfinancial rewards by refusing or

otherwise failing to monitor appropriately and restrict the improper distributionof those drugs.These actions

consist of some that have been consolidated within the MultiDistrict Litigation(“MDL”) proceeding In Re National

Prescription Opiate Litigation (MDL No. 2804; Case No. 17-md-2804)and are currently stayed, and others which

remain pending in state courts and are proceeding independently and outsideof the MDL.At this time, the

following cases are set for trial: the action filed by Mobile County Boardof Health, et al., in Alabama state court,

which is currently stayed but remains set for a jury trial on January 9, 2023;the action filed by DCH Health Care

Authority, et al. in Alabama state court, which has been designated a bellwether with

eight

of

thirty-eight

plaintiffs

set for a jury trial on July 24, 2023; and the action filed by Florida HealthSciences Center, Inc. (and

38

other

hospitals located throughout the State of Florida) in Florida state court,which is currently scheduled for a jury trial

in October 2024.In June 2022, we settled

twenty-six

cases filed by hospitals in West Virginia,and settled with

one

additional hospital, for a total amount of

three-hundred thousand

dollars.The

twenty-six

cases have been

dismissed.Of Henry Schein’s 2021 net sales of approximately $

12.4

billion, sales of opioids represented less than

two-tenths

of 1 percent.Opioids represent a negligible part of our business.We intend to defend ourselves

vigorously against these actions.

In August 2022, Henry Schein received a Grand Jury Subpoena from the UnitedStates Attorney’s Office for the

Western District of Virginia,seeking documents in connection with an investigation of possibleviolations of the

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

Henry Schein.The investigation relates to the sale of veterinary prescription drugsto certain customers.In

October 2022, Henry Schein received a second Grand Jury Subpoenafrom the United States Attorney’s Office for

the Western District of Virginia.The October Subpoena seeks documents relating to payments HenrySchein

received from Butler or Covetrus, Inc. (“Covetrus”).Butler was spun off into a separate company and became a

subsidiary of Covetrus in 2019 and is no longer owned by Henry Schein.We are cooperating with the

investigation.

From time to time, we may become a party to other legal proceedings,including, without limitation, product

liability claims, employment matters, commercial disputes, governmentalinquiries and investigations (which may

in some cases involve our entering into settlement arrangements or consentdecrees), 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 anticipatedto have a material adverse effect on our

consolidated financial position, liquidity or results of operations.

As of September 24, 2022, we had accrued our best estimate of potential lossesrelating to claims that were

probable to result in liability and for which we were able to reasonablyestimate 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, presentlyenacted laws and regulations and

other factors, including probable recoveries from third parties.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

21

Note 10 – Stock-Based Compensation

Stock-based awards are provided to certain employees under the terms of our2020 Stock Incentive Plan and to

non-employee directors under the terms of our 2015 Non-Employee DirectorStock Incentive Plan (together, the

“Plans”).The Plans are administered by the Compensation Committee of the Boardof Directors (the

“Compensation Committee”).Historically, equity-based awards to our employees have been granted solely in the

form of time-based and performance-based restricted stock units (“RSUs”).However, for our 2021 fiscal year, in

light of the COVID-19 pandemic, the Compensation Committee determinedit would be difficult for management

to set a meaningful three-year cumulative earnings per share target as the goal applicableto performance-based

RSU awards as it had done in prior years.Instead, the Compensation Committee set our equity-based awardsto

employees for fiscal 2021 in the form of time-based RSUs and non-qualifiedstock options which focus on stock

value appreciation and retention instead of pre-established performance goals.Our non-employee directors

continued to receive equity-based awards for fiscal 2021 solely in the form of time-basedRSUs.In March 2022,

the Compensation Committee reinstated performance-based RSUsfor equity-based awards to employees for fiscal

2022 and awarded grants in the form of time-based RSUs, performance-basedRSUs and non-qualified stock

options.

RSUs are stock-based awards granted to recipients with specified vesting provisions.In the case of RSUs, common

stock is generally delivered on or following satisfaction of vesting conditions.We issue RSUs to employees that

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

four

-year cliff vesting and/or (ii)

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

with

three

-year cliff vesting.RSUs granted under the 2015 Non-Employee Director Stock IncentivePlan primarily

are granted with

12

-month cliff vesting.For these RSUs, we recognize the cost as compensation expense ona

straight-line basis.

With respect to time-based RSUs, we estimate the fair value on the date of grant based on our closingstock price at

the time of grant.With respect to performance-based RSUs, the number of shares that ultimately vestand are

received by the recipient is based upon our performance as measured againstspecified targets over a specified

period, as determined by the Compensation Committee.Although there is no guarantee that performance targets

will be achieved, we estimate the fair value of performance-based RSUsbased on our closing stock price at time of

grant.

Each of the Plans provide for certain adjustments to the performancemeasurement in connection with awards under

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

performance measurement adjustments relate to significant events, including, withoutlimitation, acquisitions,

divestitures, new business ventures, certain capital transactions (including sharerepurchases), differences in

budgeted average outstanding shares (other than those resulting from capitaltransactions referred to above),

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

applicable laws or regulations, changes in income tax rates in certainmarkets, foreign exchange fluctuations, the

financial impact, either positive or negative, of the differences in projected earningsgenerated by sales of COVID-

19 test kits (solely with respect to performance-based RSUsgranted in the 2022 plan year) and unforeseen events or

circumstances affecting us.

Over the performance period, the number of shares of common stock that willultimately vest and be issued and the

related compensation expense is adjusted upward or downward based uponour estimation of achieving such

performance targets.The ultimate number of shares delivered to recipients andthe related compensation cost

recognized as an expense will be based on our actual performance metricsas defined under the Plans.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

22

Stock options are awards that allow the recipient to purchase shares of our commonstock at a fixed price following

vesting of the stock options.Stock options are granted at an exercise price equal to our closing stockprice on the

date of grant.Stock options issued beginning in 2021 vest

one-third

per year based on the recipient’s continued

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

three years

from the

grant date and have a contractual term of

ten years

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

upon certain events.Compensation expense for these stock options is recognizedusing a graded vesting method.

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

In addition to equity-based awards granted in fiscal 2021 under the long-termincentive program, the Compensation

Committee granted a Special Pandemic Recognition Award under the 2020 Stock Incentive Plan to recipients of

performance-based RSUs under the 2018 long-term incentive program.The payout under the performance-based

restricted stock units granted under the fiscal 2018 long-term incentive program(the “2018 LTIP”) was negatively

impacted by the global COVID-19 pandemic.Given the significance of the impact of the pandemic on our

three

-

year EPS goal under such equity awards and the contributions made by our employees(including those who

received such awards), on March 3, 2021, the Compensation Committee granteda Special Pandemic Recognition

Award to recipients of performance-based restricted stock units under the 2018 LTIP who were employed by us on

the grant date of the Special Pandemic Recognition Award.These time-based RSU awards vest

50

% on the first

anniversary of the grant date and

50

% on the second anniversary of the grant date, based on the recipient’s

continued service and subject to the terms and conditions of the 2020 Stock IncentivePlan, and are recorded as

compensation expense using a graded vesting method.The combination of the

20

% payout based on actual

performance of the 2018 LTIP and the one-time Special Pandemic Recognition Award granted in 2021 will

generate a cumulative payout of

75

% of each recipient’s original number of performance-based restricted stock

units awarded in 2018 if the recipient satisfies the

two

-year vesting schedule commencing on the grant date.

Our accompanying condensed consolidated statements of income reflectpre-tax share-based compensation expense

of $

17

million ($

13

million after-tax) and $

44

million ($

34

million after-tax) for the three and nine months ended

September 24, 2022, respectively.For the three and nine months ended September 25, 2021, werecorded pre-tax

share-based compensation expense of $

28

million ($

21

million after-tax) and $

58

million ($

44

million after-tax),

respectively.

Total unrecognized compensation cost related to unvested awards as of September 24, 2022 was $

104

million,

which is expected to be recognized over a weighted-average period ofapproximately

2.2

years.

The following weighted-average assumptions were used in determiningthe most recent fair values of stock options

granted using the Black-Scholes valuation model:

2022

Expected dividend yield

0.0

%

Expected stock price volatility

27.70

%

Risk-free interest rate

3.42

%

Expected life of options (years)

6.00

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

the foreseeable future.The expected stock price volatility is based on implied volatilitiesfrom traded options on

our stock, historical volatility of our stock, and other factors.The risk-free interest rate is based on the U.S.

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

six

-year expected life of the options was determined using the simplifiedmethod for estimating the expected term

as permitted under SAB Topic 14.Estimates of fair value are not intended to predict actual future events orthe

value ultimately realized by recipients of stock options, and subsequent eventsare not indicative of the

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

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

23

The following table summarizes stock option activity under the Plansduring the nine months ended September 24,

2022:

Stock Options

Weighted

Average

Weighted

Remaining

Average

Contractual

Aggregate

Exercise

Life in

Intrinsic

Shares

Price

Years

Value

Outstanding at beginning of period

767,717

$

63.24

Granted

418,425

85.82

Exercised

(30,554)

62.71

Forfeited

(17,850)

72.96

Outstanding at end of period

1,137,738

$

71.41

8.8

$

3

Options exercisable at end of period

223,198

$

63.19

Weighted

Weighted

Average

Average

Remaining

Aggregate

Number of

Exercise

Contractual

Intrinsic

Options

Price

Life (in years)

Value

Vestedor expected to vest

898,310

$

73.60

8.9

$

2

The following tables summarize the activity of our unvested RSUs for the ninemonths ended September 24, 2022:

Time-Based Restricted Stock Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share

Outstanding at beginning of period

1,945,862

$

58.79

Granted

466,473

85.67

Vested

(505,004)

54.74

Forfeited

(54,618)

67.23

Outstanding at end of period

1,852,713

$

66.39

$

67.34

Performance-Based Restricted Stock Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share

Outstanding at beginning of period

674,753

$

59.63

Granted

442,871

76.68

Vested

(392,646)

59.18

Forfeited

(13,631)

67.17

Outstanding at end of period

711,347

$

63.27

$

67.34

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

24

Note 11 – Redeemable Noncontrolling Interests

Some minority stockholders in certain of our subsidiaries have the right,at certain times, to require us to acquire

their ownership interest in those entities at fair value.Accounting Standards Codification Topic 480-10 is

applicable for noncontrolling interests where we are or may be requiredto purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrollinginterest holder under the terms of a put

option contained in contractual agreements.The components of the change in the redeemable noncontrolling

interests for the nine months ended September 24, 2022 and the yearended December 25, 2021 are presented in the

following table:

September 24,

December 25,

2022

2021

Balance, beginning of period

$

613

$

328

Decrease in redeemable noncontrolling interests due to acquisitions of

noncontrolling interests in subsidiaries

(26)

(60)

Increase in redeemable noncontrolling interests due to business

acquisitions

4

189

Net income attributable to redeemable noncontrolling interests

19

23

Dividends declared

(16)

(21)

Effect of foreign currency translation loss attributable to

redeemable noncontrolling interests

(13)

(6)

Change in fair value of redeemable securities

(18)

160

Balance, end of period

$

563

$

613

Note 12 – 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 ofapplicable taxes as of:

September 24,

December 25,

2022

2021

Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment

$

(44)

$

(31)

Attributable to noncontrolling interests:

Foreign currency translation adjustment

$

(1)

$

-

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

$

(317)

$

(155)

Unrealized gain (loss) from foreign currency hedging activities

18

(2)

Pension adjustment loss

(13)

(14)

Accumulated other comprehensive loss

$

(312)

$

(171)

Total Accumulatedother comprehensive loss

$

(357)

$

(202)

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

25

The following table summarizes the components of comprehensive income, netof applicable taxes as follows:

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

2022

2021

2022

2021

Net income

$

162

$

169

$

515

$

508

Foreign currency translation loss

(89)

(40)

(176)

(40)

Tax effect

-

-

-

-

Foreign currency translation loss

(89)

(40)

(176)

(40)

Unrealized gain from foreign currency hedging

activities

15

5

27

7

Tax effect

(4)

(1)

(7)

(2)

Unrealized gain from foreign currency hedging

activities

11

4

20

5

Pension adjustment gain

2

-

2

1

Tax effect

(1)

-

(1)

-

Pension adjustment gain

1

-

1

1

Comprehensive income

$

85

$

133

$

360

$

474

The change in the unrealized gain from foreign currency hedging activitiesduring the three and nine months ended

September 24, 2022 and September 25, 2021 was primarily attributable toa net investment hedge that was entered

into during 2019.

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 impacton our comprehensive income.The

foreign currency translation loss during the nine months ended September24, 2022 was primarily due to

strengthening of the U.S. Dollar as compared to the Euro, British Pound, AustralianDollar and Canadian Dollar.

The following table summarizes our total comprehensive income, net ofapplicable taxes, as follows:

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

2022

2021

2022

2021

Comprehensive income attributable to

Henry Schein, Inc.

$

79

$

131

$

350

$

454

Comprehensive income attributable to

noncontrolling interests

2

2

4

5

Comprehensive income attributable to

Redeemable noncontrolling interests

4

-

6

15

Comprehensive income

$

85

$

133

$

360

$

474

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

26

Note 13 – Plans of Restructuring

and Integration Costs

On August 1, 2022, we committed to a restructuring plan focused onfunding the priorities of the strategic plan and

streamlining operations and other initiatives to increase efficiency.This plan also includes the rationalization of the

Company’s office space in North America as a result of transitioning to a partial and full remote work model for

certain employees.We recorded restructuring charges of $

9

million primarily related to severance and employee-

related costs and lease right-of-use and other long-lived asset accelerated depreciationand amortization and lease

exit costs.We expect this initiative to extend through 2023.We are currently unable in good faith to make a

determination of an estimate of the amount or range of amounts expected tobe incurred in connection with these

activities, both with respect to each major type of cost associatedtherewith and with respect to the total cost, or an

estimate of the amount or range of amounts that willresult in future cash expenditures.

On August 26,2022, we acquired Midway Dental Supply.In connection with this acquisition, during the three

months ended September 24, 2022, we recorded integration costs of $

1

million related to one-time employee and

other costs, as well as restructuring charges of $

2

million, which are included in the $

9

million of restructuring

charges discussed above.

On November 20, 2019, we committed to a contemplated restructuringinitiative intended to mitigate stranded costs

associated with the spin-off of our animal health business and to rationalize operationsand provide expense

efficiencies.These activities were originally expected to be completed bythe end of 2020 but we extended them to

the end of 2021 in light of the changes to the business environment broughton by the COVID-19 pandemic.The

restructuring activities under this prior initiative were completed in2021.

Restructuring and integration costs recorded for the three and ninemonths ended September 24, 2022 and nine

months ended September 25, 2021 (there were

no

restructuring costs for the three months ended September 25,

2021) consisted of the following:

Three and Nine Months Ended September 24, 2022

Health-Care Distribution

Technologyand Value-Added

Services

Restructuring

Costs

Integration

Costs

Restructuring

Costs

Integration

Costs

Total

Severance and employee-related costs

$

6

$

-

$

-

$

-

$

6

Accelerated depreciation and amortization

2

-

-

-

2

Exit and other related costs

1

-

-

-

1

Integration employee-related and other

costs

-

1

-

-

1

Total restructuringand integration costs

$

9

$

1

$

-

$

-

$

10

Nine Months Ended September 25, 2021

Health-Care Distribution

Technologyand Value-Added

Services

Restructuring

Costs

Integration

Costs

Restructuring

Costs

Integration

Costs

Total

Severance and employee-related costs

$

3

$

-

$

1

$

-

$

4

Total restructuringand integration costs

$

3

$

-

$

1

$

-

$

4

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

27

The following table summarizes,by reportable segment, the activity related to the liabilities associatedwith our

restructuring initiativesfor the period ended September 24, 2022.The remaining accrued balance of restructuring

costs as of September 24, 2022 is included in accrued expenses: other withinour condensed consolidated balance

sheet.

Technologyand

Health Care

Value-Added

Distribution

Services

Total

Balance, December 25, 2021

$

3

$

1

$

4

Restructuring charges

9

-

9

Non-cash charges

(2)

-

(2)

Cash payments and other adjustments

(5)

(1)

(6)

Balance, September 24, 2022

$

5

$

-

$

5

Note 14

–

Earnings Per Share

Basic earnings per share is computed by dividing net income attributableto 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 issuablefor presently unvested RSUs

and upon exercise of stock options using the treasury stock methodin periods in which they have a dilutive effect.

A reconciliation of shares used in calculating earnings per basic and dilutedshare follows:

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

2022

2021

2022

2021

Basic

135,608,678

139,377,237

136,731,413

140,661,182

Effect of dilutive securities:

Stock options and restricted stock units

1,475,371

1,702,100

1,756,841

1,517,520

Diluted

137,084,049

141,079,337

138,488,254

142,178,702

The number of antidilutive securities that were excluded from the calculationof diluted weighted average common

shares outstanding are as follows:

Three Months Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

2022

2021

2022

2021

Stock options

482,497

789,130

310,565

595,798

Restricted stock units

445,494

-

261,718

5,716

Total anti-dilutivesecurities excluded from EPS

computation

927,991

789,130

572,283

601,514

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

28

Note 15 – Supplemental Cash Flow Information

Cash paid for interest and income taxes was:

Nine Months Ended

September 24,

September 25,

2022

2021

Interest

$

29

$

22

Income taxes

235

179

During the nine months ended September 24, 2022 and September 25, 2021,we had $

27

million and $

7

million,

respectively of non-cash net unrealized gains related to foreign currencyhedging activities.

Note 16 – Related Party Transactions

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

million annually for the use of their intellectual property.During the three and

nine months ended September 24, 2022, we recorded $

8

million and $

23

million, respectively in connection with

costs related to this royalty agreement.During the three and nine months ended September 25, 2021, we recorded

$

8

million and $

23

million, respectively, in connection with costs related to this royalty agreement.As of

September 24, 2022 and December 25, 2021, Henry Schein One, LLC hada net (payable) receivable balance due

(to) from Internet Brands of $

(14)

million and $

9

million, respectively, comprised of amounts related to results of

operations and the royalty agreement.

During our normal course of business, we have interests in entities that we account for under the equity accounting

method.

During the three and nine months ended September 24, 2022, werecorded net sales of $

16

million and

$

49

million, respectively, to such entities.During the three and nine months ended September 25, 2021, we

recorded net sales of $

18

million and $

51

million, respectively, to such entities.During the three and nine months

ended September 24, 2022, we purchased $

4

million and $

14

million, respectively, from such entities.During the

three and nine months ended September 25, 2021, we purchased $

5

million and $

14

million, respectively, from

such entities.At September 24, 2022 and December 25, 2021, in the aggregate wehad $

39

million and $

45

million

due from our equity affiliates, and $

9

million and $

9

million due to our equity affiliates, respectively.

Certain of our facilities related to our acquisitions are leased from employeesand minority shareholders.These

leases are classified as operating leases and have a remaining lease termranging from

one year

to

9 years

.As of

September 24, 2022, current and non-current liabilities associated with relatedparty operating leases were $

4

million and $

16

million, respectively.Related party leases represented

5.2

% and

5.8

% of the total current and non-

current operating lease liabilities.

29

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

RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

In accordance with the “Safe Harbor” provisions of the Private SecuritiesLitigation Reform Act of 1995, we

provide the following cautionary remarks regarding important factorsthat, among others, could cause future results

to differ materially from the forward-looking statements, expectations and assumptionsexpressed or implied

herein.All forward-looking statements made by us are subject torisks and uncertainties and are not guarantees of

future performance.These forward-looking statements involve known and unknown risks, uncertaintiesand other

factors that may cause our actual results, performance and achievementsor industry results to be materially

different from any future results, performance or achievements expressed or implied by suchforward-looking

statements.These statements are generally identified by the use of suchterms 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 limitedto, those discussed in

the documents we file with the Securities and Exchange Commission(SEC), including our Annual Report on Form

10-K. Forward looking statements include the overall impact of the NovelCoronavirus Disease 2019 (COVID-19)

on us, our results of operations, liquidity and financial condition (includingany estimates of the impact on these

items), the rate and consistency with which dental and other practicesresume 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, whether additional resurgences or variantsof the virus will adversely

impact the resumption of normal operations, whether supply chain disruptionswill adversely impact our business,

the impact of integration and restructuring programs as well as of anyfuture acquisitions, general economic

conditions including exchange rates, inflation and recession, and more generallycurrent expectations regarding

performance in current and future periods.Forward looking statements also include the (i) our ability to have

continued access to a variety of COVID-19 test types, expectations regardingCOVID-19 test sales, demand and

inventory levels, as well as the efficacy or relative efficacy of the test results given that thetest efficacy has not

been, or will not have been, independently verified under normal FDA proceduresand (ii) potential for us to

distribute the COVID-19 vaccines and ancillary supplies.

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

include, but are not limited to: risks associated with COVID-19and any variants thereof, as well as other disease

outbreaks, epidemics, pandemics, or similar wide-spread public health concernsand other natural disasters; our

dependence on third parties for the manufacture and supply of our products;our ability to develop or acquire and

maintain and protect new products (particularly technology products) andtechnologies that achieve market

acceptance with acceptable margins; transitional challenges associated with acquisitions,dispositions and joint

ventures, including the failure to achieve anticipated synergies/benefits; financialand tax risks associated with

acquisitions, dispositions and joint ventures; certain provisionsin 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 repeal orjudicial prohibition on implementation of the

Affordable Care Act; changes in the health care industry; risks from expansion of customerpurchasing power and

multi-tiered costing structures; increases in shipping costs for our productsor other service issues with our third-

party shippers; general global and domestic macro-economic and politicalconditions, including inflation, deflation,

recession, fluctuations in energy pricing and the value of the U.S. dollar as comparedto foreign currencies, and

changes to other economic indicators, international trade agreements, potentialtrade barriers and terrorism; failure

to comply with existing and future regulatory requirements; risks associatedwith the EU Medical Device

Regulation; failure to comply with laws and regulations relating to healthcare fraud or other laws and regulations;

failure to comply with laws and regulations relating to the collection, storageand processing of sensitive personal

information or standards in electronic health records or transmissions;changes in tax legislation; risks related to

product liability, intellectual property and other claims; litigation risks; new or unanticipated litigation

developments and the status of litigation matters; risks associated withcustoms policies or legislative import

restrictions; cyberattacks or other privacy or data security breaches;risks associated with our global operations; our

dependence on our senior management, employee hiring and retention,and our relationships with customers,

suppliers and manufacturers; and disruptions in financial markets.The order in which these factors appear should

not be construed to indicate their relative importance or priority.

30

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

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

of actual results.We undertake no duty and have no obligation to update forward-looking statements except as

required by law.

Where YouCan 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 relationspage of our website (www.henryschein.com)

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

Recent Developments

The COVID-19 pandemic negatively impacted the global economy, disrupted global supply chains and created

significant volatility and disruption of global financial markets in2020 and 2021.The impact of COVID-19 had a

material adverse effect on our business, results of operations and cash flows in 2020.During the year ended

December 25, 2021, patient traffic levels returned to levels approaching pre-pandemiclevels.Demand for dental

products and certain medical products throughout 2021 was drivenby sales of PPE and COVID-19 test kits.

During the six months ended June 25,2022 we experienced a decrease in the sales volume of PPE andCOVID-19

test kits.During the three months ended September 24, 2022, we continuedto experience a decrease in the sales

volume of PPE and COVID-19 test kits compared with the same periodin the prior year.The volatility in sales of

COVID-19 test kits has moderated, albeit at a significantlylower level of sales compared with 2021,resulting in us

recording an inventory obsolescence reserve of $12 million for COVID-19test kits during the quarter ended

September 24, 2022.

While the U.S. economy has recently experienced inflationarypressures and strengthening of the U.S dollar, their

impacts have not been material to our results of operations, andwe currently expect moderating of inflation and

foreign currency fluctuations.Though inflation impacts both our revenues and costs, the depth andbreadth of our

product portfolio often allows us to offer lower-cost national brand solutionsor corporate brand alternatives to our

more price-sensitive customers who are unable to absorb priceincreases, thus positioning us to protect our gross

profit.

Our condensed consolidated financial statements reflect estimates and assumptionsmade by us that affect, among

other things, our goodwill, long-lived asset and definite-lived intangibleasset valuation; inventory valuation; equity

investment valuation; assessment of the annual effective tax rate; valuation of deferredincome taxes and income

tax contingencies; the allowance for doubtful accounts; hedging activity;supplier rebates; measurement of

compensation cost for certain share-based performance awards and cash bonusplans; and pension plan

assumptions.Due to the significant uncertainty surrounding the future impactof COVID-19, our judgments

regarding estimates and impairments could change in the future.There is an ongoing risk that the COVID-19

pandemic may again have a material adverse effect on our business, results of operationsand 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.

31

Executive-Level Overview

Henry Schein, Inc. is a solutions company for health care professionals poweredby a network of people and

technology.We believe we are the world’s largestprovider of health care products and services primarily tooffice-

based dental and medical practitioners, as well as alternate sites of care.We serve more than one million customers

worldwide including dental practitioners, laboratories, physician practices,and ambulatory surgery centers, as well

as government, institutional health care clinics and other alternate care clinics.We believe that we have a strong

brand identity due to our more than 90 years of experience distributing healthcare products.

We are headquartered in Melville, New York,employ approximately 22,000 people (of which approximately

10,300 are based outside of the United States) and have operations oraffiliates in 32 countries and territories.Our

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

strategic acquisitions.

We have established strategically located distribution centers around the world to enable us to better serve our

customers and increase our operating efficiency.This infrastructure, together with broad product and service

offerings at competitive prices, and a strong commitment to customer service,enables us to be a single source of

supply for our customers’ needs.

While our primary go-to-market strategy is in our capacity as a distributor, we also manufacture certain dental

specialty products and solutions in the areas of implants, orthodonticsand endodontics.We have achieved scale in

these global businesses primarily through acquisitions as manufacturersof these products typically do not utilize a

distribution channel to serve customers.

We conduct our business through two reportable segments: (i) health care distribution and (ii) technology and

value-added services.These segments offer different products and services to the same customer base.Our global

dental businesses serve office-based dental practitioners, dental laboratories, schools andother institutions.Our

global medical businesses serve office-based medical practitioners, ambulatorysurgery centers, other alternate-care

settings and other institutions.

The health care distribution reportable segment aggregates our globaldental 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, dentalspecialty products (including

implant, orthodontic and endodontic products), diagnostic tests, infection-controlproducts, PPE and vitamins.

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

services to health care practitioners.Our technology business offerings include practice management software

systems for dental and medical practitioners.Our value-added practice solutions include practice consultancy,

education, revenue cycle management and financial services on a non-recoursebasis, e-services, practice

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

practitioners.

A key element to grow closer to our customers is our One Scheininitiative, which is a unified go-to-market

approach that enables practitioners to work synergistically with our supply chain,equipment sales and service and

other value-added services, allowing our customers to leveragethe combined value that we offer through a single

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

national brand products, our corporate brand products and proprietary specialtyproducts and solutions (including

implant, orthodontic and endodontic products).In addition, customers have access to a wide range of services,

including software and other value-added services.

32

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 atlow prices.It also has accelerated the

growth of HMOs, group practices, other managed care accounts and collectivebuying groups, which, in addition to

their emphasis on obtaining products at competitive prices, tend tofavor 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, whichcan enhance the efficiency and

facilitation of practice management.

Our operating results in recent years have been significantly affected by strategiesand transactions that we

undertook to expand our business, domestically and internationally, in part to address significant changesin 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 bythe COVID-19 pandemic, the current economic

environment and continued economic and public health uncertainty.Since the onset of the COVID-19 pandemic in

early 2020, we have been carefully monitoring its impact on our globaloperations and have taken appropriate steps

to minimize the risk to our employees.We have seen and expect to continue to see changes in demand trends for

some of our products and services, supply chain challenges and laborchallenges, as rates of infection fluctuate, new

strains or variants of COVID-19 emerge and spread, governments adapt their approachesto combatting the virus,

and local conditions change across geographies.As a result, we expect to see continued volatility through atleast

the duration of the pandemic.

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 outof 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 managelarge quantities of supplies

in their offices, the distribution of health care supplies and smallequipment to office-based health care practitioners

has been characterized by frequent, small quantity orders, and a need forrapid, reliable and substantially complete

order fulfillment.The purchasing decisions within an office-based health care practice are typicallymade by the

practitioner or an administrative assistant.Supplies and small equipment are generally purchased from morethan

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 groupsare 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, seekingto combine with larger companies that can

provide growth opportunities.This consolidation also may continue to result in distributors seekingto acquire

companies that can enhance their current product and service offerings or provideopportunities to serve a broader

customer base.

Our trend with regard to acquisitions and joint ventures has been to expandour role as a provider of products and

services to the health care industry.This trend has resulted in our expansion into service areas that complementour

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

businesses.

33

As industry consolidation continues, we believe that we are positionedto 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 decisionmakers who do not reside in the office-

based practitioner setting.

As the health care industry continues to change, we continually evaluatepossible candidates for joint venture or

acquisition and intend to continue to seek opportunities to expand ourrole as a provider of products and services to

the health care industry.There can be no assurance that we will be able to successfully pursueany 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, andthere can be no assurance that the

integration efforts associated with any such transaction would be successful.

Aging Population and Other Market Influences

The health care products distribution industry continues to experience growthdue to the aging population,

increased health care awareness, the proliferation of medical technologyand 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 fromthe shift of procedures and diagnostic testing

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

According to the U.S. Census Bureau’s International Database, in 2022 there are approximately seven million

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

services.By the year 2050, that number is projected to nearly triple to approximately19 million.The population

aged 65 to 84 years is projected to increase by approximately 27% duringthe same period.

As a result of these market dynamics, annual expenditures for healthcare services continue to increase in the

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

current and future operating, economic, and industry conditions.The Centers for Medicare and Medicaid Services,

or CMS, published “National Health Expenditure Data” indicatingthat total national health care spending reached

approximately $4.1 trillion in 2020, or 19.7% of the nation’s gross domestic product, the benchmark measurefor

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 thenation’s projected gross domestic product.The

latest projections begin after the latest historical year (2020) and go through2030.

Government

Certain of our businesses involve the distribution, manufacturing,importation, exportation, marketing and sale of,

and/or third party payment for, pharmaceuticals and/or medical devices, and in this regard, weare subject to

extensive local, state, federal and foreign governmental laws and regulations,including as applicable to our

wholesale distribution of pharmaceuticals and medical devices, manufacturingactivities, and as part of our

specialty home medical supply business that distributes and sellsmedical equipment and supplies directly to

patients.The federal government and state governments have also increasedenforcement activity in the health care

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

device regulations and data privacy and security standards.

In addition, certain of our businesses must operate in compliance witha variety of burdensome and complex billing

and record-keeping requirements in order to substantiate claims for payment underfederal, state and commercial

healthcare reimbursement programs.One of these businesses was suspended in October 2021 by CMSfrom

receiving payments from Medicare, although it was permitted to continueto perform and bill for Medicare services.

On September 30, 2022, CMS terminated the suspension of Medicare payments.As a result of the termination of

the suspension, we recognized $13 million of previously deferred revenueduring the quarter ended September 24,

2022.

34

Government and private insurance programs fund a large portion of the total cost of medicalcare, 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 reimbursementrates 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 andour financial performance.

Our businesses are generally subject to numerous laws and regulations that couldimpact our financial performance,

and failure to comply with such laws or regulations could have amaterial adverse effect on our business.

A more detailed discussion of governmental laws and regulationsis included in Management’s Discussion &

Analysis of Financial Condition and Results of Operations, containedin our Annual Report on Form 10-K for the

fiscal year ended December 25, 2021, filed with the SEC on February15, 2022.

Results of Operations

The following table summarizes the significant components of our operatingresults for the three and nine months

ended September 24, 2022 and September 25, 2021 and cash flows forthe nine months ended September 24, 2022

and September 25, 2021:

ThreeMonths Ended

Nine Months Ended

September 24,

September 25,

September 24,

September 25,

2022

2021

2022

2021

Operating results:

Net sales

$

3,067

$

3,178

$

9,276

$

9,070

Cost of sales

2,153

2,266

6,444

6,376

Gross profit

914

912

2,832

2,694

Operating expenses:

Selling, general and administrative

648

657

2,010

1,906

Depreciation and amortization

45

44

137

133

Restructuring and integration costs

10

-

10

4

Operating income

$

211

$

211

$

675

$

651

Other expense, net

$

(6)

$

(5)

$

(17)

$

(14)

Gain on sale of equity investment

-

7

-

7

Net income

162

169

515

508

Net income attributable to Henry Schein, Inc.

150

162

491

484

Nine Months Ended

September 24,

September 25,

2022

2021

Cash flows:

Net cash provided by operating activities

$

348

$

433

Net cash used in investing activities

(211)

(479)

Net cash used in financing activities

(121)

(254)

35

Plans of Restructuring and Integration Costs

On August 1, 2022, we committed to a restructuring plan focused onfunding the priorities of the strategic plan and

streamlining operations and other initiatives to increase efficiency.This plan also includes the rationalization of the

Company’s office space in North America as a result of transitioning to a partial and full remote work model for

certain employees.We recorded restructuring charges of $9 million primarily related to severance and employee-

related costs and lease right-of-use and other long-lived asset accelerated depreciationand amortization and lease

exit costs.We expect this initiative to extend through 2023.We are currently unable in good faith to make a

determination of an estimate of the amount or range of amounts expected tobe incurred in connection with these

activities, both with respect to each major type of cost associatedtherewith and with respect to the total cost, or an

estimate of the amount or range of amounts that will result in futurecash expenditures.The expense savings

realized from this plan are expected to mainly affect 2023 and beyond.

On August 26, 2022, we acquired Midway Dental Supply.In connection with this acquisition, during the three

months ended September 24, 2022 we recorded integration costsof $1 million related to one-time employee and

other costs, as well as restructuring charges of $2 million, which are includedin the $9 million of restructuring

charges discussed above.

On November 20, 2019, we committed to a contemplated restructuringinitiative intended to mitigate stranded costs

associated with the spin-off of our animal health business and to rationalize operationsand provide expense

efficiencies.These activities were originally expected to be completed bythe end of 2020 but we extended them to

the end of 2021 in light of the changes to the business environment broughton by the COVID-19 pandemic.The

restructuring activities under this prior initiative were completedin 2021.

36

Three Months Ended September 24, 2022 Compared to ThreeMonths Ended September 25, 2021

Net Sales

Net sales were as follows:

September 24,

% of

September 25,

% of

Increase / (Decrease)

2022

Total

2021

Total

$

%

Health care distribution

(1)

Dental

$

1,785

58.2

%

$

1,823

57.3

%

$

(38)

(2.1)

%

Medical

1,106

36.0

1,185

37.3

(79)

(6.7)

Total health care distribution

2,891

94.2

3,008

94.6

(117)

(3.9)

Technology and value-added services

(2)

176

5.8

170

5.4

6

3.8

Total

$

3,067

100.0

%

$

3,178

100.0

%

$

(111)

(3.5)

(1)

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

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

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

(2)

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

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

education services for practitioners, consulting and other services.

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

actual values and may not recalculate due to rounding.

The 3.5% decrease in net sales includes a decrease of 0.6% in localcurrency sales (2.4% decrease in internally

generated sales partially offset by 1.8% growth from acquisitions) and a decrease of2.9% related to foreign

currency exchange.We estimate that sales of PPE and COVID-19 test kits were approximately $244 million, a

decrease of 51.6%versus the prior year.Excluding PPE and COVID-19 test kits, the estimated increase in

internally generated local currency sales was 6.8%.

The 2.1% decrease in dental net sales includes an increase of 2.6% in localcurrency sales (1.2% increase in

internally generated sales and 1.4% growth from acquisitions) offset by a decreaseof 4.7% related to foreign

currency exchange.The 2.6% increase in local currency sales was attributable to an increase in dentalconsumable

merchandise sales of 1.0% (1.8% growth from acquisitions and 0.8% decreasein internally generated sales)and an

increase in dental equipment and servicesales of 8.3% (8.0% growth in internally generated salesand 0.3% growth

from acquisitions).Our sales growth in dental merchandise was lower than our sales growthin dental equipment

during the three months ended September 24, 2022 primarily due to a decreasein PPE sales.Dental equipment

sales increased in both our North American and international markets,primarily attributable to increased demand.

We estimate that our dental business recorded sales of approximately $94 million of PPE, an estimated decrease of

44.9% versus the prior year.Excluding PPE, the estimated increase in internally generated local currencydental

sales was 5.8%.

The 6.7% decrease in medical net sales includes a decrease of 6.4% in localcurrency sales (8.8% decrease in

internally generated sales partially offset by 2.4%growth from acquisitions), and a decrease of 0.3% related to

foreign currency exchange.Our medical business was impacted by a continuing decrease in sales of PPEand

COVID-19 test kits, partially offset by strong growth in sales of pharmaceutical,medical equipment and point-of-

care diagnostic products.We estimate that our medical business recorded sales of approximately $150 million of

PPE and COVID-19 test kits for the three months ended September24, 2022, an estimated decrease of 55.0%

compared to the prior year.Excluding sales of PPE and COVID-19 test kits, the estimatedincrease in internally

generated local currency medical sales was 9.3%.

37

The 3.8% increase in technology and value-added services net sales includesan increase of 5.6% in local currency

sales (4.2% increase in internally generated sales and 1.4% growthfrom acquisitions) partially offset by a decrease

of 1.8% related to foreign currency exchange.During the quarter ended September 24, 2022, the trend for

transactional software sales improved compared to the prior year, as we increased the number of users, generating

demand for our sales cycle management solutions, and alsofrom cloud-based solutions that drive practice

efficiency and patient engagement.The increase in sales during the quarter ended September 24,2022, was

partially offset by the expiration of a modestly profitable government contractin one of our value-added services

businesses.

Gross Profit

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

September 24,

Gross

September 25,

Gross

Increase

2022

Margin %

2021

Margin %

$

%

Health care distribution

$

799

27.7

%

$

799

26.6

%

$

-

-

%

Technology and value-added services

115

65.0

113

66.1

2

2.0

Total

$

914

29.8

$

912

28.7

$

2

0.2

As a result of different practices of categorizing costs associated with distribution networksthroughout our

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

realize substantially higher gross margin percentages in our technology and value-added servicessegment 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 development.

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

the mix of products sold as well as changes in our customer mix have beenthe most significant drivers affecting

our gross profit margin.For example, sales of our corporate brand products achievegross profit margins that are

higher than average total gross profit margins of all products.With respect to customer mix, sales to our large-

group customers are typically completed at lower gross margins due to the highervolumes sold as opposed to the

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

Our health care distribution gross profit includes a $21 million increasein the gross margin rates due to product mix

and $19 million additional gross profit from acquisitions,partially offset by a decrease of $40 million in gross profit

from internally generated sales.

Technology and value-added services gross profit increased $2 million, or 2.0%, due to a $2 million increase in

gross profit from internally generated sales and $2 million additionalgross profit from acquisitions,partially offset

by a decrease of $2 million from gross margin rates due to product mix.Technology and value-added services

gross profit margin decreasedto 65.0% from 66.1% primarily due to our continued investmentin product

development and customer service.

38

Selling, General and Administrative

Selling, general and administrative expenses by segment and intotal were as follows:

% of

% of

September 24,

Respective

September 25,

Respective

Increase

2022

Net Sales

2021

Net Sales

$

%

Health care distribution

$

620

21.5

%

$

620

20.6

%

$

-

-

%

Technology and value-added services

83

47.2

81

47.4

2

3.2

Total

$

703

22.9

$

701

22.1

$

2

0.3

Selling, general and administrative expenses (including depreciation andamortization; and restructuring and

integration costs in the three months ended September 24, 2022) increased$2 million, or 0.3%.

Selling, general and administrative expenses within our health care distributionsegment had an increase of $18

million of additionalcosts from acquired companies and an increase of $10 million in restructuringand integration

costs, offset by a decrease of $28 million in internally generated operating costs.The $2 million increase in selling,

general and administrative expenses within our technology and value-added servicessegment was attributable to an

increase of $2 million of operating costs and an increase of $1 million of additionalcosts from acquired companies,

partially offset by a decrease of $1 million in restructuring and integration costs.

As a component of total selling, general and administrative expenses, sellingexpenses increased $12 million, or

3.0% to $424 million primarily due to an increase in payroll and payrollrelated costs and travel and convention

expenses.As a percentage of net sales, selling expenses increased to 13.8%from 13.0%.

As a component of total selling, general and administrative expenses, generaland administrative expenses

decreased $10 million, or 3.6% to $279 million primarily due to a decreasein payroll and payroll related costs,

partially offset by an increase in travel expenses.As a percentage of net sales, general and administrative expenses

remained consistent at 9.1%.

Other Expense, Net

Other expense, net, was as follows:

September 24,

September 25,

Variance

2022

2021

$

%

Interest income

$

4

$

2

$

2

191.5

%

Interest expense

(11)

(7)

(4)

(67.1)

Other, net

1

-

1

127.6

Other expense, net

$

(6)

$

(5)

$

(1)

(25.0)

Interest income increased $2 million and interest expense increased$4 million primarily due to increased interest

rates.

Income Taxes

For the three months ended September 24, 2022 our effective tax rate was 22.7%compared to 23.9% for the prior

year period.The difference between our effective tax rate and the federal statutory tax rate forthe three months

ended September 24, 2022 primarily relates to state and foreign income taxesand interest expense.The difference

between our effective tax rate and the federal statutory tax rate for the threemonths ended September 25, 2021 was

primarily due to state and foreign income taxes, interest expense and taxcharges and credits associated with legal

entity reorganizations.

39

Gain on Sale of Equity Investment

In the third quarter of 2021 we received contingent proceeds of $10 millionfrom the 2019 sale of Hu-Friedy

resulting in the recognition of an additional after-tax gain of $7million.

40

Nine Months Ended September 24, 2022 Compared to Nine Months Ended September25, 2021

Net Sales

Net sales were as follows:

September 24,

% of

September 25,

% of

Increase/(Decrease)

2022

Total

2021

Total

$

%

Health care distribution

(1)

Dental

$

5,466

58.9

%

$

5,524

60.9

%

$

(58)

(1.1)

%

Medical

3,274

35.3

3,078

33.9

196

6.3

Total health care distribution

8,740

94.2

8,602

94.8

138

1.6

Technology and value-added services

(2)

536

5.8

468

5.2

68

14.5

Total

$

9,276

100.0

%

$

9,070

100.0

%

$

206

2.3

(1)

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

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

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

(2)

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

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

education services for practitioners, consulting and other services.

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

actual values and may not recalculate due to rounding.

The 2.3% increase in net sales includes an increase of 4.5% in local currencysales (2.4% increase in internally

generated sales and 2.1% growth from acquisitions) partially offset by a decreaseof 2.2% related to foreign

currency exchange.We estimate that sales for the nine months ended September 24, 2022 of PPE and COVID-19

test kits were approximately $991 million, an estimated decrease of 25.8% versusthe prior year.Excluding PPE

and COVID-19 test kits,the estimated increase in internally generated local currency sales was 7.3%.

The 1.1% decrease in dental net sales includes an increase of 2.4% inlocal currency sales (1.4% increase in

internally generated sales and 1.0% growth from acquisitions) offset by a decreaseof 3.5% related to foreign

currency exchange.The 2.4% increase in local currency sales was attributable to an increase in dentalconsumable

merchandise sales of 0.6% (1.2% growth from acquisitions partiallyoffset by 0.6% decrease in internally generated

sales), and an increase in dental equipment sales and service sales of9.0% (8.9% increase in internally generated

sales and 0.1% growth from acquisitions).Our sales growth in dental merchandise was lower than our salesgrowth

in dental equipment during the nine months ended September 24,2022 primarily due to a decrease in PPE sales.

Dental equipment sales increased in both our North American and internationalmarkets, primarily due to increased

demand.We estimate that global dental sales for the nine months ended September 24, 2022 of PPE were

approximately $352 million, an estimated decrease of 32.5% versusthe prior year.Excluding PPE, the estimated

increase in internally generated local currency dental sales was 4.9%.

The 6.3% increase in medical net sales was attributable to an increase of 6.6%in local currency sales (3.3%

increase in internally generated sales and 3.3% growth from acquisitions)partially offset by a decrease of 0.3%

related to foreign currency exchange.Globally, we estimate our medical business recorded sales of approximately

$639 million sales of PPE and COVID-19 test kits for the nine months ended September24, 2022, a decrease of

approximately 21.4% compared to the prior year.Excluding PPE and COVID-19 test kits, the estimated increasein

internally generated local currency medical sales was 12.3%.

The 14.5% increase in technology and value-added services net saleswas attributable to an increase of 15.9% in

local currency sales (8.5% increase in internally generated sales and 7.4%growth from acquisitions) partially offset

by a decrease of 1.4% related to foreign currency exchange.During the nine months ended September 24, 2022,

the trend for transactional software sales improved as we increased the numberof users, generating demand for our

sales cycle management solutions, and also from cloud-based solutions thatdrive practice efficiency and patient

engagement.

41

Gross Profit

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

September 24,

Gross

September 25,

Gross

Increase

2022

Margin %

2021

Margin %

$

%

Health care distribution

$

2,482

28.4

%

$

2,374

27.6

%

$

108

4.6

%

Technology and value-added services

350

65.3

320

68.3

30

9.4

Total

$

2,832

30.5

$

2,694

29.7

$

138

5.1

As a result of different practices of categorizing costs associated with distribution networksthroughout our

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

realize substantially higher gross margin percentages in our technology and value-addedservices segment than in

our health care distribution segment.These higher gross margins result from being both the developer and seller of

software products and services, as well as certain financial services.The software industry typically realizes higher

gross margins to recover investments in research and development.

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

the mix of products sold as well as changes in our customer mix have beenthe most significant drivers affecting

our gross profit margin.For example, sales of our corporate brand products achievegross profit margins that are

higher than average total gross profit margins of all products.With respect to customer mix, sales to our large-

group customers are typically completed at lower gross margins due to the highervolumes sold as opposed to the

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

Health care distribution gross profit increased $108 million, or 4.6% primarilydue to the increase in net sales

discussed above.In addition, health care distribution gross profit margin benefitted from supplierrebates due to

increased purchase volumes compared to the comparable prior-year period.The overall increase in our health care

distribution gross profit was attributable to a $68 million increase in grossprofit due to the increase in the gross

margin rates and $57 million additional gross profit from acquisitions,partially offset by $17 million decrease in

gross profit from internally generated sales.

Technology and value-added services gross profit increased $30 million, or 9.4%, attributable to an increase of $23

million in gross profit from internally generated sales and $15million additional gross profit from acquisitions,

partially offset by a $8 million decrease in gross margin rates.Technology and value-added services gross profit

margin decreased to 65.3% from 68.3% primarily due to lower gross margins of recently acquired companiesin the

business services sector and our continued investment in productdevelopment and customer service.

42

Selling, General and Administrative

Selling, general and administrative expenses by segment and intotal were as follows:

% of

% of

September 24,

Respective

September 25,

Respective

Increase

2022

Net Sales

2021

Net Sales

$

%

Health care distribution

$

1,903

21.8

%

$

1,816

21.1

%

$

87

4.8

%

Technology and value-added services

254

47.4

227

48.5

27

11.9

Total

$

2,157

23.3

$

2,043

22.5

$

114

5.6

Selling, general and administrative expenses (including depreciation andamortization; and restructuring and

integration costs) increased $114 million, or 5.6%.

The $87 million increase in selling, general and administrative expenses withinour health care distribution segment

was attributable to an increase of $24 million in internally generated operatingcosts, an increase of $56 million of

additional costs from acquired companies,and an increase of $7 million in restructuring and integration costs.The

$27 million increase in selling, general and administrative expenseswithin our technology and value-added services

segment was attributable to an increase of $15 million in internally generatedoperating costs and an increase of $13

million of additional costs from acquired companies,partially offset by a decrease in restructuring costs of $1

million.

As a component of total selling, general and administrative expenses, sellingexpenses increased $91 million, or

7.6% to $1,299 million, primarily due to an increase in payroll and payroll relatedcosts and travel and convention

expenses.As a percentage of net sales, selling expenses increased to 14.0%from 13.3%.

As a component of total selling, general and administrative expenses, generaland administrative expenses

increased $23 million, or 2.7% to $858 million, primarily due to an increasein payroll and payroll related costs and

travel and convention expenses.As a percentage of net sales, general and administrative expensesincreased to

9.3% from 9.2%.

Other Expense, Net

Other expense, net, was as follows:

September 24,

September 25,

Variance

2022

2021

$

%

Interest income

$

9

$

5

$

4

90.3

%

Interest expense

(27)

(20)

(7)

(37.9)

Other, net

1

1

-

(20.2)

Other expense, net

$

(17)

$

(14)

$

(3)

(24.1)

Interest income increased $4 million and interest expense increased$7 million primarily due to increased interest

rates.

Income Taxes

For the nine months ended September 24, 2022, our effective tax rate was 23.5% compared to24.2% for the prior

year period.The difference between our effective tax rate and the federal statutory tax rate for the ninemonths

ended September 24, 2022 primarily relates to state and foreign income taxesand interest expense as well as share-

based compensation.The difference between our effective tax rate and the federal statutory tax rate for the nine

months ended September 25, 2021 was primarily due to state andforeign income taxes, interest expense and tax

charges and credits associated with legal entity reorganizations.

43

Gain on Sale of Equity Investment

In the third quarter of 2021 we received contingent proceeds of $10 millionfrom the 2019 sale of Hu-Friedy

resulting in the recognition of an additional after-tax gain of $7million.

44

Liquidity and Capital Resources

Our principal capital requirements have included funding of acquisitions, purchasesof additional noncontrolling

interests, repayments of debt principal, the funding of working capital needs,purchases of fixed assets and

repurchases of common stock.Working capital requirements generally result from increased sales, special

inventory forward buy-in opportunities and payment terms for receivablesand payables.Historically, sales have

tended to be stronger during the second half of the year and special inventoryforward buy-in opportunities have

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

from the end of the third quarter to the end of the first quarter ofthe following year.

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

placements.Please see

for further information.Our ability to generate sufficient cash flows from

operations is dependent on the continued demand of our customersfor our products and services, and access to

products and services from our suppliers.

Our business requires a substantial investment in working capital, whichis susceptible to fluctuations during the

year as a result of inventory purchase patterns and seasonal demands.Inventory purchase activity is a function of

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

future increases in our working capital requirements.

We finance our business to provide adequate funding for at least 12 months.Funding requirements are based on

forecasted profitability and working capital needs, which, on occasion, maychange.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 withsufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

Net cash provided by operating activities was $348 million for the ninemonths ended September 24, 2022,

compared to net cash provided by operating activities of $433 million for thecomparable prior year period.The net

change of $85 million was primarily attributable to a relative increasein working capital, driven by an increase in

other current assets and a decrease in inventories, partially offset by a decrease inaccounts payable.

Net cash used in investing activities was $211 million for the nine months ended September 24,2022, compared to

$479 million for the comparable prior year period.The net change of $268 million was primarily attributable to

decreased payments for equity investments and business acquisitions.

Net cash used in financing activities was $121 million for the ninemonths ended September 24, 2022, compared to

net cash used in financing activities of $254 million for the comparableprior year period.The net change of $133

million was primarily due to increased net borrowings from debt and decreasedrepurchases of common stock.

45

The following table summarizes selected measures of liquidity and capitalresources:

September 24,

December 25,

2022

2021

Cash and cash equivalents

$

123

$

118

Workingcapital

(1)

1,811

1,537

Debt:

Bank credit lines

$

107

$

51

Current maturities of long-term debt

4

11

Long-term debt

934

811

Total debt

$

1,045

$

873

Leases:

Current operating lease liabilities

$

72

$

76

Non-current operating lease liabilities

271

268

(1)

Includes $313 million and $138 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

securitization at September 24, 2022 and December 25, 2021, respectively.

Our cash and cash equivalents consist of bank balances and investmentsin money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operationsincreased to 42.9 days as of September 24, 2022

from 42.6 days as of September 25, 2021.During the nine months ended September 24, 2022, we wroteoff

approximately $7 million of fully reserved accounts receivable against ourtrade receivable reserve.Our inventory

turns from operations decreased to 4.7 as of September 24, 2022 from 5.1as of September 25, 2021.Our working

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

Leases

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

and certain equipment.Our leases have remaining terms of less than one year to approximately19 years, some of

which may include options to extend the leases for up to ten years.As of September 24, 2022, our right-of-use

assets related to operating leases were $319 million and our current and non-currentoperating lease liabilities were

$72 million and $271 million, respectively.

Stock Repurchases

From March 3, 2003 through September 24, 2022, we repurchased $4.2billion, or 83,598,119 shares, under our

common stock repurchase programs, with $400 million availableas of September 24, 2022 for future common

stock share repurchases.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies andestimates from those disclosed in Item

7 of our Annual Report on Form 10-K for the year ended December 25, 2021,except accounting policies adopted

as of December 26, 2021, which are discussed in

of the Notes to the Condensed Consolidated Financial

Statements included under Item 1.

46

Accounting Standards Update

For a discussion of accounting standards updates that have been adoptedor will be adopted, see

of the Notes

to the Condensed Consolidated Financial Statements included under Item 1.

ITEM 3.QUANTITATIVEAND QUALITATIVEDISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market riskfrom that disclosed in Item 7A of our Annual

Report on Form 10-K for the year ended December 25, 2021.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, includingour principal executive officer and

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

procedures as of the end of the period covered by this quarterly reportas such term is defined in Rules 13a-15(e)

and 15d-15(e) promulgated under the Securities Exchange Act of 1934, asamended (the “Exchange Act”).Based

on this evaluation, our management, including our principal executive officer and principalfinancial officer,

concluded that our disclosure controls and procedures were effective as of September 24,2022, to ensure that all

material information required to be disclosed by us in reports that we fileor submit under the Exchange Act is

accumulated and communicated to them as appropriate to allow timelydecisions regarding required disclosure and

that all such information is recorded, processed, summarized and reportedwithin the time periods specified in the

SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

The combination of acquisitions, continued acquisition integrations and systemsimplementation activity

undertaken during the quarter and carried over from prior quarters when consideredin the aggregate, represents a

material change in our internal control over financial reporting.

During the quarter ended September 24, 2022, we completed the acquisitionof dental businesses in North America

and Europe.Also, post-acquisition integration related activities continuedfor our dental and medical businesses

acquired during prior quarters.These acquisitions, the majority of which utilize separateinformation and financial

accounting systems, have been included in our condensed consolidatedfinancial statements since their respective

dates of acquisition.In addition, we completed systems implementation activitiesin North America related to a

new ERP system for a dental business as well as the integration of adental business onto an existing ERP system.

All acquisitions, continued acquisition integrations and systems implementationactivity involve necessary and

appropriate change-management controls that are considered in our quarterlyassessment of the design and

operating effectiveness of our internal control over financial reporting.

Limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can provideonly 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 thatall control issues, if any, within a company

have been detected.

47

PARTII.OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

For a discussion of Legal Proceedings, see

of the Notes to the Condensed Consolidated

Financial Statements included under Item 1.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed inPart1, Item 1A, of our Annual Report on

Form 10-K for the year ended December 25, 2021.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIESAND USE OF PROCEEDS

Purchases of equity securities by the issuer

Our share repurchase program announced on March 3, 2003

, originally allowed us to repurchase up to two million

shares pre-stock splits (eight million shares post-stock splits) of our commonstock, which represented

approximately 2.3% of the shares outstanding at the commencement ofthe program.Subsequent additional

increases totaling $4.5 billion, authorized by our Board of Directors,to the repurchase program provide for a total

of $4.6 billion of shares of our common stock to be repurchased under thisprogram.

On August 17, 2022, our Board of Directors authorized the repurchaseof up to an additional $400 million in shares

of our common stock.

As of September 24, 2022, we had repurchased approximately $4.2 billionof common stock (83,598,119 shares)

under these initiatives, with $400 million available for future commonstock share repurchases.

The following table summarizes repurchases of our common stockunder our stock repurchase program during the

fiscal quarter ended September 24, 2022.

Total Number

Maximum Number

Total

of Shares

of Shares

Number

Average

Purchased as Part

that May Yet

of Shares

Price Paid

of Our Publicly

Be Purchased Under

Fiscal Month

Purchased (1)

Per Share

Announced Program

Our Program (2)

6/26/2022 through 7/30/2022

745,762

$

76.71

745,762

421,839

8/1/2022 through 8/27/2022

437,967

75.93

437,967

5,450,334

8/28/2022 through 9/24/2022

-

-

-

5,940,006

1,183,729

1,183,729

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

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

closing price of our common stock at that time.This table excludes shares withheld from employees to satisfy minimum tax withholding

requirements for equity-based transactions.

48

ITEM 6.EXHIBITS

31.1

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

31.2

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

32.1

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

101.INS

Inline XBRL Instance Document - the instance document does not appearin the

Interactive Data File because its XBRL tags are embedded within theInline

XBRL document+

101.SCH

Inline XBRL Taxonomy Extension Schema Document+

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document+

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document+

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document+

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document+

104

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

quarter ended September 24, 2022, formatted in Inline XBRL (includedwithin

Exhibit 101 attachments).+

+ Filed or furnished herewith.

49

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registranthas duly caused this Report to

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

Henry Schein, Inc.

(Registrant)

By: /s/ Ronald N. South

Ronald N. South

Senior Vice President and

Chief Financial Officer

(Authorized Signatory and Principal Financial

and Accounting Officer)

Dated: November 1, 2022