Executive-Level Overview

Condensed Statements of Comprehensive Income for the three monthsended

Condensed Statement of Changes in Stockholders' Equity for the threemonths ended

Condensed Statements of Cash Flows for the three months ended

Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

Note 2 – Critical Accounting Policies, Accounting Pronouncements Adopted

and Recently Issued Accounting Standards

Note 3 – Revenue from Contracts with Customers

Note 4 – Segment Data

Note 5 – Business Acquisitions

Note 6 – Fair ValueMeasurements

Note 7 – Debt

Note 8 – Income Taxes

Note 9 – Legal Proceedings

Note 10 – Stock-Based Compensation

Note 11 – Redeemable Noncontrolling Interests

Note 12 – Comprehensive Income

Note 13 – Plans of Restructuring

Note 14 – Earnings Per Share

Note 15 – Supplemental Cash Flow Information

Note 16 – Related Party Transactions

ITEM 2.

Management's Discussion and Analysis of

Financial Condition and Results of Operations

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

ITEM 4.

Controls and Procedures

PARTII.OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

See accompanying notes.

PART

~~PART~~ I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in ~~thousands,~~millions,

except share data)

March 26,

December 25,

2022

2021

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

126

118

Accounts receivable, net of reserves of $

and $

1,444

1,452

Inventories, net

1,871

1,861

Prepaid expenses and other

389

413

Total current assets

3,830

3,844

Property and equipment, net

358

366

Operating lease right-of-use assets

331

325

Goodwill

2,857

2,854

Other intangibles, net

644

668

Investments and other

427

424

Total assets

8,447

8,481

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

914

1,054

Bank credit lines

Current maturities of long-term debt

Operating lease liabilities

Accrued expenses:

Payroll and related

326

385

Taxes

174

137

Other

561

593

Total current liabilities

2,144

2,307

Long-term debt

773

811

Deferred income taxes

Operating lease liabilities

277

268

Other liabilities

376

377

Total liabilities

3,610

3,805

Redeemable noncontrolling interests

613

Commitments and contingencies

(nil)

Stockholders' equity:

Preferred stock, $

0.01

par value,

1,000,000

shares authorized,

NaN

outstanding

Common stock, $

0.01

par value,

480,000,000

shares authorized,

137,708,809

outstanding on March 26, 2022 and

137,145,558

outstanding on December 25, 2021

Additional paid-in capital

Retained earnings

3,759

3,595

Accumulated other comprehensive loss

(168)

(171)

Total Henry Schein, Inc. stockholders' equity

3,592

3,425

Noncontrolling interests

632

638

Total stockholders' equity

4,224

4,063

Total liabilities, redeemable noncontrolling

interests and stockholders' equity

8,447

8,481

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS

OF INCOME

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

September 30,

December 31,

2017

2016

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents ..............................................................................................................................................................

$
79,879

$
62,381

Accounts receivable, net of reserves of $96,953 and $90,329 ................................................................................................................

1,544,582

1,254,139

Inventories, net .............................................................................................................................................................................

1,692,256

1,635,750

Prepaid expenses and other .............................................................................................................................................................

465,812

360,510

Total current assets ................................................................................................................................................................

3,782,529

3,312,780
Property and equipment, net ...............................................................................................................................................................

361,708

333,906
Goodwill ..........................................................................................................................................................................................

2,224,657

2,019,740
Other intangibles, net .........................................................................................................................................................................

666,997

621,180
Investments and other .......................................................................................................................................................................

450,770

442,790

Total assets ..........................................................................................................................................................................

$
7,486,661

$
6,730,396

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable .........................................................................................................................................................................

$
1,029,138

$
977,249

Bank credit lines ...........................................................................................................................................................................

631,865

437,476

Current maturities of long-term debt .................................................................................................................................................

17,247

65,923

Accrued expenses:

Payroll and related ....................................................................................................................................................................

251,849

266,463

Taxes ......................................................................................................................................................................................

148,627

151,750

Other ......................................................................................................................................................................................

358,421

391,785

Total current liabilities ............................................................................................................................................................

2,437,147

2,290,646
Long-term debt .................................................................................................................................................................................

907,592

715,457
Deferred income taxes .......................................................................................................................................................................

91,786

51,589
Other liabilities ..................................................................................................................................................................................

292,179

264,264

Total liabilities ......................................................................................................................................................................

3,728,704

3,321,956

Redeemable noncontrolling interests .....................................................................................................................................................

737,747

607,636
Commitments and contingencies .........................................................................................................................................................

Stockholders' equity:

Preferred stock, $.01 par value, 1,000,000 shares authorized,

none outstanding ......................................................................................................................................................................

-

-

Common stock, $.01 par value, 240,000,000 shares authorized,

156,952,738 outstanding on September 30, 2017 and

158,805,010 outstanding on December 31, 2016 ............................................................................................................................

1,570

1,588

Additional paid-in capital ...............................................................................................................................................................

-

126,742

Retained earnings ..........................................................................................................................................................................

3,164,541

2,981,777

Accumulated other comprehensive loss .............................................................................................................................................

(154,472)

(317,041)

Total Henry Schein, Inc. stockholders' equity .................................................................................................................................

3,011,639

2,793,066

Noncontrolling interests ..................................................................................................................................................................

8,571

7,738

Total stockholders' equity .......................................................................................................................................................

3,020,210

2,800,804

Total liabilities, redeemable noncontrolling interests and stockholders' equity .......................................................................................

$
7,486,661

$
6,730,396

~~See accompanying notes.~~

Three Months Ended

March 26,

March 27,

2022

2021

Net sales

3,179

2,925

Cost of sales

2,206

2,034

Gross profit

973

891

Operating expenses:

Selling, general and administrative

682

614

Depreciation and amortization

Restructuring costs

Operating income

244

230

Other income (expense):

Interest income

Interest expense

(7)

(6)

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

239

226

Income taxes

(57)

Equity in earnings of affiliates

Net income

186

175

Less: Net income attributable to noncontrolling interests

(5)

(9)

Net income attributable to Henry Schein, Inc.

181

166

Earnings per share attributable to Henry Schein, Inc.:

Basic

1.31

1.17

Diluted

1.30

1.16

Weighted-average common

shares outstanding:

Basic

137,296,581

142,298,387

Diluted

139,237,472

143,397,724

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(unaudited, in millions)

Three Months Ended

March 26,

March 27,

2022

2021

Net income

186

175

Other comprehensive income (loss), net of tax:

Foreign currency translation gain (loss)

(38)

Unrealized gain from foreign currency hedging activities

Pension adjustment gain

Other comprehensive income (loss), net of tax

(34)

Comprehensive income

190

141

Comprehensive income attributable to noncontrolling interests:

Net income

(5)

(9)

Foreign currency translation (gain) loss

(1)

Comprehensive income attributable to noncontrolling interests

(6)

(3)

Comprehensive income attributable to Henry Schein, Inc.

184

138

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENT

OF CHANGES IN

STOCKHOLDERS’ EQUITY

(unaudited, in millions, except share data)

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, December 25, 2021

137,145,558

3,595

(171)

638

4,063

Net income (excluding $

attributable to Redeemable

noncontrolling interests)

181

182

Foreign currency translation gain (excluding gain of $

attributable to Redeemable noncontrolling interests)

Unrealized gain from foreign currency hedging activities,

net of tax of $

Purchase of noncontrolling interests

(7)

Change in fair value of redeemable securities

(3)

Stock-based compensation expense

876,161

Stock issued upon exercise of stock options

26,233

Shares withheld for payroll taxes

(336,331)

(28)

Settlement of stock-based compensation awards

(2,812)

Transfer of charges in excess of

capital

(17)

Balance, March 26, 2022

137,708,809

3,759

(168)

632

4,224

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, December 26, 2020

142,462,571

3,455

(108)

636

3,984

Net income (excluding $

attributable to Redeemable

noncontrolling interests)

166

168

Foreign currency translation loss (excluding loss of $

attributable to Redeemable noncontrolling interests)

(32)

Unrealized gain from foreign currency hedging activities,

net of tax of $

Pension adjustment gain, net of tax of $

Change in fair value of redeemable securities

(46)

Initial noncontrolling interests and adjustments related

business acquisitions

Repurchase and retirement of common stock

(1,325,242)

(12)

(77)

(89)

Stock-based compensation expense

281,645

Settlement of stock-based compensation awards

Shares withheld for payroll taxes

(108,861)

(7)

Transfer of charges in excess of

capital

(51)

Balance, March 27, 2021

141,310,113

3,493

(136)

639

3,997

See accompanying notes.

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

(unaudited, in millions)

Three Months Ended

March 26,

March 27,

2022

2021

Cash flows from operating activities:

Net income

186

175

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

Depreciation and amortization

Stock-based compensation expense

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

(3)

Provision for (benefit from) deferred income taxes

(3)

Equity in earnings of affiliates

(4)

(6)

Distributions from equity affiliates

Changes in unrecognized tax benefits

Other

(7)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

119

Inventories

(9)

(78)

Other current assets

(45)

Accounts payable and accrued expenses

(188)

(180)

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of fixed assets

(19)

(14)

Payments related to equity investments and business

acquisitions, net of cash acquired

(5)

(204)

Proceeds from loan to affiliate

Other

(7)

(5)

Net cash used in investing activities

(27)

(223)

Cash flows from financing activities:

Net change in bank borrowings

Principal payments for long-term debt

(53)

(18)

Proceeds from issuance of stock upon exercise of stock options

Payments for repurchases and retirement of common stock

(89)

Payments for taxes related to shares withheld for employee taxes

(26)

(6)

Distributions to noncontrolling shareholders

(5)

(7)

Acquisitions of noncontrolling interests in subsidiaries

(10)

Net cash used in financing activities

(62)

(120)

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

(277)

Cash and cash equivalents, beginning of period

118

421

Cash and cash equivalents, end of period

126

144

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS ~~OF INCOME~~

(in ~~thousands, except per share data)~~

~~(unaudited)~~

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2017

2016

2017

2016

Net sales ....................................................................................................................................................................................

$
3,161,083

$
2,865,148

$
9,143,489

$
8,450,734
Cost of sales ...............................................................................................................................................................................

2,325,029

2,077,473

6,645,342

6,083,748

Gross profit ...........................................................................................................................................................................

836,054

787,675

2,498,147

2,366,986
Operating expenses:

Selling, general and administrative ................................................................................................................................................

622,506

581,584

1,879,969

1,779,583

Restructuring costs ....................................................................................................................................................................

-

5,370

-

29,811

Operating income ...................................................................................................................................................................

213,548

200,721

618,178

557,592
Other income (expense):

Interest income .........................................................................................................................................................................

4,793

3,141

13,204

10,045

Interest expense ........................................................................................................................................................................

(13,428)

(7,488)

(37,056)

(21,982)

Other, net .................................................................................................................................................................................

(194)

(199)

489

3,206

Income before taxes and equity in earnings

of affiliates .........................................................................................................................................................................

204,719

196,175

594,815

548,861
Income taxes ..............................................................................................................................................................................

(59,340)

(56,601)

(156,276)

(159,099)
Equity in earnings of affiliates .......................................................................................................................................................

5,569

5,717

12,244

13,160
Net income .................................................................................................................................................................................

150,948

145,291

450,783

402,922

Less: Net income attributable to noncontrolling interests ...................................................................................................................

(12,917)

(11,578)

(35,949)

(35,360)
Net income attributable to Henry Schein, Inc. ...................................................................................................................................

$
138,031

$
133,713

$
414,834

$
367,562

Earnings per share attributable to Henry Schein, Inc.:

Basic ......................................................................................................................................................................................

$
0.88

$
0.83

$
2.64

$
2.26

Diluted ....................................................................................................................................................................................

$
0.87

$
0.82

$
2.61

$
2.23

Weighted-average common shares outstanding:

Basic ......................................................................................................................................................................................

156,914

161,791

157,386

162,600

Diluted ....................................................................................................................................................................................

158,271

163,710

158,866

164,635

~~See accompanying notes.~~

~~HENRY SCHEIN, INC.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(in thousands)~~

~~(unaudited)~~

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2017

2016

2017

2016

Net income .................................................................................................................................................................................

$
150,948

$
145,291

$
450,783

$
402,922

Other comprehensive income (loss), net of tax:

Foreign currency translation gain (loss)...........................................................................................................................................

58,916

(6,463)

173,166

(2,041)

Unrealized gain (loss) from foreign currency hedging

activities ................................................................................................................................................................................

(34)

(603)

(1,274)

1,026

Unrealized investment loss ..........................................................................................................................................................

(2)

-

(2)

-

Pension adjustment gain (loss)......................................................................................................................................................

(353)

209

(1,063)

10

Other comprehensive income (loss), net of tax ..................................................................................................................................

58,527

(6,857)

170,827

(1,005)
Comprehensive income .................................................................................................................................................................

209,475

138,434

621,610

401,917

Comprehensive income attributable to noncontrolling

interests:

Net income ............................................................................................................................................................................

(12,917)

(11,578)

(35,949)

(35,360)

Foreign currency translation gain................................................................................................................................................

(3,473)

(716)

(8,258)

(1,236)

Comprehensive income attributable to noncontrolling

interests ............................................................................................................................................................................

(16,390)

(12,294)

(44,207)

(36,596)

Comprehensive income attributable to Henry Schein, Inc. ...................................................................................................................

$
193,085

$
126,140

$
577,403

$
365,321

~~See accompanying notes.~~

~~HENRY SCHEIN, INC.~~

~~CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY~~

~~(in thousands,~~millions, except share and per share data)

~~(unaudited)~~

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 31, 2016 .........................................................................................................................................................................

158,805,010

$
1,588

$
126,742

$
2,981,777

$
(317,041)

$
7,738

$
2,800,804
Net income (excluding $35,398 attributable to Redeemable

noncontrolling interests) ........................................................................................................................................................................

-

-

-

414,834

-

551

415,385
Foreign currency translation gain (excluding gain of $7,961

attributable to Redeemable noncontrolling interests) .............................................................................................................................................

-

-

-

-

164,908

297

165,205
Unrealized loss from foreign currency hedging activities,

net of tax benefit of $4..........................................................................................................................................................................

-

-

-

-

(1,274)

-

(1,274)
Unrealized investment loss, net of tax of $1..........................................................................................................................................................

-

-

-

-

(2)

-

(2)
Pension adjustment loss, including tax benefit of $508................................................................................................................................................

-

-

-

-

(1,063)

-

(1,063)
Dividends paid .....................................................................................................................................................................................

-

-

-

-

-

(383)

(383)
Other adjustments ..................................................................................................................................................................................

-

-

29

-

-

368

397
Change in fair value of redeemable securities .........................................................................................................................................................

-

-

(124,747)

-

-

-

(124,747)
Repurchase and retirement of common stock .........................................................................................................................................................

(2,625,230)

(26)

(49,184)

(175,795)

-

-

(225,005)
Stock issued upon exercise of stock options,

including tax benefit of $681 ....................................................................................................................................................................

186,570

2

4,258

-

-

-

4,260
Stock-based compensation expense ..................................................................................................................................................................

1,106,354

11

31,976

-

-

-

31,987
Shares withheld for payroll taxes ....................................................................................................................................................................

(519,966)

(5)

(44,696)

-

-

-

(44,701)
Liability for cash settlement of stock-based compensation

awards.........................................................................................................................................................................................

-

-

(653)

-

-

-

(653)
Transfer of charges in excess of capital.................................................................................................................................................................
-

-

56,275

(56,275)

-

-

-

Balance, September 30, 2017 ........................................................................................................................................................................

156,952,738

$
1,570

$
-

$
3,164,541

$
(154,472)

$
8,571

$
3,020,210

~~See accompanying notes.~~

(unaudited

)

~~HENRY SCHEIN, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in thousands)~~

~~(unaudited)~~

Nine Months Ended

September 30,

September 24,

2017

2016

Cash flows from operating activities:

Net income ......................................................................................................................................................................................

$
450,783

$
402,922

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization ....................................................................................................................................................

141,278

125,829

Stock-based compensation expense .............................................................................................................................................

31,987

43,627

Provision for losses on trade and other accounts receivable ...............................................................................................................

6,981

1,736

Provision for (benefit from) deferred income taxes ..........................................................................................................................

8,600

(13,425)

Equity in earnings of affiliates .....................................................................................................................................................

(12,244)

(13,160)

Distributions from equity affiliates ...............................................................................................................................................

16,826

12,104

Changes in unrecognized tax benefits ...........................................................................................................................................

(6,653)

4,799

Other ......................................................................................................................................................................................

6,031

7,845

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable ...............................................................................................................................................................

(229,239)

(131,586)

Inventories ...........................................................................................................................................................................

27,336

48,513

Other current assets ...............................................................................................................................................................

(70,833)

(35,781)

Accounts payable and accrued expenses ...................................................................................................................................

(63,352)

(75,355)
Net cash provided by operating activities ...............................................................................................................................................

307,501

378,068

Cash flows from investing activities:

Purchases of fixed assets ....................................................................................................................................................................

(55,315)

(44,525)

Payments for equity investments and business

acquisitions, net of cash acquired .....................................................................................................................................................

(258,786)

(126,543)

Other ..............................................................................................................................................................................................

(6,694)

(8,766)
Net cash used in investing activities .......................................................................................................................................................

(320,795)

(179,834)

Cash flows from financing activities:

Proceeds from (repayments of) bank borrowings .....................................................................................................................................

193,550

(3,274)

Proceeds from issuance of long-term debt ..............................................................................................................................................

200,440

260,000

Principal payments for long-term debt ...................................................................................................................................................

(59,531)

(9,293)

Debt issuance costs ............................................................................................................................................................................

(1,771)

(233)

Proceeds from issuance of stock upon exercise of stock options .................................................................................................................

4,941

9,754

Payments for repurchases of common stock ..........................................................................................................................................

(225,005)

(350,001)

Payments for taxes related to shares withheld for employee taxes...............................................................................................................

(44,721)

(27,115)

Excess tax benefits related to stock-based compensation..........................................................................................................................

-

(463)

Distributions to noncontrolling shareholders ...........................................................................................................................................

(23,921)

(26,366)

Acquisitions of noncontrolling interests in subsidiaries ..............................................................................................................................

(27,914)

(51,265)
Net cash provided by (used in) financing activities ...................................................................................................................................

16,068

(198,256)

Effect of exchange rate changes on cash and cash equivalents ..................................................................................................................

14,724

4,128
Net change in cash and cash equivalents ................................................................................................................................................

17,498

4,106
Cash and cash equivalents, beginning of period .......................................................................................................................................

62,381

72,086
Cash and cash equivalents, end of period ...............................................................................................................................................

$
79,879

$
76,192

~~See accompanying notes.~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

Note 1 – Basis of Presentation

Our condensed consolidated financial statements include ~~our~~the accounts ~~as well as those~~of Henry

Schein, Inc. and all of our ~~wholly-owned~~

controlled subsidiaries.

All intercompany accounts and ~~majority-owned subsidiaries.~~ transactions are eliminated

in consolidation.

Investments

in unconsolidated affiliates in which we have the ability to influence the operating

or financial decisions are

accounted for under the equity method.

Certain prior period amounts have been reclassified to conform

to the

current period presentation.

Our accompanying unaudited condensed consolidated financial statements

have been prepared in accordance with

accounting principles generally accepted in the United States (“

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

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

Accordingly, they do not include all of the

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

statements.

The unaudited interim condensed consolidated financial statements should be

read in conjunction with the audited

consolidated financial statements and notes to the consolidated financial

statements contained in our Annual Report

on Form 10-K for the year ended December 25, 2021 and with the information

contained in our other publicly-

available filings with the Securities and Exchange Commission.

The condensed consolidated financial statements

reflect all adjustments considered necessary for a fair presentation of the

consolidated results of operations and

financial position for the interim periods presented.

All such adjustments are of a normal recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2016.

The preparation of financial statements in conformity with ~~U.S. GAAP~~accounting principles

generally accepted in the United

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

assets and liabilities and

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

and the reported amounts of

revenues and expenses during the reporting period.

Actual results could differ from those estimates.

The results of

operations for the ~~nine~~three months ended ~~September 30, 2017~~March 26, 2022 are not necessarily

indicative of the results to be expected

for any other interim period or for the year ending December ~~30, 2017.~~

~~On August 16, 2017,~~ 31, 2022.

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

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

direct activities that most significantly affect the economic performance and have

the obligation to absorb the

majority of the losses or benefits.

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

pledged as

collateral to the related debt.

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

receivable.

March 26, 2022 and December 25, 2021, certain trade accounts receivable

that can only be used to settle

obligations of this VIE were $

million and $

138

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

creditors have recourse to us were $

million and $

105

million, respectively.

Our condensed consolidated financial statements reflect estimates and assumptions

made by us that affect, among

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

asset valuation; inventory valuation; equity

investment valuation; assessment of ~~Directors approved~~the annual effective tax rate; valuation of deferred

income taxes and income

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

supplier rebates; measurement of

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

plans; and pension plan

assumptions.

Due to the significant uncertainty surrounding the future impact of

COVID-19, our judgments

regarding estimates and impairments could change in the future and

may result in a ~~2-for-1 split~~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 CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 2 – Critical Accounting Policies, Accounting Pronouncements Adopted

and Recently Issued Accounting

Standards

Critical Accounting Policies

There have been no material changes in our critical accounting policies

during the three months ended March 26,

2022, as compared to the critical accounting policies described in Item

7 of our ~~common stock. Each Henry Schein, Inc. stockholder~~Annual Report on Form 10-K for

the year ended December 25, 2021, except as follows:

Accounting Pronouncements Adopted

December 26, 2021

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

for

Contract Assets and Contract Liabilities from Contracts with Customers”

(Subtopic 805), as early adoption of this

ASU was permitted.

ASU 2021 – 08 requires an acquirer to recognize and measure

contract assets and contract

liabilities acquired in a business combination in accordance with Topic 606.

At the acquisition date, an acquirer

should account for the related revenue contracts 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 atfor the ~~close~~

acquired revenue contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired

contract assets and contract liabilities consistent with how

they were recognized and measured in the acquiree’s

financial statements.

Our

adoption

of ~~business~~ASU 2021 - 08 did not have a material impact on ~~September 1, 2017 received~~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”) or

by 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. GAAP

to ease the financial reporting burdens related

to the expected market transition from LIBOR and other interbank offered rates

to 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 ~~dividend~~material

impact on our consolidated financial statements.

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

Hedging –

Portfolio Layer Method,” which will expand companies' abilities

to hedge the benchmark interest rate risk of ~~one additional share~~

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-layer

method) to allow multiple hedges of a single

closed portfolio of assets using spot starting, forward starting and amortizing-notional

swaps.

It also permits both

prepayable and non-prepayable financial assets to be included in the closed

portfolio of assets hedged in a portfolio

layer hedge.

This ASU further requires that basis adjustments not be allocated

to individual assets for ~~every share held. Trading began~~active

portfolio layer method hedges, but rather be maintained on the closed portfolio

of assets as a ~~split-adjusted basis~~ whole.

ASU 2022 –

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

within those fiscal

years.

Early adoption is permitted for any entity that has adopted the amendments

in ASU 2017-12.

We do not

expect that the requirements of this guidance will have a material impact

on ~~September 15, 2017~~our consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled

Debt Restructuring and ~~has been retroactively reflected for all periods presented~~Vintage Disclosures”.

The amendments in this ASU eliminate the accounting guidance

for

troubled debt restructurings by creditors that have adopted the Current Expected

Credit Losses model and enhance

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

the disclosure requirements for loan refinancings and restructurings

made with borrowers experiencing financial

difficulty.

In addition, the amendments require a public business entity

to disclose current-period gross write-offs

for financing receivables and net investment in leases by year of origination

in the vintage disclosures.

ASU 2022

– 02 is effective for fiscal years beginning after December 15, 2022, including

interim periods within those fiscal

years.

Early adoption is permitted for any entity that has adopted the amendments

in ASU No. 2016-13, “Financial

Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.

We do not

expect that the requirements of this guidance will have a material impact on our

consolidated financial statements.

Note 3 – Revenue from Contracts with Customers

Revenue is recognized in accordance with policies disclosed in Item 8 of our

Annual Report on Form ~~10-~~Q.

10-K for

the year ended December 25, 2021.

Disaggregation of Net Sales

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

area:

Three Months Ended

March 26, 2022

North America

International

Global

Revenues:

Health care distribution

Dental

1,105

723

1,828

Medical

1,150

1,172

Total health care distribution

2,255

745

3,000

Technology

and value-added services

156

179

Total revenues

2,411

768

3,179

Three Months Ended

March 27, 2021

North America

International

Global

Revenues:

Health care distribution

Dental

1,045

744

1,789

Medical

963

991

Total health care distribution

2,008

772

2,780

Technology

and value-added services

124

145

Total revenues

2,132

793

2,925

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

million was reported in Accrued expenses:

Other, and $

million related to non-current contract liabilities was reported

in Other liabilities.

During the three

months ended March 26, 2022, we recognized in revenue $

million of the amounts that were previously deferred

at December 25, 2021.

At March 26, 2022, the current and non-current portion of contract liabilities

were $

million and $

million, respectively.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 24

–

Segment Data

We conduct our business through ~~two~~

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

and

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

base.

Our global

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

other institutions. Our

global medical businesses serve office-based medical practitioners, ambulatory

surgery centers, other alternate-care

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

practitioners in

countries worldwide.

The health care distribution reportable segment aggregates our global

dental ~~animal health~~ and medical operating segments. This

segment distributes consumable products, dental specialty products,

small equipment, laboratory products, large

equipment, equipment repair services, branded and generic pharmaceuticals,

vaccines, surgical products, diagnostic

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

and vitamins.

Our global technology and value-added services reportable segment provides

software, technology and other value-

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

software systems

for dental and medical practitioners. Our value-added practice solutions

include practice consultancy, education,

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

e-services, practice technology, network

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

The following tables present information about our reportable and operating

segments:

Three Months Ended

March 26,

March 27,

2022

2021

Net Sales:

Health care distribution

(1)

Dental

1,828

1,789

Medical

1,172

991

Total health care distribution

3,000

2,780

Technology

and value-added services

(2)

179

145

Total

3,179

2,925

(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. Our global dental group serves office-based dental practitioners, dental laboratories, schools and other institutions. Our global animal health group serves animal health practices and clinics. Our global medical group serves office-based medical practitioners, ambulatory surgery centers, other alternate-care settings and other institutions. Our global dental, animal health and medical groups serve practitioners in 33 ~~countries worldwide.~~

~~Our global technology and value-added services group provides~~

(2)

Consists of practice management software ~~technology~~ and other value-added ~~services~~products, which are distributed primarily to health care ~~practitioners. Our technology group offerings include~~ providers,

practice consultancy, education, revenue cycle management ~~software systems for dental~~ and ~~medical practitioners and animal health clinics. Our value-added practice solutions include~~ financial services on a non-recourse basis, e-services, continuing

education services for practitioners, consulting and other services.

Three Months Ended

March 26,

March 27,

2022

2021

Operating Income:

Health care distribution

211

197

Technology

and value-added services

Total

244

230

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 5

–

Business Acquisitions

2022 Acquisitions

During the three months ended March 26, 2022,

we made an acquisition within the technology and value-added

services segment.

The impact of this acquisition was not considered material to our

condensed consolidated

financial statements.

2021 Acquisitions

We completed acquisitions during the three months ended March 27, 2021 which were immaterial to our financial

statements.

Our ownership interest acquired ranges between approximately

% to

100

Acquisitions within our

health care distribution segment included

companies that specialize in distribution of dental products, a provider

home medical 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 business analytics and intelligence software.

The following table aggregates the estimated fair value, as of the

date of acquisition, of consideration paid and net

assets acquired for acquisitions during the three months ended March 27, 2021.

While we use our best estimates

and assumptions to accurately value those assets acquired and liabilities

assumed at the acquisition date as well as

contingent consideration, where applicable, our estimates are inherently uncertain

and subject to refinement.

As a

result, during the measurement period we may record adjustments

to the assets acquired and liabilities assumed

with the corresponding offset to goodwill within our consolidated balance sheets.

Acquisition consideration:

Cash

212

Deferred consideration

Redeemable noncontrolling interests

Total consideration

289

Identifiable assets acquired and liabilities assumed:

Current assets

Intangible assets

151

Other noncurrent assets

Current liabilities

(32)

Deferred income taxes

(9)

Other noncurrent liabilities

(22)

Total identifiable

net assets

194

Goodwill

Total net assets acquired

289

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

The following table summarizes the identifiable intangible assets acquired

during the quarter ended March 27, 2021

and their estimated useful lives as of the date of the acquisition:

Estimated

Useful Lives

(in years)

Trademark / Tradename

Non-compete agreements

Customer relationships and lists

120

Product development

Total

151

The major classes of assets and liabilities that we generally allocate purchase

price to, excluding goodwill, include

identifiable intangible assets (i.e., customer relationships and lists, trademarks

and trade names, product

development and non-compete agreements), inventory and accounts

receivable, property, plant and equipment,

deferred taxes and other current and long-term assets and liabilities.

The estimated fair value of identifiable

intangible assets is based on critical estimates, judgments and assumptions

derived from analysis of market

conditions, discount rates, discounted cash flows, customer retention rates

and estimated useful lives.

Some prior owners of acquired subsidiaries are eligible to receive additional

purchase price cash consideration if

certain financial targets are met.

We have accrued liabilities for the estimated fair value of additional purchase

price consideration at the time of the acquisition.

Any adjustments to these accrual amounts are recorded in our

consolidated statements of income.

For the three months ended March 26, 2022 and March 27, 2021, there were

material adjustments recorded in our consolidated statements of income

relating to changes in estimated contingent

purchase price liabilities.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 6 – Fair Value Measurements

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

paid to transfer a liability in an orderly

transaction between market participants at the measurement date.

The fair value hierarchy distinguishes between

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

from independent sources (observable

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

information available in the circumstances (unobservable inputs).

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

highest priority to unadjusted quoted prices

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

to unobservable inputs (Level 3).

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

•

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

or liabilities that are accessible at the

measurement date.

•

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

for the asset or liability,

either directly or indirectly.

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

in active markets;

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

not active; inputs other than quoted

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

derived principally from or corroborated by

observable market data by correlation or other means.

•

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

The following section describes the fair values of our financial instruments

and the methodologies that we used to

measure their fair values.

Investments and notes receivable

There are no quoted market prices available for investments in unconsolidated

affiliates and notes receivable;

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

rates in the

applicable markets.

Debt

The fair value of our debt (including bank credit lines) is classified as

Level 3 within the fair value hierarchy, and

as of March 26, 2022 and December 25, 2021 was estimated at $

866

million and $

873

million, respectively.

Factors that we considered when estimating the fair value of our debt

included market conditions, such as interest

rates and credit spreads.

Derivative contracts

Derivative contracts are valued using quoted market prices and

significant other observable inputs.

We use

derivative instruments to minimize our exposure to fluctuations in foreign

currency exchange rates.

Our derivative

instruments primarily include foreign currency forward agreements related

to certain intercompany loans, certain

forecasted inventory purchase commitments with foreign suppliers,

foreign currency forward contracts to hedge a

portion of our euro-denominated foreign operations which are designated

as net investment hedges and a total

return swap for the purpose of economically hedging our unfunded

non-qualified supplemental executive retirement

plan and our deferred compensation plan.

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

are obtained by comparing our contract

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

is based on market rates for comparable

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

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

~~The following tables present information about our reportable and operating segments:~~

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2017

2016

2017

2016
Net Sales:

Health care distribution (1):

Dental .....................................................................................................................................................................................

$
1,478,730

$
1,330,525

$
4,372,055

$
4,005,468

Animal health ...........................................................................................................................................................................

882,580

790,279

2,586,850

2,415,290

Medical ...................................................................................................................................................................................

690,761

639,648

1,861,074

1,716,590

Total health care distribution ..................................................................................................................................................

3,052,071

2,760,452

8,819,979

8,137,348

Technology and value-added services (2)...........................................................................................................................................

109,012

104,696

323,510

313,386

Total .......................................................................................................................................................................................

$
3,161,083

$
2,865,148

$
9,143,489

$
8,450,734
*CS

*CE

(1)
Consists of consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and

generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

(2)
Consists of practice management software and other value-added products, which are distributed primarily to health care providers,

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

services.

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2017

2016

2017

2016
Operating Income:

Health care distribution ..................................................................................................................................................................

$
181,612

$
170,158

$
521,278

$
468,610

Technology and value-added services ...............................................................................................................................................

31,936

30,563

96,900

88,982

Total .......................................................................................................................................................................................

$
213,548

$
200,721

$
618,178

$
557,592

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in ~~thousands,~~millions, except share and per share data)

(unaudited

)

Redeemable noncontrolling interests

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

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

Note 11–Redeemable Noncontrolling

Interests

for additional information.

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

basis classified under the appropriate level of the fair value hierarchy as of
March 26, 2022 and December 25,

2021:

March 26, 2022

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total return
swaps

Total assets

Liabilities:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total liabilities

Redeemable noncontrolling interests

613

December 25, 2021

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total return
swaps

Total assets

Liabilities:

Derivative contracts designated as hedges

Derivative contracts undesignated

Total liabilities

Redeemable noncontrolling interests

613

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 7 – Debt

Bank Credit Lines

Bank credit lines consisted of the following:

March 26,

December 25,

2022

2021

Revolving credit agreement

Other short-term bank credit lines

Total

Revolving Credit Agreement

On ~~April 18, 2017,~~

August 20, 2021

, we entered into a new $~~750~~ ~~million~~

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

This

facility, which matures in ~~April 2022~~on

August 20, 2026

, replaced our $~~500~~

750

million revolving credit facility, which was

scheduled to mature in ~~September 2019~~. April 2022.

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

leverage ratio at the end of each financial reporting quarter.

Most LIBOR rates have been discontinued after

December 31, 2021, while the remaining LIBOR rates will be discontinued

immediately after June 30, 2023.

do not expect the discontinuation of LIBOR as a reference rate in our

debt agreements to have a material adverse

effect on our financial position or to materially affect our interest expense.

The Credit Agreement ~~provides,~~ also requires,

among other things, that we ~~are required to~~ maintain certain maximum leverage ~~ratios, and~~ ratios.

Additionally, the Credit Agreement

contains customary representations, warranties and affirmative ~~covenants. The Credit Agreement also contains~~covenants as well

as customary negative covenants,

subject to negotiated exceptions, on liens, indebtedness, significant corporate

changes (including mergers),

dispositions and certain restrictive agreements.

As of ~~September 30, 2017~~March 26, 2022 and December ~~31, 2016, the~~ 25, 2021, we had

borrowings onunder this revolving credit ~~facility~~facility.

As of March 26, 2022 and ~~the prior credit facility~~December 25, 2021, there were $~~175.0~~

million and $~~65.0~~ ~~million, respectively. As of September 30, 2017 and December 31, 2016, there were $11.7~~ ~~million and $13.0~~

million of letters of credit, respectively, provided to third parties under the credit ~~facility and the prior credit~~ facility.

Other Short-Term Bank Credit

Lines

As of ~~September 30, 2017~~March 26, 2022 and December ~~31, 2016,~~25, 2021, we had various other short-term

bank credit lines available, of

which $~~456.9~~

million and $~~372.5~~

million, respectively, were outstanding.

At ~~September 30, 2017~~March 26, 2022 and December ~~31, 2016,~~ 25, 2021,

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

rate of~~2.09~~

8.91

% and~~1.61~~

10.44

%, respectively.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Long-term debt

Long-term debt consisted of the following:

March 26,

December 25,

2022

2021

Private placement facilities

699

706

U.S. trade accounts receivable securitization

105

Various
collateralized and uncollateralized loans payable with interest,

in varying installments through 2023 at interest rates

ranging from

% to

4.27

% at March 26, 2022 and

ranging from

2.62

% to

4.27

% at December 25, 2021

Finance lease obligations

Total

776

822

Less current maturities

(3)

(11)

Total long-term debt

773

811

Private Placement Facilities

~~On September 15, 2017, we increased our available~~

Our private placement facilities ~~with three~~were amended on

October 20, 2021

to include

(previously

) insurance

companies, tohave a total facility amount of $1

1.5

billion (previously $

1.0

billion), and ~~extended the expiration date to September 15, 2020. These facilities~~ are available on an

uncommitted basis at fixed rate economic terms to be agreed upon at

the time of issuance, from time to time

through~~September 15, 2020~~

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 applicable

treasury notes at the time of

issuance.

The term of each possible issuance will be selected by us and

can range from

five

15 years ~~(with~~

(with an

average life no longer than

12 ~~years)~~years

The proceeds of any issuances under the facilities will be used for

general

corporate purposes, including working capital and capital expenditures,

to refinance existing indebtedness, and/or

to fund potential acquisitions.

The agreements provide, among other things, that we maintain

certain maximum

leverage ratios, and contain restrictions relating to subsidiary indebtedness,

liens, affiliate transactions, disposal of

assets and certain changes in ownership.

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

pay

off the facilities prior to the applicable due dates.

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

The components of our private placement facility borrowings as

of ~~September 30, 2017~~March 26, 2022 are presented in the following ~~table (in thousands):~~

table:

Amount of

Borrowing

Date of Borrowing

Outstanding

Rate

Due Date

January 20, 2012

3.45

January 20, 2024

December 24, 2012

3.00

December 24, 2024

June 16, 2017

100

3.42

June 16, 2027

September 15, 2017

100

3.52

September 15, 2029

January 2, 2018

100

3.32

January 2, 2028

September 2, 2020

100

2.35

September 2, 2030

June 2, 2021

100

2.48

June 2, 2031

June 2, 2021

100

2.58

June 2, 2033

Less: Deferred debt issuance costs

(1)

Total

699

Amount of

Borrowing

Borrowing

Date of Borrowing

Outstanding

Rate

Due Date
September 2, 2010

$
100,000

3.79
%

September 2, 2020
January 20, 2012

50,000

3.45

January 20, 2024
January 20, 2012 (1)

35,714

3.09

January 20, 2022
December 24, 2012

50,000

3.00

December 24, 2024
June 2, 2014

100,000

3.19

June 2, 2021
June 16, 2017

100,000

3.42

June 16, 2027
September 15, 2017

100,000

3.52

September 15, 2029
Less: Deferred debt issuance costs

(250)

$
535,464

(1) Annual repayments of approximately $7.1 million for this borrowing commenced on January 20, 2016.
HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

U.S. Trade Accounts Receivable Securitization

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

an asset-backed securitization program with pricing committed for up

three years

Our current facility, which

had a purchase limit of $

350

million, was scheduled to ~~three years.~~ expire on

April 29, 2022

On ~~June 1, 2016,~~October 20, 2021, we ~~extended~~

amended our U.S. trade accounts receivable securitization facility to

increase the purchase limit to $

450

million

with

banks as agents and extend the expiration date to

October 18, 2024

As of ~~this facility agreement to~~ ~~April 29, 2019~~March 26, 2022 and ~~increased~~December

25, 2021, the ~~purchase limit under the facility from $300~~ ~~million to $350~~ ~~million. On July 6, 2017, we extended the expiration date of this facility agreement to~~ ~~April 29, 2020. The~~ borrowings outstanding under this securitization facility were

$~~350.0~~

million and $~~350.0~~

105

million, ~~as of September 30, 2017 and December 31, 2016,~~

respectively.

At ~~September 30, 2017,~~March 26, 2022, the interest rate on borrowings under

this facility was based on the asset-backed

commercial paper rate of

0.53

% plus

0.75

%, for a combined rate of

1.28

At December 25, 2021, the interest rate

on borrowings under this facility was based on the asset-backed commercial

paper rate of~~134~~ ~~basis points~~

0.19

% plus75 ~~basis points,~~

0.75

%, for a

combined rate of~~2.09~~

0.94

%. ~~At December 31, 2016, the interest rate on borrowings~~

If our accounts receivable collection pattern changes due to customers

either paying late or not making payments,

our ability to borrow under this facility ~~was based on the asset-backed commercial paper rate of~~ ~~101~~ ~~basis points plus~~ 75 ~~basis points, for a combined rate of~~ ~~1.76~~%.

may be reduced.

We are required to pay a commitment fee of

basis points depending upon program utilization.

Note 8 – Income Taxes

For the three months ended March 26, 2022 our effective tax rate was

24.0

% compared to

25.1

% for the prior year

period.

The difference between our effective tax rates and the federal statutory tax rate for

the three months ended

March 26, 2022 primarily relates to state and foreign income taxes and

interest expense as well as share-based

compensation.

The difference between our effective tax rate and the federal statutory tax rate for the three

months

ended March 27, 2021 was primarily due to state and foreign income

taxes and interest expense.

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

“other liabilities” within our consolidated

balance sheets, as of March 26, 2022 and December 25, 2021 was $

million and $

million, respectively of

which $

million and $

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

It is possible that

the amount of unrecognized tax benefits will change in the next 12

months, which may result in a material impact

on our consolidated statements of income.

All tax returns audited by the ~~daily balance~~IRS are officially closed through 2016.

The tax years subject to examination by the

IRS include years 2017 and forward.

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

by the IRS

that tax year 2019 was selected for examination.

During the quarter ended September 26, 2020 we reached an agreement

with the Advanced Pricing Division on an

appropriate transfer pricing methodology for the years 2014-2025.

The objective of ~~the unused portion~~this resolution was to mitigate

future transfer pricing audit adjustments.

The total amounts of ~~the facility if our usage is greater than or equal to~~ 50 ~~% of the facility limit or a commitment fee of~~ 35 ~~basis points on the daily balance of the unused portion of the facility if our usage is less than~~ 50~~% of the facility limit.~~

~~Borrowings under this facility~~interest and penalties are ~~presented~~classified as a component

of ~~Long-term debt within our consolidated balance sheet.~~

the provision for income taxes.

The

amount of tax interest expense was $

million for each of the three months ended March 26, 2022 and March

27,

2021.

The total amount of accrued interest is included in “Other liabilities,”

and was $

million as of March 26,

2022 and $

million as of December 25, 2021.

NaN

penalties were accrued for the periods presented.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in ~~thousands,~~millions, except share and per share data)

(~~unaudited~~)

~~Long-term debt~~

~~Long-term debt consisted of the following:~~

September 30,

December 31,

2017

2016
Private placement facilities ..........................................................................................................................................................

$
535,464

$
342,857
U.S. trade accounts receivable securitization ...................................................................................................................................

350,000

350,000
Note payable to bank at a weighted-average interest rate of

21.37% at December 31, 2016...................................................................................................................................................

-

47,957
Various collateralized and uncollateralized loans payable with

interest, in varying installments through 2022 at interest rates

ranging from 2.56% to 12.90% at September 30, 2017 and

ranging from 2.56% to 12.90% at December 31, 2016....................................................................................................................

33,994

35,150
Capital lease obligations payable through 2029 with interest rates

ranging from 0.84% to 19.79% at September 30, 2017 and

ranging from 1.38% to 19.15% at December 31, 2016 ...................................................................................................................

5,381

5,416
Total .......................................................................................................................................................................................

924,839

781,380
Less current maturities ................................................................................................................................................................

(17,247)

(65,923)

Total long-term debt .............................................................................................................................................................

$
907,592

$
715,457

~~Note 4 – Redeemable Noncontrolling Interests~~

Some minority shareholders 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 (“ASC”) Topic 480-10 is applicable for noncontrolling interests where we are or may be required to purchase all or a portion of the outstanding interest in a consolidated subsidiary from the noncontrolling interest holder under the terms of a put option contained in contractual agreements. The components of the change in the Redeemable noncontrolling interests for the nine months ended September 30, 2017 and the year ended December 31, 2016 are presented in the following table:

September 30,

December 31,

2017

2016
Balance, beginning of period ...................................................................................................................................................

$
607,636

$
542,194
Decrease in redeemable noncontrolling interests due to

redemptions .....................................................................................................................................................................

(40,638)

(72,729)
Increase in redeemable noncontrolling interests due to business

acquisitions.......................................................................................................................................................................

25,209

58,172
Net income attributable to redeemable noncontrolling interests ......................................................................................................

35,398

48,760
Dividends declared ................................................................................................................................................................

(22,566)

(32,973)
Effect of foreign currency translation gain (loss) attributable to

redeemable noncontrolling interests ......................................................................................................................................

7,961

(2,652)
Change in fair value of redeemable securities .............................................................................................................................

124,747

66,864
Balance, end of period ...........................................................................................................................................................

$
737,747

$
607,636

Changes in the estimated redemption amounts of the noncontrolling interests subject to put options are adjusted at each reporting period with a corresponding adjustment to Additional paid-in capital. Future reductions in the carrying amounts are subject to a floor amount that is equal to the fair value of the redeemable noncontrolling interests at the time they were originally recorded. The recorded value of the redeemable noncontrolling interests cannot go below the floor level. These adjustments do not impact the calculation of earnings per share.

(unaudited

)

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

Note 59 – ~~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. Our comprehensive income is primarily comprised of net income, foreign currency translation gain (loss), unrealized gain (loss) on foreign currency hedging activities, unrealized investment loss and pension adjustment gain (loss).

~~The following table summarizes our Accumulated other comprehensive loss, net of applicable taxes as of:~~

September 30,

December 31,

2017

2016
Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment ..........................................................................................................

$
(5,064)

$
(13,025)

Attributable to noncontrolling interests:

Foreign currency translation adjustment ..........................................................................................................

$
184

$
(113)

Attributable to Henry Schein, Inc.:

Foreign currency translation loss .........................................................................................................................

$
(131,304)

$
(296,212)

Unrealized loss from foreign currency hedging activities ..........................................................................................

(1,327)

(53)

Unrealized investment loss .................................................................................................................................

(2)

-

Pension adjustment loss ....................................................................................................................................

(21,839)

(20,776)

Accumulated other comprehensive loss ...........................................................................................................

$
(154,472)

$
(317,041)

Total Accumulated other comprehensive loss ............................................................................................................

$
(159,352)

$
(330,179)
Legal Proceedings

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

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2017

2016

2017

2016
Net income ........................................................................................................................................................................

$
150,948

$
145,291

$
450,783

$
402,922

Foreign currency translation gain (loss)....................................................................................................................................

58,916

(6,463)

173,166

(2,041)
Tax effect .........................................................................................................................................................................

-

-

-

-
Foreign currency translation gain (loss) ...................................................................................................................................

58,916

(6,463)

173,166

(2,041)

Unrealized gain (loss) from foreign currency hedging

activities .........................................................................................................................................................................

26

(803)

(1,278)

1,316
Tax effect .........................................................................................................................................................................

(60)

200

4

(290)
Unrealized gain (loss) from foreign currency hedging

activities .........................................................................................................................................................................

(34)

(603)

(1,274)

1,026

Unrealized investment loss....................................................................................................................................................

(3)

-

(3)

-
Tax effect .........................................................................................................................................................................

1

-

1

-
Unrealized investment loss....................................................................................................................................................

(2)

-

(2)

-

Pension adjustment gain (loss)...............................................................................................................................................

(529)

280

(1,571)

(13)
Tax effect .........................................................................................................................................................................

176

(71)

508

23
Pension adjustment gain (loss)...............................................................................................................................................

(353)

209

(1,063)

10
Comprehensive income .......................................................................................................................................................

$
209,475

$
138,434

$
621,610

$
401,917

Henry Schein has been named as a defendant in multiple lawsuits (currently

less than one-hundred and seventy-five

(

175

); in less than half of those cases one or more of Schein’s affiliated companies is also named as a defendant),

which

lawsuits allege that manufacturers of prescription opioid drugs engaged in a false advertising campaign to

expand the market for such drugs and their own market share and that the entities in the supply chain (including

Henry Schein, Inc.) reaped financial rewards by refusing or otherwise failing to monitor appropriately and restrict

the improper distribution of those drugs

. These actions consist of some that have been consolidated

within the

MultiDistrict Litigation (“MDL”) proceeding In Re National Prescription

Opiate Litigation (MDL No. 2804; Case

No. 17-md-2804) and are currently abated for discovery purposes, and others

which remain pending in state courts

and are proceeding independently and outside of the MDL.

At this time, the only cases set for trial are: the action

filed by Mobile County Board of Health, et al., in Alabama state court, which

is currently set for a jury trial on

January 9, 2023; and the action filed by DCH Health Care Authority, et al. in Alabama state court, which is

currently scheduled for a jury trial on March 20, 2023.

The court for the pending cases filed by hospitals in West

Virginia has indicated that it intends to set trials for all defendants in 2022.

However, as of this filing, the West

Virginia hospital cases against Henry Schein have not been set for trial.

Of Henry Schein’s 2021 sales of

approximately $

12.4

billion, sales of opioids represented less than two-tenths of

percent.

Opioids represent a

negligible part of our business.

We intend to defend ourselves vigorously against these actions.

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

including, without limitation, product

liability claims, employment matters, commercial disputes, governmental

inquiries and investigations (which may

in some cases involve our entering into settlement arrangements or consent

decrees), and other matters arising out

of the ordinary course of our business.

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

in our opinion none of these other pending matters are currently anticipated

to have a material adverse effect on our

consolidated financial position, liquidity or results of operations.

As of March 26, 2022, we had accrued our best estimate of potential losses

relating to claims that were probable to

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

loss.

This accrued amount, as well as related

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

or cash flows.

Our method for

determining estimated losses considers currently available facts, presently

enacted laws and regulations and other

factors, including probable recoveries from third parties.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in ~~thousands,~~millions, except share and per share data)

(unaudited

)

Note 10 – Stock-Based Compensation

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

our 2020 Stock Incentive Plan and to

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

Stock Incentive Plan (together, the

“Plans”).

The Plans are administered by the Compensation Committee of the Board

of Directors (the

“Compensation Committee”).

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

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

However, for our 2021 fiscal year, in

light of the COVID-19 pandemic, the Compensation Committee determined

it would be difficult for management

to set a meaningful three-year cumulative earnings per share target as the goal applicable

to performance-based

restricted stock unit awards as it had done in prior years.

Instead, the Compensation Committee set our equity-

based awards to employees for fiscal 2021 in the form of time-based RSUs

and non-qualified stock options which

focus on stock value appreciation and retention instead of pre-established

performance goals.

Our non-employee

directors continued to receive equity-based wards for fiscal 2021 solely in

the form of time-based RSUs.

During

the three months ended ~~September 30, 2017~~March 26, 2022, the Compensation Committee

reinstated performance-based RSUs for

equity-based awards to employees for fiscal 2022 and ~~September 24, 2016,~~awarded grants in

the form of time-based RSUs,

performance-based RSUs 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 Incentive

Plan primarily

are granted with

-month cliff vesting.

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

straight-line basis.

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

stock price at

the time of grant.

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

are

received by the recipient is based upon our performance as measured against

specified targets over a specified

period, as determined by the Compensation Committee.

Although there is no guarantee that performance targets

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

based on our closing stock price at time of

grant.

Each of the Plans provide for certain adjustments to awards under

the Plans and with respect to the performance

goals under the performance-based RSUs granted under our 2020 Stock

Incentive Plan, including adjustment to the

goals for significant events, including, without limitation, acquisitions,

divestitures, new business ventures, certain

capital transactions (including share repurchases), other differences in budgeted average

outstanding shares (other

than those resulting from capital transactions referred to above), restructuring

costs, if any, certain litigation

settlements or payments, if any, changes in accounting principles or in applicable laws or regulations, changes in

income tax rates in certain markets, foreign exchange fluctuations, and

unforeseen events or circumstances

affecting the Company.

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

that will ultimately

vest and be issued and the related compensation expense is adjusted upward

or downward based upon our

estimation of achieving such performance targets.

The ultimate number of shares delivered to recipients

and the

related compensation cost recognized as ~~a component~~an expense will be based on our

actual performance metrics as defined

under the Plans.

Stock options are awards that allow the recipient to purchase shares of our ~~comprehensive income,~~

common stock at a ~~foreign currency translation gain (loss)~~fixed price following

vesting of ~~$58.9 million~~the stock options.

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

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 ~~$(6.5) million, respectively, due to changes in foreign exchange rates~~ 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 ~~beginning~~grant date, subject to earlier termination of the ~~period to~~term

upon certain events.

Compensation expense for these stock options is recognized

using a graded vesting method.

We estimate the end of the period. During the nine months ended September 30, 2017 and September 24, 2016, we recognized, as a component of our comprehensive income, a foreign currency translation gain (loss) of $173.2 million and $(2.0) million, respectively, due to changes in foreign exchange rates from the beginning of the period to the end of the period. Our financial statements are denominated in the U.S. Dollar currency. Fluctuations in thefair value of ~~foreign currencies as compared to~~stock options using the U.S. Dollar may have a significant impact on our comprehensive income (loss). The foreign currency translation gain (loss) during the three and nine months ended September 30, 2017 and September 24, 2016 was impacted by changes in foreign currency exchange rates as follows:

Black-Scholes valuation model.

Foreign Currency

Foreign Currency

Translation

Translation

Gain (Loss)

Gain (Loss)

for the Three

for the Three

Months Ended

FX Rate into USD

Months Ended

FX Rate into USD

September 30,

September 30,

July 1,

September 24,

September 24,

June 25,
Currency

2017

2017

2017

2016

2016

2016
Euro ..........................................................................................................................................................................................

$
30,373

1.18

1.14

$
3,755

1.12

1.12
British Pound ...............................................................................................................................................................................

9,168

1.34

1.30

(17,161)

1.30

1.38
Australian Dollar ..........................................................................................................................................................................

3,767

0.78

0.77

3,826

0.76

0.75
Canadian Dollar ..........................................................................................................................................................................

5,640

0.80

0.77

(1,565)

0.76

0.77
Polish Zloty .................................................................................................................................................................................

940

0.27

0.27

2,044

0.26

0.25
Swiss Franc .................................................................................................................................................................................

407

1.03

1.04

189

1.03

1.03
Brazilian Real..............................................................................................................................................................................

6,400

0.32

0.30

826

0.31

0.30
All other currencies .......................................................................................................................................................................

2,221

1,623

Total .......................................................................................................................................................................................

$
58,916

$
(6,463)

Foreign Currency

Foreign Currency

Translation

Translation

Gain (Loss)

Gain (Loss)

for the Nine

for the Nine

Months Ended

FX Rate into USD

Months Ended

FX Rate into USD

September 30,

September 30,

December 31,

September 24,

September 24,

December 26,
Currency

2017

2017

2016

2016

2016

2015
Euro ..........................................................................................................................................................................................

$
95,715

1.18

1.05

$
14,932

1.12

1.10
British Pound ...............................................................................................................................................................................

24,712

1.34

1.23

(39,536)

1.30

1.49
Australian Dollar ..........................................................................................................................................................................

16,220

0.78

0.72

9,268

0.76

0.73
Canadian Dollar ..........................................................................................................................................................................

9,820

0.80

0.74

5,941

0.76

0.72
Polish Zloty .................................................................................................................................................................................

7,891

0.27

0.24

428

0.26

0.26
Swiss Franc .................................................................................................................................................................................

5,305

1.03

0.98

1,408

1.03

1.01
Brazilian Real..............................................................................................................................................................................

4,136

0.32

0.31

3,055

0.31

0.25
All other currencies .......................................................................................................................................................................

9,367

2,463

Total .......................................................................................................................................................................................

$
173,166

$
(2,041)

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in ~~thousands,~~millions, except share and per share data)

(unaudited

)

In addition to equity-based awards granted in fiscal 2021 under the Company’s long-term incentive 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.

~~The following table summarizes our total comprehensive income, net~~Given the significance of ~~applicable taxes, as follows:~~

the impact of the

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2017

2016

2017

2016
Comprehensive income attributable to

Henry Schein, Inc. ...................................................................................................................................................

$
193,085

$
126,140

$
577,403

$
365,321
Comprehensive income attributable to

noncontrolling interests .............................................................................................................................................

372

165

848

519
Comprehensive income attributable to

Redeemable noncontrolling interests ...........................................................................................................................

16,018

12,129

43,359

36,077
Comprehensive income .................................................................................................................................................

$
209,475

$
138,434

$
621,610

$
401,917
pandemic on the Company’s

~~Note 6~~ – ~~Fair Value Measurements~~

~~ASC Topic 820 “Fair Value Measurements~~

three-year

EPS goal under such equity awards and ~~Disclosures” (“ASC Topic 820”) provides~~the contributions made

by the

Company’s employees (including those who received such awards), on March 3, 2021, the Compensation

Committee granted a ~~framework for measuring fair value in generally accepted accounting principles.~~

~~ASC Topic 820 defines fair value as~~Special Pandemic Recognition Award to recipients of performance-based restricted stock

units under the ~~price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at~~2018 LTIP who were employed by the ~~measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based~~Company on ~~market data obtained from independent sources (observable inputs)~~the grant date of the Special Pandemic

Recognition Award.

These time-based RSU awards vest

% on the first anniversary of the grant date and ~~(2) an entity’s own assumptions about market participant assumptions developed~~

% on

the second anniversary of the grant date, based on the ~~best information available~~recipient’s continued service and subject to the terms

and

conditions of the 2020 Stock Incentive Plan, and are recorded as compensation

expense using a graded vesting

method.

The combination of the

% 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

% 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 reflect

pre-tax share-based compensation expense

of $

million ($

million after-tax) and $

million ($

million after-tax) for the three months ended March 26,

2022 and March 27, 2021, respectively.

Total unrecognized compensation cost related to unvested awards as of March 26, 2022 was $

134

million, which is

expected to be recognized over a weighted-average period of approximately

2.6

years.

Our accompanying condensed consolidated statements of cash flows present

our stock-based compensation expense

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

activities for all periods presented.

the accompanying consolidated statements of cash flows, there were

benefits associated with tax deductions in

excess of recognized compensation as a cash inflow from financing

activities for the three months ended March 26,

2022 and March 27, 2021, respectively.

The following weighted-average assumptions were used in determining

the most recent fair values of stock options

granted using the Black-Scholes valuation model:

2022

Expected dividend yield

0.0

Expected stock price volatility

27.20

Risk-free interest rate

2.20

Expected life of options (years)

6.00

We have not declared cash dividends on our stock in the ~~circumstances (unobservable inputs).~~

past and we do not anticipate declaring cash dividends in

the foreseeable future.

The expected stock price volatility is based on implied volatilities

from traded options on

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

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

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

The

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

method for estimating the expected term

as permitted under SAB Topic 14.

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

the

value ultimately realized by recipients of ~~three broad levels, which gives~~stock options, and subsequent

events are not indicative of the ~~highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels~~

reasonableness of the original estimates of fair value ~~hierarchy under ASC Topic 820 are described as follows:~~

~~• Level 1— Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.~~

• Level 2— Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroboratedmade 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 valuation methodologies that we used to measure different financial instruments at fair value.~~

~~Investments and notes receivable~~

~~There are no quoted market prices available for investments in unconsolidated affiliates and notes receivable; however, we believe the carrying amounts are a reasonable estimate of fair value.~~

us.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

The following table summarizes stock option activity under the Plans

during the three months ended March 26,

2022:

Stock Options

Weighted

Average

Weighted

Remaining

Average

Contractual

Aggregate

Exercise

Life in

Intrinsic

Price

Years

Value

Outstanding at beginning of period

767,717

63.24

Granted

396,874

86.27

Exercised

(26,233)

62.71

Forfeited

(1,688)

62.71

Outstanding at end of period

1,136,670

71.30

9.3

Options exercisable at end of period

220,065

62.71

Weighted

Average

Remaining

Aggregate

Number of

Exercise

Contractual

Intrinsic

Options

Price

Life (in years)

Value

Vested

or expected to vest

891,140

73.66

9.4

The following tables summarize the activity of our unvested RSUs for

the three months ended March 26, 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

427,978

86.43

Vested

(489,549)

54.57

Forfeited

(7,374)

61.18

Outstanding at end of period

1,876,917

66.30

87.85

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

460,896

70.93

Vested

(386,612)

59.08

Forfeited

(1,752)

60.56

Outstanding at end of period

747,285

56.77

87.85

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in ~~thousands,~~millions, except share and per share data)

(unaudited

)

~~Debt~~

~~The fair value of our debt, including bank credit lines, as of September 30, 2017 and December 31, 2016 was estimated at $1,556.7~~ ~~million and $1,218.9~~ million, respectively. Factors that we considered when estimating the fair value of our debt include market conditions, prepayment and make-whole provisions, liquidity levels in the private placement market, variability in pricing from multiple lenders and term of debt.

~~Derivative contracts~~

Derivative contracts are valued using quoted market prices and significant other observable and unobservable inputs. We use derivative instruments to minimize our exposure to fluctuations in foreign currency exchange rates. Our derivative instruments primarily include foreign currency forward agreements related to intercompany loans and certain forecasted inventory purchase commitments with suppliers.

The fair values for the majority of our foreign currency derivative contracts are obtained by comparing our contract rate to a published forward price of the underlying market rates, which is based on market rates for comparable transactions and are classified within Level 2 of the fair value hierarchy.

Note 11 – Redeemable ~~noncontrolling interests~~

Noncontrolling Interests

Some minority ~~shareholders~~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 based on third-party valuations.~~ value.

Accounting Standards Codification Topic 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling

interest holder under the terms of a put

option contained in contractual agreements.

The ~~primary factor affecting~~components of the ~~future~~change in the redeemable noncontrolling

interests for the three months ended March 26, 2022 and the year ended December

25, 2021 are presented in the

following table:

March 26,

December 25,

2022

2021

Balance, beginning of period

613

328

Decrease in redeemable noncontrolling interests due to acquisitions of

noncontrolling interests in subsidiaries

(3)

(60)

Increase in redeemable noncontrolling interests due to business

acquisitions

189

Net income attributable to redeemable noncontrolling interests

Dividends declared

(5)

(21)

Effect of foreign currency translation gain (loss) attributable to

redeemable noncontrolling interests

(6)

Change in fair value of redeemable ~~noncontrolling interests is expected earnings and, if such earnings are not achieved, the value~~securities

160

Balance, end of ~~the redeemable noncontrolling interests might be impacted. The noncontrolling interests subject to put options are adjusted to their estimated redemption amounts each reporting~~ period with a corresponding adjustment to Additional paid-in capital. Future reductions in the carrying amounts are subject to a “floor” amount that is equal to the fair value of the redeemable noncontrolling interests at the time they were originally recorded. The recorded value of the redeemable noncontrolling interests cannot go below the floor level. These adjustments do not impact the calculation of earnings per share. The values for Redeemable noncontrolling interests are classified within Level 3 of the fair value hierarchy. The details of the changes in Redeemable noncontrolling interests are presented in Note 4.

613

~~Table of Contents~~613

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

The following table presents our assets and liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of September 30, 2017 and December 31, 2016:

September 30, 2017

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts ..............................................................................................................................................................

$
-

$
6,191

$
-

$
6,191

Total assets .....................................................................................................................................................................

$
-

$
6,191

$
-

$
6,191

Liabilities:

Derivative contracts ..............................................................................................................................................................

$
-

$
2,636

$
-

$
2,636

Total liabilities ..................................................................................................................................................................

$
-

$
2,636

$
-

$
2,636

Redeemable noncontrolling interests ..............................................................................................................................................

$
-

$
-

$
737,747

$
737,747
*CS

*CE

December 31, 2016

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts ..............................................................................................................................................................

$
-

$
1,240

$
-

$
1,240

Total assets .....................................................................................................................................................................

$
-

$
1,240

$
-

$
1,240

Liabilities:

Derivative contracts ..............................................................................................................................................................

$
-

$
931

$
-

$
931

Total liabilities ..................................................................................................................................................................

$
-

$
931

$
-

$
931

Redeemable noncontrolling interests ..............................................................................................................................................

$
-

$
-

$
607,636

$
607,636

~~Note 7~~ – ~~Business Acquisitions~~

~~Acquisitions~~

~~The operating results of all acquisitions are reflected in our financial statements from their respective acquisition dates.~~

~~We did not complete any material acquisitions during the nine months ended September 30, 2017.~~

Some prior owners of acquired subsidiaries are eligible to receive additional purchase price cash consideration if certain financial targets are met. We have accrued liabilities for the estimated fair value of additional purchase price consideration at the time of the acquisition. Any adjustments to these accrual amounts are recorded in our consolidated statements of income. For the nine months ended September 30, 2017 and September 24, 2016, there were no material adjustments recorded in our consolidated statement of income relating to changes in estimated contingent purchase price liabilities.

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

Note 812 – ~~Plan of Restructuring~~

~~On November 6, 2014, we announced a corporate initiative~~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 ~~rationalize our operations and provide expense efficiencies, which was expected to be completed by the end of fiscal 2015. This initiative originally planned for the elimination of approximately~~ 2~~% to~~ 3% of our workforce and the closing of certain facilities. We subsequently announced our plan to extend these restructuring activities through the end of 2016 to further implement cost-savings initiatives, which ultimately resulted in the elimination of approximately ~~900~~ ~~positions, representing~~ 4 ~~% of our workforce. We recorded restructuring costs of $34.9~~ ~~million pre-tax in fiscal 2015 and $45.9 million pre-tax in fiscal 2016. Our restructuring activities are complete and we do not expect to report any such charges in 2017.~~

~~During the nine months ended September 24, 2016, we recorded restructuring costs of $29.8~~ ~~million. The costs associated with this restructuring are included in a separate line item, “Restructuring costs” within our consolidated statements of income.~~

stockholders’

equity.

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

applicable taxes as of:

March 26,

December 25,

2022

2021

Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment

(30)

(31)

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

(153)

(155)

Unrealized loss from foreign currency hedging activities

(1)

(2)

Pension adjustment loss

(14)

Accumulated other comprehensive loss

(168)

(171)

Total Accumulated

other comprehensive loss

(198)

(202)

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

The following table summarizes the ~~amounts expensed and paid for restructuring costs that were incurred~~components of comprehensive income, net

of applicable taxes as follows:

Three Months Ended

March 26,

March 27,

2022

2021

Net income

186

175

Foreign currency translation gain (loss)

(38)

Tax effect

Foreign currency translation gain (loss)

(38)

Unrealized gain from foreign currency hedging activities

Tax effect

(1)

Unrealized gain from foreign currency hedging activities

Pension adjustment gain

Tax effect

Pension adjustment gain

Comprehensive income

190

141

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

Fluctuations in the value of foreign

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

on our comprehensive income.

The

foreign currency translation loss during the ~~nine~~three months ended ~~September 30, 2017~~March

26, 2022 and ~~during~~three months ended March 27,

2021 was primarily impacted by changes in foreign currency exchange rates

of the Euro, British Pound, Brazilian

Real, Australian Dollar and Canadian Dollar.

The following table summarizes our ~~2016 fiscal year~~total comprehensive income, net of

applicable taxes, as follows:

Three Months Ended

March 26,

March 27,

2022

2021

Comprehensive income attributable to

Henry Schein, Inc.

184

138

Comprehensive income attributable to

noncontrolling interests

Comprehensive income attributable to

Redeemable noncontrolling interests

Comprehensive income

190

141

Note 13 – Plans of Restructuring

On November 20, 2019, we committed to a contemplated restructuring

initiative intended to mitigate stranded costs

associated with the spin-off of our animal health business and to rationalize operations

and to provide expense

efficiencies.

These restructuring activities were completed in 2021.

During the three months ended March 27, 2021, we recorded restructuring

costs of $

million.

As of March 26,

2022 and December 25, 2021, the remaining accrued balance ~~of restructuring costs as of September 30, 2017, which is included in Accrued expenses: Other and Other liabilities within our consolidated balance sheet:~~

Facility

Severance

Closing

Costs

Costs

Other

Total
Balance, December 26, 2015 ...............................................................................................................................................................

$
9,103

$
2,151

$
811

$
12,065
Provision ..........................................................................................................................................................................................

40,728

3,587

1,576

45,891
Payments and other adjustments ..........................................................................................................................................................

(27,477)

(3,284)

(1,492)

(32,253)
Balance, December 31, 2016 ...............................................................................................................................................................

$
22,354

$
2,454

$
895

$
25,703
Provision ..........................................................................................................................................................................................

-

-

-

-
Payments .........................................................................................................................................................................................

(17,282)

(935)

(824)

(19,041)
Balance, September 30, 2017 ..............................................................................................................................................................

$
5,072

$
1,519

$
71

$
6,662

.......................................................................................................................................................................................................

~~The following table shows, by reportable segment, the amounts expensed and paid~~ for restructuring

costs ~~that were incurred during the nine months ended September 30, 2017~~was $

million and ~~the 2016 fiscal year and the remaining accrued balance of restructuring costs as of September 30, 2017:~~

Technology and

Health Care

Value-Added

Distribution

Services

Total
Balance, December 26, 2015 ..................................................................................................................................................

$
12,062

$
3

$
12,065
Provision ............................................................................................................................................................................

44,082

1,809

45,891
Payments and other adjustments ............................................................................................................................................

(30,906)

(1,347)

(32,253)
Balance, December 31, 2016 ..................................................................................................................................................

$
25,238

$
465

$
25,703
Provision ............................................................................................................................................................................

-

-

-
Payments ...........................................................................................................................................................................

(18,679)

(362)

(19,041)
Balance, September 30, 2017 .................................................................................................................................................

$
6,559

$
103

$
6,662
4

million,

respectively

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(in ~~thousands,~~millions, except share and per share data)

(unaudited

)

Note 914

–

Earnings Per Share

Basic earnings per share is computed by dividing net income attributable

to Henry Schein, Inc. by the ~~weighted-average~~weighted-

average number of common shares outstanding for the period.

Our diluted earnings per share is computed similarly

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

for presently unvested

restricted stock and ~~restricted stock units~~RSUs and upon exercise of stock options using

the treasury stock method in periods in which

they have a dilutive effect.

A reconciliation of shares used in calculating earnings per basic and

diluted share follows:

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2017

2016

2017

2016
Basic .......................................................................................................................................................................................

156,914

161,791

157,386

162,600
Effect of dilutive securities:

Stock options, restricted stock and restricted stock units .................................................................................................................

1,357

1,919

1,480

2,035

Diluted ..................................................................................................................................................................................

158,271

163,710

158,866

164,635

Three Months Ended

March 26,

March 27,

2022

2021

Basic

137,296,581

142,298,387

Effect of dilutive securities:

Stock options, restricted stock and restricted stock units

1,940,891

1,099,337

Diluted

139,237,472

143,397,724

The effect of weighted average assumed exercise of stock options outstanding totaling

76,597

and

216,482

as of

March 26, 2022 and March 27, 2021, respectively, were excluded from the calculation of diluted weighted average

common shares outstanding because the effect would have been antidilutive.

The effect of weighted average non-vested restricted stock units outstanding totaling

70,923

and

6,315

as of March

26, 2022 and March 27, 2021,
respectively, were excluded from the calculation of diluted weighted average

common shares outstanding because the effect would have been antidilutive.

Note 1015 – Supplemental Cash Flow Information

Cash paid for interest and income taxes was:

Three Months Ended

March 26,

March 27,

2022

2021

Interest

Income taxes

During the three months ended March 26, 2022 and March 27, 2021,
we had a $

million and a $

million of non-

cash net unrealized gains related to foreign currency hedging activities,
respectively.

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HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(in millions, except share and per share data)

(unaudited

)

Note 16 – Related Party Transactions

In connection with the formation of Henry Schein One, LLC, our joint venture
with Internet Brands, which was

formed on July 1, 2018, we entered into a

ten-year

royalty agreement with Internet Brands whereby we will pay

Internet Brands approximately $

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

months ended March 26, 2022 and March 27, 2021, we recorded $

million and $

million, respectively, in

connection with costs related to this royalty agreement.
As of March 26, 2022 and December 25, 2021, Henry

Schein One, LLC had a net receivable balance due from Internet Brands of
$

million and $

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 months ended March 26, 2022 and March 27,
2021, we recorded net sales of $

million

and $

million, respectively, to such entities.
During the three months ended March 26, 2022 and March 27,
2021,

we purchased $

million and $

million, respectively from such entities.
At March 26, 2022 and December 25,

2021, we had in aggregate $

million and $

million, due from our equity affiliates, and $

million and $

million due to our equity affiliates, respectively.

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

RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

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

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

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

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

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

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

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

statements.
These statements are generally identified by the use of such
terms as “may,” “could,” “expect,”

“intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,”
“to be,” “to make” or other comparable

terms.
Factors that could cause or contribute to such differences include, but are not limited
to, those discussed in

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

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

on the Company, its results of operations, liquidity and financial condition (including any estimates of the impact

on these items), the rate and consistency with which dental and other practices
resume or maintain normal

operations in the United States and internationally, expectations regarding personal protective equipment (“PPE”)

and COVID-19 related product sales and inventory levels, whether additional
resurgences or variants of the virus

will adversely impact the resumption of normal operations, whether vaccine
mandates will adversely impact the

Company (by disrupting our workforce and/or business), whether supply chain
disruptions will adversely impact

our business, the impact of restructuring programs as well as of any
future acquisitions, and more generally current

expectations regarding performance in current and future periods.
Forward looking statements also include the (i)

ability of the Company to have continued access to a variety of COVID-19
test types, expectations regarding

COVID-19 test sales, demand and inventory levels, as well
as the efficacy or relative efficacy of the test results

given that the test efficacy has not been, or will not have been, independently
verified under normal FDA

procedures and (ii) potential for the Company to distribute the COVID-19
vaccines and ancillary supplies.

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

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

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

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

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

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

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

acquisitions, dispositions and joint ventures; certain provisions in our governing
documents that may discourage

third-party acquisitions of us; effects of a highly competitive (including, without
limitation, competition from third-

party online commerce sites) and consolidating market; the repeal or
judicial prohibition on implementation of the

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

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

party shippers; general global macro-economic and political conditions,
including international trade agreements,

potential trade barriers and terrorism; failure to comply with existing and
future regulatory requirements; risks

associated with the EU Medical Device Regulation; failure to comply with
laws and regulations relating to health

care fraud or other laws and regulations; failure to comply with laws
and regulations relating to the collection,

storage and processing of sensitive personal information or standards in electronic
health records or transmissions;

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

risks; new or unanticipated litigation developments and the status of
litigation matters; risks associated with

customs policies or legislative import restrictions; cyberattacks or other
privacy or data security breaches; risks

associated with our global operations; our dependence on our senior management,
employee hiring and retention,

and our relationships with customers, suppliers and manufacturers;
and disruptions in financial markets.
The order

in which these factors appear should not be construed to indicate their
relative importance or priority.

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

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

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

Where You
Can Find Important Information

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

conference calls and webcasts, press releases, the investor relations
page of our website (www.henryschein.com)

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

Recent Developments

COVID-19 Pandemic

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

significant volatility and disruption of global financial markets in
2020 and 2021.
The impact of COVID-19 had a

material adverse effect on our business, results of operations and cash flows in the
second quarter of 2020.
In the

latter half of the second quarter of 2020, dental and medical practices began
to re-open worldwide, and continued to

do so during the second half of 2020.
During the year ended December 25, 2021, patient traffic levels returned to

levels approaching pre-pandemic levels.
Demand for dental products and certain medical products throughout 2021

was driven by sales of PPE, COVID-19 test kits and other COVID-19
related products.
During the three months

ended March 26, 2022, with the exception of COVID-19 test kits, we experienced
a decrease in the sales volume of

PPE and COVID-19 related products.

During the three months ended March 26, 2022,
as a result of an increase in COVID-19 variants, primarily in

Europe and to a lesser extent in North America, we experienced lower dental
patient traffic, which began to

increase as the quarter progressed.
Although some COVID-19 restrictions are still in place in parts of Europe,
we

expect these markets to recover but at a slower pace.
In contrast to our dental business, during the three months

ended March 26, 2022, our medical business benefited from an increase
in sales volume of COVID-19 test kits and

point-of-care diagnostics.

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

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

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

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

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

assumptions.
Due to the significant uncertainty surrounding the future impact of
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 operations
and cash flows and may

result in a material adverse effect on our financial condition and liquidity.
However, the extent of the potential

impact cannot be reasonably estimated at this time.

Executive-Level Overview

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

technology.
We believe we are the world’s largest
provider of health care products and services primarily to
office-

based dental and medical practitioners, as well as alternate sites of care.
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 89 years of experience distributing health
care products.

We are headquartered in Melville, New York,
employ nearly 22,000 people (of which approximately 10,600
are

based outside of the United States) and have operations or affiliates in 32 countries
and territories.
Our broad

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

acquisitions.

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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, orthodontics
and endodontics.
We have achieved scale in

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

distribution channel to serve customers.

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
and other institutions.
Our

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

settings and other institutions.

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

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

services, branded and generic pharmaceuticals, vaccines, surgical products, dental
specialty products (including

implant, orthodontic and endodontic products), diagnostic tests, infection-control
products, 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-recourse
basis, e-services, practice

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

practitioners.

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

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

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

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

national brand products, our private label products and proprietary specialty
products and solutions (including

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

including software and other value-added services.

Industry Overview

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

distributors capable of providing a broad array of products and services at
low prices.
It also has accelerated the

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

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

specialized management information support.
We believe that the trend towards cost containment has the potential

to favorably affect demand for technology solutions, including software, which can
enhance the efficiency and

facilitation of practice management.

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

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

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

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

Our current and future results have been and could be impacted by
the 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 global
operations and have taken appropriate steps

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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 labor
challenges, as rates of infection fluctuate, new

strains or variants of COVID-19 emerge and spread, vaccine uptake and mandates
increase and change,

governments adapt their approaches to combatting the virus (including
without limitation, vaccine mandates), and

local conditions change across geographies.
For example, vaccine mandates affecting our workforce, whether

imposed through government regulations or contracts with governmental authorities
or other customers, could

potentially cause staffing shortages if employees choose not to comply as well as
other consequences to our

business or operations, managing and tracking vaccination status and ongoing
testing for exempt employees could

potentially increase our costs, as could addressing inconsistent COVID-19
vaccination mandates.
As a result, we

expect to see continued volatility through at least 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 out
of relatively small offices to group practices

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

combined or otherwise associated their practices.

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

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

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

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

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

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

The trend of consolidation extends to our customer base.
Health care practitioners are increasingly seeking to

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

hospital organizations.
In many cases, purchasing decisions for consolidated groups
are made at a centralized or

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

We believe that consolidation within the industry will continue to result in a number of distributors, particularly

those with limited financial, operating and marketing resources, seeking
to combine with larger companies that can

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

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

customer base.

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

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

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

businesses.

As industry consolidation continues, we believe that we are positioned
to capitalize on this trend, as we believe we

have the ability to support increased sales through our existing infrastructure,
although there can be no assurances

that we will be able to successfully accomplish this.
We also have invested in expanding our sales/marketing

infrastructure to include a focus on building relationships with decision
makers who do not reside in the office-

based practitioner setting.

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

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

the health care industry.
There can be no assurance that we will be able to successfully pursue
any such

opportunity or consummate any such transaction, if pursued.
If additional transactions are entered into or

consummated, we would incur merger and/or acquisition-related costs, and
there can be no assurance that the

integration efforts associated with any such transaction would be successful.
In response to the COVID-19

pandemic, we had taken a range of actions to preserve cash, including
the temporary suspension of significant

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acquisition activity.
During the second half of 2020, as global conditions improved, we resumed
our acquisition

strategy.

Aging Population and Other Market Influences

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

increased health care awareness, the proliferation of medical technology
and testing, new pharmacology treatments,

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

coverage. In addition, the physician market continues to benefit from the shift
of procedures and diagnostic testing

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

According to the U.S. Census Bureau’s International Database, in 2021 there were more than six and a half million

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

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

aged 65 to 84 years is projected to increase by approximately 32% during
the same period.

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

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

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

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

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

annual production of goods and services in the United States.
Health care spending is projected to reach

approximately $6.2 trillion in 2028, approximately 19.7% of the
nation’s projected gross domestic product.
The

latest projections begin after the latest historical year 2018 and go through
2028. These projections do not take into

account the impacts of COVID-19 because of the timing of the report and
the highly uncertain nature of the

pandemic.

Government

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

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

federal and foreign governmental laws and regulations, including
as applicable to our wholesale distribution of

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

sells medical equipment and supplies directly to patients.
The federal government and state governments have also

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

corruption, controlled substances handling, medical device regulations and
data privacy and security standards.

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

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

healthcare reimbursement programs.
One of these businesses was recently suspended by CMS from
receiving

payments from Medicare, although it is permitted to continue to perform
and bill for Medicare services.
The

amounts billed are being deposited in an escrow account pending resolution
of an audit.
The Company has not

recognized revenue for these services and has currently deferred slightly over $8
million in revenue (including $4

million deferred during the three months ended March 26, 2022 and slightly
over $4 million deferred during the

three months ended December 25, 2021).

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

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

seek repeal of the entire United States Patient Protection and Affordable Care Act,
as amended by the Health Care

and Education Reconciliation Act, each enacted in March 2010, (as amended,
the “ACA”).
In addition, activities to

control medical costs, including laws and regulations lowering reimbursement
rates for pharmaceuticals, medical

devices and/or medical treatments or services, are ongoing.
Many of these laws and regulations are subject to

change and their evolving implementation may impact our operations and
our financial performance.

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

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

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

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

fiscal year ended December 25, 2021, filed with the SEC on February 15, 2022.

Results of Operations

The following table summarizes the significant components of our operating
results and cash flows for the three

months ended March 26, 2022 and March 27, 2021:

Three Months Ended

March 26,

March 27,

2022

2021

Operating results:

Net sales

3,179

2,925

Cost of sales

2,206

2,034

Gross profit

973

891

Operating expenses:

Selling, general and administrative

682

614

Depreciation and amortization

Restructuring costs

Operating income

244

230

Other expense, net

(5)

(4)

Net income

186

175

Net income attributable to Henry Schein, Inc.

181

166

Three Months Ended

March 26,

March 27,

2022

2021

Cash flows:

Net cash provided by operating activities

Net cash used in investing activities

(27)

(223)

Net cash used in financing activities

(62)

(120)

Plans of Restructuring

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

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

efficiencies.
These restructuring activities were completed in 2021.

During the three months ended March 27, 2021, we recorded restructuring
costs of $3 million.
As of March 26,

2022 and December 25, 2021, the remaining accrued balance for restructuring
costs was $3 million and $4 million,

respectively.

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Three Months Ended March 26, 2022 Compared to Three Months Ended March 27, 2021

Net Sales

Net sales were as follows:

March 26,

% of

March 27,

% of

Increase

2022

Total

2021

Total

Health care distribution

(1)

Dental

1,828

57.5

1,789

61.2

2.2

Medical

1,172

36.9

991

33.9

181

18.3

Total health care distribution

3,000

94.4

2,780

95.1

220

7.9

Technology and value-added services

(2)

179

5.6

145

4.9

23.4

Total

3,179

100.0

2,925

100.0

254

8.7

(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.

The 8.7% increase in net sales includes an increase of 10.1% in local currency
sales (7.7% increase in internally

generated sales and 2.4% growth from acquisitions) partially offset by a decrease
of 1.4% related to foreign

currency exchange.
We estimate that sales of PPE and COVID-19 related products were approximately $487

million, an increase of 4.4% versus the prior year.
Excluding PPE and COVID-19 related products, the estimated

increase in internally generated local currency sales was 8.9%.

The 2.2% increase in dental net sales includes an increase of 4.4% in local
currency sales (3.5% increase in

internally generated sales and 0.9% growth from acquisitions) partially offset by a
decrease of 2.2% related to

foreign currency exchange.
The 4.4% increase in local currency sales was attributable to an increase in dental

consumable merchandise sales of 2.4% (1.3% increase in internally generated
sales and 1.1% growth from

acquisitions) and an increase in dental equipment and service
sales of 12.0% (11.9% increase in internally

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

sales growth in dental equipment during the first half of the three months
ended March 26, 2022.
As a result of an

increase in COVID-19 variants, primarily in Europe and to a lesser extent
in North America, our dental

merchandise growth was impacted by lower patient traffic, which began to increase as the
quarter progressed.

Dental equipment sales increased in both our North American and international
markets, which is primarily

attributable to increased demand and strong order backlog.
We estimate that our dental business recorded sales of

approximately $143 million of PPE and COVID-19 related products, an estimated
decrease of 15.3% versus the

prior year.
Excluding PPE and COVID-19 related products, the estimated
increase in internally generated local

currency dental sales was 6.3%.

The 18.3% increase in medical net sales includes an increase of 18.5%
in local currency sales (14.7% increase in

internally generated sales and 3.8% growth from acquisitions), partially offset by
a decrease of 0.2% related to

foreign currency exchange.
We estimate that our medical business recorded sales of approximately $344 million of

PPE, COVID-19 test kits, point-of-care diagnostics and other COVID-19
related products for the three months

ended March 26, 2022, an estimated increase of 15.7%
compared to the prior year.
Excluding sales of PPE,

COVID-19 test kits, point-of-care diagnostics and other COVID-19
related products, the estimated increase in

internally generated local currency medical sales was 14.5%.

The 23.4% increase in technology and value-added services net sales includes
an increase of 24.1%
in local

currency sales (11.1% increase in internally generated sales and 13.0% growth from acquisitions)
partially offset by

a decrease of 0.7% related to foreign currency exchange.
During the quarter ended March 26, 2022, the trend for

transactional software sales improved compared to the prior year, as more patients visited dental practices

worldwide, generating demand for our sales cycle management solutions,
and also from cloud-based solutions that

drive practice efficiency and patient engagement.

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Gross Profit

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

March 26,

Gross

March 27,

Gross

Increase

2022

Margin %

2021

Margin %

Health care distribution

857

28.6

789

28.4

8.6

Technology and value-added services

116

64.9

102

70.3

13.8

Total

973

30.6

891

30.5

9.2

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

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

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

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

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

gross margins to recover investments in development.

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

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

our gross profit margin.
For example, sales of our private label products achieve
gross profit margins that are

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

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

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

Health care distribution gross profit increased $68 million, or 8.6%, primarily
due to the increase in net sales

discussed above.
In addition, health care distribution gross profit margin benefitted from supplier rebates
during

the quarter due to increased purchase volumes.
The overall increase in our health care distribution gross profit

includes an increase of $37 million from internally generated sales, $19
million additional gross profit from

acquisitions, and a $12 million increase in the gross margin rates due to product mix and supplier
rebates.

Technology and value-added services gross profit increased $14 million, or 13.8%, due to a $10 million increase in

internally generated sales and $8 million additional gross profit from acquisitions,
partially offset by a decrease of

$4 million from gross margin rates due to product mix.
Technology and value-added services gross profit margin

decreased to 64.9% from 70.3% primarily due to lower gross margins of recently acquired
companies in the

business services sector.

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Selling, General and Administrative

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

% of

March 26,

Respective

March 27,

Respective

Increase

2022

Net Sales

2021

Net Sales

Health care distribution

646

21.5

592

21.3

9.1

Technology and value-added services

46.4

48.0

19.2

Total

729

22.9

661

22.6

10.2

Selling, general and administrative expenses (including restructuring costs
in the three months ended March 27,

2021) increased $68 million, or 10.2%.

The $54 million increase in selling, general and administrative expenses within
our health care distribution segment

was attributable to an increase of $36 million of operating costs and an increase
of $21 million of additional costs

from acquired companies, partially offset by a decrease of $3 million in restructuring costs.
The $14 million

increase in selling, general and administrative expenses within our technology
and value-added services segment

was attributable to an increase of $7 million of operating costs and an
increase of $7 million of additional costs

from acquired companies.

As a component of total selling, general and administrative expenses,
selling expenses increased $57 million, or

14.8% to $443 million primarily due to an increase in payroll and payroll
related costs and travel and convention

expenses.
As a percentage of net sales, selling expenses increased to 13.9%
from 13.2%.

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

increased $11 million, or 3.7% to $287 million primarily due to an increase in payroll and payroll related
costs and

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

9.0% from 9.3%.

Other Expense, Net

Other expense, net, was as follows:

March 26,

March 27,

Variance

2022

2021

Interest income

Interest expense

(7)

(6)

(1)

(16.7)

Other expense, net

(5)

(4)

(1)

(25.0)

Interest expense increased $1 million primarily due to increased interest
rates.

Income Taxes

For the ~~nine~~three months ended ~~September 30, 2017 and September 24, 2016,~~March 26, 2022 our effective tax rate was ~~26.3~~%24.0% compared

to 25.1% for the prior year

period.

The difference between our effective tax rates and ~~29.0~~%. the federal statutory tax rate for the three

months ended

March 26, 2022 primarily relates to state and foreign income taxes and

interest expense as well as share-based

compensation.

The difference between our effective tax rate and the federal statutory tax rate for ~~both periods~~the three months

ended March 27, 2021 was primarily ~~relates~~due to ~~the adoption of Accounting Standards Update No. 2016-09, “Stock Compensation” (Topic 718) (“ASU 2016-09”) in the first quarter of 2017, as well as~~ state and foreign income

taxes and interest ~~expense for both periods. The 2016 effective tax rate was further affected by a federal tax audit settlement~~ ~~which reduced our income tax expense by approximately $4.5~~ ~~million in the period.~~

~~Under ASU 2016-09,~~ all excess tax benefits and tax deficiencies resulting from the difference between the deduction for tax purposes and the stock-based compensation cost recognized for financial reporting purposes are included as a component of income tax expense beginning January 1, 2017. Prior to the implementation of ASU 2016-09, excess tax benefits were recorded as a component of additional paid in capital and tax deficiencies were recognized either as an offset to accumulated excess tax benefits or in the income statement if there were no accumulated excess tax benefits. ~~The adoption of ASU No. 2016-09 reduced income tax expense by approximately $19.5~~ ~~million for the nine months ended September 30, 2017.~~

~~The total amount of unrecognized tax benefits as of September 30, 2017 was approximately $102.3~~ ~~million, of which $75.6~~ million would affect the effective tax rate if recognized. It is expected that the amount of unrecognized tax benefits will change in the next 12 months; however, we do not expect the change to have a material impact on our consolidated financial statements.

~~The total amounts of interest and penalties, which are classified as a component of Other liabilities within our consolidated balance sheets, were approximately $12.9~~ ~~million and $0.0, respectively, as of September 30, 2017.~~

expense.

Liquidity and Capital Resources

Our principal capital requirements have included funding of acquisitions, purchases

of additional noncontrolling

interests, repayments of debt principal, the funding of working capital needs,

purchases of fixed assets and

repurchases of common stock (which had been temporarily suspended

in April 2020, but were resumed in early

March 2021).

Working capital requirements generally result from increased sales, special inventory forward buy-in

opportunities and payment terms for receivables and payables.

Historically, sales have tended to be stronger during

the second half of the year and special inventory forward buy-in opportunities

have been most prevalent just before

the end of the year, and have caused our working capital requirements to be higher from the end of the

third quarter

to the end of the first quarter of the following year.

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

placements.

Please see

Note 7 – Debt

for further information.

Our ability to generate sufficient cash flows from

operations is dependent on the continued demand of our customers

for our products and services, and access to

products and services from our suppliers.

Our business requires a substantial investment in working capital, which

is susceptible to fluctuations during the

year as a result of inventory purchase patterns and seasonal demands.

Inventory purchase activity is a function of

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

We anticipate

future increases in our working capital requirements.

We finance our business to provide adequate funding for at least 12 months.

Funding requirements are based on

forecasted profitability and working capital needs, which, on occasion, may

change.

Consequently, we may change

our funding structure to reflect any new requirements.

We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,

and our available funds under existing credit facilities provide us with

sufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

Net cash provided by operating activities was $93 million for the

three months ended March 26, 2022, compared to

net cash provided by operating activities of $63 million for the comparable

prior year period.

The net change of

$30 million was primarily attributable to higher net income and decreased

working capital, specifically a decrease

in inventory

levels of PPE and COVID-19 related products, and reduced levels

of prepaid inventory and lower

outstanding vendor rebates.

These working capital decreases were partially offset by an increase in accounts

receivable balances resulting from increased sales.

Net cash used in investing activities was $27 million for the three

months ended March 26, 2022, compared to $223

million for the comparable prior year period.

The net change of $196 million was primarily attributable to

decreased payments for equity investments and business acquisitions.

Net cash used in financing activities was $62 million for the three

months ended March 26, 2022, compared to net

cash used in financing activities of $120 million for the comparable

prior year period.

The net change of $58

million was primarily due to decreased repurchases of common stock.

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

The tax years subject to examination by major tax jurisdictions include the years 2012 and forward by the U.S. Internal Revenue Service (“IRS”), as well as the years 2008 and forward for certain states and certain foreign jurisdictions. We are currently under audit for the years 2012 and 2013. During the quarter ended December 31, 2016, we reached a settlement on a portion of the IRS audit of tax years 2012 and 2013. Additionally, during the quarter ended December 31, 2016 we filed a Mutual Agreement Procedure request with the IRS for assistance from the U.S. Competent Authority for an open transfer pricing matter. We received a 30-Day Letter from the IRS during the quarter ended April 1, 2017 for the remaining open audit matters for the years 2012 and 2013. We have filed a protest with the Appellate Division regarding these matters during the second quarter of 2017. We do not expect this to have a material adverse effect on our consolidated financial condition, liquidity or results of operations.

~~Note 11~~ – ~~Derivatives and Hedging Activities~~

We are exposed to market risks as well as changes in foreign currency exchange rates as measured against the U.S. dollar and each other, and changes to the credit markets. We attempt to minimize these risks by primarily using foreign currency forward contracts and by maintaining counter-party credit limits. These hedging activities provide only limited protection against currency exchange and credit risks. Factors that could influence the effectiveness of our hedging programs include currency markets and availability of hedging instruments and liquidity of the credit markets. All foreign currency forward contracts that we enter into are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure. We do not enter into such contracts for speculative purposes and we manage our credit risks by diversifying our investments, maintaining a strong balance sheet and having multiple sources of capital.

Fluctuations in the value of certain foreign currencies as compared to the U.S. dollar may positively or negatively affect our revenues, gross margins, operating expenses and retained earnings, all of which are expressed in U.S. dollars. Where we deem it prudent, we engage in hedging programs using primarily foreign currency forward contracts aimed at limiting the impact of foreign currency exchange rate fluctuations on earnings. We purchase short-term (i.e., 18 months or less) foreign currency forward contracts to protect against currency exchange risks associated with intercompany loans due from our international subsidiaries and the payment of merchandise purchases to our foreign suppliers. We do not hedge the translation of foreign currency profits into U.S. dollars, as we regard this as an accounting exposure, not an economic exposure. Our hedging activities have historically not had a material impact on our consolidated financial statements. Accordingly, additional disclosures related to derivatives and hedging activities required by ASC Topic 815 have been omitted.

N~~ote 12 – Stock-Based Compensation~~

~~Our accompanying consolidated statements of income reflect pre-tax share-based compensation expense of $12.6~~ ~~million ($9.0~~ ~~million after-tax) and $32.0~~ ~~million ($23.6~~ ~~million after-tax) for the three and nine months ended September 30, 2017, respectively, and $16.1~~ ~~million ($11.5~~ ~~million after-tax) and $43.6~~ ~~million ($31.0~~ ~~million after-tax) for the three and nine months ended September 24, 2016, respectively.~~

Stock-based compensation represents the cost related to stock-based awards granted to employees and non-employee directors. We measure stock-based compensation at the grant date, based on the estimated fair value of the award, and recognize the cost (net of estimated forfeitures) as compensation expense on a straight-line basis over the requisite service period. Our stock-based compensation expense is reflected in selling, general and administrative expenses in our consolidated statements of income.

The following table summarizes selected measures of liquidity and capital

resources:

March 26,

December 25,

2022

2021

Cash and cash equivalents

126

118

Working

capital

(1)

1,686

1,537

Debt:

Bank credit lines

Current maturities of long-term debt

Long-term debt

773

811

Total debt

866

873

Leases:

Current operating lease liabilities

Non-current operating lease liabilities

277

268

(1)

Includes $77 million and $138 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

securitization at March 26, 2022 and December 25, 2021, respectively.

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations decreased

to 42 days as of March 26, 2022 from 43

days as of March 27, 2021.

During the three months ended March 26, 2022, we wrote off approximately $3 million

of fully reserved accounts receivable against our trade receivable reserve.

Our inventory turns from operations

decreased to 4.7 as of March 26, 2022 from 5.2 as of March 27, 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

approximately 19 years, some of

which may include options to extend the leases for up to 10 years.

As of March 26, 2022, our right-of-use assets

related to operating leases were $331 million and our current and non-current

operating lease liabilities were $76

million and $277 million, respectively.

Stock Repurchases

On March 8, 2021, we announced the reinstatement of our share repurchase

program.

From March 3, 2003 through March 26, 2022, we repurchased $4.0 billion,

or 81,068,993 shares, under our

common stock repurchase programs, with $200 million available as of March

26, 2022 for future common stock

share repurchases.

During the fiscal quarter ended March 26, 2022,

we did not repurchase any shares of our common stock because

had a 10b5-1 plan that did not result in any shares being repurchased during

the quarter.

We intend to put in place

an additional plan effective May 4, 2022.

Note 2-Critical Accounting Policies, Accounting Pronouncements

Critical Accounting Policies and Estimates

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

estimates from those disclosed in Item

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

except accounting policies adopted

as of December 26, 2021, which are discussed in

Adopted and Recently Issued Accounting Standards

of the Notes to the Consolidated Financial Statements included

under Item 1.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted, see

Note 2-Critical

Accounting Policies, Accounting Pronouncements Adopted

and Recently Issued Accounting Standards of the Notes

to the Consolidated Financial Statements included under Item 1.

ITEM 3.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

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

from that disclosed in Item 7A of our Annual

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

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

(ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including

our principal executive officer and

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

procedures as of the end of the period covered by this quarterly report

as such term is defined in ~~thousands, except per share data)~~

(~~unaudited~~)

Rules 13a-15(e)

~~Stock-based awards are provided to certain employees~~

and ~~non-employee directors~~15d-15(e) promulgated under the ~~terms~~Securities Exchange Act of 1934, as

amended (the “Exchange Act”).

Based

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

financial officer,

concluded that our disclosure controls and procedures were effective as of March

26, 2022, to ensure that all

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

or submit under the Exchange Act is

accumulated and communicated to them as appropriate to allow timely

decisions regarding required disclosure and

that all such information is recorded, processed, summarized and reported

within the time periods specified in the

SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

The combination of continued acquisition integrations and system

implementation undertaken during the quarter

and carried over from prior quarters when considered in the aggregate, represents

a material change in our internal

control over financial reporting.

During the three months ended March 26, 2022, post-acquisition integration

related activities continued for our

dental and medical businesses acquired during prior quarters.

These acquisitions, the majority of which utilize

separate information and financial accounting systems, have been

included in our consolidated financial statements

since their respective dates of acquisition.

In addition, during the quarter ended March 26, 2022, we completed the

systems implementation activities to

upgrade the warehouse management system for our Australian dental

business.

All continued acquisition integrations and systems implementation involve

necessary and appropriate change-

management controls that are considered in our quarterly assessment of

the design and operating effectiveness of

our internal control over financial reporting.

Limitations of the Effectiveness of Internal Control

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

only reasonable, not absolute, assurance

that the objectives of the internal control system are met.

Because of the inherent limitations of any internal control

system, no evaluation of controls can provide absolute assurance that all control

issues, if any, within a company

have been detected.

PART

II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

For a discussion of Legal Proceedings, see

Note 9–Legal Proceedings

of the Notes to the Condensed Consolidated

Financial Statements included under Item 1.

ITEM 1A. RISK FACTORS

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

Part 1, Item 1A, of our ~~2013 Stock Incentive Plan,~~Annual Report on

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

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS

Purchases of equity securities by the issuer

Our share repurchase program announced on March 3, 2003

, originally allowed us to repurchase up to two million

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

stock, which represented

approximately 2.3% of the shares outstanding at the commencement of

the program.

Subsequent additional

increases totaling $4.1 billion, authorized by our Board of Directors,

to the repurchase program provide for a total

of $4.2 billion of shares of our common stock to be repurchased under this

program.

As of March 26, 2022, we had repurchased approximately $4.0 billion of

common stock (81,068,993 shares) under

these initiatives, with $200 million available for future common stock

share repurchases.

During the fiscal quarter ended March 26, 2022, we did not repurchase

any shares of our common stock because we

had a 10b5-1 plan that did not result in any shares being repurchased during

the quarter.

We intend to put in place

an additional plan effective May 4, 2022.

The maximum number of shares that could be purchased under this program

is determined at the end of each month

based on the closing price of our common stock at that time.

The maximum number of shares that could be

repurchased as ~~amended,~~of January 29, 2022, February 26, 2022, and ~~our 2015 Non-Employee Director Stock Incentive Plan (together, the “Plans”). The Plans are administered by~~March

26, 2022 were 2,642,010, 2,290,428 and

2,276,610, respectively.

ITEM 5.

OTHER INFORMATION

On May 2, 2022, the Compensation Committee of the Board of ~~Directors. Prior to March 2009, awards under~~ Directors

(the ~~Plans principally included a combination~~“Compensation Committee”)

approved the adoption of ~~at-the-money stock options~~the Henry Schein, Inc. Executive Change in Control

Plan (the “CIC Plan”). The CIC Plan

contains the following material terms and ~~restricted stock/units. Since March 2009, equity-based awards have been granted solely~~conditions (terms capitalized but

not defined in the below description

have the definitions set forth in the CIC Plan):

•

Eligibility and Participation.

Members of our Executive Management Committee (“EMC”) and

other

employees of the Company or its subsidiaries who are specifically designated

by the “Administrator” are

eligible to participate in the CIC Plan, in each case,

subject to such person’s execution of a “Participation

Agreement” provided by the Company (in the form attached as Appendix

A to the CIC Plan), and provided

that such person is a member of ~~restricted stock/units, with~~a select group of management or highly

compensated employees.

•

Benefits Under the ~~exception of providing stock options to employees pursuant to certain pre-existing contractual obligations.~~

~~Grants of restricted stock/units are stock-based awards granted to recipients with specified vesting provisions.~~ CIC Plan.

In the event that a participant in the Plan is terminated without “Cause”, or

resigns for “Good Reason”, in each case, ~~of restricted stock, common stock is delivered on~~during the period starting

90 days prior to a “Change in Control”

(or, if earlier, the date of ~~grant,~~the first public announcement of a pending “Change in Control”) and ending two

years following a Change in Control (such termination of employment,

a “Termination”), then subject to

execution and non-revocation of a release of claims, the participant will be

entitled to receive:

●

base salary through the Termination date;

●

a pro-rated annual bonus based on actual performance for the year

in which the Termination

occurs;

●

an amount equal to the product of (A) the sum of the participant’s base salary and target annual

bonus amount, multiplied by (B) the “Severance Multiple”;

●

immediate vesting ~~conditions. In~~of the ~~case of restricted~~participant’s outstanding stock ~~units, common~~options (to the maximum extent

permitted by the applicable stock ~~is generally delivered on or following satisfaction of vesting conditions. We issue~~option plan), restricted stock/units, ~~that vest solely based on~~deferred

stock awards and

non-qualified retirement benefits;

●

settlement of the ~~recipient’s continued service over time (primarily four-year cliff vesting, except for grants made under~~participant’s deferred compensation arrangements in accordance with the ~~2015 Non-Employee Director Stock Incentive Plan, which are primarily 12-month cliff vesting)~~

applicable plan or election form; and ~~restricted stock/units that vest based on our achieving specified performance measurements and the recipient’s continued service over time (primarily three-year cliff vesting).~~

With respect to time-based restricted stock/units, we estimate the fair value on the date of grant based on our closing stock price. With respect to performance-based restricted stock/units, the number of shares that ultimately vest and are received

●

COBRA continuation health coverage subsidized by the ~~recipient is based upon our performance as measured against specified targets over a specified~~Company (with

the participant paying the

applicable active employee rate) for up to the applicable severance period ~~as determined by~~

(not to exceed 18

months).

Under the Plan, the Compensation Committee ofhas the Board of Directors. Although there is no guarantee that performance targets will be achieved, we estimate the fair value of performance-based restricted stock/units based on our closing stock price at time of grant.

~~The Plans provide for adjustments~~ sole discretion

to the performance-based restricted stock/units targets for significant events, including, without limitation, acquisitions, divestitures, new business ventures, certain capital transactions (including share repurchases), restructuring costs, if any, changes in accounting principles set and/or in applicable laws or regulations and certain foreign exchange fluctuations. Over the performance period, the number of shares of common stock that will ultimately vest and be issued and the related compensation expense is adjusted upward or downward based upon our estimation of achieving such performance targets. The ultimate number of shares delivered to recipients and the related compensation cost recognized as an expense will be based on our actual performance metrics as definedincrease a participant’s

Severance Multiple under the ~~Plans.~~

~~Total unrecognized compensation cost related~~Plan, but in no event to ~~non-vested awards~~a value greater

than 3.0. The Compensation Committee has

set the Severance Multiple for each participant (other than a participant who

serves as our Chief Executive Officer)

who is an “executive officer” (as determined under Securities and Exchange Commission

rules) to 2.0, and has set

the Severance Multiple for all other participants to 1.0.

•

Restrictive Covenants.

The CIC Plan contains perpetual confidentiality and non-disparagement

provisions,

and prohibits solicitation of ~~September 30, 2017 was $101.2~~ ~~million, which is expected to~~Company employees for 24 months following the

participant’s termination of

employment for any reason.

•

Amendment and Termination.

The CIC Plan cannot be ~~recognized over~~terminated or amended in any way

that materially

and adversely affects the right of a ~~weighted-average period of approximately 2.2 years.~~

~~The following table summarizes stock option activity under~~participant without such participant’s consent. Additionally, the ~~Plans~~CIC

Plan cannot be amended or terminated in any way during the ~~nine months ended September 30, 2017:~~

time period

Weighted

Average

Weighted

Remaining

Average

Contractual

Aggregate

Exercise

Life in

Intrinsic

Shares

Price

Years

Value
Outstanding at beginning of period ............................................................................................................................................

353

$
28.59

Granted ...............................................................................................................................................................................

-

-

Exercised .............................................................................................................................................................................

(187)

27.63

Forfeited ..............................................................................................................................................................................

-

-

Outstanding at end of period ....................................................................................................................................................

166

$
29.67

0.5

$
8,705

Options exercisable at end of period ..........................................................................................................................................

166

$
29.67

0.5

$
8,705

starting 90 days prior to a Change

in Control (or the date the Company enters into a definitive agreement to

effect a Change in Control) and

Form of 2022 Restricted Stock Unit Agreement for time-basedrestricted stock

ending on the later of (i) two years after a Change in Control or (ii) the date

that all payments and benefits

under the Plan have been paid.

The foregoing summary of the CIC Plan does not purport to be complete

and is subject to, and qualified in its

entirety by, the full text of the CIC Plan, which is attached as Exhibit 10.3 and incorporated herein by reference.

ITEM 6.

EXHIBITS

10.1

unit awards pursuant to the Henry Schein, Inc. 2020 Stock Incentive Plan (as

amended and restated effective as of May 21, 2020).**+

10.2

Form of 2022 Restricted Stock Unit Agreement for performance-based

restricted stock unit awards pursuant to the Henry Schein, Inc. 2020 Stock

Incentive Plan (as amended and restated effective as of May 21, 2020).**+

10.3

Henry Schein, Inc. Executive Change in Control Plan, effective as of May 2,

2022**+

31.1

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

31.2

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

32.1

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

101.INS

Inline XBRL Instance Document - the instance document does not appear

in the

Interactive Data File because its XBRL tags are embedded within the

Inline

XBRL document+

101.SCH

Inline XBRL Taxonomy Extension Schema Document+

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document+

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document+

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document+

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document+

104

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

quarter ended March 26, 2022, formatted in Inline XBRL (included within

Exhibit 101 attachments).+

+ Filed or furnished herewith.

** Indicates management contract or compensatory plan or agreement.

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

~~The following tables summarize~~

SIGNATURE

Pursuant to the ~~activity~~requirements of ~~our non-vested restricted stock/units for~~ the ~~nine months ended September 30, 2017:~~

Securities Exchange Act of 1934, the

Time-Based Restricted Stock/Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share
Outstanding at beginning of period .............................................................................................................................................

1,339

$
60.54

Granted .................................................................................................................................................................................

295

85.58

Vested ...................................................................................................................................................................................

(374)

47.13

Forfeited ................................................................................................................................................................................

(22)

74.63

Outstanding at end of period .....................................................................................................................................................

1,238

$
70.30

$
81.99

Performance-Based Restricted Stock/Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share
Outstanding at beginning of period .............................................................................................................................................

1,849

$
54.05

Granted .................................................................................................................................................................................

343

83.02

Vested ...................................................................................................................................................................................

(850)

54.88

Forfeited ................................................................................................................................................................................

(18)

79.68

Outstanding at end of period .....................................................................................................................................................

1,324

$
62.38

$
81.99

~~Note 13 – Supplemental Cash Flow Information~~

~~Cash paid for interest~~Registrant has duly caused this Report to

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

Henry Schein, Inc.

(Registrant)

By: /s/ Ronald N. South

Ronald N. South

Senior Vice President and

Chief Financial Officer

(Authorized Signatory and ~~income taxes was:~~

Principal Financial

Nine Months Ended

September 30,

September 24,

2017

2016
Interest..................................................................................................................................................................................

$
33,640

$
21,187
Income taxes..........................................................................................................................................................................

179,445

152,351

~~During the nine months ended September 30, 2017~~ and September 24, 2016, we had $(1.3) million and $1.3 million of non-cash net unrealized gains (losses) related to foreign currency hedging activities, respectively. During the second quarter of 2017, a~~s part of a business acquisition, we increased our ownership in a subsidiary through a non-cash transaction of $16.8~~ ~~million.~~

Accounting Officer)

Dated: May 3, 2022

~~Note 14 – Legal Proceedings~~

~~Beginning in~~ ~~January 2016~~, ~~class action complaints~~ ~~were filed against~~ ~~Patterson Companies, Inc. (“Patterson”), Benco Dental Supply Co. (“Benco”)~~ ~~and Henry Schein, Inc~~.~~Each of these complaints allege, among other things, that defendants conspired to~~ ~~fix prices, allocate customers and foreclose competitors by boycotting manufacturers, state dental associations and others that deal with defendants’ competitors.~~ Subject to certain exclusions, these classes seek to represent all persons who purchased dental supplies or equipment in the United States directly from any of the defendants or Burkhart Dental Supply Co. (“Burkhart”) since August 31, 2008. Each class action complaint asserts a single count under Section 1 of the Sherman Act, and seeks equitable relief, compensatory and treble damages, jointly and severally, and reasonable costs and expenses, including attorneys’ fees and expert fees. We intend to defend ourselves vigorously against these actions.

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

On ~~August 31, 2012~~, ~~Archer and White Sales, Inc.~~ ~~(“Archer”) filed a complaint against~~ Henry Schein, Inc. as well as Danaher Corporation and its subsidiaries Instrumentarium Dental, Inc., Dental Equipment, LLC, Kavo Dental Technologies, LLC and Dental Imaging Technologies Corporation (collectively, the “Danaher Defendants”) in the United States District Court for the Eastern District of Texas, Civil Action No. 2:12-CV-00572-JRG, styled as an antitrust action under Section 1 of the Sherman Act, and the Texas Free Enterprise Antitrust Act. ~~Archer alleges a conspiracy between Henry Schein, Inc., an unnamed company and the Danaher Defendants to terminate or limit Archer’s distribution rights.~~ On October 1, 2012, Henry Schein filed a motion for an order: (i) compelling Archer to arbitrate its claims against Henry Schein; (2) staying all proceedings pending arbitration; and (3) joining the Danaher Defendants’ motion to arbitrate and stay. On May 28, 2013, the Magistrate Judge granted the motions to arbitrate and stayed proceedings pending arbitration. On June 10, 2013, Archer moved for reconsideration before the District Court judge. On December 7, 2016, the District Court Judge granted Archer’s motion for reconsideration and lifted the stay. Defendants have appealed the District Court’s order, and that appeal is pending.

On ~~August 1, 2017, Archer filed an amended complaint, adding Patterson and Benco as defendants, and~~ alleging that Henry Schein, Inc., Patterson, Benco and Burkhart conspired to fix prices and refused to compete with each other for sales of dental equipment to dental professionals and agreed to enlist their common suppliers, the Danaher Defendants, to join a price-fixing conspiracy and boycott by reducing the distribution territory of, and eventually terminating, their price-cutting competing distributor Archer. ~~Archer seeks injunctive relief, and damages in an amount to be proved at trial, to be trebled with interest and costs, including attorneys’ fees, jointly and severally.~~

On ~~October 30, 2017, Archer filed a second amended complaint under seal, to add~~ ~~additional allegations that it believes support its claims. The named parties and causes of action are the same as the August 1, 2017 amended complaint.~~ ~~Trial is currently scheduled for February 2018. We intend to defend ourselves vigorously against this action.~~

On ~~August 17, 2017~~, ~~IQ Dental Supply, Inc.~~ ~~(“IQ Dental”) filed a complaint in the United States District Court for the Eastern District of New York, entitled IQ Dental Supply, Inc.~~ v. ~~Henry Schein, Inc., Patterson Companies, Inc. and Benco Dental Supply Company, Case No. 2:17-cv-4834.~~ ~~Plaintiff alleges that it is a distributor of dental supplies and equipment, and sells dental products through an online dental distribution platform operated by SourceOne Dental (“SourceOne”).~~ SourceOne had previously brought an antitrust lawsuit against the Company, Patterson and Benco which the Company settled in the second quarter of 2017 and which is described in the Company’s prior filings with the Securities and Exchange Commission.

IQ Dental alleges, among other things, that defendants conspired to suppress competition from IQ Dental and SourceOne for the marketing, distribution and sale of dental supplies and equipment in the United States, and that defendants unlawfully agreed with one another to boycott dentists, manufacturers and state dental associations that deal with, or considered dealing with, plaintiff and SourceOne. Plaintiff claims that this alleged conduct constitutes unreasonable restraint of trade in violation of Section 1 of the Sherman Act, New York’s Donnelly Act and the New Jersey Antitrust Act, and also makes pendant state law claims for tortious interference with prospective business relations, civil conspiracy and aiding and abetting. Plaintiff seeks injunctive relief, ~~compensatory, treble and punitive damages, jointly and severally, and reasonable costs and expenses, including attorneys’ fees and expert fees.~~ ~~We intend to vigorously defend ourselves against this action.~~

From time to time, we may become a party to other legal proceedings, including, without limitation, product liability claims, employment matters, commercial disputes, governmental inquiries and investigations (which may in some cases involve our entering into settlement arrangements or consent decrees), and other matters arising out of the ordinary course of our business. While the results of any legal proceeding cannot be predicted with certainty, in our opinion none of these other pending matters are currently anticipated to have a material adverse effect on our financial condition or results of operations.

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

(~~unaudited~~)

~~As of September 30, 2017,~~ we had accrued our best estimate of potential losses relating to claims that were probable to result in liability and for which we were able to reasonably estimate a loss. This accrued amount, as well as related expenses, was not material to our financial position, results of operations or cash flows. Our method for determining estimated losses considers currently available facts, presently enacted laws and regulations and other factors, including probable recoveries from third parties.

~~Note 15 –~~ ~~Subsequent Event~~

~~In October 2017, we sold our~~ ~~21.4% equity ownership of D4D Technologies LLC in exchange for cash and contingent consideration. As a result of this transaction, we expect to record a loss of approximately $~~17 ~~million to $~~18 ~~million, or $0.10~~ ~~to $0.11~~ ~~per diluted share, in the fourth quarter of 2017.~~

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

~~Cautionary Note Regarding Forward-Looking Statements~~

In accordance with the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995, we provide the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. All forward-looking statements made by us are subject to risks and uncertainties and are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These statements are identified by the use of such terms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate” or other comparable terms.

Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to: effects of a highly competitive and consolidating market; our dependence on third parties for the manufacture and supply of our products; our dependence upon sales personnel, customers, suppliers and manufacturers; our dependence on our senior management; fluctuations in quarterly earnings; risks from expansion of customer purchasing power and multi-tiered costing structures; increases in shipping costs for our products or other service issues with our third-party shippers; general global macro-economic conditions; risks associated with currency fluctuations; risks associated with political and economic uncertainty; disruptions in financial markets; volatility of the market price of our common stock; changes in the health care industry; implementation of health care laws; failure to comply with regulatory requirements and data privacy laws; risks associated with our global operations; transitional challenges associated with acquisitions and joint ventures, including the failure to achieve anticipated synergies; financial risks associated with acquisitions and joint ventures; litigation risks; the dependence on our continued product development, technical support and successful marketing in the technology segment; increased competition by third party online commerce sites; risks from disruption to our information systems; cyberattacks or other privacy or data security breaches; certain provisions in our governing documents that may discourage third-party acquisitions of us; and changes in tax legislation. The order in which these factors appear should not be construed to indicate their relative importance or priority.

We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control or predict. Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction of actual results. We undertake no duty and have no obligation to update forward-looking statements.

~~Where You Can Find Important Information~~

~~We may disclose important information through one or more of the following channels: SEC filings, public conference calls and webcasts, press releases, the investor relations page of our website (www.henryschein.com) and the social media channels identified on the Newsroom page of our website.~~

Executive-Level Overview

We believe we are the world’s largest provider of health care products and services primarily to office-based dental, animal health and medical practitioners. We serve more than 1 million customers worldwide including dental practitioners and laboratories, animal health clinics and physician practices, as well as government, institutional health care clinics and other alternate care clinics. We believe that we have a strong brand identity due to our more than 85 years of experience distributing health care products.

We are headquartered in Melville, New York, employ more than 22,000 people (of which more than 11,000 are based outside the United States) and have operations or affiliates in 33 countries, including the United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China, the Czech Republic, Denmark, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, the Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, South Africa, Spain, Sweden, Switzerland, Thailand, United Arab Emirates and the United Kingdom.

We have established strategically located distribution centers to enable us to better serve our customers and increase our operating efficiency. This infrastructure, together with broad product and service offerings at competitive prices, and a strong commitment to customer service, enables us to be a single source of supply for our customers’ needs. Our infrastructure also allows us to provide convenient ordering and rapid, accurate and complete order fulfillment.

We conduct our business through two reportable segments: (i) health care distribution and (ii) technology and value-added services. These segments offer different products and services to the same customer base.

The health care distribution reportable segment aggregates our global dental, animal health and medical operating segments. This segment distributes consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins. Our global dental group serves office-based dental practitioners, dental laboratories, schools and other institutions. Our global animal health group serves animal health practices and clinics. Our global medical group serves office-based medical practitioners, ambulatory surgery centers, other alternate-care settings and other institutions.

Our global technology and value-added services group provides software, technology and other value-added services to health care practitioners. Our technology group offerings include practice management software systems for dental and medical practitioners and animal health clinics. Our value-added practice solutions include financial services on a non-recourse basis, e-services, practice technology, network and hardware services, as well as continuing education services for practitioners.

Industry Overview

In recent years, the health care industry has increasingly focused on cost containment. This trend has benefited distributors capable of providing a broad array of products and services at low prices. It also has accelerated the growth of HMOs, group practices, other managed care accounts and collective buying groups, which, in addition to their emphasis on obtaining products at competitive prices, tend to favor distributors capable of providing specialized management information support. We believe that the trend towards cost containment has the potential to favorably affect demand for technology solutions, including software, which can enhance the efficiency and facilitation of practice management.

Our operating results in recent years have been significantly affected by strategies and transactions that we undertook to expand our business, domestically and internationally, in part to address significant changes in the health care industry, including consolidation of health care distribution companies, health care reform, trends toward managed care, cuts in Medicare and collective purchasing arrangements.

~~Our current and future results have been and could be impacted by the current economic environment and uncertainty, particularly impacting overall demand for our products and services.~~

Industry Consolidation

The health care products distribution industry, as it relates to office-based health care practitioners, is fragmented and diverse. This industry, which encompasses the dental, animal health and medical markets, was estimated to produce revenues of approximately $45 billion in 2016 in the global markets. The industry ranges from sole practitioners working out of relatively small offices to group practices or service organizations ranging in size from a few practitioners to a large number of practitioners who have combined or otherwise associated their practices.

Due in part to the inability of office-based health care practitioners to store and manage large quantities of supplies in their offices, the distribution of health care supplies and small equipment to office-based health care practitioners has been characterized by frequent, small quantity orders, and a need for rapid, reliable and substantially complete order fulfillment. The purchasing decisions within an office-based health care practice are typically made by the practitioner or an administrative assistant. Supplies and small equipment are generally purchased from more than one distributor, with one generally serving as the primary supplier.

The trend of consolidation extends to our customer base. Health care practitioners are increasingly seeking to partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician hospital organizations. In many cases, purchasing decisions for consolidated groups are made at a centralized or professional staff level; however, orders are delivered to the practitioners’ offices.

We believe that consolidation within the industry will continue to result in a number of distributors, particularly those with limited financial, operating and marketing resources, seeking to combine with larger companies that can provide growth opportunities. This consolidation also may continue to result in distributors seeking to acquire companies that can enhance their current product and service offerings or provide opportunities to serve a broader customer base.

Our trend with regard to acquisitions and joint ventures has been to expand our role as a provider of products and services to the health care industry. This trend has resulted in our expansion into service areas that complement our existing operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired businesses.

As industry consolidation continues, we believe that we are positioned to capitalize on this trend, as we believe we have the ability to support increased sales through our existing infrastructure, although there can be no assurances that we will be able to successfully accomplish this. We also have invested in expanding our sales/marketing infrastructure to include a focus on building relationships with decision makers who do not reside in the office-based practitioner setting.

As the health care industry continues to change, we continually evaluate possible candidates for merger and joint venture or acquisition and intend to continue to seek opportunities to expand our role as a provider of products and services to the health care industry. There can be no assurance that we will be able to successfully pursue any such opportunity or consummate any such transaction, if pursued. If additional transactions are entered into or consummated, we would incur merger and/or acquisition-related costs, and there can be no assurance that the integration efforts associated with any such transaction would be successful.

~~Aging Population and Other Market Influences~~

The health care products distribution industry continues to experience growth due to the aging population, increased health care awareness, the proliferation of medical technology and testing, new pharmacology treatments and expanded third-party insurance coverage, partially offset by the effects of unemployment on insurance coverage. In addition, the physician market continues to benefit from the shift of procedures and diagnostic testing from acute care settings to alternate-care sites, particularly physicians’ offices.

According to the U.S. Census Bureau’s International Data Base, in 2016 there were more than six million Americans aged 85 years or older, the segment of the population most in need of long-term care and elder-care

services. By the year 2050, that number is projected to nearly triple to approximately 19 million. The population aged 65 to 84 years is projected to increase over 60% during the same time period.

As a result of these market dynamics, annual expenditures for health care services continue to increase in the United States. We believe that demand for our products and services will grow, while continuing to be impacted by current and future operating, economic and industry conditions. The Centers for Medicare and Medicaid Services, or CMS, published “National Health Expenditure Projections 2016-2025” indicating that total national health care spending reached approximately $3.4 trillion in 2016, or 18.1% of the nation’s gross domestic product, the benchmark measure for annual production of goods and services in the United States. Health care spending is projected to reach approximately $5.5 trillion in 2025, approximately 19.9% of the nation’s gross domestic product.

~~Government~~

Certain of our businesses involve the distribution of pharmaceuticals and medical devices, and in this regard we are subject to extensive local, state, federal and foreign governmental laws and regulations applicable to the distribution and sale of pharmaceuticals and medical devices. Additionally, government and private insurance programs fund a large portion of the total cost of medical care, and there has been an emphasis on efforts to control medical costs, including laws and regulations lowering reimbursement rates for pharmaceuticals, medical devices, and/or medical treatments or services. Also, many of these laws and regulations are subject to change and may impact our financial performance. In addition, our businesses are generally subject to numerous other laws and regulations that could impact our financial performance, including securities, antitrust, anti-bribery and anti-kickback, customer interaction transparency, data privacy, data security and other laws and regulations. Failure to comply with law or regulations could have a material adverse effect on our business.

~~Health Care Reform~~

The United States Health Care Reform Law adopted through the March 2010 enactment of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act increased federal oversight of private health insurance plans and included a number of provisions designed to reduce Medicare expenditures and the cost of health care generally, to reduce fraud and abuse, and to provide access to increased health coverage.

The Health Care Reform Law requirements include a 2.3% excise tax on domestic sales of many medical devices by manufacturers and importers that began in 2013 and a fee on branded prescription drugs and biologics that was implemented in 2011, both of which may affect sales. However, with respect to the medical device excise tax, a two-year moratorium was imposed under the Consolidated Appropriations Act, 2016, suspending the imposition of the tax on device sales during the period beginning January 1, 2016 and ending on December 31, 2017. The Health Care Reform Law has also materially expanded the number of individuals in the United States with health insurance. The Health Care Reform Law has faced ongoing legal challenges, including litigation seeking to invalidate some of or all of the law or the manner in which it has been implemented. The President has reaffirmed his intention to repeal and replace the Health Care Reform Law, and has taken a number of administrative actions that seek to materially weaken the Health Care Reform Law, such as to curtail funding intended to help lower-income individuals pay for health insurance policies, and to make less robust plans available, both of which actions may adversely affect our business. Some of these administrative actions have been challenged as unlawful. The uncertain status of the Health Care Reform Law affects our ability to plan.

A Health Care Reform Law provision, generally referred to as the Physician Payment Sunshine Act or Open Payments Program, imposes reporting and disclosure requirements for drug and device manufacturers and distributors with regard to payments or other transfers of value made to certain covered recipients (including physicians, dentists and teaching hospitals), and for such manufacturers and distributors and for group purchasing organizations, with regard to certain ownership interests held by physicians in the reporting entity. CMS publishes information from these reports on a publicly available website, including amounts transferred and physician, dentist and teaching hospital identities.

Under the Physician Payment Sunshine Act, we are required to collect and report detailed information regarding certain financial relationships we have with physicians, dentists and teaching hospitals. We believe that we are substantially compliant with applicable Physician Payment Sunshine Act requirements. The Physician Payment Sunshine Act pre-empts similar state reporting laws, although we or our subsidiaries may be required to report under certain state transparency laws that address circumstances not covered by the Physician Payment Sunshine Act, and some of these state laws, as well as the federal law, can be ambiguous. We are also subject to foreign regulations requiring transparency of certain interactions between suppliers and their customers. While we believe we have substantially compliant programs and controls in place to comply with these requirements, our compliance with these rules imposes additional costs on us.

Another notable Medicare health care reform initiative, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), enacted on April 16, 2015, establishes a new payment framework, called the Quality Payment Program, which modifies certain Medicare payments to “eligible clinicians,” including physicians, dentists and other practitioners. Under MACRA, eligible clinicians will be required to participate in Medicare through the Merit-Based Incentive Payment System (“MIPS”) or Advanced Alternative Payment Models (“APMs”). MIPS generally will consolidate three current programs; the physician quality reporting system, the value-based payment modifier and the Medicare electronic health record (“EHR”) program, into a single program in which Medicare reimbursement to eligible clinicians will include both positive and negative payment adjustments that take into account quality, resource use, clinical practice improvement and meaningful use of certified EHR technology. Advanced APMs generally involve higher levels of financial and technology risk. A final rule was published in the Federal Register on November 4, 2016 and allows eligible Medicare clinicians to pick their pace of participation for the first performance period that began January 1, 2017. The data collected in the first performance year will determine payment adjustments beginning January 1, 2019. A final rule updating certain Quality Payment Program regulations is expected to be released on or about November 1, 2017, and is anticipated to be effective on January 1, 2018. MACRA represents a fundamental change in physician reimbursement that is expected to provide substantial financial incentives for physicians to participate in risk contracts, and to increase physician information technology and reporting obligations. The implications of the implementation of MACRA are uncertain and will depend on future regulatory activity and physician activity in the marketplace. MACRA may encourage physicians to move from smaller practices to larger physician groups or hospital employment, leading to a consolidation of a portion of our customer base. Although we believe that we are positioned to capitalize on this consolidation trend, there can be no assurances that we will be able to successfully accomplish this.

~~Health Care Fraud~~

Certain of our businesses are subject to federal and state (and similar foreign) health care fraud and abuse, referral and reimbursement laws and regulations with respect to their operations. Some of these laws, referred to as “false claims laws,” prohibit the submission or causing the submission of false or fraudulent claims for reimbursement to federal, state and other health care payers and programs. Other laws, referred to as “anti-kickback laws,” prohibit soliciting, offering, receiving or paying remuneration in order to induce the referral of a patient or ordering, purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing of, items or services that are paid for by federal, state and other health care payers and programs.

The fraud and abuse laws and regulations have been subject to varying interpretations, as well as heightened enforcement activity over the past few years, and significant enforcement activity has been the result of “relators,” who serve as whistleblowers by filing complaints in the name of the United States (and if applicable, particular states) under federal and state false claims laws. Under the federal False Claims Act, relators can be entitled to receive up to 30% of total recoveries. Also, violations of the federal False Claims Act can result in treble damages, and each false claim submitted can be subject to a civil penalty which, for penalties assessed after February 3, 2017 whose associated violations occurred after November 2, 2015, ranges from a minimum of $10,957 to a maximum of $21,916 per claim. Most states have adopted similar state false claims laws, and these state laws have their own penalties which may be in addition to federal False Claims Act penalties. The Health Care Reform Law significantly strengthened the federal False Claims Act and the federal Anti-Kickback Law provisions, which could lead to the possibility of increased whistleblower or relator suits, and among other things made clear that a federal Anti-Kickback Law violation can be a basis for federal False Claims Act liability.

The United States government (among others) has expressed concerns about financial relationships between suppliers on the one hand and physicians and dentists on the other. As a result, we regularly review and revise our marketing practices as necessary to facilitate compliance.

We also are subject to certain United States and foreign laws and regulations concerning the conduct of our foreign operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, German anti-corruption laws and other anti-bribery laws and laws pertaining to the accuracy of our internal books and records, which have been the focus of increasing enforcement activity globally in recent years.

Failure to comply with fraud and abuse laws and regulations could result in significant civil and criminal penalties and costs, including the loss of licenses and the ability to participate in federal and state health care programs, and could have a material adverse effect on our business. Also, these measures may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations or incur substantial defense and settlement expenses. Even unsuccessful challenges by regulatory authorities or private relators could result in reputational harm and the incurring of substantial costs. In addition, many of these laws are vague or indefinite and have not been interpreted by the courts, and have been subject to frequent modification and varied interpretation by prosecutorial and regulatory authorities, increasing the risk of noncompliance.

While we believe that we are substantially compliant with applicable fraud and abuse laws and regulations, and have adequate compliance programs and controls in place to ensure substantial compliance, we cannot predict whether changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in response to changes in applicable law or interpretation of laws, could have a material adverse effect on our business.

~~Operating, Security and Licensure Standards~~

Certain of our businesses involve the distribution of pharmaceuticals and medical devices, and in this regard we are subject to various local, state, federal and foreign governmental laws and regulations applicable to the distribution of pharmaceuticals and medical devices. Among the United States federal laws applicable to us are the Controlled Substances Act, the Federal Food, Drug, and Cosmetic Act, as amended (“FDC Act”), and Section 361 of the Public Health Service Act. We are also subject to comparable foreign regulations.

The FDC Act and similar foreign laws generally regulate the introduction, manufacture, advertising, labeling, packaging, storage, handling, reporting, marketing and distribution of, and record keeping for, pharmaceuticals and medical devices shipped in interstate commerce, and states may similarly regulate such activities within the state. Section 361 of the Public Health Service Act, which provides authority to prevent the spread of communicable diseases, serves as the legal basis for the United States Food and Drug Administration’s (“FDA”) regulation of human cells, tissues and cellular and tissue-based products, also known as “HCT/P products.”

The Federal Drug Quality and Security Act of 2013 brought about significant changes with respect to pharmaceutical supply chain requirements and pre-empts state law. Title II of this measure, known as the Drug Supply Chain Security Act (“DSCSA”), is being phased in over a period of ten years, and is intended to build a national electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States. The law’s track and trace requirements applicable to manufacturers, wholesalers, repackagers and dispensers (e.g., pharmacies) of prescription drugs took effect in January 2015, and will continue to be implemented. The DSCSA product tracing requirements replace the former FDA drug pedigree requirements and pre-empt state requirements that are inconsistent with, more stringent than, or in addition to, the DSCSA requirements.

The DSCSA also establishes certain requirements for the licensing and operation of prescription drug wholesalers and third party logistics providers (“3PLs”), and includes the eventual creation of national wholesaler and 3PL licenses in cases where states do not license such entities. The DSCSA requires that wholesalers and 3PLs distribute drugs in accordance with certain standards regarding the recordkeeping, storage and handling of prescription drugs. According to FDA guidance, states are pre-empted from imposing any licensing requirements that are inconsistent with, less stringent than, directly related to, or covered by the standards established by federal law in this area. Current state licensing requirements will likely remain in effect until the FDA issues new regulations as directed by the DSCSA.

~~We believe that we are substantially compliant with applicable DSCSA requirements.~~

The Food and Drug Administration Amendments Act of 2007 and the Food and Drug Administration Safety and Innovation Act of 2012 amended the FDC Act to require the FDA to promulgate regulations to implement a unique device identification (“UDI”) system. The FDA is phasing in the implementation of the UDI regulations over seven years, generally beginning with the highest-risk devices (i.e., Class III medical devices) and ending with the lowest-risk devices. The UDI regulations require “labelers” to include unique device identifiers (“UDIs”), with a content and format prescribed by the FDA and issued under a system operated by an FDA-accredited issuing agency, on the labels and packages of medical devices, and to directly mark certain devices with UDIs. The UDI regulations also require labelers to submit certain information concerning UDI-labeled devices to the FDA, much of which information is publicly available on an FDA database, the Global Unique Device Identification Database. The UDI regulations provide for certain exceptions, alternatives and time extensions. For example, the UDI regulations include a general exception for Class I devices exempt from the Quality System Regulation (other than record-keeping requirements and complaint files). Regulated labelers include entities such as device manufacturers, repackagers, reprocessors and relabelers that cause a device’s label to be applied or modified, with the intent that the device will be commercially distributed without any subsequent replacement or modification of the label, and include certain of our businesses.

~~We believe that we are substantially compliant with applicable UDI requirements.~~

Under the Controlled Substances Act, as a distributor of controlled substances, we are required to obtain and renew annually registrations for our facilities from the United States Drug Enforcement Administration (“DEA”) permitting us to handle controlled substances. We are also subject to other statutory and regulatory requirements relating to the storage, sale, marketing, handling, reporting and distribution of such drugs, in accordance with the Controlled Substances Act and its implementing regulations, and these requirements have been subject to heightened enforcement activity in recent times. We are subject to inspection by the DEA.

Certain of our businesses are also required to register for permits and/or licenses with, and comply with operating and security standards of, the DEA, the FDA, the United States Department of Health and Human Services (“HHS”), and various state boards of pharmacy, state health departments and/or comparable state agencies as well as comparable foreign agencies, and certain accrediting bodies depending on the type of operations and location of product distribution, manufacturing or sale. These businesses include those that distribute, manufacture and/or repackage prescription pharmaceuticals and/or medical devices and/or HCT/P products, or own pharmacy operations, or install, maintain or repair equipment. In addition, Section 301 of the National Organ Transplant Act, and a number of comparable state laws, impose civil and/or criminal penalties for the transfer of certain human tissue (for example, human bone products) for valuable consideration, while generally permitting payments for the reasonable costs incurred in procuring, processing, storing and distributing that tissue. We are also subject to foreign government regulation of such products. The DEA, the FDA and state regulatory authorities have broad inspection and enforcement powers, including the ability to suspend or limit the distribution of products by our distribution centers, seize or order the recall of products and impose significant criminal, civil and administrative sanctions for violations of these laws and regulations. Foreign regulations subject us to similar foreign enforcement powers. Furthermore, compliance with legal requirements has required and may in the future require us to institute voluntary recalls, or carry out recalls as a result of our suppliers’ legal obligations, of products we sell, which could result in financial losses and potential reputational harm. Our customers are also subject to significant federal, state, local and foreign governmental regulation.

Certain of our businesses are subject to various additional federal, state, local and foreign laws and regulations, including with respect to the sale, transportation, storage, handling and disposal of hazardous or potentially hazardous substances, and safe working conditions.

~~Certain of our businesses also maintain contracts with governmental agencies and are subject to certain regulatory requirements specific to government contractors.~~

~~Antitrust~~

The U.S. federal government, most U.S. states and many foreign countries have antitrust laws that prohibit certain types of conduct deemed to be anti-competitive. Violations of antitrust laws can result in various sanctions, including criminal and civil penalties. Private plaintiffs also could bring civil lawsuits against us in the United States for alleged antitrust law violations, including claims for treble damages.

~~Regulated Software and Data Processing; Electronic Health Records~~

The FDA has become increasingly active in addressing the regulation of computer software intended for use in health care settings, and has developed and continues to develop policies on regulating clinical decision support tools and other types of software as medical devices. Certain of our businesses involve the development and sale of software and related products to support physician and dental practice management, and it is possible that the FDA or foreign government authorities could determine that one or more of our products is a medical device that is subject to regulation, which could subject us or one or more of our businesses to substantial additional requirements with respect to these products.

In addition, our businesses that involve physician and dental practice management products include electronic information technology systems that store and process personal health, clinical, financial and other sensitive information of individuals. These information technology systems may be vulnerable to breakdown, wrongful intrusions, data breaches and malicious attack, which could require us to expend significant resources to eliminate these problems and address related security concerns, and could involve claims against us by private parties and/or governmental agencies. For example, we are directly or indirectly subject to numerous federal, state, local and foreign laws and regulations that protect the privacy and security of such information, such as the privacy and security provisions of the federal Health Insurance Portability and Accountability Act of 1996, as amended, and implementing regulations (“HIPAA”). HIPAA requires, among other things, the implementation of various recordkeeping, operational, notice and other practices intended to safeguard that information, limit its use to allowed purposes and notify individuals in the event of privacy and security breaches. Failure to comply with these laws and regulations can result in substantial penalties and other liabilities.

In addition, the European Parliament and the Council of the European Union have adopted a new pan-European General Data Protection Regulation (“GDPR”), effective from May 25, 2018, which increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and data processors and imposes increased requirements and potential penalties on companies offering goods or services to individuals who are located in Europe (“Data Subjects”) or monitoring the behavior of such individuals (including by companies based outside of Europe). Noncompliance can result in penalties of up to the greater of EUR 20 million, or 4% of global company revenues. Individual member states may impose additional requirements and penalties as they relate to certain things such as employee personal data. Among other things, the GDPR requires with respect to data concerning Data Subjects, company accountability, consents from Data Subjects’ or other acceptable legal basis needed to process the personal data, prompt breach notifications within 72 hours, fairness and transparency in how the personal data is stored, used or otherwise processed, and data integrity and security, and provides rights to Data Subjects relating to modification, erasure and transporting of the personal data. While we expect to have substantially compliant programs and controls in place to comply with the GDPR requirements, our compliance with the new regulation is likely to impose additional costs on us, and we cannot predict whether the interpretations of the requirements, or changes in our practices in response to new requirements or interpretations of the requirements, could have a material adverse effect on our business.

We also sell products and services that health care providers, such as physicians and dentists, use to store and manage patient medical or dental records. These customers are subject to laws, regulations and industry standards, such as HIPAA and the Payment Card Industry Data Security Standards, which require that they protect the privacy and security of those records, and our products may be used as part of these customers’ comprehensive data security programs, including in connection with their efforts to comply with applicable privacy and security laws. Perceived or actual security vulnerabilities in our products or services, or the perceived or actual failure by us or our customers who use our products to comply with applicable legal or contractual requirements, may not only cause us significant reputational harm, but may also lead to claims against us by our customers and/or governmental agencies and involve substantial fines, penalties and other liabilities and expenses and costs for remediation.

Federal initiatives provide a program of incentive payments available to certain health care providers involving the adoption and use of certain electronic health care records systems and processes. The initiatives include providing, among others, physicians and dentists, with financial incentives if they meaningfully use certified EHR technology in accordance with applicable and evolving requirements. In addition, Medicare-eligible providers that fail to timely adopt certified EHR systems and meet “meaningful use” requirements for those systems in accordance with regulatory requirements are to be subject to cumulative Medicare reimbursement reductions, which reductions for applicable health professionals (including physicians and dentists) began on January 1, 2015. Qualification for the incentive payments requires the use of EHRs that have certain capabilities for meaningful use pursuant to evolving standards adopted by CMS and by the Office of the National Coordinator for Health Information Technology (“ONC”) of HHS.

The use of certified EHR technology will continue as a feature of MACRA’s MIPS program, and in connection with this, Medicare EHR program payment adjustments to eligible professionals will sunset at the end of 2018 and MIPS payment adjustments will begin on January 1, 2019. The first performance period for MIPS began January 1, 2017, and will afford eligible clinicians different reporting options linked to the amount of data reported and the duration of the reporting period, with positive payment adjustments generally linked to more robust reporting.

On October 6, 2015, CMS and ONC released comprehensive final rules with respect to the EHR program that, among other things, established the more challenging “Stage 3” criteria, made certain adjustments to Stage 1 and Stage 2 standards (e.g., reducing the 2015 reporting period from a full year to 90 days), and finalized 2015 edition health information technology (HIT) certification criteria (which is now added to the existing 2014 edition HIT certification criteria, but not required until 2018). Notably, under the new rules, compliance with Stage 3 standards is optional for providers in 2017, and would generally be required for all eligible providers (regardless of prior participation in the EHR incentive program) for 2018 reporting periods and subsequently. Developers and others involved in the manufacture of EHR program technology will have this interim period to develop and certify products, and work with customers to implement products for the 2018 EHR program period. In connection with the release of the October 6 rules, HHS has also stated that it will continue to modify applicable EHR program standards. On November 14, 2016, CMS published a final rule that will impact Medicare and Medicaid EHR incentive programs through revisions to the objectives and measures for eligible hospitals, critical access hospitals and dual-eligible hospitals.

Certain of our businesses involve the manufacture and sale of certified EHR systems and other products linked to incentive programs. CMS and ONC establish criteria for certified EHR systems, and these criteria have been subject to change. In order to maintain certification of our EHR products, we must satisfy these changing governmental criteria. If any of our EHR systems do not meet these standards, yet have been relied upon by health care providers to receive federal incentive payments, as noted above, we are exposed to risk under federal health care fraud and abuse laws, such as the False Claims Act. For example, on May 31, 2017, the U.S. Department of Justice announced a $155 million settlement and 5-year corporate integrity agreement involving a vendor of certified EHR systems, based on allegations that the vendor, by misrepresenting capabilities to the certifying body, caused its health care provider customers to submit false Medicare and Medicaid claims for meaningful use payments in violation of the False Claims Act. While we believe we are substantially in compliance with such certifications and with applicable fraud and abuse laws and regulations, and we have adequate compliance programs and controls in place to ensure substantial compliance, we cannot predict whether changes in applicable law, or interpretation of laws, or changes in our practices in response to changes in applicable law or interpretation of laws, could have a material adverse effect on our business. Moreover, in order to satisfy our customers, our products may need to incorporate increasingly complex reporting functionality. Although we believe we are positioned to accomplish this, the effort may involve increased costs, and our failure to implement product modifications, or otherwise satisfy applicable standards, could have a material adverse effect on our business.

Other health information standards, such as regulations under HIPAA, establish standards regarding electronic health data transmissions and transaction code set rules for specific electronic transactions, such as transactions involving claims submissions to third party payers. Certain of our businesses provide electronic practice management products that must meet these requirements. Failure to abide by electronic health data transmission standards could expose us to breach of contract claims, substantial fines, penalties, and other liabilities and expenses, costs for remediation and harm to our reputation.

~~There may be additional legislative initiatives in the future impacting health care.~~

~~E-Commerce~~

Electronic commerce solutions have become an integral part of traditional health care supply and distribution relationships. Our distribution business is characterized by rapid technological developments and intense competition. The continuing advancement of online commerce requires us to cost-effectively adapt to changing technologies, to enhance existing services and to develop and introduce a variety of new services to address the changing demands of consumers and our customers on a timely basis, particularly in response to competitive offerings.

Through our proprietary, technologically based suite of products, we offer customers a variety of competitive alternatives. We believe that our tradition of reliable service, our name recognition and large customer base built on solid customer relationships, position us well to participate in this significant aspect of the distribution business. We continue to explore ways and means to improve and expand our Internet presence and capabilities, including our online commerce offerings and our use of various social media outlets.

Results of Operations

The following table summarizes the significant components of our operating results for the three and nine months ended September 30, 2017 and September 24, 2016 and cash flows for the nine months ended September 30, 2017 and September 24, 2016 (in thousands):

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2017

2016

2017

2016
Operating results:

Net sales ..............................................................................................................................................................................

$
3,161,083

$
2,865,148

$
9,143,489

$
8,450,734
Cost of sales ........................................................................................................................................................................

2,325,029

2,077,473

6,645,342

6,083,748

Gross profit ......................................................................................................................................................................

836,054

787,675

2,498,147

2,366,986
Operating expenses:

Selling, general and administrative .......................................................................................................................................

622,506

581,584

1,879,969

1,779,583

Restructuring costs ............................................................................................................................................................

-

5,370

-

29,811

Operating income ..........................................................................................................................................................

$
213,548

$
200,721

$
618,178

$
557,592

Other expense, net .................................................................................................................................................................

$
(8,829)

$
(4,546)

$
(23,363)

$
(8,731)
Net income ..........................................................................................................................................................................

150,948

145,291

450,783

402,922
Net income attributable to Henry Schein, Inc. ............................................................................................................................

138,031

133,713

414,834

367,562

Cash flows:

Net cash provided by operating activities ...............................................................................................................................................

$
307,501

$
378,068
Net cash used in investing activities .......................................................................................................................................................

(320,795)

(179,834)
Net cash provided by (used in) financing activities ...................................................................................................................................

16,068

(198,256)

~~Plan of Restructuring~~

On November 6, 2014, we announced a corporate initiative to rationalize our operations and provide expense efficiencies, which was expected to be completed by the end of fiscal 2015. This initiative originally planned for the elimination of approximately 2% to 3% of our workforce and the closing of certain facilities. We subsequently announced our plan to extend these restructuring activities through the end of 2016 to further implement cost-savings initiatives, which ultimately resulted in the elimination of approximately 900 positions, representing 4% of our workforce. We recorded restructuring costs of $34.9 million pre-tax in fiscal 2015 and $45.9 million pre-tax in fiscal 2016. Our restructuring activities are complete and we do not expect to report any such charges in 2017.

~~During the three and~~ ~~nine~~months ended September 24, 2016, we recorded restructuring costs of $5.4 million and $29.8 million, respectively. The costs associated with this restructuring are included in a separate line item, “Restructuring costs” within our consolidated statements of income.

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 24, 2016~~

~~Net Sales~~

~~Net sales for the three months ended September 30, 2017 and September 24, 2016 were as follows (in thousands):~~

September 30,

% of

September 24,

% of

Increase

2017

Total

2016

Total

$

%
Health care distribution (1):

Dental ............................................................................................................................................................................................

$
1,478,730

46.8
%

$
1,330,525

46.4
%

$
148,205

11.1
%

Animal health ...................................................................................................................................................................................

882,580

27.9

790,279

27.6

92,301

11.7

Medical ..........................................................................................................................................................................................

690,761

21.9

639,648

22.3

51,113

8.0

Total health care distribution ..............................................................................................................................................................

3,052,071

96.6

2,760,452

96.3

291,619

10.6

Technology and value-added services (2).......................................................................................................................................................

109,012

3.4

104,696

3.7

4,316

4.1

Total .........................................................................................................................................................................................

$
3,161,083

100.0
%

$
2,865,148

100.0
%

$
295,935

10.3

(1)

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

generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

(2)

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

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

services.

The $295.9 million, or 10.3%, increase in net sales for the three months ended September 30, 2017 includes 8.8% local currency growth (4.8% increase in internally generated revenue and 4.0% growth from acquisitions) as well as an increase of 1.5% related to foreign currency exchange. We have estimated that our total increase in internally generated revenue was negatively affected by approximately 0.3% due to the hurricanes that occurred in North America during the quarter.

The $148.2 million, or 11.1%, increase in dental net sales for the three months ended September 30, 2017 includes 9.1% local currency growth (1.6% increase in internally generated revenue and 7.5% growth from acquisitions) as well as an increase of 2.0% related to foreign currency exchange. The 9.1% local currency growth was due to an increase in dental consumable merchandise sales of 12.0% (2.0% increase in internally generated revenue and 10.0% growth from acquisitions), as well as an increase in dental equipment sales and service revenues of 0.6% (0.5% increase in internally generated revenue and 0.1% growth from acquisitions). We have estimated that our increase in internally generated dental revenue was negatively affected by approximately 0.4% due to the hurricanes that occurred in North America during the quarter.

~~The $92.3 million, or 11.7%, increase in animal health net sales for the three months ended September 30, 2017 includes 9.9%~~ local currency growth (8.0% increase in internally generated revenue and 1.9% growth from acquisitions) as well as an increase of 1.8% related to foreign currency exchange. The growth in internally generated animal health revenue is affected by the revenue for certain products being recognized on a gross basis in 2017 that had been recognized on an agency basis in the prior year. When excluding the effects of this change, internally generated revenue grew by 7.8%. ~~We have estimated that our increase in internally generated animal health revenue was negatively affected by approximately 0.2% due to the hurricanes that occurred in North America during the quarter.~~

The $51.1 million, or 8.0%, increase in medical net sales for the three months ended September 30, 2017 includes 7.9% local currency growth (7.8% increase in internally generated revenue and 0.1% growth from acquisitions) as well as an increase of 0.1% related to foreign currency exchange. We have estimated that our increase in internally generated medical revenue was negatively affected by approximately 0.2% due to the hurricanes that occurred in North America during the quarter.

The $4.3 million, or 4.1%, increase in technology and value-added services net sales for the three months ended September 30, 2017 includes 3.7% local currency growth (3.0% internally generated revenue and 0.7% growth from acquisitions) as well as an increase of 0.4% related to foreign currency exchange. We believe that our internally generated technology and value-added services revenue was not meaningfully affected by the hurricanes that occurred in North America during the quarter.

~~Gross Profit~~

~~Gross profit and gross margin percentages by segment and in total for the three months ended September 30, 2017 and September 24, 2016 were as follows (in thousands):~~

September 30,

Gross

September 24,

Gross

Increase

2017

Margin %

2016

Margin %

$

%
Health care distribution ........................................................................................................................................................................

$
765,528

25.1
%

$
719,255

26.1
%

$
46,273

6.4
%
Technology and value-added services .......................................................................................................................................................

70,526

64.7

68,420

65.4

2,106

3.1

Total .........................................................................................................................................................................................

$
836,054

26.4

$
787,675

27.5

$
48,379

6.1

Gross profit increased $48.4 million, or 6.1% for the three months ended September 30, 2017, compared to the prior year period. As a result of different practices of categorizing costs associated with distribution networks throughout our industry, our gross margins may not necessarily be comparable to other distribution companies. Additionally, we realize substantially higher gross margin percentages in our technology segment than in our health care distribution segment. These higher gross margins result from being both the developer and seller of software products and services, as well as certain financial services. The software industry typically realizes higher gross margins to recover investments in research and development.

Within our health care distribution segment, gross profit margins may vary from one period to the next. Changes in the mix of products sold as well as changes in our customer mix have been the most significant drivers affecting our gross profit margin. For example, sales of pharmaceutical products are generally at lower gross profit margins than other products. Conversely, sales of our private label products achieve gross profit margins that are higher than average. With respect to customer mix, sales to our large-group customers are typically completed at lower gross margins due to the higher volumes sold as opposed to the gross margin on sales to office-based practitioners who normally purchase lower volumes at greater frequencies.

Health care distribution gross profit increased $46.3 million, or 6.4%, for the three months ended September 30, 2017 compared to the prior year period. Health care distribution gross profit margin decreased to 25.1% for the three months ended September 30, 2017 from 26.1% for the comparable prior year period. The decline in gross profit margin was attributable to lower margins experienced in each of our operating segments within the health care distribution segment. Our lower margin medical and animal health businesses have been growing at a faster rate than our higher margin dental product sales, resulting in overall gross profit margins being impacted. As a result of extending multi-year contracts with key Dental Support Organizations, our gross profit margins have been negatively impacted. Our gross profit margins were also negatively impacted by our European dental business, particularly in Germany. The overall increase in our health care distribution gross profit is attributable to a $39.4 million gross profit increase from growth in internally generated revenue and $33.7 million is attributable to acquisitions. These increases were partially offset by a $26.8 million decline in gross profit due primarily to the effects of foreign exchange on revenues and the decrease in the gross margin rates.

Technology and value-added services gross profit increased $2.1 million, or 3.1%, for the three months ended September 30, 2017 compared to the prior year period. Technology and value-added services gross profit margin decreased to 64.7% for the three months ended September 30, 2017 from 65.4% for the comparable prior year period. The increase in gross profit in our technology and value-added services segment was attributable to $1.4 million of growth in internally generated revenue. Acquisitions accounted for the remaining $0.7 million increase of gross profit increase within our technology and value-added services segment for the three months ended September 30, 2017 compared to the prior year period.

~~Selling, General and Administrative~~

~~Selling, general and administrative expenses by segment and in total for the three months ended September 30, 2017 and September 24, 2016 were as follows (in thousands):~~

% of

% of

September 30,

Respective

September 24,

Respective

Increase

2017

Net Sales

2016

Net Sales

$

%
Health care distribution .......................................................................................................................................................................

$
583,915

19.1
%

$
543,771

19.7
%

$
40,144

7.4
%
Technology and value-added services ......................................................................................................................................................

38,591

35.4

37,813

36.1

778

2.1

Total ........................................................................................................................................................................................

$
622,506

19.7

$
581,584

20.3

$
40,922

7.0

Selling, general and administrative expenses increased $40.9 million, or 7.0%, to $622.5 million for the three months ended September 30, 2017 from the comparable prior year period. The $40.1 million increase in selling, general and administrative expenses within our health care distribution segment for the three months ended September 30, 2017 as compared to the prior year period was attributable to $26.7 million of additional costs from acquired companies, and $13.4 million of additional operating costs. As a percentage of net sales, selling, general and administrative expenses decreased to 19.7% from 20.3% for the comparable prior year period.

As a component of total selling, general and administrative expenses, selling expenses increased $22.8 million, or 6.3% to $385.7 million, for the three months ended September 30, 2017 from the comparable prior year period. As a percentage of net sales, selling expenses decreased to 12.2% from 12.7% for the comparable prior year period.

As a component of total selling, general and administrative expenses, general and administrative expenses increased $18.1 million, or 8.3% to $236.8 million, for the three months ended September 30, 2017 from the comparable prior year period. As a percentage of net sales, general and administrative expenses decreased to 7.5% from 7.6% for the comparable prior year period.

~~Other Expense, Net~~

~~Other expense, net, for the three months ended September 30, 2017 and September 24, 2016 was as follows (in thousands):~~

September 30,

September 24,

Variance

2017

2016

$

%
Interest income ........................................................................................................................................................................

$
4,793

$
3,141

$
1,652

52.6
%
Interest expense .......................................................................................................................................................................

(13,428)

(7,488)

(5,940)

(79.3)

Other, net ..............................................................................................................................................................................

(194)

(199)

5

2.5

Other expense, net .............................................................................................................................................................

$
(8,829)

$
(4,546)

$
(4,283)

(94.2)

Other expense, net increased $4.3 million to $8.8 million for the three months ended September 30, 2017 from the comparable prior year period. Interest income increased by $1.7 million primarily due to increased investment and late fee income. Interest expense increased $5.9 million primarily due to increased borrowings and higher interest rates under our bank credit lines and interest expense related to a financing arrangement entered into during the first quarter of 2017 in Brazil.

~~Income Taxes~~

~~For the three months ended September 30, 2017, our effective tax rate was 29.0% compared to 28.9% for the prior year period.~~ ~~The difference between our effective tax rates and the federal statutory tax rates primarily relates to state and foreign income taxes and interest expense.~~

~~Net Income~~

~~Net income increased $5.7 million, or 3.9%, for the three months ended September 30, 2017, compared to the prior year period due to the factors noted above.~~

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 24, 2016~~

~~Net Sales~~

~~Net sales for the nine months ended September 30, 2017 and September 24, 2016 were as follows (in thousands):~~

September 30,

% of

September 24,

% of

Increase

2017

Total

2016

Total

$

%
Health care distribution (1):

Dental ............................................................................................................................................................................................

$
4,372,055

47.8
%

$
4,005,468

47.4
%

$
366,587

9.2
%

Animal health ...................................................................................................................................................................................

2,586,850

28.3

2,415,290

28.6

171,560

7.1

Medical ..........................................................................................................................................................................................

1,861,074

20.4

1,716,590

20.3

144,484

8.4

Total health care distribution ..............................................................................................................................................................

8,819,979

96.5

8,137,348

96.3

682,631

8.4

Technology and value-added services (2).......................................................................................................................................................

323,510

3.5

313,386

3.7

10,124

3.2

Total .........................................................................................................................................................................................

$
9,143,489

100.0
%

$
8,450,734

100.0
%

$
692,755

8.2

(1)

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

generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

(2)

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

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

services.

The $692.8 million, or 8.2%, increase in net sales for the nine months ended September 30, 2017 includes an increase of 8.4% in local currency growth (5.0% increase in internally generated revenue and 3.4% growth from acquisitions) partially offset by a decrease of 0.2% related to foreign currency exchange.

The $366.6 million, or 9.2%, increase in dental net sales for the nine months ended September 30, 2017 includes an increase of 8.9% in local currency growth (2.6% increase in internally generated revenue and 6.3% growth from acquisitions) as well as an increase of 0.3% related to foreign currency exchange. The 8.9% increase in local currency sales was due to an increase in dental consumable merchandise sales growth of 10.5% (2.4% increase in internally generated revenue and 8.1% growth from acquisitions), as well as an increase in dental equipment sales and service revenues of 3.6% (3.0% increase in internally generated revenue and 0.6% growth from acquisitions).

~~The $171.6 million, or 7.1%, increase in animal health net~~ sales for the nine months ended September 30, 2017 includes an increase of 8.2% in local currency growth (6.9% internally generated revenue and 1.3% growth from acquisitions) partially offset by a decrease of 1.1% related to foreign currency exchange. The growth in internally generated animal health revenue is affected by the revenue for certain products being recognized on a gross basis in 2017 that had been recognized on an agency basis in the prior year. ~~When excluding the effects of this change, internally generated revenue grew by 6.6%.~~

The $144.5 million, or 8.4%, increase in medical net sales for the nine months ended September 30, 2017 is the result of an increase of 8.5% in local currency growth (8.4% increase in internally generated revenue and 0.1% growth from acquisitions) partially offset by a decrease of 0.1% related to foreign currency exchange.

The $10.1 million, or 3.2%, increase in technology and value-added services net sales for the nine months ended September 30, 2017 includes an increase of 4.0% in local currency growth (3.6% internally generated revenue and 0.4% growth from acquisitions) partially offset by a decrease of 0.8% related to foreign currency exchange.

~~Gross Profit~~

~~Gross profit and gross margin percentages by segment and in total for the nine months ended September 30, 2017 and September 24, 2016 were as follows (in thousands):~~

September 30,

Gross

September 24,

Gross

Increase

2017

Margin %

2016

Margin %

$

%
Health care distribution ........................................................................................................................................................................

$
2,286,863

25.9
%

$
2,163,217

26.6
%

$
123,646

5.7
%
Technology and value-added services .......................................................................................................................................................

211,284

65.3

203,769

65.0

7,515

3.7

Total .........................................................................................................................................................................................

$
2,498,147

27.3

$
2,366,986

28.0

$
131,161

5.5

For the nine months ended September 30, 2017, gross profit increased $131.2 million, or 5.5%, from the comparable prior year period. As a result of different practices of categorizing costs associated with distribution networks throughout our industry, our gross margins may not necessarily be comparable to other distribution companies. Additionally, we realize substantially higher gross margin percentages in our technology segment than in our health care distribution segment. These higher gross margins result from being both the developer and seller of software products and services, as well as certain financial services. The software industry typically realizes higher gross margins to recover investments in research and development.

Health care distribution gross profit increased $123.6 million, or 5.7%, for the nine months ended September 30, 2017 compared to the prior year period. Health care distribution gross profit margin decreased to 25.9% for the nine months ended September 30, 2017 from 26.6% for the comparable prior year period. The decline in gross profit margin was attributable to lower margins experienced in each of our operating segments within the health care distribution segment. Our lower margin medical and animal health businesses have been growing at a faster rate than our higher margin dental product sales, resulting in overall gross profit margins being impacted. As a result of extending multi-year contracts with key Dental Support Organizations, our gross profit margins have been negatively impacted. Our gross profit margins were also negatively impacted by our European dental business, particularly in Germany. The overall increase in our health care distribution gross profit is attributable to a $86.8 million gross profit increase from growth in internally generated revenue and $91.6 million is attributable to acquisitions. These increases were partially offset by a $54.8 million decline in gross profit due primarily to the effects of foreign exchange on revenues and the decrease in the gross margin rates.

Technology and value-added services gross profit increased $7.5 million, or 3.7%, for the nine months ended September 30, 2017 compared to the prior year period. Technology gross profit margin increased to 65.3% for the nine months ended September 30, 2017 from 65.0% for the comparable prior year period. The increase in gross profit in our technology and value-added services segment was attributable to $6.3 million growth in internally generated revenue. Acquisitions accounted for the remaining $1.2 million increase of gross profit within our technology and value-added services segment for the nine months ended September 30, 2017 compared to the prior year period.

~~Selling, General and Administrative~~

~~Selling, general and administrative expenses by segment and in total for the nine months ended September 30, 2017 and September 24, 2016 were as follows (in thousands):~~

% of

% of

September 30,

Respective

September 24,

Respective

Increase

2017

Net Sales

2016

Net Sales

$

%
Health care distribution ........................................................................................................................................................................

$
1,765,585

20.0
%

$
1,665,644

20.5
%

$
99,941

6.0
%
Technology and value-added services .......................................................................................................................................................

114,384

35.4

113,939

36.4

445

0.4

Total .........................................................................................................................................................................................

$
1,879,969

20.6

$
1,779,583

21.1

$
100,386

5.6

Selling, general and administrative expenses increased $100.4 million, or 5.6%, to $1,880.0 million for the nine months ended September 30, 2017 from the comparable prior year period. The $99.9 million increase in selling, general and administrative expenses within our health care distribution segment for the nine months ended September 30, 2017 as compared to the prior year period was attributable to $79.9 million of additional costs from acquired companies, and $20.0 million of additional operating costs. As a percentage of net sales, selling, general and administrative expenses decreased to 20.6% from 21.1% for the comparable prior year period.

As a component of selling, general and administrative expenses, selling expenses increased $42.0 million, or 3.8%, to $1,146.2 million for the nine months ended September 30, 2017 from the comparable prior year period. As a percentage of net sales, selling expenses decreased to 12.5% as compared to 13.1% for the comparable prior year period.

As a component of selling, general and administrative expenses, general and administrative expenses increased $58.4 million, or 8.7%, to $733.8 million for the nine months ended September 30, 2017 from the comparable prior year period. As a percentage of net sales, general and administrative expenses remained consistent at 8.0%.

~~Other Expense, Net~~

~~Other expense, net, for the nine months ended September 30, 2017 and September 24, 2016 was as follows (in thousands):~~

September 30,

September 24,

Variance

2017

2016

$

%
Interest income ........................................................................................................................................................................

$
13,204

$
10,045

$
3,159

31.4
%
Interest expense .......................................................................................................................................................................

(37,056)

(21,982)

(15,074)

(68.6)

Other, net ..............................................................................................................................................................................

489

3,206

(2,717)

(84.7)

Other expense, net .............................................................................................................................................................

$
(23,363)

$
(8,731)

$
(14,632)

(167.6)

Other expense, net increased $14.6 million to $23.4 million for the nine months ended September 30, 2017 from the comparable prior year period. Interest income increased $3.2 million primarily due to increased investment and late fee income. Interest expense increased $15.1 million primarily due to increased borrowings and higher interest rates under our bank credit lines and interest expense related to a financing arrangement entered into during the first quarter of 2017 in Brazil. Other, net decreased by $2.7 million primarily due to investment proceeds received in the first quarter of 2016.

~~Income Taxes~~

For the nine months ended September 30, 2017 and September 24, 2016, our effective tax rate was 26.3% and 29.0%. The difference between our effective tax rate and the federal statutory tax rate for both periods primarily relates to the adoption of Accounting Standards Update No. 2016-09, “Stock Compensation” (Topic 718) in the first quarter of 2017, as well as state and foreign income taxes and interest expense for both periods. See Note 10 “Income Taxes” in the Notes to Consolidated Financial Statements. The 2016 effective tax rate was further affected by a federal tax audit settlement ~~which reduced our income tax expense by approximately $4.5 million in the period.~~

~~Net Income~~

~~Net income increased $47.9 million, or 11.9%, for the nine months ended September 30, 2017, compared to the prior year period due to the factors noted above.~~

~~Liquidity and Capital Resources~~

Our principal capital requirements include funding of acquisitions, purchases of additional noncontrolling interests, repayments of debt principal, the funding of working capital needs, purchases of fixed assets and repurchases of common stock. Working capital requirements generally result from increased sales, special inventory forward buy-in opportunities and payment terms for receivables and payables. Historically, sales have tended to be stronger during the third and fourth quarters and special inventory forward buy-in opportunities have been most prevalent just before the end of the year, which has caused our working capital requirements to be higher from the end of the third quarter to the end of the first quarter of the following year.

We finance our business primarily through cash generated from our operations, revolving credit facilities and debt placements. Our ability to generate sufficient cash flows from operations is dependent on the continued demand of our customers for our products and services, and access to products and services from our suppliers.

Our business requires a substantial investment in working capital, which is susceptible to fluctuations during the year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity is a function of sales activity, special inventory forward buy-in opportunities and our desired level of inventory. We anticipate future increases in our working capital requirements.

We finance our business to provide adequate funding for at least 12 months. Funding requirements are based on forecasted profitability and working capital needs, which, on occasion, may change. Consequently, we may change our funding structure to reflect any new requirements.

We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets, and our available funds under existing credit facilities provide us with sufficient liquidity to meet our currently foreseeable short-term and long-term capital needs. We have no off-balance sheet arrangements.

Net cash provided by operating activities was $307.5 million for the nine months ended September 30, 2017, compared to $378.1 million for the comparable prior year period. The net change of $70.6 million was primarily attributable to changes in net working capital, partially offset by an increase in net income.

Net cash used in investing activities was $320.8 million for the nine months ended September 30, 2017, compared to $179.8 million for the comparable prior year period. The net change of $141.0 million was primarily due to increased payments for equity investments and business acquisitions.

Net cash provided by financing activities was $16.1 million for the nine months ended September 30, 2017, compared to net cash used in financing activities of $198.3 million for the comparable prior year period. The net change of $214.4 million was primarily due to increased net borrowings from debt, decreased repurchases of common stock and decreased acquisitions of noncontrolling interests in subsidiaries.

~~The following table summarizes selected measures of liquidity and capital resources (in thousands):~~

September 30,

December 31,

2017

2016
Cash and cash equivalents ...........................................................................................................................................................

$
79,879

$
62,381
Working capital ..........................................................................................................................................................................

1,345,382

1,022,134

Debt:

Bank credit lines .....................................................................................................................................................................

$
631,865

$
437,476

Current maturities of long-term debt ...........................................................................................................................................

17,247

65,923

Long-term debt ......................................................................................................................................................................

907,592

715,457

Total debt .........................................................................................................................................................................

$
1,556,704

$
1,218,856

~~Our cash and cash equivalents consist of bank balances and investments in money market funds representing overnight investments with a high degree of liquidity.~~

~~Accounts receivable days sales outstanding and inventory turns~~

Our accounts receivable days sales outstanding from operations decreased to 41.7 days as of September 30, 2017 from 41.9 days as of September 24, 2016. During the nine months ended September 30, 2017, we wrote off approximately $5.8 million of fully reserved accounts receivable against our trade receivable reserve. Our inventory turns from operations remained consistent at 5.4 as of September 30, 2017 compared to comparable prior year period. Our working capital accounts may be impacted by current and future economic conditions.

~~Bank Credit Lines~~

On April 18, 2017, we entered into a new $750 million revolving agreement (the “Credit Agreement”). This facility, which matures in April 2022, replaced our $500 million revolving credit facility, which was scheduled to mature in September 2019. The interest rate is based on the USD LIBOR plus a spread based on our leverage ratio at the end of each financial reporting quarter. The Credit Agreement provides, among other things, that we are required to maintain maximum leverage ratios, and contains customary representations, warranties and affirmative covenants. The Credit Agreement also contains customary negative covenants, subject to negotiated exceptions on liens, indebtedness, significant corporate changes (including mergers), dispositions and certain restrictive agreements. As of September 30, 2017 and December 31, 2016, the borrowings on this revolving credit facility and the prior credit facility were $~~175.0~~ ~~million and $65.0~~ ~~million, respectively. As of September 30, 2017 and December 31, 2016, there were $11.7~~ ~~million and $13.0~~ ~~million of letters of credit, respectively, provided to third parties under the credit facility and the prior credit facility.~~

As of September 30, 2017 and December 31, 2016, we had various other short-term bank credit lines available, of which $456.9 million and $372.5 million, respectively, were outstanding. At September 30, 2017 and December 31, 2016, borrowings under all of our credit lines had a weighted average interest rate of 2.09% and 1.61%, respectively.

~~Private Placement Facilities~~

On ~~September 15, 2017, we increased our available private placement facilities with three insurance companies to a total facility amount of $~~1 billion, and extended the expiration date to September 15, 2020. These facilities are available on an uncommitted basis at fixed rate economic terms to be agreed upon at the time of issuance, from time to time through September 15, 2020. The facilities allow us to issue senior promissory notes to the lenders at a fixed rate based on an agreed upon spread over applicable treasury notes at the time of issuance. The term of each possible issuance will be selected by us and can range from five to 15 years (with an average life no longer than 12 years). The proceeds of any issuances under the facilities will be used for general corporate purposes, including working capital and capital expenditures, to refinance existing indebtedness and/or to fund potential acquisitions. The agreements provide, among other things, that we maintain certain maximum leverage ratios, and contain restrictions relating to subsidiary indebtedness, liens, affiliate transactions, disposal of assets and certain changes in ownership. These facilities contain make-whole provisions in the event that we pay off the facilities prior to the applicable due dates.

~~The components of our private placement facility borrowings as of September 30, 2017 are presented in the following table (in thousands):~~

~~U.S. Trade Accounts Receivable Securitization~~

We have a facility agreement with a bank, as agent, based on the securitization of our U.S. trade accounts receivable that is structured as an asset-backed securitization program with pricing committed for up to three years. On June 1, 2016, we extended the expiration date of this facility agreement to ~~April 29, 2019 and increased the purchase limit under the facility from $300 million to $350~~ million. On July 6, 2017, we extended the expiration date of this facility agreement to April 29, 2020. The borrowings outstanding under this securitization facility were $350.0 million and $350.0 million as of September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, the interest rate on borrowings under this facility was based on the asset-backed commercial paper rate of 134 basis points plus 75 basis points, for a combined rate of 2.09%. At December 31, 2016, the interest rate on borrowings under this facility was based on the asset-backed commercial paper rate of 101 basis points plus 75 basis points, for a combined rate of 1.76%.

We are required to pay a commitment fee of 30 basis points on the daily balance of the unused portion of the facility if our usage is greater than or equal to 50% of the facility limit or a commitment fee of 35 basis points on the daily balance of the unused portion of the facility if our usage is less than 50% of the facility limit.

~~Borrowings under this facility are presented as a component of Long-term debt within our consolidated balance sheet.~~

~~Long-term debt~~

~~Long-term debt consisted of the following:~~

September 30,

December 31,

2017

2016
Private placement facilities ..........................................................................................................................................................

$
535,464

$
342,857
U.S. trade accounts receivable securitization ...................................................................................................................................

350,000

350,000
Note payable to bank at a weighted-average interest rate of

21.37% at December 31, 2016...................................................................................................................................................

-

47,957
Various collateralized and uncollateralized loans payable with

interest, in varying installments through 2022 at interest rates

ranging from 2.56% to 12.90% at September 30, 2017 and

ranging from 2.56% to 12.90% at December 31, 2016....................................................................................................................

33,994

35,150
Capital lease obligations payable through 2029 with interest rates

ranging from 0.84% to 19.79% at September 30, 2017 and

ranging from 1.38% to 19.15% at December 31, 2016....................................................................................................................

5,381

5,416
Total .......................................................................................................................................................................................

924,839

781,380
Less current maturities ................................................................................................................................................................

(17,247)

(65,923)

Total long-term debt .............................................................................................................................................................

$
907,592

$
715,457

~~Stock Repurchases~~

From June 21, 2004 through September 30, 2017, we repurchased $2.5 billion, or 52,431,816 shares, under our common stock repurchase programs, with $425.0 million available as of September 30, 2017 for future common stock share repurchases.

~~On September 15, 2017, our Board of Directors authorized the repurchase of up to an additional $400.0 million in shares of our common stock.~~

~~Redeemable Noncontrolling Interests~~

Some minority shareholders in certain of our subsidiaries have the right, at certain times, to require us to acquire their ownership interest in those entities at fair value. Accounting Standards Codification Topic 480-10 is applicable for noncontrolling interests where we are or may be required to purchase all or a portion of the outstanding interest in a consolidated subsidiary from the noncontrolling interest holder under the terms of a put option contained in contractual agreements. The components of the change in the Redeemable noncontrolling interests for the nine months ended September 30, 2017 and the year ended December 31, 2016 are presented in the following table:

September 30,

December 31,

2017

2016
Balance, beginning of period ..................................................................................................................................................

$
607,636

$
542,194
Decrease in redeemable noncontrolling interests due to

redemptions ....................................................................................................................................................................

(40,638)

(72,729)
Increase in redeemable noncontrolling interests due to

business acquisitions.........................................................................................................................................................

25,209

58,172
Net income attributable to redeemable noncontrolling interests .....................................................................................................

35,398

48,760
Dividends declared ...............................................................................................................................................................

(22,566)

(32,973)
Effect of foreign currency translation gain (loss) attributable to

redeemable noncontrolling interests .....................................................................................................................................

7,961

(2,652)
Change in fair value of redeemable securities ............................................................................................................................

124,747

66,864
Balance, end of period ..........................................................................................................................................................

$
737,747

$
607,636

Additionally, some prior owners of such acquired subsidiaries are eligible to receive additional purchase price cash consideration if certain financial targets are met. Any adjustments to these accrual amounts are recorded in our consolidated statement of income.

Critical Accounting Policies and Estimates

~~There have been no material changes in our critical accounting policies and estimates from those disclosed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2016.~~

~~Accounting Pronouncement Adopted~~

In March 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, “Stock Compensation” (Topic 718) (“ASU 2016-09”). ASU 2016-09 contains amended guidance for share-based payment accounting. We adopted the provisions of this standard during the first quarter of 2017.

~~Under ASU 2016-09,~~ all excess tax benefits and tax deficiencies resulting from the difference between the deduction for tax purposes and the stock-based compensation cost recognized for financial reporting purposes are included as a component of income tax expense as of January 1, 2017. Prior to the implementation of ASU 2016-09, excess tax benefits were recorded as a component of additional paid in capital and tax deficiencies were recognized either as an offset to accumulated excess tax benefits or in the income statement if there were no accumulated excess tax benefits. ~~The adoption of ASU 2016-09 reduced income tax expense by approximately $19.5 million~~ ~~for the nine months ended September 30, 2017~~.

The ASU clarifies the classification of certain share based payment activities within the statements of cash flow. We have elected to prospectively present the amount of excess tax benefits related to stock compensation as a component of cash flow from operating activities. Additionally, classification of all cash payments made to taxing authorities on an employees’ behalf when directly withholding shares for tax-withholding purposes, which was previously included as cash flows from operating activities, is now presented retrospectively as cash flows from financing activities within the statement of cash flows.

~~Recently Issued Accounting Standards~~

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under accounting principles generally accepted in United States (“U.S. GAAP”). The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.

In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers”, which deferred the effective date by one year to December 15, 2017 for interim and annual reporting periods beginning after that date. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

When effective, ASU 2014-09 will require us to use either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients; or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).

Currently, we are nearing completion of our review of our various revenue streams within our two reportable segments: (i) health care distribution and (ii) technology and value-added services. We have gathered data to quantify the amount of sales by type of revenue stream and categorized the types of sales for our business units for the purpose of comparing how we currently recognize revenue to the new standard in order to quantify the impact of this ASU. We generally anticipate having substantially similar performance obligations under the new guidance as compared with deliverables and units of account currently being recognized. We intend to make policy elections within the amended standard that are consistent with our current accounting.

At this time, we believe that the largest impact of this ASU will occur within our technology and value-added services reportable segment. However, we do not currently believe that the impact will be material to this segment or to our consolidated financial statements.

~~This preliminary assessment is subject to change prior to adoption. We anticipate adopting this amended standard on a modified retrospective basis in our first quarter of 2018.~~

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”). ASU 2016-02 contains guidance on accounting for leases and requires that most lease assets and liabilities and the associated rights and obligations be recognized on the Company’s balance sheet. ASU 2016-02 focuses on lease assets and lease liabilities by lessees classified as operating leases under previous generally accepted accounting principles. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. ASU 2016-02 will require disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. The standard, which requires the use of a modified retrospective approach, will be effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We are currently exploring the methods we can use to gather and process our operating lease data at a worldwide consolidated level.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other” (Topic 350) (“ASU 2017-04”). ASU 2017-04 eliminates step two from the goodwill impairment test, thereby eliminating the requirement to calculate the implied fair value of a reporting unit. ASU 2017-04 will require us to perform our annual goodwill impairment test by comparing the fair value of our reporting units to the carrying value of those units. If the carrying value exceeds the fair value, we will be required to recognize an impairment charge; however, the impairment charge should not exceed the amount of goodwill allocated to such reporting unit. ASU 2017-04 is required to be implemented on a prospective basis for fiscal years beginning after December 15, 2019. We do not expect that the requirements of ASU 2017-04 will have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 clarifies guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. ASU 2017-09 requires modification accounting if the fair value, vesting conditions, or equity or liability classification of the award is not the same immediately before and after a change to the terms and conditions of the award. ASU 2017-09 is required to be implemented on a prospective basis for fiscal years beginning after December 15, 2017. We do not expect that the requirements of ASU 2017-09 will have a material impact on our consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging” (Topic 815) (“ASU 2017-12”), which simplifies the requirements for hedge accounting, more closely aligns hedge accounting with risk management activities and increases transparency of the scope and results of hedging activities. This ASU amends the presentation and disclosure requirements and changes how we can assess the effectiveness of our hedging relationships. This ASU will make more financial and nonfinancial hedging strategies eligible for hedge accounting. ASU 2017-12 is required to be implemented for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2017-12 is permitted in any interim period after the issuance of this ASU. We do not expect that the requirements of ASU 2017-12 will have a material impact on our consolidated financial statements.

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~There have been no material changes in our exposure to market risk from that disclosed in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2016.~~

~~ITEM 4. CONTROLS AND PROCEDURES~~

~~Evaluation of Disclosure Controls and Procedures~~

Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective as of September 30, 2017 to ensure that all material information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to them as appropriate to allow timely decisions regarding required disclosure and that all such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

~~Changes in Internal Control over Financial Reporting~~

The combination of continued acquisition integrations and systems implementations undertaken during the quarter and carried over from prior quarters, when considered in the aggregate, represents a material change in our internal control over financial reporting.

During the quarter ended September 30, 2017, we completed the acquisition of an animal health business in North America and dental businesses in Europe, Asia and Australia with approximate aggregate annual revenues of $157.0 million. In addition, post-acquisition integration related activities continued for our global dental, animal health and corporate commercial development Group businesses acquired during prior quarters, representing aggregate annual revenues of approximately $370.0 million. These acquisitions, the majority of which utilize separate information and financial accounting systems, have been included in our consolidated financial statements.

Also, during the quarter ended September 30, 2017, we completed multiple new system implementations and an existing system upgrade involving our US dental and medical and Canadian dental businesses having approximate aggregate annual revenues of $5.7 billion. This included the implementations of a new master data management system and e-commerce website, a new equipment system at selected dental equipment centers, and a new medical sales commission application as well as an upgrade to our central enterprise resource planning system.

All acquisition integrations and systems implementations involved necessary and appropriate change-management controls that are considered in our annual assessment of the design and operating effectiveness of our internal control over financial reporting.

~~Limitations of the Effectiveness of Internal Control~~

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

~~PART II. OTHER INFORMATION~~

~~ITEM 1. LEGAL PROCEEDINGS~~

~~Beginning in~~ ~~January 2016~~, ~~class action complaints~~ ~~were filed against~~ ~~Patterson Companies, Inc. (“Patterson”), Benco Dental Supply Co. (“Benco”) and Henry Schein, Inc~~.~~Each of these complaints allege, among other things, that defendants conspired to~~ fix prices, allocate customers and foreclose competitors by boycotting manufacturers, state dental associations and others that deal with defendants’ competitors. Subject to certain exclusions, these classes seek to represent all persons who purchased dental supplies or equipment in the United States directly from any of the defendants or Burkhart Dental Supply Co. (“Burkhart”) since August 31, 2008. Each class action complaint asserts a single count under Section 1 of the Sherman Act, and seeks equitable relief, compensatory and treble damages, jointly and severally, and reasonable costs and expenses, including attorneys’ fees and expert fees. We intend to defend ourselves vigorously against these actions.

On August 31, 2012, Archer and White Sales, Inc. (“Archer”) filed a complaint against Henry Schein, Inc. as well as Danaher Corporation and its subsidiaries Instrumentarium Dental, Inc., Dental Equipment, LLC, Kavo Dental Technologies, LLC and Dental Imaging Technologies Corporation (collectively, the “Danaher Defendants”) in the United States District Court for the Eastern District of Texas, Civil Action No. 2:12-CV-00572-JRG, styled as an antitrust action under Section 1 of the Sherman Act, and the Texas Free Enterprise Antitrust Act. Archer alleges a conspiracy between Henry Schein, Inc., an unnamed company and the Danaher Defendants to terminate or limit Archer’s distribution rights. On October 1, 2012, Henry Schein filed a motion for an order: (i) compelling Archer to arbitrate its claims against Henry Schein; (2) staying all proceedings pending arbitration; and (3) joining the Danaher Defendants’ motion to arbitrate and stay. On May 28, 2013, the Magistrate Judge granted the motions to arbitrate and stayed proceedings pending arbitration. On June 10, 2013, Archer moved for reconsideration before the District Court judge. On December 7, 2016, the District Court Judge granted Archer’s motion for reconsideration and lifted the stay. Defendants have appealed the District Court’s order, and that appeal is pending.

On August 1, 2017, Archer filed an amended complaint, adding Patterson and Benco as defendants, and alleging that Henry Schein, Inc., Patterson, Benco and Burkhart conspired to fix prices and refused to compete with each other for sales of dental equipment to dental professionals and agreed to enlist their common suppliers, the Danaher Defendants, to join a price-fixing conspiracy and boycott by reducing the distribution territory of, and eventually terminating, their price-cutting competing distributor Archer. Archer seeks injunctive relief, and damages in an amount to be proved at trial, to be trebled with interest and costs, including attorneys’ fees, jointly and severally.

On October 30, 2017, Archer filed a second amended complaint under seal, to add additional allegations that it believes support its claims. The named parties and causes of action are the same as the August 1, 2017 amended complaint. ~~Trial is currently scheduled for February 2018. We intend to defend ourselves vigorously against this action.~~

On August 17, 2017, IQ Dental Supply, Inc. (“IQ Dental”) filed a complaint in the United States District Court for the Eastern District of New York, entitled IQ Dental Supply, Inc. v. Henry Schein, Inc., Patterson Companies, Inc. and Benco Dental Supply Company, Case No. 2:17-cv-4834. Plaintiff alleges that it is a distributor of dental supplies and equipment, and sells dental products through an online dental distribution platform operated by SourceOne Dental (“SourceOne”). SourceOne had previously brought an antitrust lawsuit against the Company, Patterson and Benco which the Company settled in the second quarter of 2017 and which is described in the Company’s prior filings with the Securities and Exchange Commission.

~~and punitive damages, jointly and severally, and reasonable costs and expenses, including attorneys’ fees and expert fees.~~ ~~We intend to vigorously defend ourselves against this action.~~

~~ITEM 1A. RISK FACTORS~~

~~There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2016~~.

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~Purchases of equity securities by the issuer~~

On August 16, 2017, we announced that our Board of Directors approved a 2-for-1 split of our common stock. Each Henry Schein, Inc. stockholder of record at the close of business on September 1, 2017 received a dividend of one additional share for every share held. Trading began on a split-adjusted basis on September 15, 2017 and has been retroactively reflected for all periods presented in this Form 10-Q.

Our share repurchase program, announced on June 21, 2004, originally allowed us to repurchase up to $100 million of shares of our common stock, which represented approximately 3.5% of the shares outstanding at the commencement of the program. As summarized in the table below, subsequent additional increases totaling $2.8 billion, authorized by our Board of Directors, to the repurchase program provide for a total of $2.9 billion of shares of our common stock to be repurchased under this program.

Date of

Amount of Additional

Authorization

Repurchases Authorized

October 31, 2005

$
100,000,000

March 28, 2007

100,000,000

November 16, 2010

100,000,000

August 18, 2011

200,000,000

April 18, 2012

200,000,000

November 12, 2012

300,000,000

December 9, 2013

300,000,000

December 4, 2014

300,000,000

November 30, 2015

400,000,000

October 18, 2016

400,000,000

September 15, 2017

400,000,000

As of September 30, 2017, we had repurchased approximately $2.5 billion of common stock (52,431,816 shares) under these initiatives, with $425.0 million available as of September 30, 2017 for future common stock share repurchases.

~~The following table summarizes repurchases of our common stock under our stock repurchase program during the fiscal quarter ended September 30, 2017:~~

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)
07/02/17 through 08/05/17

294,238

$
91.54

294,238

1,377,198
08/06/17 through 09/02/17

851,356

85.82

851,356

576,207
09/03/17 through 09/30/17

286,052

87.40

286,052

5,183,494

1,431,646

1,431,646

(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.

~~ITEM 6. EXHIBITS~~

~~Exhibits.~~

	~~4.1~~	Amended and Restated Private Shelf Agreement dated September 15, 2017, by and among the Company, PGIM, Inc. and each Prudential affiliate which becomes party thereto. (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on September 18, 2017.)
	~~4.2~~	Amended and Restated Master Note Facility dated September 15, 2017, by and among the Company, NYL Investors LLC and each New York Life affiliate which becomes party thereto. (Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on September 18, 2017.)
	~~4.3~~	Amended and Restated Master Note Purchase Agreement dated September 15, 2017, by and among the Company, Metropolitan Life Insurance Company, MetLife Investment Advisors Company, LLC and each MetLife affiliate which becomes party thereto. (Incorporated by reference to Exhibit 4.3 to our Current Report on Form 8-K filed on September 18, 2017.)
	~~10.1~~	Amendment No. 4 to Receivables Purchase Agreement, dated as of June 1, 2016, by and among us, as performance guarantor, HSFR, Inc., as seller, The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as agent and the various purchaser groups party thereto.+
	~~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~~	~~XBRL Instance Document+~~
	~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document+~~
	~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document+~~
	~~101.DEF~~	~~XBRL Taxonomy Definition Linkbase Document+~~
	~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document+~~
	~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document+~~

~~_________~~

~~+ Filed herewith.~~

~~SIGNATURE~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.~~

	~~Henry Schein, Inc.~~
	~~(Registrant)~~


	~~By: /s/ Steven Paladino~~
	~~Steven Paladino~~
	~~Executive Vice President and~~
	~~Chief Financial Officer~~
	~~(Authorized Signatory and Principal Financial~~
	~~and Accounting Officer)~~

~~Dated: November 6, 2017~~