See accompanying notes.

PART

I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

June 27,

December 28,

2020

2019

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$
296,110

$
106,097

Accounts receivable, net of reserves of $80,825 and $60,002

1,101,201

1,246,246

Inventories, net

1,406,719

1,428,799

Prepaid expenses and other

605,176

445,360

Total current assets

3,409,206

3,226,502
Property and equipment, net

335,898

329,645
Operating lease right-of-use assets, net

211,473

231,662
Goodwill

2,471,108

2,462,495
Other intangibles, net

527,875

572,878
Investments and other

362,565

327,919

Total assets

$
7,318,125

$
7,151,101

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$
734,957

$
880,266

Bank credit lines

503,178

23,975

Current maturities of long-term debt

109,587

109,849

Operating lease liabilities

61,710

65,349

Accrued expenses:

Payroll and related

212,178

265,206

Taxes

210,439

165,171

Other

475,192

528,553

Total current liabilities

2,307,241

2,038,369
Long-term debt

515,802

622,908
Deferred income taxes

56,925

64,989
Operating lease liabilities

163,342

176,267
Other liabilities

374,045

331,173

Total liabilities

3,417,355

3,233,706

Redeemable noncontrolling interests

279,225

287,258
Commitments and contingencies

Stockholders' equity:

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

none outstanding

-

-

Common stock, $.01 par value, 480,000,000 shares authorized,

142,438,127 outstanding on June 27, 2020 and

143,353,459 outstanding on December 28, 2019

1,424

1,434

Additional paid-in capital

16,475

47,768

Retained earnings

3,172,439

3,116,215

Accumulated other comprehensive loss

(199,251)

(167,373)

Total Henry Schein, Inc. stockholders' equity

2,991,087

2,998,044

Noncontrolling interests

630,458

632,093

Total stockholders' equity

3,621,545

3,630,137

Total liabilities, redeemable noncontrolling interests and stockholders' equity

$
7,318,125

$
7,151,101

March 27,

December 26,

2021

2020

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

144,538

421,185

Accounts receivable, net of reserves of $

79,936

and $

88,030

1,317,546

1,424,787

Inventories, net

1,626,185

1,512,499

Prepaid expenses and other

482,356

432,944

Total current assets

3,570,625

3,791,415

Property and equipment, net

353,248

342,004

Operating lease right-of-use assets

301,759

288,847

Goodwill

2,587,438

2,504,392

Other intangibles, net

597,619

479,429

Investments and other

369,231

366,445

Total assets

7,779,920

7,772,532

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

909,575

1,005,655

Bank credit lines

67,415

73,366

Current maturities of long-term debt

111,176

109,836

Operating lease liabilities

68,580

64,716

Accrued expenses:

Payroll and related

286,106

295,329

Taxes

146,755

138,671

Other

533,161

595,529

Total current liabilities

2,122,768

2,283,102

Long-term debt

506,461

515,773

Deferred income taxes

42,254

30,065

Operating lease liabilities

248,624

238,727

Other liabilities

410,184

392,781

Total liabilities

3,330,291

3,460,448

Redeemable noncontrolling interests

452,899

327,699

Commitments and contingencies

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,

141,310,113

outstanding on March 27, 2021 and

142,462,571

outstanding on December 26, 2020

1,413

1,425

Additional paid-in capital

Retained earnings

3,493,060

3,454,831

Accumulated other comprehensive loss

(136,305)

(108,084)

Total Henry Schein, Inc. stockholders' equity

3,358,168

3,348,172

Noncontrolling interests

638,562

636,213

Total stockholders' equity

3,996,730

3,984,385

Total liabilities, redeemable noncontrolling

interests and stockholders' equity

7,779,920

7,772,532

Table of Contents

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF INCOME

(in thousands, except per share data)

(unaudited)

Three Months Ended

March 27,

March 28,

2021

2020

Net sales

2,924,961

2,428,871

Cost of sales

2,034,110

1,682,857

Gross profit

890,851

746,014

Operating expenses:

Selling, general and administrative

657,992

567,362

Restructuring costs

2,931

4,787

Operating income

229,928

173,865

Other income (expense):

Interest income

1,983

3,190

Interest expense

(6,485)

(7,812)

Other, net

309

(220)

Income from continuing operations before taxes, equity in

earnings of affiliates and noncontrolling interests

225,735

169,023

Income taxes

(56,685)

(37,910)

Equity in earnings of affiliates

5,878

2,734

Net income from continuing operations

174,928

133,847

Loss from discontinued operations

(282)

Net Income

174,928

133,565

Less: Net income attributable to noncontrolling interests

(8,931)

(3,304)

Net income attributable to Henry Schein, Inc.

165,997

130,261

Amounts attributable to Henry Schein, Inc.:

Continuing operations

165,997

130,543

Discontinued operations

(282)

Net income attributable to Henry Schein, Inc.

165,997

130,261

Earnings per share from continuing operations attributable to Henry Schein, Inc.:

Basic

1.17

0.91

Diluted

1.16

0.91

Loss per share from discontinued operations attributable to Henry Schein, Inc.:

Basic

0.00

Diluted

0.00

Earnings per share attributable to Henry Schein, Inc.:

Basic

1.17

0.91

Diluted

1.16

0.91

Weighted

-average common shares outstanding:

Basic

142,298

142,967

Diluted

143,398

143,095

Table of Contents

~~HENRY SCHEIN, INC.~~

~~CONSOLIDATED STATEMENTS OF INCOME~~

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

~~(unaudited)~~

Three Months Ended

Six Months Ended

June 27,

June 29,

June 27,

June 29,

2020

2019

2020

2019

Net sales

$
1,684,399

$
2,447,827

$
4,113,270

$
4,808,095
Cost of sales

1,230,105

1,680,396

2,912,937

3,288,974

Gross profit

454,294

767,431

1,200,333

1,519,121
Operating expenses:

Selling, general and administrative

445,793

593,218

1,013,180

1,167,826

Restructuring costs

15,934

11,925

20,721

16,566

Operating income (loss)

(7,433)

162,288

166,432

334,729
Other income (expense):

Interest income

1,997

3,654

5,187

8,425

Interest expense

(10,486)

(12,785)

(18,298)

(29,086)

Other, net

(291)

(1,416)

(511)

(1,835)

Income (loss) from continuing operations before taxes,

equity in earnings of affiliates and noncontrolling interests

(16,213)

151,741

152,810

312,233
Income tax benefit (expense)

950

(35,880)

(36,960)

(75,362)
Equity in earnings of affiliates

1,411

5,556

4,145

8,186
Net income (loss) from continuing operations

(13,852)

121,417

119,995

245,057
Income (loss) from discontinued operations, net of tax

585

(2,221)

303

(11,217)
Net income (loss)

(13,267)

119,196

120,298

233,840

Less: Net (income) loss attributable to noncontrolling interests

2,470

(4,664)

(834)

(9,891)

Plus: Net loss attributable to noncontrolling interests

from discontinued operations

-

-

-

366
Net income (loss) attributable to Henry Schein, Inc.

$
(10,797)

$
114,532

$
119,464

$
224,315
Amounts attributable to Henry Schein Inc.:

Continuing operations

$
(11,382)

$
116,753

$
119,161

$
235,166
Discontinued operations

585

(2,221)

303

(10,851)
Net income (loss) attributable to Henry Schein, Inc.

$
(10,797)

$
114,532

$
119,464

$
224,315

Earnings (loss) per share from continuing operations attributable to Henry Schein, Inc.:

Basic

$
(0.08)

$
0.79

$
0.84

$
1.58

Diluted

$
(0.08)

$
0.78

$
0.84

$
1.56

Loss per share from discontinued operations attributable to Henry Schein, Inc.:

Basic

$
-

$
(0.01)

$
-

$
(0.07)

Diluted

$
-

$
(0.01)

$
-

$
(0.07)

Earnings (loss) per share attributable to Henry Schein, Inc.:

Basic

$
(0.08)

$
0.77

$
0.84

$
1.50

Diluted

$
(0.08)

$
0.77

$
0.84

$
1.49

Weighted-average common shares outstanding:

Basic

142,350

148,148

142,654

149,310

Diluted

142,350

149,423

142,654

150,560

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

Three Months Ended

March 27,

March 28,

2021

2020

Net income

174,928

133,565

Other comprehensive loss, net of tax:

Foreign currency translation loss

(38,481)

(89,312)

Unrealized gain from foreign currency hedging activities

3,361

15,143

Unrealized investment loss

(6)

(9)

Pension adjustment gain

807

724

Other comprehensive loss, net of tax

(34,319)

(73,454)

Comprehensive income

140,609

60,111

Comprehensive (income) loss attributable to noncontrolling interests:

Net income

(8,931)

(3,304)

Foreign currency translation loss

6,098

13,179

Comprehensive (income) loss attributable to noncontrolling interests

(2,833)

9,875

Comprehensive income attributable to Henry Schein, Inc.

137,776

69,986

Table of Contents

~~HENRY SCHEIN, INC.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(in thousands)~~

~~(unaudited)~~

Three Months Ended

Six Months Ended

June 27,

June 29,

June 27,

June 29,

2020

2019

2020

2019

Net income (loss)

$
(13,267)

$
119,196

$
120,298

$
233,840

Other comprehensive income (loss), net of tax:

Foreign currency translation gain (loss)

34,408

10,107

(54,904)

16,709

Unrealized gain (loss) from foreign currency hedging

activities

(4,989)

958

10,154

(323)

Unrealized investment gain (loss)

2

3

(7)

6

Pension adjustment gain (loss)

(225)

(285)

499

432

Other comprehensive income (loss), net of tax

29,196

10,783

(44,258)

16,824
Comprehensive income

15,929

129,979

76,040

250,664

Comprehensive income (loss) attributable to noncontrolling

interests:

Net (income) loss

2,470

(4,664)

(834)

(9,525)

Foreign currency translation (gain) loss

(799)

(849)

12,380

(1,405)

Comprehensive (income) loss attributable to noncontrolling

interests

1,671

(5,513)

11,546

(10,930)

Comprehensive income attributable to Henry Schein, Inc.

$
17,600

$
124,466

$
87,586

$
239,734

See accompanying notes.

~~Table of Contents~~

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENT

OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands, 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
Loss
Interests
Equity
Balance, March 28, 2020
142,433,360
$
1,424
$
17,565
$
3,183,236
$
(227,648)
$
631,215
$
3,605,792
Net loss (excluding loss of $1,678 attributable to Redeemable

noncontrolling interests from continuing operations)
-

-

-

(10,797)

-

(792)

(11,589)
Foreign currency translation gain (excluding gain of $751

attributable to Redeemable noncontrolling interests)
-

-

-

-

33,609

48

33,657
Unrealized loss from foreign currency hedging activities,

net of tax benefit of $1,744
-

-

-

-

(4,989)

-

(4,989)
Unrealized investment gain, net of tax of $1
-

-

-

-

2

-

2
Pension adjustment loss, net of tax benefit of $125
-

-

-

-

(225)

-

(225)
Dividends paid
-

-

-

-

-

(8)

(8)
Purchase of noncontrolling interests
-

-

-

-

-

(9)

(9)
Change in fair value of redeemable securities
-

-

(7,489)

-

-

-

(7,489)
Initial noncontrolling interests and adjustments related to

business acquisitions
-

-

-

-

-

4

4
Stock-based compensation expense
7,033

-

5,156

-

-

-

5,156
Shares withheld for payroll taxes
(2,266)

-

(132)

-

-

-

(132)
Settlement of stock-based compensation awards
-

-

(273)

-

-

-

(273)
Separation of Animal Health business
-

-

1,648

-

-

-

1,648
Balance, June 27, 2020
142,438,127
$
1,424
$
16,475
$
3,172,439
$
(199,251)
$
630,458
$
3,621,545

Accumulated

Common Stock
Additional

Other

Total

$.01 Par Value
Paid-in
Retained
Comprehensive
Noncontrolling
Stockholders'

Shares

Amount
Capital
Earnings
Loss
Interests
Equity
Balance, March 30, 2019
148,996,092
$
1,490
$
86,128
$
2,859,182
$
(149,878)
$
617,751
$
3,414,673
Cumulative impact of adopting new accounting standards
-

-

-

(274)

-

-

(274)
Net income (excluding $3,135 attributable to Redeemable

noncontrolling interests from continuing operations)
-

-

-

114,532

-

1,529

116,061
Foreign currency translation gain (excluding gain of $1,027

attributable to Redeemable noncontrolling interests)
-

-

-

-

9,258

(178)

9,080
Unrealized gain from foreign currency hedging activities,

net of tax of $293
-

-

-

-

958

-

958
Unrealized investment gain, net of tax of $0
-

-

-

-

3

-

3
Pension adjustment loss, including tax benefit of $95
-

-

-

-

(285)

-

(285)
Dividends paid
-

-

-

-

-

(146)

(146)
Other adjustments
-

-

(2)

-

-

-

(2)
Change in fair value of redeemable securities
-

-

6,692

-

-

-

6,692
Initial noncontrolling interests and adjustments related to

business acquisitions
-

-

-

-

-

(19)

(19)
Repurchase and retirement of common stock
(1,182,210)

(12)

(3,717)

(73,053)

-

-

(76,782)
Stock-based compensation expense
11,658

-

12,662

-

-

-

12,662
Shares withheld for payroll taxes
(1,694)

-

(123)

-

-

-

(123)
Settlement of stock-based compensation awards
-

-

32

-

-

-

32
Separation of Animal Health business
-

-

(36,316)

-

-

-

(36,316)
Balance, June 29, 2019
147,823,846
$
1,478
$
65,356
$
2,900,387
$
(139,944)
$
618,937
$
3,446,214

(unaudited)

Accumulated

Common Stock

Additional

Other

Total

$.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, December 26, 2020

142,462,571

1,425

3,454,831

(108,084)

636,213

3,984,385

Net income (excluding $

7,053

attributable to Redeemable

noncontrolling interests from continuing operations)

165,997

1,878

167,875

Foreign currency translation loss (excluding loss of $

6,173

attributable to Redeemable noncontrolling interests)

(32,383)

(32,308)

Unrealized gain from foreign currency hedging activities,

net of tax of $

1,334

3,361

Unrealized investment loss, net of tax benefit of $

(6)

Pension adjustment gain, net of tax of $

219

807

Dividends paid

(77)

Change in fair value of redeemable securities

(45,520)

Initial noncontrolling interests and adjustments related to

business acquisitions

473

Repurchase and retirement of common stock

(1,325,242)

(13)

(12,250)

(76,396)

(88,659)

Stock-based compensation expense

281,645

12,787

12,790

Settlement of stock-based compensation awards

787

Shares withheld for payroll taxes

(108,861)

(2)

(7,176)

(7,178)

Transfer of charges in excess of

capital

51,372

(51,372)

Balance, March 27, 2021

141,310,113

1,413

3,493,060

(136,305)

638,562

3,996,730

Accumulated

Common Stock

Additional

Other

Total

$.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Amount

Capital

Earnings

Income / (Loss)

Interests

Equity

Balance, December 28, 2019

143,353,459

1,434

47,768

3,116,215

(167,373)

632,093

3,630,137

Cumulative impact of adopting new accounting standards

(412)

Net income (excluding $

2,839

attributable to Redeemable

noncontrolling interests from continuing operations)

130,261

465

130,726

Foreign currency translation loss (excluding loss of $

13,027

attributable to Redeemable noncontrolling interests)

(76,133)

(152)

(76,285)

Unrealized gain from foreign currency hedging activities,

net of tax of $

5,090

15,143

Unrealized investment loss, net of tax benefit of $

(9)

Pension adjustment gain, net of tax of $

324

724

Dividends paid

(499)

Purchase of noncontrolling interests

(1,597)

(692)

(2,289)

Change in fair value of redeemable securities

13,072

Repurchase and retirement of common stock

(1,200,000)

(12)

(10,949)

(62,828)

(73,789)

Stock-based compensation credit

507,410

(17,519)

(17,514)

Shares withheld for payroll taxes

(227,509)

(3)

(13,871)

(13,874)

Settlement of stock-based compensation awards

660

Separation of Animal Health business

Balance, March 28, 2020

142,433,360

1,424

17,565

3,183,236

(227,648)

631,215

3,605,792

Table of Contents

HENRY SCHEIN, INC.

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

~~(in thousands, 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
Loss
Interests
Equity
Balance, December 28, 2019
143,353,459
$
1,434
$
47,768
$
3,116,215
$
(167,373)
$
632,093
$
3,630,137
Cumulative impact of adopting new accounting standards
-

-

-

(412)

-

-

(412)
Net income (excluding $1,161 attributable to Redeemable

noncontrolling interests from continuing operations)
-

-

-

119,464

-

(327)

119,137
Foreign currency translation loss (excluding loss of $12,276

attributable to Redeemable noncontrolling interests)
-

-

-

-

(42,524)

(104)

(42,628)
Unrealized gain from foreign currency hedging activities,

net of tax of $3,346
-

-

-

-

10,154

-

10,154
Unrealized investment loss, net of tax benefit of $1
-

-

-

-

(7)

-

(7)
Pension adjustment gain, net of tax of $199
-

-

-

-

499

-

499
Dividends paid
-

-

-

-

-

(507)

(507)
Purchase of noncontrolling interests
-

-

(1,597)

-

-

(701)

(2,298)
Change in fair value of redeemable securities
-

-

5,583

-

-

-

5,583
Initial noncontrolling interests and adjustments related to

business acquisitions
-

-

-

-

-

4

4
Repurchase and retirement of common stock
(1,200,000)

(12)

(10,949)

(62,828)

-

-

(73,789)
Stock-based compensation expense (credit)
514,443

5

(12,363)

-

-

-

(12,358)
Shares withheld for payroll taxes
(229,775)

(3)

(14,003)

-

-

-

(14,006)
Settlement of stock-based compensation awards
-

-

387

-

-

-

387
Separation of Animal Health business
-

-

1,649

-

-

-

1,649
Balance, June 27, 2020
142,438,127
$
1,424
$
16,475
$
3,172,439
$
(199,251)
$
630,458
$
3,621,545

Accumulated

Common Stock
Additional

Other

Total

$.01 Par Value
Paid-in
Retained
Comprehensive
Noncontrolling
Stockholders'

Shares

Amount
Capital
Earnings
Loss
Interests
Equity
Balance, December 29, 2018
151,401,668
$
1,514
$
-
$
3,208,589
$
(248,771)
$
580,456
$
3,541,788
Cumulative impact of adopting new accounting standards
-

-

-

(274)

-

-

(274)
Net income (excluding $6,513 attributable to Redeemable

noncontrolling interests from continuing operations

and ($366) from discontinued operations)
-

-

-

224,315

-

3,378

227,693
Foreign currency translation gain (loss) (excluding gain of $836

attributable to Redeemable noncontrolling interests

and $592 gain from discontinued operations)
-

-

-

-

15,304

(23)

15,281
Unrealized loss from foreign currency hedging activities,

net of tax benefit of $29
-

-

-

-

(323)

-

(323)
Unrealized investment gain, net of tax of $1
-

-

-

-

6

-

6
Pension adjustment gain, net of tax of $129
-

-

-

-

432

-

432
Dividends paid
-

-

-

-

-

(215)

(215)
Other adjustments
-

-

(4)

-

-

-

(4)
Change in fair value of redeemable securities
-

-

4,200

-

-

-

4,200
Initial noncontrolling interests and adjustments related to

business acquisitions
-

-

-

-

-

35,341

35,341
Adjustment for Animal Health Spin-off
87,629

1

-

-

-

-

1
Repurchase and retirement of common stock
(3,705,347)

(37)

(36,203)

(190,542)

-

-

(226,782)
Stock issued upon exercise of stock options
2,526

-

34

-

-

-

34
Stock-based compensation expense
212,535

2

20,095

-

-

-

20,097
Shares withheld for payroll taxes
(175,165)

(2)

(10,566)

-

-

-

(10,568)
Settlement of stock-based compensation awards
-

-

388

-

-

-

388
Share Sale related to Animal Health business
-

-

361,090

-

-

-

361,090
Separation of Animal Health business
-

-

(72,221)

(543,158)

93,408

-

(521,971)
Transfer of charges in excess of capital
-

-

(201,457)

201,457

-

-

-
Balance, June 29, 2019
147,823,846
$
1,478
$
65,356
$
2,900,387
$
(139,944)
$
618,937
$
3,446,214

~~See accompanying notes.~~

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

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

~~(unaudited)~~

Six Months Ended

June 27,

June 29,

2020

2019
Cash flows from operating activities:

Net income

$
120,298

$
233,840

Income (loss) from discontinued operations

303

(11,217)

Income from continuing operations

119,995

245,057

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

96,095

89,355

Stock-based compensation (credit) expense

(12,358)

19,772

Provision for losses on trade and other accounts receivable

28,758

3,976

Provision for (benefit from) deferred income taxes

(32,871)

2,284

Equity in earnings of affiliates

(4,145)

(8,186)

Distributions from equity affiliates

4,220

61,357

Changes in unrecognized tax benefits

1,380

4,435

Other

227

(1,045)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

99,672

(17,452)

Inventories

13,700

86,803

Other current assets

(176,616)

(62,098)

Accounts payable and accrued expenses

(138,900)

(125,472)
Net cash provided by (used in) operating activities from continuing operations

(843)

298,786
Net cash provided by (used in) operating activities from discontinued operations

573

(169,294)
Net cash provided by (used in) operating activities

(270)

129,492
Cash flows from investing activities:

Purchases of fixed assets

(30,588)

(30,708)

Payments related to equity investments and business

acquisitions, net of cash acquired

(37,725)

(622,441)

Proceeds from sale of equity investment

-

10,500

Proceeds from (repayments to) loan to affiliate

(1,729)

15,868

Other

(11,599)

(8,762)
Net cash used in investing activities from continuing operations

(81,641)

(635,543)
Net cash used in investing activities from discontinued operations

-

(2,064)
Net cash used in investing activities

(81,641)

(637,607)
Cash flows from financing activities:

Net change in bank borrowings

479,702

(709,012)

Proceeds from issuance of long-term debt

501,421

741

Principal payments for long-term debt

(609,580)

(9,038)

Debt issuance costs

(3,655)

(391)

Proceeds from issuance of stock upon exercise of stock options

-

34

Payments for repurchases of common stock

(73,789)

(226,782)

Payments for taxes related to shares withheld for employee taxes

(13,713)

(10,527)

Distribution received related to Animal Health Spin-off

-

1,120,000

Proceeds related to Animal Health Share Sale

-

361,090

Proceeds from (distributions to) noncontrolling shareholders

(3,466)

49,398

Acquisitions of noncontrolling interests in subsidiaries

(14,934)

(2,270)

Proceeds from (payments to) Henry Schein Animal Health Business

64

(212,957)
Net cash provided by financing activities from continuing operations

262,050

360,286
Net cash provided by (used in) financing activities from discontinued operations

(573)

150,274
Net cash provided by financing activities

261,477

510,560
Effect of exchange rate changes on cash and cash equivalents from continuing operations

10,447

4,510
Effect of exchange rate changes on cash and cash equivalents from discontinued operations

-

(2,240)
Net change in cash and cash equivalents from continuing operations

190,013

28,039
Net change in cash and cash equivalents from discontinued operations

-

(23,324)
Cash and cash equivalents, beginning of period

106,097

56,885
Cash and cash equivalents, end of period

$
296,110

$
84,924

~~See accompanying notes.~~

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

~~(unaudited~~)

(unaudited

)

Note 1

–

Basis of Presentation

Our consolidated financial statements include our accounts, as well

as those of our wholly-owned and ~~majority-owned~~majority-

owned subsidiaries.

Certain prior period amounts have been reclassified to conform

to the current period

presentation.

Our accompanying unaudited 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.

We consolidate a Variable Interest Entity (“VIE”) where we hold a variable interest and are the primary

beneficiary.

The VIE is a trade accounts receivable securitization.

We are the primary beneficiary because we

have the power to direct activities that most significantly affect the economic performance

and have the obligation

to absorb the majority of the losses or benefits.

The results of operations and financial position of this VIE

are

included in our consolidated financial statements.

For the consolidated VIE, the trade accounts receivable transferred

to the VIE are pledged as collateral to the

related debt.

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

At ~~June~~March 27, ~~2020~~ 2021

and December ~~28, 2019,~~26, 2020,

there were no trade accounts receivable that ~~can only be used~~were restricted to settle obligations of this

VIE,

nor were ~~$0 million and $127 million, respectively, and the~~there liabilities of the VIE where the creditors have recourse to ~~us were $0 million and $100 million, respectively.~~

us.

The 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 ~~28, 2019.~~

On February 7, 2019 (the “Distribution Date”), we completed the separation (the “Separation”) and subsequent merger (“Merger”) of our animal health business (the “Henry Schein Animal Health Business”) with Direct Vet Marketing, Inc. (d/b/a Vets First Choice, “Vets First Choice”). All financial information within this Form 10-Q presents the Henry Schein Animal Health Business as a discontinued operation.

26, 2020.

The preparation of financial statements in conformity with accounting principles

generally accepted in the United

States

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

and liabilities and

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

statements and the reported amounts of

revenues and expenses during the reporting period.

Actual results could differ from those estimates.

The results of

operations for the ~~six~~three months ended ~~June~~March 27, ~~2020~~2021 are not necessarily

indicative of the results to be expected

for any other interim period or for the year ending December ~~26, 2020.~~

25, 2021.

In March 2020, the World Health Organization declared the Novel Coronavirus Disease 2019 (“COVID-19”) a

pandemic. The COVID-19 pandemic ~~has~~ negatively impacted the global economy, disrupted global supply chains and

created significant volatility and disruption of global financial markets. In response,

many countries ~~have~~ implemented

business closures and restrictions, stay-at-home and social distancing ordinances

and similar measures to combat

the pandemic, which significantly impacted global business and dramatically

reduced demand for dental products

and certain medical products in the second quarter ~~and year-to-date~~ of 2020.

Demand increased in the second half of 2020 and has

continued into the first quarter of 2021, resulting in growth over the

prior year driven by sales of personal

protective equipment (PPE) and COVID-19 related products.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited)

)

Our consolidated financial statements reflect estimates and assumptions

made by us that affect, among other things,

our goodwill, long-lived asset and ~~indefinite-lived~~definite-lived intangible asset valuation;

inventory valuation; equity investment

valuation; assessment of the annual effective tax rate; valuation of deferred income

taxes and income tax

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

rebates; measurement of

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

plans; and pension plan

assumptions. Due to the significant uncertainty surrounding the

future impact of COVID-19, our judgments

regarding estimates and impairments could change in the future. In

addition, the impact of COVID-19 had a

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

in the second quarter ~~and year-to-date~~ of

2020. In the latter half of the second quarter of 2020,

dental and medical practices began to re-open ~~worldwide. However,~~worldwide, and

continued to do so during the second half of 2020.

During the first quarter of 2021, patient ~~volumes are below pre-COVID-19~~traffic levels ~~and a number of~~returned to

levels approaching pre-pandemic levels, although certain regions in the ~~U.S~~ U.S.

and ~~certain international geographies~~internationally are experiencing an ~~uptick~~

increase in COVID-19 cases. ~~As such, there~~There is an ongoing risk that the COVID-19

pandemic ~~will continue to~~may again have a material

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

in a material adverse effect on

our financial condition and liquidity. However, the extent of the potential impact cannot be reasonably estimated at

this time.

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

Note 2 ~~– Discontinued Operations~~

~~Animal Health Spin-off~~

On the Distribution Date, we completed the Separation and subsequent Merger of the Henry Schein Animal Health Business with Vets First Choice. This was accomplished by a series of transactions among us, Vets First Choice, Covetrus, Inc. (f/k/a HS Spinco, Inc. “Covetrus”), a wholly owned subsidiary of ours prior to the Distribution Date, and HS Merger Sub, Inc., a wholly owned subsidiary of Covetrus (“Merger Sub”). In connection with the Separation, we contributed, assigned and transferred to Covetrus certain applicable assets, liabilities and capital stock or other ownership interests relating to the Henry Schein Animal Health Business. On the Distribution Date, we received a tax-free distribution of $1,120 million from Covetrus pursuant to certain debt financing incurred by Covetrus. On the Distribution Date and prior to the Animal Health Spin-off, Covetrus issued shares of Covetrus common stock to certain institutional accredited investors (the “Share Sale Investors”) for $361.1 million (the “Share Sale”). The proceeds of the Share Sale were paid to Covetrus and distributed to us. Subsequent to the Share Sale, we distributed, on a pro rata basis, all of the shares of the common stock of Covetrus held by us to our stockholders of record as of the close of business on January 17, 2019 (the “Animal Health Spin-off”). After the Share Sale and Animal Health Spin-off, Merger Sub consummated the Merger whereby it merged with and into Vets First Choice, with Vets First Choice surviving the Merger as a wholly owned subsidiary of Covetrus. Immediately following the consummation of the Merger, on a fully diluted basis, (i) approximately 63% of the shares of Covetrus common stock were (a) owned by our stockholders and the Share Sale Investors, and (b) held by certain employees of the Henry Schein Animal Health Business (in the form of certain equity awards), and (ii) approximately 37% of the shares of Covetrus common stock were (a) owned by stockholders of Vets First Choice immediately prior to the Merger, and (b) held by certain employees of Vets First Choice (in the form of certain equity awards). After the Separation and the Merger, we no longer beneficially owned any shares of Covetrus common stock and, following the Distribution Date, will not consolidate the financial results of Covetrus for the purpose of our financial reporting. Following the Separation and the Merger, Covetrus was an independent, publicly traded company on the Nasdaq Global Select Market.

In connection with the completion of the Animal Health Spin-off, we entered into a transition services agreement with Covetrus under which we have agreed to provide certain transition services for up to ~~twenty-four months in areas such as information technology, finance and accounting, human resources, supply chain, and real estate and facility services.~~

As a result of the Separation, the financial position and results of operations of the Henry Schein Animal Health Business are presented as discontinued operations and have been excluded from continuing operations and segment results for all periods presented. The accompanying Notes to the Consolidated Financial Statements have been revised to reflect the effect of the Separation and all prior year balances have been revised accordingly to reflect continuing operations only. The historical statements of Comprehensive Income (Loss) and Shareholders' Equity have not been revised to reflect the Separation and instead reflect the Separation as an adjustment to the balances at ~~June 29, 2019.~~

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

~~Summarized financial information for our discontinued operations is as follows:~~

Three Months Ended

Six Months Ended

June 27,

June 29,

June 27,

June 29,

2020

2019

2020

2019

Net sales

$
-

$
-

$
-

$
319,522
Cost of goods sold

-

-

-

260,097
Gross profit

-

-

-

59,425
Selling, general and administrative

80

2,056

456

66,950
Operating loss

(80)

(2,056)

(456)

(7,525)
Income tax expense (benefit)

(665)

(83)

(759)

4,681
Income (loss) from discontinued operations

585

(2,221)

303

(11,217)
Net loss attributable to noncontrolling interests

-

-

-

366
Net income (loss) from discontinued operations

attributable to Henry Schein, Inc.

585

(2,221)

303

(10,851)

The operating loss from discontinued operations for the six months ended June 27, 2020 was primarily attributable to transaction costs directly related to the Animal Health Spin-off. See Note 19-Related Party Transactions for additional information.

The net income from discontinued operations for the three and six months ended June 27, 2020 was primarily attributable to a tax refund received during Q2 2020 by a holding company previously part of our Animal Health legal structure.

The June 29, 2019 financial information above represents activity of the discontinued operations during the quarter and year-to-date through the Distribution Date. The loss from discontinued operations for the three and six months ended June 29, 2019 was primarily attributable to the inclusion of approximately $2.2 million and $23.1 million, respectively, of transaction costs directly related to the Animal Health Spin-off. See Note 19-Related Party Transactions for additional information.

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

~~The following are the amounts of assets and liabilities that were transferred to Covetrus as of February 7, 2019 and December 29, 2018.~~

February 7,

December 29,

2019

2018

Cash and cash equivalents

$
6,815

$
23,324
Accounts receivable, net

432,812

434,935
Inventories, net

536,637

555,230
Prepaid expenses and other

120,546

69,525

Total current assets of discontinued operations

1,096,810

1,083,014
Property and equipment, net

69,790

68,177
Operating lease right-of-use asset, net

57,012

-
Goodwill

742,931

739,266
Other intangibles, net

205,793

208,213
Investments and other

120,518

118,003

Total long-term assets of discontinued operations

1,196,044

1,133,659
Total assets of discontinued operations

$
2,292,854

$
2,216,673

Accounts payable

$
316,162

$
441,453
Current maturities of long-term debt

657

675
Operating lease liabilities

18,951

-
Accrued expenses:

Payroll and related

36,847

36,888

Taxes

24,060

17,552

Other

80,400

81,039

Total current liabilities of discontinued operations

477,077

577,607
Long-term debt

1,176,105

23,529
Deferred income taxes

17,019

4,352
Operating lease liabilities

38,668

-
Other liabilities

29,209

34,572

Total long-term liabilities of discontinued operations

1,261,001

62,453
Total liabilities of discontinued operations

$
1,738,078

$
640,060
Redeemable noncontrolling interests

$
28,270

$
92,432

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

~~Note 3~~ – 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 ~~six~~three months ended ~~June~~March 27, ~~2020,~~

2021, as compared to the critical accounting policies described in Item

8 to the consolidated financial statements

included in our Annual Report on Form 10-K for the year ended December ~~28, 2019,~~

26, 2020, except as follows:

Accounting Pronouncements Adopted

In ~~January 2017,~~

December 2019

, the Financial Accounting Standards Board ~~(the “FASB”~~(“FASB”) issued Accounting Standards Update

(“ASU”) No. 2017-04, “Intangibles-Goodwill and Other” (Topic 350) (“ASU 2017-04”). ASU 2017-04 eliminates step two from the goodwill impairment test, thereby eliminating the requirement to calculate the implied fair value of a reporting unit. ASU 2017-04 requires us to perform our annual goodwill impairment test by comparing the fair value of our reporting units to the carrying value of those units. 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. Our ~~adoption~~ ~~of ASU 2017-04 on~~ ~~December 29, 2019, did not have a material impact on our consolidated financial statements.~~

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. We ~~adopted~~ ~~Topic 326 using the~~ ~~modified-retrospective~~ ~~method and recorded an immaterial~~ ~~cumulative-effect adjustment~~ to the opening balance of retained earnings. Based upon the level and makeup of our financial asset portfolio, including accounts receivable, past loan loss activity and current known activity regarding our outstanding loans, the adoption of Topic 326 on ~~December 29, 2019 resulted in a decrease of $0.4 million to retained earnings.~~

~~Recently Issued Accounting Standards~~

~~In December 2019, the FASB issued ASU~~ No. 2019-12, “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes (“ASU ~~2019-12”~~2019-

12”).

ASU 2019-12 will simplify the accounting for income taxes

by removing certain exceptions to the general

principles in Topic 740.

The amendments also improve consistent application

of and simplify U.S. GAAP for other

areas of Topic 740 by clarifying and amending existing guidance.

Our

adoption

of ASU ~~2017-04~~2019 - 12 did not have a

material impact on our consolidated financial statements.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options” (Subtopic

470-20) and “Derivatives and Hedging— in Entity’s Own Equity” (Subtopic 815-40): Accounting for Convertible

Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).

ASU 2020-06 simplifies the accounting

for convertible instruments.

In addition to eliminating certain accounting models, this ASU

includes improvements

to the disclosures for convertible instruments and earnings-per-share (EPS) guidance and

amends the guidance for

the derivatives scope exception for contracts in an entity’s own equity.

ASU 2020-06 is effective for fiscal years

beginning after December 15, ~~2020.~~ 2021.

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

impact on our consolidated financial statements.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

~~(unaudited~~)

(unaudited

)

Note 87 – Redeemable Noncontrolling Interests

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

certain times, to require us to acquire

their ownership interest in those entities at fair value.

Accounting Standards Codification (“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 ~~six~~three months ended ~~June~~March 27, ~~2020~~2021 and the year ended December ~~28, 2019~~

26, 2020 are presented in the

following table:

June 27,

December 28,

2020

2019
Balance, beginning of period

$
287,258

$
219,724
Decrease in redeemable noncontrolling interests due to

redemptions

(12,636)

(2,270)
Increase in redeemable noncontrolling interests due to business

acquisitions

25,369

74,865
Net income attributable to redeemable noncontrolling interests

1,161

14,838
Dividends declared

(4,068)

(10,264)
Effect of foreign currency translation loss attributable to

redeemable noncontrolling interests

(12,276)

(2,335)
Change in fair value of redeemable securities

(5,583)

(7,300)
Balance, end of period

$
279,225

$
287,258

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

March 27,

December 26,

2021

2020

Balance, beginning of period

327,699

287,258

Decrease in redeemable noncontrolling interests due to

redemptions

(17,241)

Increase in redeemable noncontrolling interests due to business

acquisitions

85,037

28,387

Net income attributable to redeemable noncontrolling interests

7,053

13,363

Dividends declared

(6,237)

(12,631)

Effect of foreign currency translation loss attributable to

redeemable noncontrolling interests

(6,173)

(4,279)

Change in fair value of redeemable securities

45,520

32,842

Balance, end of period

452,899

327,699

Note 98 – Comprehensive Income

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

GAAP,

are excluded from net income as

such amounts are recorded directly as an adjustment to stockholders’

equity.

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

applicable taxes as of:

June 27,

December 28,

2020

2019
Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment

$
(32,614)

$
(20,338)

Attributable to noncontrolling interests:

Foreign currency translation adjustment

$
(635)

$
(531)

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

$
(185,696)

$
(143,172)

Unrealized gain (loss) from foreign currency hedging activities

6,122

(4,032)

Unrealized investment gain (loss)

(1)

6

Pension adjustment loss

(19,676)

(20,175)

Accumulated other comprehensive loss

$
(199,251)

$
(167,373)

Total Accumulated other comprehensive loss

$
(232,500)

$
(188,242)

March 27,

December 26,

2021

2020

Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment

(30,790)

(24,617)

Attributable to noncontrolling interests:

Foreign currency translation adjustment

310

235

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

(108,948)

(76,565)

Unrealized loss from foreign currency hedging activities

(8,127)

(11,488)

Unrealized investment gain (loss)

(5)

Pension adjustment loss

(19,225)

(20,032)

Accumulated other comprehensive loss

(136,305)

(108,084)

Total Accumulated

other comprehensive loss

(166,785)

(132,466)

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited

)

The following table summarizes the components of comprehensive income, net

of applicable taxes as follows:

Three Months Ended

Six Months Ended

June 27,

June 29,

June 27,

June 29,

2020

2019

2020

2019
Net income (loss)

$
(13,267)

$
119,196

$
120,298

$
233,840

Foreign currency translation gain (loss)

34,408

10,107

(54,904)

16,709
Tax effect

-

-

-

-
Foreign currency translation gain (loss)

34,408

10,107

(54,904)

16,709

Unrealized gain (loss) from foreign currency hedging

activities

(6,733)

1,251

13,500

(352)
Tax effect

1,744

(293)

(3,346)

29
Unrealized gain (loss) from foreign currency hedging

activities

(4,989)

958

10,154

(323)

Unrealized investment gain (loss)

3

3

(8)

7
Tax effect

(1)

-

1

(1)
Unrealized investment gain (loss)

2

3

(7)

6

Pension adjustment gain (loss)

(350)

(380)

698

561
Tax effect

125

95

(199)

(129)
Pension adjustment gain (loss)

(225)

(285)

499

432
Comprehensive income

$
15,929

$
129,979

$
76,040

$
250,664

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

~~The increase in the unrealized~~

Three Months Ended

March 27,

March 28,

2021

2020

Net income

174,928

133,565

Foreign currency translation loss

(38,481)

(89,312)

Tax effect

Foreign currency translation loss

(38,481)

(89,312)

Unrealized gain from foreign currency hedging activities ~~during the year ended June 27, 2020 was primarily attributable to a net~~

4,695

20,233

Tax effect

(1,334)

(5,090)

Unrealized gain from foreign currency hedging activities

3,361

15,143

Unrealized investment ~~hedge that was entered into during 2019. See Note 15 -~~ ~~Derivatives and Hedging Activities~~ ~~for further information.~~

loss

(8)

(11)

Tax effect

Unrealized investment loss

(6)

(9)

Pension adjustment gain

1,026

1,048

Tax effect

(219)

(324)

Pension adjustment gain

807

724

Comprehensive income

140,609

60,111

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

Fluctuations in the value of foreign

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

on our comprehensive income.

The

foreign currency translation ~~gain (loss)~~loss during the ~~six~~three months ended ~~June~~ March

27, ~~2020~~2021 and ~~six~~three months ended ~~June 29, 2019~~ March 28,

2020 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 total comprehensive income, net of

applicable taxes, as follows:

Three Months Ended

Six Months Ended

June 27,

June 29,

June 27,

June 29,

2020

2019

2020

2019
Comprehensive income attributable to

Henry Schein, Inc.

$
17,600

$
124,466

$
87,586

$
239,734
Comprehensive income (loss) attributable to

noncontrolling interests

(744)

1,352

(431)

3,356
Comprehensive income (loss) attributable to

Redeemable noncontrolling interests

(927)

4,161

(11,115)

7,574
Comprehensive income

$
15,929

$
129,979

$
76,040

$
250,664

Three Months Ended

March 27,

March 28,

2021

2020

Comprehensive income attributable to

Henry Schein, Inc.

137,776

69,986

Comprehensive income attributable to

noncontrolling interests

1,953

313

Comprehensive income (loss) attributable to

Redeemable noncontrolling interests

880

(10,188)

Comprehensive income

140,609

60,111

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited

)

Note 109 – 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 ~~for determining that~~ distinguishes between

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

from independent sources (observable

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

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

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 as of ~~June~~

March 27, ~~2020~~2021 and December ~~28, 2019~~26, 2020 was estimated at ~~$1,128.6~~ $

685.1

million and ~~$756.7~~ $

699.0

million, respectively.

Factors

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

market conditions, such as interest rates and

credit spreads.

Derivative contracts

Derivative contracts are valued using quoted market prices and

significant other observable and unobservable

inputs.

We use derivative instruments to minimize our exposure to fluctuations in foreign currency exchange

rates.

Our derivative instruments primarily include foreign currency forward

agreements related to certain

intercompany loans, certain forecasted inventory purchase commitments with

foreign suppliers, 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 retirement plan and our deferred compensation plan.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited

)

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

obtained by comparing our contract

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

is based on market rates for comparable

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

See

Note 15 14-Derivatives and Hedging

Activities

for further information.

Redeemable noncontrolling interests

The values for Redeemable noncontrolling interests are classified within

Level 3 of the fair value hierarchy and are

based on recent transactions and/or implied multiples of earnings. ~~The details of the changes in~~

See

Note 7–Redeemable ~~noncontrolling interests are presented in Note 8.~~

Noncontrolling

~~Table of Contents~~Interests

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

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 ~~June~~

March 27, ~~2020~~2021 and December ~~28, 2019:~~

June 27, 2020

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts

$
-

$
36,663

$
-

$
36,663

Total return swaps

-

45

-

45

Total assets

$
-

$
36,708

$
-

$
36,708

Liabilities:

Derivative contracts

$
-

$
2,017

$
-

$
2,017

Total liabilities

$
-

$
2,017

$
-

$
2,017

Redeemable noncontrolling interests

$
-

$
-

$
279,225

$
279,225

December 28, 2019

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts

$
-

$
567

$
-

$
567

Total assets

$
-

$
567

$
-

$
567

Liabilities:

Derivative contracts

$
-

$
5,795

$
-

$
5,795

Total liabilities

$
-

$
5,795

$
-

$
5,795

Redeemable noncontrolling interests

$
-

$
-

$
287,258

$
287,258

26,

2020:

March 27, 2021

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts

1,856

Total return

swaps

1,458

Total assets

3,314

Liabilities:

Derivative contracts

5,353

Total liabilities

5,353

Redeemable noncontrolling interests

452,899

December 26, 2020

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts

1,868

Total return

swaps

1,565

Total assets

3,433

Liabilities:

Derivative contracts

11,765

Total liabilities

11,765

Redeemable noncontrolling interests

327,699

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited

)

Note 1110

–

Business Acquisitions

Acquisitions

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

We completed acquisitions during the ~~six~~three months ended ~~June~~March 27, ~~2020~~2021 which were immaterial to our financial ~~statements individually. In~~

statements.

The acquisitions that we completed included companies within

our Health care distribution and

Technology and value-added services segments.

Our initial ownership interest acquired ranges between

approximately

% to

100

Acquisitions within our Health care distribution segment include companies that

specialize in distribution of dental products, a provider of 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 summarizes the ~~aggregate, these transactions resulted in~~estimated fair value, as of the date

of acquisition, of consideration ~~of $36.6 million~~paid and net

assets acquired for acquisitions during the ~~six~~three months ended ~~June~~March 27, ~~2020 related~~2021.

While we use our best estimates

and assumptions to ~~business combinations, for~~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

213.8

Redeemable noncontrolling interests

75.2

Total consideration

289.0

Identifiable assets acquired and liabilities assumed:

Current assets

86.9

Intangible assets

151.4

Other noncurrent assets

19.0

Current liabilities

(31.8)

Deferred income taxes

(9.4)

Other noncurrent liabilities

(22.4)

Total identifiable

net assets

193.7

Goodwill

95.3

Total net assets ~~amounting~~acquired

289.0

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

price to, ~~$16.3 million. As of June 27, 2020, we had recorded $24.1 million~~excluding goodwill, include

identifiable intangible assets (i.e., trademarks and trade names, customer

relationships and lists, non-compete

agreements and product development), property, plant and equipment, deferred taxes and other current and long-

term assets and liabilities.

The estimated fair value of identifiable ~~intangibles, $29.3 million~~intangible assets is based on critical

estimates,

judgments and assumptions derived from analysis of ~~goodwill~~market conditions,

discount rates, discounted cash flows,

customer retention rates and ~~$23.7 million of non-controlling interest, related to these acquisitions.~~

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 ~~six~~three months ended ~~June~~March 27, ~~2020~~2021 and ~~June 29, 2019,~~ March 28, 2020,

there were no

material adjustments recorded in our consolidated statements of income

relating to changes in estimated contingent

purchase price liabilities.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

~~(unaudited~~)

(unaudited

)

Note 1211 – Plans of Restructuring

On July 9, 2018, we committed to an initiative to rationalize our operations and provide expense efficiencies. These actions allowed us to execute on our plan to reduce our cost structure and fund new initiatives that drive growth under our 2018 to 2020 strategic plan. This initiative has resulted in the elimination of approximately 4% of our workforce and the closing of certain facilities.

On November 20, 2019, we committed to a contemplated initiative, intended

to mitigate stranded costs associated

with the Animal Health Spin-off and to rationalize operations and to provide expense

efficiencies.

These activities

were originally expected to be completed by the end of 2020. ~~We are re-assessing that timeline in~~

In light of the ~~current~~changes to the business environment

brought on by the COVID-19 ~~pandemic.~~

pandemic, we extended such activities

to the end of 2021.

During the three months ended ~~June~~March 27, 2021 and March 28, 2020, ~~and June 29, 2019,~~ we

recorded restructuring costs of ~~$15.9~~ $

2.9

million and ~~$11.9 million. During the six months ended June 27, 2020 and June 29, 2019, we recorded restructuring costs of $20.7~~ $

4.8

million, ~~and $16.6 million.~~respectively. The restructuring costs for these periods included costs for severance

benefits and facility exit costs.

The costs associated with these restructurings are included in

a separate line item, ~~“Restructuring~~

“Restructuring costs” within our consolidated statements of income.

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

amounts expected to be incurred in connection with these activities

in 2021, both with respect to each major type of

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

of the amount or range of amounts that

will result in future cash expenditures.

The following table shows the net amounts expensed and paid for restructuring

costs that were incurred during the ~~six~~

three months ended ~~June~~March 27, ~~2020~~2021 and during our ~~2019~~2020 fiscal year

and the remaining accrued balance of

restructuring costs as of ~~June~~March 27, ~~2020,~~2021, which is included in Accrued

expenses: Other within our consolidated

balance sheets:

Facility

Severance

Closing

Costs

Costs

Other

Total
Balance, December 29, 2018

$
29,964

$
1,603

$
158

$
31,725
Provision

13,741

937

27

14,705
Payments and other adjustments

(30,794)

(1,714)

(112)

(32,620)
Balance, December 28, 2019

$
12,911

$
826

$
73

$
13,810
Provision

16,359

4,268

94

20,721
Payments and other adjustments

(13,837)

(4,419)

(120)

(18,376)
Balance, June 27, 2020

$
15,433

$
675

$
47

$
16,155

Facility

Severance

Closing

Costs

Other

Total

Balance, December 28, 2019

12,911

826

13,810

Provision

25,855

5,878

360

32,093

Payments and other adjustments

(26,152)

(6,309)

(329)

(32,790)

Balance, December 26, 2020

12,614

395

104

13,113

Provision

2,848

(151)

234

2,931

Payments and other adjustments

(8,623)

156

(243)

(8,710)

Balance, March 27, 2021

6,839

400

7,334

The following table shows, by reportable segment, the net amounts

expensed and paid for restructuring costs that

were incurred during the ~~six~~three months ended ~~June~~March 27, ~~2020~~2021 and during

our ~~2019~~2020 fiscal year and the remaining

accrued balance of restructuring costs as of ~~June~~March 27, ~~2020:~~

Technology and

Health Care

Value-Added

Distribution

Services

Total
Balance, December 29, 2018

$
30,291

$
1,434

$
31,725
Provision

13,935

770

14,705
Payments and other adjustments

(30,853)

(1,767)

(32,620)
Balance, December 28, 2019

$
13,373

$
437

$
13,810
Provision

19,945

776

20,721
Payments and other adjustments

(17,778)

(598)

(18,376)
Balance, June 27, 2020

$
15,540

$
615

$
16,155

2021:

Technology

and

Health Care

Value-Added

Distribution

Services

Total

Balance, December 28, 2019

13,373

437

13,810

Provision

30,935

1,158

32,093

Payments and other adjustments

(31,484)

(1,306)

(32,790)

Balance, December 26, 2020

12,824

289

13,113

Provision

2,803

128

2,931

Payments and other adjustments

(8,531)

(179)

(8,710)

Balance, March 27,

2021

7,096

238

7,334

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

~~(unaudited~~)

(unaudited

)

Note 1312

–

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 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

Six Months Ended

June 27,

June 29,

June 27,

June 29,

2020

2019

2020

2019
Basic

142,350

148,148

142,654

149,310
Effect of dilutive securities:

Restricted stock and restricted stock units

-

1,275

-

1,250

Diluted

142,350

149,423

142,654

150,560

~~During the three~~

Three Months Ended

March 27,

March 28,

2021

2020

Basic

142,298

142,967

Effect of dilutive securities:

Stock options, restricted stock and ~~six months ended June 27, 2020 we excluded 36 and 422 anti-dilutive shares, respectively, from the amount of diluted shares used in the calculation of earnings per share.~~

restricted stock units

1,100

128

Diluted

143,398

143,095

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

~~(unaudited~~)

(unaudited

)

Note 1413 – Income Taxes

For the ~~six~~three months ended ~~June~~March 27, ~~2020,~~2021 our effective tax rate was ~~24.2%~~

25.1

% compared to ~~24.1~~

22.4

% for the prior year

period. The difference between our effective tax rates and the federal statutory tax rate for the six months ended June 27, 2020 primarily relates to state and foreign income taxes and interest expense, tax charges and credits associated with legal entity reorganizations outside the U.S and a valuation allowance recognized on a portion of a deferred tax asset.

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

three months ended ~~June 29, 2019~~

March 27, 2021 was primarily ~~relates~~due to state and foreign income taxes and interest

expense.

The difference between

our effective tax rate and the federal statutory tax rate for the three months ended

March 28, 2020 primarily relates

to state and foreign income taxes and interest expense as well as tax charges and credits associated

with legal entity

reorganizations outside the United States.

The American Rescue Plan Act of 2021 (“ARPA”) was signed into law on March 11, 2021.

The ARPA included a

corporate income tax provision to further limit the deductibility of compensation

under Section 162(m) for tax

years starting after December 31, 2026.

Section 162(m) generally limits the deductibility of compensation paid

covered employees of publicly held corporations.

Covered employees include the CEO, CFO and the three highest

paid officers. The ARPA expands the group of covered employees to additionally include five of the highest paid

employees.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“

(“CARES Act”) was enacted in

response to the COVID-19 pandemic.

The CARES Act includes, but is not limited to, certain income tax

provisions that modify the Section 163(j) limitation of business interest and ~~Net Operating Loss (“NOL”)~~

net operating loss carryover and

carryback rules. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for years beginning in 2019 and 2020. The CARES Act eliminated the NOL income limitation for years beginning before 2021 and it extended the carryback period to five years for year losses incurred in 2018, 2019 and 2020.

We have analyzed the income tax provisions of the CARES Act and have accounted for the

impact in the ~~six~~three months ended ~~June 27,~~March 28, 2020, which did not have a

material impact on our consolidated

financial statements.

There are certain other non-income tax benefits available to us under

the CARES Act that

require further clarification or interpretation that may affect our consolidated financial statements

in the future.

On July 20, 2020, the U.S Internal Revenue Service (the “IRS”) issued final regulations related to the 2017 Tax Cuts and Jobs Act (“Tax Act”). The final regulations concern the global intangible low-taxed income (“GILTI”) and subpart F income provisions of the Tax Act. To provide flexibility to taxpayers, the IRS is permitting the application of these final regulations to prior tax years, if the taxpayer elects to do so. We do not believe the final regulations will have material impact to our consolidated financial statements.

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

liabilities” within our consolidated

balance sheets, as of ~~June~~March 27, ~~2020~~ 2021 was approximately ~~$110.5~~ $

89.2

million, of which ~~$92.6~~ $

73.0

million 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.

The tax years subject to examination by major tax jurisdictions include ~~the~~ years 2012, 2013, 2017 and forward by the ~~IRS,~~

U.S Internal Revenue Service (the “IRS”) as well as the years 2008 and forward for certain states and certain

foreign jurisdictions. All tax returns audited by the IRS are officially closed through ~~2011.~~2011 and 2014 through

2016. We are currently under audit with the IRS for the years 2012 and ~~2013. In the quarter ended December 28, 2019, we~~2013 and all fieldwork has been completed.

We reached a settlement with the U.S. Competent Authority to resolve certain transfer pricing issues related to

2012 and ~~2013.~~2013 in the quarter ended December 28, 2019. For all remaining outstanding issues for 2012 and 2013,

we have provided all necessary documentation to the Appellate Division to date and are waiting for responses. We ~~are also in~~

do not believe the final resolution will have a material impact to our consolidated financial statements. During the

quarter ended September 26, 2020 we finalized negotiations with the ~~Advanced~~Advance Pricing Division ~~to reach~~and reached an

agreement on an appropriate transfer pricing ~~methodology. As part~~methodology for the years 2014-2025. The objective of this ~~process, we have submitted documentation with the objective to reach a~~ resolution ~~for 2014-2024 in order~~

was to mitigate future transfer pricing audit adjustments. ~~It is possible that~~In the fourth quarter of 2020, we reached a favorable

resolution with the IRS ~~may have a material impact on our consolidated financial statements.~~

relating to select audit years.

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

the provision for income taxes. The

amount of tax interest expense was approximately $

0.5

million for the ~~six~~ three months ended ~~June~~March 27, ~~2020~~,2021, and

0.3

million for the ~~comparable prior year period, was approximately $1.8 million.~~ three months ended March 28, 2020.

The total amount of accrued interest is included in “Other

liabilities”, and was approximately ~~$19.1~~ $

14.6

million as of ~~June~~March 27, ~~2020~~2021 and ~~$18.0~~ $

14.0

million as of December ~~28, 2019.~~ 26, 2020.

NaN

penalties were accrued for the periods presented.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

~~(unaudited~~)

(unaudited

)

Note 1514

–

Derivatives and Hedging Activities

We are exposed to market risks as well as changes in foreign currency exchange rates as measured against the U.S.

dollar and each other, and changes to the credit risk of the derivative counterparties.

We attempt to minimize these

risks by primarily using foreign currency forward contracts and by

maintaining counter-party credit limits.

These

hedging activities provide only limited protection against currency exchange

and credit risks.

Factors that could

influence the effectiveness of our hedging programs include currency markets and

availability of hedging

instruments and liquidity of the credit markets.

All foreign currency forward contracts that we enter into are

components of hedging programs and are entered into for the sole purpose

of hedging an existing or anticipated

currency exposure.

We do not enter into such contracts for speculative purposes and we manage our credit risks by

diversifying our counterparties, maintaining a strong balance sheet and having

multiple sources of capital.

During 2019

we entered into foreign currency forward contracts to hedge a portion of our euro-denominated

foreign operations which are designated as net investment hedges. These net investment hedges offset the change

in the U.S dollar value of our investment in certain euro-functional currency subsidiaries due to fluctuating foreign

exchange rates.

Gains and losses related to these net investment hedges are recorded

Accumulated other

comprehensive loss

within our consolidated balance sheets.

Amounts excluded from the assessment of hedge

effectiveness are included in interest expense within our consolidated statements

of income.

The aggregate

notional value of this net investment hedge, which matures on

November 16, 2023

, is approximately ~~€200~~ €

200

million.

During the three ~~and six~~ months ended ~~June~~March 27, 2021 and March 28, 2020,

we recognized approximately ~~$1.2 million~~ $

1.1

and ~~$2.4~~ $

1.2

million, respectively, of interest savings as a result of this net investment hedge.

March 20, 2020

we entered into a total return swap for the purpose of ~~economic~~economically hedging our unfunded ~~non-qualified~~non-

qualified supplemental retirement plan (“SERP”) and our deferred compensation plan (“DCP”). This swap will

offset changes in our SERP and DCP liabilities.

At the inception, the notional value of the investments in these

plans was ~~$43.4~~ $

43.4

million.

At ~~June~~March 27, ~~2020,~~2021, the notional value of the investments in

these plans was ~~$54.0~~ $

77.5

million.

At ~~June~~March 27, ~~2020~~2021, the financing blended rate for this swap is was

based on LIBOR of ~~0.18%~~

0.12

% plus ~~0.38%~~

0.50

for a combined rate of ~~0.56%~~

0.62

%. ~~From~~

For the three months ended March ~~20, 2020, the effective date of the swap, to June~~ 27, ~~2020,~~2021, we have recorded a

gain, within the

selling, general and administrative line item in our consolidated statement

of income, of approximately ~~$6.7~~ $

2.7

million, ~~and $10.3 million, respectively,~~ net of transaction costs, related to this undesignated ~~swap for the three and six months ended June 27, 2020. This gain was offset by the change in fair value adjustment in deferred compensation, resulting in a neutral impact to our results of operations.~~ swap.

This swap is expected to be renewed on an

annual ~~basis.~~

basis after its current expiration date of March 29, 2022, and

is expected to result in a neutral impact to our

results of operations.

Fluctuations in the value of certain foreign currencies as compared

to the U.S. dollar may positively or negatively

affect our revenues, gross margins, operating expenses and retained earnings, all of which are expressed

in U.S.

dollars.

Where we deem it prudent, we engage in hedging programs using primarily

foreign currency forward

contracts aimed at limiting the impact of foreign currency exchange

rate fluctuations on earnings.

We purchase

short-term (i.e., generally

months or less) foreign currency forward contracts to protect against

currency

exchange risks associated with intercompany loans due from our international

subsidiaries and the payment of

merchandise purchases to our foreign suppliers.

We do not hedge the translation of foreign currency profits into

U.S. dollars, as we regard this as an accounting exposure, not an

economic exposure.

Our hedging activities have

historically not had a material impact on our consolidated financial statements.

Accordingly, additional disclosures

related to derivatives and hedging activities required by ASC 815 have

been omitted.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

~~(unaudited~~)

(unaudited

)

Note 1615 – Stock-Based Compensation

Our accompanying consolidated statements of income reflect pre-tax share-based

compensation expense of ~~$5.2~~ $

12.8

million ($~~4.2 million after-tax) and a credit of $12.4 million ($9.4~~

9.6

million after-tax) for the three ~~and six~~ months ended ~~June~~March 27, ~~2020, respectively. For~~2021 and pre-tax share

based compensation

credit of $

17.5

million ($

13.6

million after-tax) for the three ~~and six~~ months ended ~~June 29, 2019 we recorded pre-tax share-based compensation expense of $12.7 million ($9.6 million after-tax) and $19.8 million ($15.0 million after-tax), respectively.~~ March 28, 2020.

The ~~$12.4~~ $

17.5

million

credit for share-based compensation during the ~~six~~three months ended ~~June 27,~~March

28, 2020 ~~reflects~~reflected our reduced estimate

in expected achievement of performance targets resulting from the impact of COVID-19. Due to the significantly lower projected earnings in 2020, we are currently estimating that no performance shares granted under our 2018, 2019 or 2020 Long-Term Incentive Programs under our employee stock incentive plan will ultimately vest.

Our accompanying consolidated statements of cash flows present our

stock-based compensation expense (credit) as

an adjustment to reconcile net income to net cash provided by ~~(used in)~~ operating activities

for all periods presented.

In the

accompanying consolidated statements of cash flows, there were

benefits associated with tax deductions in

excess of recognized compensation as a cash inflow from financing

activities for the ~~six~~three months ended ~~June~~March 27,

2021 and March 28, 2020, ~~and June 29, 2019,~~ respectively.

Stock-based compensation represents the cost related to stock-based awards granted

to employees and ~~non-employee~~non-

employee directors.

We measure stock-based compensation at the grant date, based on the estimated fair value of

the award, and recognize the cost (net of estimated forfeitures) as compensation

expense ~~on a straight-line basis~~ over the requisite service

period.

Our stock-based compensation expense is reflected in selling, general

and administrative expenses in our

consolidated statements of income.

Stock-based awards are provided to certain employees and non-employee directors

under the terms of our 2020

Stock Incentive Plan ~~(formerly known as the 2013 Stock Incentive Plan),~~ and our 2015 Non-Employee Director Stock Incentive Plan ~~(together,~~

(together, the “Plans”).

The Plans

are administered by the Compensation Committee of the Board of ~~Directors. Equity-based~~Directors

(the “Compensation

Committee”).

Historically, equity-based awards ~~are~~have been granted solely in the form of restricted ~~stock/~~stock units ~~with~~

(“RSUs”).

However, in March 2021, our equity-based awards were granted in the ~~exception~~form of ~~providing~~ RSUs and non-qualified

stock ~~options to employees pursuant to certain pre-existing contractual obligations.~~

options.

Grants of ~~restricted stock/units~~RSUs are stock-based awards granted to recipients with specified

vesting provisions.

In the case of ~~restricted stock, common stock is delivered on the date of grant, subject to vesting conditions. In the case of restricted stock units,~~

RSUs, common stock is generally delivered on or following satisfaction of vesting

conditions.

We issue ~~restricted stock/units~~RSUs that

vest solely based on the recipient’s continued service over time (primarily ~~four-year~~four-year cliff vesting, except for grants

made under the 2015 Non-Employee Director Stock Incentive Plan, which

are primarily~~12-month~~

-month cliff vesting),

and ~~restricted stock/units~~RSUs that vest based on our achieving specified performance measurements

and the recipient’s continued

service over time (primarily ~~three-year~~three-year cliff vesting).

For these RSUs, we recognize the cost as compensation

expense on a straight-line basis.

During the three months ended March 27, 2021, as a result of the continuing

economic risk and uncertainty

resulting from the ongoing COVID-19 pandemic, the Compensation Committee

decided to adjust the form of

awards granted under our 2021 long-term incentive program for our 2021

fiscal year in a manner that focuses on

our long-term value by granting stock options and time-based RSUs rather

than performance-based RSUs.

Stock

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

stock at a fixed price following

vesting of the stock options.

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

price on the

date of grant.

Stock options issued during 2021 vest

one-third

per year based on the recipient’s continued service,

subject to the terms and conditions of the Plans, are fully vested

three years

from the grant date and have a

contractual term of

ten years

from the grant date, subject to earlier termination of the term upon certain events.

Compensation expense for these stock options is recognized using a graded vesting

method.

We estimate the fair

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

In addition to equity-based awards under the 2021 long-term incentive

program under the 2020 Stock Incentive

Plan, 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.

These awards will vest

% on the first anniversary of the grant date and

% on the second anniversary of the grant date and are recorded

as compensation expense using a graded vesting method.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited

)

With respect to time-based ~~restricted stock/units,~~RSUs, we estimate the fair value on the date of grant based on our closing

stock ~~price.~~ price at

time of grant.

With respect to performance-based ~~restricted stock/units,~~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 of the Board of Directors.~~ Committee.

Although there is no guarantee that performance targets will be

achieved, we estimate the fair value of performance-based ~~restricted stock/units~~RSUs based on

our closing stock price at time of grant.

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

The Plans provide for adjustments to the performance-based restricted ~~stock/~~

stock units targets for significant events,

including, without limitation, acquisitions, divestitures, new business ventures,

certain capital transactions ~~(including~~

(including share repurchases), 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 and

foreign exchange fluctuations.

Over the performance period, the number of shares of common

stock that will

ultimately vest and be issued and the related compensation expense

is adjusted upward or downward based upon

our estimation of achieving such performance targets.

The ultimate number of shares delivered to recipients and

the related compensation cost recognized as an expense will be based

on our actual performance metrics as defined

under the Plans.

As a result of the Separation, the number of our unvested equity-based awards from previous grants made under our Long-term Incentive Program under the Plans was increased by a factor of approximately 1.2633, along with a corresponding ~~decrease~~ ~~in our price per share.~~

Total unrecognized compensation cost related to unvested awards as of ~~June~~March 27, ~~2020~~2021 was ~~$63.3~~ $

110.0

million, which

is expected to be recognized over a weighted-average period of approximately ~~2.6~~

2.8

years.

The following weighted-average assumptions were used in determining

the fair values of stock options using the

Black-Scholes valuation model:

Expected dividend yield

0.0

Expected stock price volatility

25.80

Risk-free interest rate

0.94

Expected life of options (years)

6.00

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

the foreseeable future. The expected stock price volatility is based

on implied 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

-year

expected life of the options was determined using the simplified method

for estimating the expected term as

permitted under SAB Topic 14.

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

the value

ultimately realized by recipients of stock options, and subsequent events

are not indicative of the reasonableness of

the original estimates of fair value made by us.

The following table summarizes stock option activity under the Plans during

the three months ended March 27,

2021:

Weighted

Average

Weighted

Remaining

Average

Contractual

Aggregate

Exercise

Life in

Intrinsic

Price

Years

Value

Outstanding at beginning of period

Granted

788

62.71

Forfeited

Outstanding at end of period

788

62.71

9.9

4,152

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited

)

The following tables summarize the activity of our unvested ~~restricted stock/units~~RSUs for

the ~~six~~three months ended ~~June~~March 27, ~~2020:~~

Time-Based Restricted Stock/Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share
Outstanding at beginning of period

1,417

$
58.72

Granted

379

60.00

Vested

(290)

66.03

Forfeited

(34)

60.05

Outstanding at end of period

1,472

$
57.58

$
56.67

Performance-Based Restricted Stock/Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share
Outstanding at beginning of period

1,459

$
61.41

Granted

(1,105)

57.30

Vested

(319)

67.55

Forfeited

(31)

57.78

Outstanding at end of period

4

$
52.62

$
56.67
2021:

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

Time-Based Restricted Stock Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share

Outstanding at beginning of period

1,459

57.61

Granted

797

62.75

Vested

(256)

66.92

Forfeited

(7)

59.59

Outstanding at end of period

1,993

58.46

67.98

Performance-Based Restricted Stock Units

Weighted Average

Grant Date Fair

Intrinsic Value

Shares/Units

Value Per Share

Per Share

Outstanding at beginning of period

136

53.52

Granted

189

58.35

Vested

(78)

51.92

Forfeited

(4)

59.05

Outstanding at end of period

243

59.21

67.98

Note 1716 – Supplemental Cash Flow Information

Cash paid for interest and income taxes was:

Six Months Ended

June 27,

June 29,

2020

2019
Interest

$
16,925

$
32,053
Income taxes

31,553

94,429

Three Months Ended

March 27,

March 28,

2021

2020

Interest

7,763

9,951

Income taxes

13,425

12,613

During the ~~six~~three months ended ~~June~~March 27, 2021 and March 28, 2020, ~~and June 29, 2019,~~ we

had a ~~$13.5~~ $

4.7

million and ~~$(0.4)~~ $

20.2

million of

non-cash net unrealized ~~gain (loss)~~gains related to foreign currency hedging activities,

respectively.

Note 1817 – Legal Proceedings

August 31, 2012

Archer and White Sales, Inc.

(“Archer”) filed a complaint against

Henry Schein, Inc. as well

as Danaher Corporation and its subsidiaries Instrumentarium Dental, Inc., Dental Equipment, LLC, Kavo Dental

Technologies, LLC and Dental Imaging Technologies Corporation (collectively, the “Danaher Defendants”)

in the

U.S. District Court for the Eastern District of Texas, Civil Action No. 2:12-CV-00572-JRG, styled as an antitrust

action under Section 1 of the Sherman Act, and the Texas Free Enterprise Antitrust Act.

Archer alleges a

conspiracy between Henry Schein, an unnamed company and the Danaher Defendants to terminate or limit

Archer’s distribution rights.

August 1, 2017

Archer

filed an amended complaint, adding

Patterson Companies,

Inc. (“Patterson”) and Benco Dental Supply Co. (“Benco”) as defendants

, and

alleging that Henry Schein,

Patterson, Benco and Burkhart Dental Supply conspired to fix prices and refused to compete with each other for

sales of dental equipment to dental professionals and agreed to enlist their common suppliers, the Danaher

Defendants, to join a price-fixing conspiracy and boycott by reducing the distribution territory of, and eventually

terminating, their price-cutting competing distributor Archer.

Archer seeks damages in an amount to be proved at

trial, to be

trebled with interest and costs, including attorneys’ fees, jointly and severally, as well as injunctive

relief.

October 30, 2017

Archer

filed a second amended complaint, to

add additional allegations that it believes

support its claims. The named parties and causes of action are the same as the August 1, 2017 amended complaint.

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited

)

On October 1, 2012, we filed a motion for an order: (i) compelling Archer

to arbitrate its claims against us; (2)

staying all proceedings pending arbitration; and (3) joining the Danaher

Defendants’ motion to arbitrate and stay.

On May 28, 2013, the Magistrate Judge granted the motions to arbitrate

and stayed proceedings pending arbitration.

On June 10, 2013, Archer moved for reconsideration before the District Court

judge.

On December 7, 2016, the

District Court Judge granted Archer’s motion for reconsideration and lifted the stay.

Defendants appealed the

District Court’s order.

On December 21, 2017, the U.S. Court of Appeals for the Fifth Circuit

affirmed the District

Court’s order denying the motions to compel arbitration.

On June 25, 2018, the Supreme Court of the United States

granted defendants’ petition for writ of certiorari.

On October 29, 2018, the Supreme Court heard oral arguments.

On January 8, 2019, the Supreme Court issued its published decision vacating

the judgment of the Fifth Circuit and

remanding the case to the Fifth Circuit for further proceedings consistent with

the Supreme Court’s opinion.

April 2, 2019, the District Court stayed the proceeding in the trial court pending

resolution by the Fifth Circuit.

The

Fifth Circuit heard oral argument on May 1, 2019 on whether the case should be arbitrated.

The Fifth Circuit

issued its opinion on August 14, 2019 affirming the District Court’s order denying defendants’ motions to compel

arbitration.

Defendants filed a petition for rehearing en banc before the Fifth

Circuit.

The Fifth Circuit denied that

petition.

On October 1, 2019, the District Court set the case for trial

on February 3, 2020, which was subsequently

moved to January 29, 2020.

On January 24, 2020 the Supreme Court granted our motion to stay

the District Court

proceedings, pending the disposition of our petition for writ of certiorari, which

was filed on January 31, 2020.

Archer conditionally cross petitioned for certiorari on an arbitration issue

on March 2, 2020.

On June 15, 2020, the

Supreme Court granted our petition for writ of certiorari, and denied Archer’s conditional

petition for certiorari, and

thus the District Court proceedings ~~remain~~remained stayed.

After briefing from the parties and several amici, the case was

argued before the Supreme Court on December 8, 2020.

On January 25, 2021, the Supreme Court dismissed the

writ of certiorari as improvidently granted.

That action dissolved the stay the Supreme Court had previously

granted.

The U.S. District Court for the Eastern District of Texas then set the case for trial, and jury selection was

scheduled to begin on June 1, 2021.

Patterson and the Danaher Defendants settled with Archer and

they have been

dismissed from the case with prejudice.

Benco ~~is still a defendant and filed a notice of joinder in~~

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

~~Henry Schein’s motion~~has agreed to ~~compel arbitration~~settle the case with the ~~District Court. We intend to defend ourselves vigorously against this action.~~

On March 7, 2018, Joseph Salkowitz, individually and on behalf of all others similarly situated, filed a putative class action complaint for violation of the federal securities laws against Henry Schein, Inc., Stanley M. Bergman and Steven Paladino in the U.S. District Court for the Eastern District of New York, Case No. 1:18-cv-01428. The complaint sought to certify a class consisting of all persons and entities who, subject to certain exclusions, purchased Henry Schein securities from March 7, 2013 through February 12, 2018 (the “Class Period”). The complaint alleged, among other things, that the defendants had made materially false and misleading statements about Henry Schein’s business, operations and prospects during the Class Period, thereby causing the plaintiff and members of the purported class to pay artificially inflated prices for Henry Schein securities. Those alleged statements included matters relating to the issues in the In re Dental Supplies Antitrust Litigation, which Henry Schein settled and which the court dismissed in June 2019, and in the United States Federal Trade Commission (“FTC”) administrative proceeding, in which an administrative law judge ruled in Henry Schein’s favor in October 2019 after a trial, as described in our prior filings with the SEC. The complaint sought unspecified monetary damages and a jury trial. Pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), the court appointed lead plaintiff and lead counsel on June 22, 2018 and recaptioned the putative class action as In re Henry Schein, Inc. Securities Litigation, under the same case number. Lead plaintiff filed a consolidated class action complaint on September 14, 2018. The consolidated class action complaint asserts similar claims against the same defendants (plus Timothy Sullivan) on behalf of the same putative class of purchasers during the Class Period. It alleges that Henry Schein’s stock price was inflated during that period because Henry Schein had misleadingly portrayed its dental-distribution business “as successfully producing excellent profits while operating in a highly competitive environment” even though, “in reality, [Henry Schein] had engaged for years in collusive and anticompetitive practices in order to maintain Schein’s margins, profits, and market share.” The complaint alleges that the stock price started to fall from August 8, 2017, when the company announced below-expected financial performance that allegedly “revealed that Schein’s poor results were a product of abandoning prior attempts to inflate sales volume and margins through anticompetitive collusion,” through February 13, 2018, after the FTC filed a complaint against Benco,plaintiff. Henry Schein and ~~Patterson alleging~~the

plaintiff have agreed to settle this matter for an amount that ~~they violated U.S. antitrust laws. The complaint alleges violations of Section 10(b) of~~is not material to the ~~Securities Exchange Act of 1934, as amended (the “Exchange Act”)~~ Company

and ~~Rule 10b-5 and Section 20(a) of the Exchange Act. On September 27, 2019, the court issued a decision partially granting and partially denying defendants’ motion~~ to dismiss the securities action. The court dismissed all claims against Messrs. Bergman and Paladino as well as the Section 10(b) claim against Henry Schein to the extent that that claim relied on the Company’s financial results and margins to allege a material misstatement or omission. The court also dismissed the Section 10(b) claim against Henry Schein to the extent that it relied on the Company’s August 8, 2017 disclosure to allege loss causation. The court otherwise denied the motion as to Henry Schein and Mr. Sullivan. Henry Schein and Mr. Sullivan moved for partial reconsideration of the court’s decision. Pursuant to all parties’ request, the court temporarily took the motion off the calendar after it was fully briefed. The parties later agreed to resolve this matter in exchange for a cash payment of $35 million, which will be covered by the Company’s insurance and will have no earnings impact to the Company. The proposed settlement is subject to various conditions, including court approval. The Court preliminarily approved the proposed settlement on May 5, 2020 and has scheduled a fairness hearing for September 16, 2020.

case

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

count under Section 1 of the Sherman Act, and seeks equitable relief, treble damages, reasonable attorneys’ fees and costs and expenses, and pre-judgment and post-judgment interest. On June 15, 2018, an amended complaint was filed asserting the same allegations against the same parties and adding McKesson Medical-Surgical, Inc. as a defendant. On November 30, 2018, the District Court granted defendants’ motion to dismiss and entered a final judgment, dismissing plaintiffs’ complaint with prejudice.

On December 27, 2018, plaintiffs appealed the District Court’s decision to the Seventh Circuit Court of Appeals. The parties argued the appeal on September 27, 2019. On March 5, 2020, the Seventh Circuit Court of Appeals reversed the District Court’s decision. The Seventh Circuit held that plaintiffs failed to adequately allege the necessary conspiracy by the defendants, but should be provided an opportunity to amend their complaint. The Seventh Circuit vacated the District Court’s judgment, and remanded the case for further proceedings consistent with its opinion. Plaintiffs’ counsel have indicated that they intend to amend their complaint.

May 29, 2018

, an amended complaint was filed in the MultiDistrict Litigation (“MDL”)

proceeding In Re

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

in an action entitled

The County of

Summit, Ohio et al.

v. Purdue Pharma, L.P.,

et al., Civil Action No. 1:18-op-45090-DAP (“County of

Summit

Action”), in the U.S. District Court for the Northern District of Ohio,

adding Henry Schein, Inc., Henry Schein

Medical Systems, Inc. and others as ~~defendants.~~ defendants

Summit County ~~alleges~~alleged that manufacturers of prescription opioid

drugs engaged in a false advertising campaign to expand the market for such drugs and their own market share and

that the entities in the supply chain (including Henry Schein, Inc. and Henry Schein Medical Systems, Inc.) reaped

financial rewards by refusing or otherwise failing to monitor appropriately and restrict the improper distribution of

those drugs.

On October 29, 2019, the Company was dismissed with prejudice from this lawsuit. Henry Schein,

working with Summit County, donated $1$1 million to a foundation and paid $250,000 of Summit County’s

expenses, as described in our prior ~~filing~~filings with the SEC.

In addition to the County of Summit Action,

Henry Schein and/or one or more of its affiliated companies

have ~~currently~~ been

named as a defendant in multiple lawsuits (currently less than one-hundred

and fifty ~~(150)~~(

150

)), which

allege claims

similar to those alleged in the County of Summit ~~Action.~~ Action

. These actions consist of some that have been consolidated

within the MDL and are currently abated for discovery purposes, and others

which remain pending in state courts

and are proceeding independently and outside of the MDL.

On October 9, 2020, the Circuit Court of the 17th

Judicial Circuit in and for Broward County, Florida, Case No. CACE19018882, granted Henry Schein’s motion to

dismiss the claims brought against it in the action filed by North

Broward Hospital District et. al.

The Florida court

gave plaintiffs until November 24, 2020 to replead their claims against Henry Schein.

On January 8, 2021, Henry

Schein filed a motion to dismiss the Amended Complaint.

By Order entered on March 24, 2021, the Circuit Court

of Washington County,

Arkansas, Case No. 72-CV20-156, granted Henry Schein’s motion to dismiss the claims

brought against it in the action filed by Fayetteville Arkansas Hospital Company, LLC, et al.

The Arkansas court

gave plaintiffs until forty-five (45) days from the date the court enters an order or orders deciding

all other motions

Table of Contents

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited

)

to dismiss currently pending before the court, to replead their claims against

Henry Schein.

An action filed by

Tucson Medical Center et al. was previously scheduled for trial beginning on June

1, 2021 but the court has vacated

that trial date.

At this time, the only cases set for trial are the ~~action~~actions filed by ~~Tucson Medical Center et al., which is currently scheduled for a 30-day trial beginning on June 1, 2021, and the action filed by~~

West Virginia

University Hospitals,

Inc. et al., which is currently scheduled for a non-jury liability trial on ~~Plaintiffs’~~plaintiffs’ public

nuisance claims on

November 1, 2021, and DCH Health Care Authority, et al., which is currently scheduled for a liability jury trial on

plaintiffs’ public nuisance claims on March 22, 2021. These actions consist of some that have been consolidated within the MDL and are currently abated for discovery purposes, and others which remain pending in state courts and are proceeding independently and outside of the MDL. July 18, 2022.

Of Henry Schein’s ~~2019~~2020 revenue of approximately ~~$10~~ $

10.1

billion from continuing operations, sales of opioids represented less than

one-tenth of 1 ~~percent~~.

percent.

Opioids represent

a negligible part of our business.

We intend to defend ourselves vigorously against these actions.

September 30, 2019

, the

City of Hollywood Police Officers Retirement System, individually and on behalf of

all others similarly situated

, filed a putative class action complaint for violation of the federal

securities laws

against

Henry Schein, Inc., Covetrus, Inc., and Benjamin Shaw and Christine Komola (Covetrus’s then Chief

Executive Officer and Chief Financial Officer, ~~respectively)~~respectively

) in the U.S. District Court for the Eastern District of

New York,

Case No. 2:19-cv-05530-FB-RLM.

The complaint seeks to certify a class consisting of all persons and

entities who, subject to certain exclusions, purchased or otherwise acquired Covetrus

common stock from February

8, 2019 through August 12, 2019.

The case relates to the Animal Health Spin-off and Merger of the Henry Schein

Animal Health Business with Vets First Choice in February 2019.

The complaint alleges violations of Sections

10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and ~~SEC~~ Securities and Exchange Commission

Rule 10b-5 and asserts that defendants’ statements in the offering documents and after the transaction were

materially false and misleading

because they purportedly overstated Covetrus’s capabilities as to inventory

management and supply-chain services, understated the costs of integrating

the Henry Schein Animal Health

Business and Vets

First Choice, understated Covetrus’s separation costs from Henry Schein, and understated the

impact on earnings from online competition and alternative distribution

channels and from the loss of an allegedly

large customer in North America just before the Separation and Merger.

The complaint seeks unspecified monetary

damages and a jury trial.

Pursuant to the provisions of the PSLRA, the court appointed

lead plaintiff and lead

counsel on December 23, 2019.

Lead plaintiff filed a Consolidated Class Action

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

Complaint on February 21,

2020.

Lead plaintiff added Steve Paladino, our Chief Financial Officer, as a defendant in the action.

Lead plaintiff filed

an Amended Consolidated Class Action Complaint on May 21, 2020,

in which it added a claim that Mr. Paladino is

a “control person” of Covetrus.

We intend to defend ourselves vigorously against this action.

On ~~November 15, 2019, Frank Finazzo~~

February 5, 2021

Jack Garnsey filed a putative shareholder derivative action on behalf of ~~Henry Schein,~~Covetrus, Inc. ~~against various present and former directors and officers of Henry Schein~~

in the

U.S. District Court for the Eastern District of New York, ~~Case No. 1:19-cv-6485-LDH-JO. The named~~naming as defendants ~~in the action are Stanley M. Bergman,~~

Benjamin Shaw, Christine T.

Komola, Steven Paladino, ~~Timothy J. Sullivan, Barry J. Alperin, Lawrence S. Bacow, Gerald A. Benjamin, James P. Breslawski, Paul Brons, Shira Goodman, Joseph~~Betsy Atkins, Deborah G. Ellinger, Sandra L. ~~Herring, Donald J. Kabat, Kurt Kuehn,~~Helton, Philip A. ~~Laskawy, Anne H. Margulies, Karyn Mashima, Norman S. Matthews,~~Laskaway, Mark J.

Manoff, Edward M. McNamara, Ravi Sachdev, David E. ~~Mlotek, Carol Raphael, E. Dianne Rekow, Bradley T. Sheares,~~Shaw, Benjamin Wolin, and ~~Louis W. Sullivan, with~~ Henry Schein, Inc., with

Covetrus, Inc.

named as a nominal defendant.

The ~~Complaint~~complaint alleges that

the individual defendants breached their

fiduciary duties under state law in connection with the same allegations asserted in the City of Hollywood securities

class action described above and further alleges that Henry Schein aided and abetted such breaches. The complaint

also asserts claims for contribution under the federal securities laws against Henry Schein and ~~state law relating to~~other defendants,

also arising out of the allegations in the ~~antitrust actions,~~City of Hollywood lawsuit.

The complaint seeks declaratory, injunctive,

and monetary relief. We intend to defend ourselves vigorously against this action.

On April 8, 2021 the ~~In re Henry Schein, Inc. Securities Litigation, and~~Court

entered an order staying the Garnsey action until forty-five (

) days after a decision is issued finally resolving the

motions to dismiss in the City of Hollywood securities class action described above. The complaint seeks declaratory, injunctive, and monetary relief on behalf of Henry Schein. On January 6, 2020, counsel who filed the Finazzo case filed another, virtually identical putative shareholder derivative action on behalf of Henry Schein against the same defendants, asserting the same claims and seeking the same relief. That case, captioned Mark Sloan v. Stanley M. Bergman, et al., is also pending in the U.S. District Court for the Eastern District of New York, Case No. 1:20-cv-0076. On January 24, 2020, the court consolidated the Finazzo and Sloan cases under the new caption In re Henry Schein, Inc. Derivative Litigation, No. 1:19-cv-06485-LDH-JO, and appointed the counsel in these cases as co-lead counsel for the consolidated action. The parties agreed to a resolution of this matter subject to various conditions, including court approval. The contemplated settlement, if finally approved, would involve the adoption of certain procedures but would not involve the payment of any money except a fee to the plaintiffs’ attorneys that is immaterial. The Court preliminarily approved the proposed settlement on June 10, 2020, and has scheduled a fairness hearing for September 22, 2020.

Class 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

consolidated financial position, liquidity or results of operations.

As of ~~June~~March 27, ~~2020,~~2021, 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

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HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited

)

expenses, was not material to our financial position, results of operations or cash flows. Our method for

determining estimated losses considers currently available facts, presently enacted laws and regulations and other

factors, including probable recoveries from third parties.

~~Table of Contents~~

~~HENRY SCHEIN, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(unaudited~~)

Note 1918 – Related Party Transactions

On February 7, 2019 (the “Distribution Date”), we completed the separation

(the “Separation”) and subsequent

merger (“Merger”) of our animal health business (the “Henry Schein Animal Health Business”) with Direct

Vet

Marketing, Inc. (d/b/a Vets First Choice, “Vets

First Choice”).

This was accomplished by a series of transactions

among us, Vets

First Choice, Covetrus, Inc. (f/k/a HS Spinco, Inc. “Covetrus”), a

wholly owned subsidiary of ours

prior to the Distribution Date, and HS Merger Sub, Inc., a wholly owned subsidiary

of Covetrus (“Merger Sub”). In

connection with the Separation, we contributed, assigned and transferred

to Covetrus certain applicable assets,

liabilities and capital stock or other ownership interests relating to the Henry

Schein Animal Health Business. On

the Distribution Date, we received a tax-free distribution of $

1,120

million from Covetrus pursuant to certain debt

financing incurred by Covetrus. On the Distribution Date and prior to the

Animal Health Spin-off, Covetrus issued

shares of Covetrus common stock to certain institutional accredited investors

for $

361.1

million (the “Share Sale”).

The proceeds of the Share Sale were paid to Covetrus and distributed to us. Subsequent

to the Share Sale, we

distributed, on a pro rata basis, all of the shares of the common stock

of Covetrus held by us to our stockholders of

record as of the close of business on January 17, 2019 (the “Animal Health

Spin-off”).

In connection with the completion of the Animal Health Spin-off during our 2019 fiscal year, ~~2019,~~ we entered into a

transition services agreement with Covetrus under which we ~~have~~ agreed to provide certain transition services for up to

twenty-four months in areas such as information technology, finance and accounting, human resources, supply

chain, and real estate and facility services.

Services provided under this transition services agreement ended in

December 2020.

During the three ~~and six~~ months ended ~~June 27,~~March 28, 2020, we recorded approximately

$~~4.3~~

4.4

million ~~and $8.8 million, respectively,~~ of fees

for these services. ~~During the three and six months ended June 29, 2019, we recorded approximately $4.8 million and $8.3 million, respectively, of fees for these services.~~

Covetrus also ~~purchases~~purchased certain products from us pursuant

to the transition services ~~agreement.~~ agreement,

which ended in December 2020.

During the three ~~and six~~ months ended ~~June 27,~~March 28, 2020, net sales

to Covetrus were

approximately $20.1 million and $41.2 million, respectively. During the three and six months ended June 29, 2019, net sales to Covetrus were approximately $23.9 million and $38.5 million, respectively. Sales to Covetrus under the transition services agreement are expected to continue through October 2020. At June 27, 2020 we had $4.0 million of receivables due from Covetrus and $0.4 million payable to Covetrus under this transition services agreement.

21.1

million.

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

formed on July 1, 2018, we entered into a ten-year royalty agreement with Internet Brands whereby we will pay

Internet Brands approximately $~~31.0~~$31.0 million annually for the use of their intellectual property.

During the three ~~and six~~

months ended ~~June~~March 27, 2021 and March 28, 2020, we recorded $

7.8

million and ~~$15.6~~ $

7.8

million, respectively in

connection with costs related to this royalty agreement. ~~During the three and six months ended June 29, 2019, we recorded $7.8 million and $15.6 million, respectively in connection with costs related to this royalty agreement.~~

As of ~~June~~March 27, ~~2020~~2021 and December ~~28, 2019,~~26, 2020, Henry

Schein One, LLC had a net receivable balance due from Internet Brands of ~~$15.6~~

1.7

million and ~~$9.4~~ $

4.7

million,

respectively, comprised of amounts related to results of operations and the royalty agreement.

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

method.

During the three ~~and six~~ months ended ~~June~~March 27, 2021 and March 28,

2020, we recorded net sales of ~~$7.7~~ $

15.5

million and ~~$23.0~~ $

15.4

million, respectively, to such entities.

During the three ~~and six~~ months ended ~~June 29, 2019, we recorded net sales of $28.7 million~~March 27, 2021 and ~~$45.5 million, respectively, to such entities. During the three and six months ended June 27,~~March

28, 2020, we purchased ~~$1.7~~ $

3.8

million and ~~$4.5~~ $

3.0

million, respectively from such entities. ~~During the three~~

At March 27, 2021 and ~~six months ended June 29, 2019, we purchased $2.2 million and $5.0 million, respectively, from such entities. At June 27,~~

December 26, 2020, ~~and December 28, 2019,~~ we had in aggregate ~~$67.0~~ $

36.7

million and ~~$60.8~~ $

36.4

million, due from our equity affiliates, and ~~$6.6~~ $

7.8

million and ~~$4.9~~ $

8.6

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,~~

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

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

terms.

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

to, those discussed in ~~this Quarterly Report on Form 10-Q, and in particular~~

the ~~risks discussed under the caption “Risk Factors” in Item 1A of this report and those discussed in other~~ 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 ~~percentage~~ impact

on these items), the ~~efficacy~~rate and ~~impact of the Company’s cost reduction initiatives, the rate at~~consistency with which dental and other practices

resume or maintain normal

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

and COVID-19 related product sales and inventory levels and whether ~~one or more~~

additional resurgences of the virus will

adversely impact the resumption of normal ~~operations.~~ operations, the impact of restructuring

programs as well as of any future

acquisitions, and more generally current expectations regarding

performance in current and future periods.

Forward looking statements also include the ~~Company’s~~(i) ability of the Company

to make additional testing available, the

nature of those tests and the number of tests intended to be made available

and the timing for availability, the nature

of the target market, as well as the efficacy or relative efficacy of the test results given that the test efficacy has

not

been, or will not have been, independently verified under normal FDA ~~procedures.~~

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: ~~effects~~risks associated with COVID-19,

as well as other disease outbreaks, epidemics,

pandemics, or similar wide spread public health concerns and other natural

disasters or acts of ~~a highly competitive and consolidating market; increased competition by third party online commerce sites;~~terrorism; our

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

our ~~dependence upon sales personnel, customers, suppliers~~ability to develop or acquire and ~~manufacturers; our dependence on our senior management; fluctuations in quarterly earnings; risks from expansion of customer purchasing power~~

maintain and ~~multi-tiered costing structures; increases in shipping costs for our~~protect new products ~~or other service issues~~(particularly technology products) and

technologies that achieve market

acceptance 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; risks associated with COVID-19, as well as other disease outbreaks, epidemics, pandemics, or similar wide spread public health concerns and other natural disasters; risks associated with the United Kingdom’s withdrawal from the European Union;acceptable margins; transitional challenges associated with acquisitions,

dispositions and joint

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

risks associated with

acquisitions, dispositions and joint ventures; certain provisions

in our governing documents that may discourage

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

competition from third-

party online commerce sites) and consolidating market; the potential repeal or

judicial prohibition on

implementation of the Affordable Care Act; changes in the health care industry; risks from

expansion of customer

purchasing power and multi-tiered costing structures; increases in shipping costs

for our products or other service

issues with our third-party shippers; general global macro-economic and political

conditions, including

international trade agreements and potential trade barriers; failure to

comply with existing and future regulatory

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

to comply with laws and regulations

relating to health care fraud or other laws and regulations; failure to comply with

laws and regulations relating to

the confidentiality of sensitive personal information or standards in electronic

health records or transmissions;

changes in tax legislation; litigation risks; new or unanticipated litigation

developments and the status of litigation

matters; the dependence on our continued product development, technical support and successful marketing in the technology segment; our dependence on third parties for certain technologically advanced components; risks from disruption to our information systems; cyberattacks or other privacy or data security breaches; ~~certain provisions~~risks associated

with our global operations; our

dependence on our senior management, as well as employee hiring and

retention; and disruptions in ~~our governing documents that may discourage third-party acquisitions of us; and changes in tax legislation.~~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.

~~Table of Contents~~

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~~) (www.henryschein.com)

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

Recent Developments

COVID-19 Pandemic

In March 2020, the World Health Organization declared ~~the Novel Coronavirus Disease 2019 (“COVID-19”)~~COVID-19 a pandemic. The COVID-19 pandemic ~~has~~

negatively impacted the global economy, disrupted global supply chains and created significant volatility and

disruption of global financial markets. In response, many countries ~~have~~ implemented

business closures and restrictions,

stay-at-home and social distancing ordinances and similar measures

to combat the pandemic, which significantly

impacted global business and dramatically reduced demand for dental

products and certain medical products in the

second quarter ~~and year-to-date~~ of 2020.

Demand increased in the second half of 2020 and continued into

the first quarter of 2021,

resulting in growth over the prior year driven by sales of PPE and COVID-19

related products.

Globally, our

medical ~~sales in the second quarter benefited~~business continued to benefit from sales of ~~personal protection equipment (PPE), which increased nearly 140%~~ such PPE and other

COVID-19 related products for the three

months ended March 27, 2021, recording net sales of $288.2 million,

an increase of approximately 381.3%

compared to the prior year.

Excluding sales of PPE and other COVID-19 related products, medical

internal sales in

local currencies was down 6.8%, in part due to a mild influenza season that impacted

diagnostic and consumable

merchandise sales, as well as from lower pharmaceutical sales.

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The ~~15.9% decrease~~8.4% increase in technology and value-added services net sales for the

three months ended ~~June~~March 27, ~~2020~~ 2021

includes ~~a decrease~~an increase of ~~15.4%~~ 7.0%

local currency revenue ~~(17.0% decrease~~(3.6% increase in internally generated revenue ~~partially offset by 1.6%~~

and 3.4%

growth from acquisitions) and ~~a decrease~~an increase of ~~0.5%~~ 1.4%

related to foreign currency exchange.

Sales growth was driven

by our practice management business, as well as strong financial services

revenue, which benefited from dental

equipment sales growth.

During the

~~Table of Contents~~

quarter ~~in line with the resumption of dental practice operations,~~ended March 27, 2021, the trend for transactional

software revenues

improved compared to the prior year, as more patients visited dental practices worldwide.

Although dental and medical practices began to re-open globally in the latter half of the second quarter, patient volumes are below pre-COVID-19 levels and a number of regions in the U.S and certain international geographies are experiencing an uptick in COVID-19 cases. As such, there is an ongoing risk that the COVID-19 pandemic may continue to have a material adverse effect on our net sales in future periods.

Gross Profit

Gross profit and gross margin percentages by segment and in total for the three months

ended ~~June~~March 27, 2021 and

March 28, 2020 ~~and June 29, 2019~~ were as follows (in thousands):

June 27,

Gross

June 29,

Gross

Decrease

2020

Margin %

2019

Margin %

$

%
Health care distribution

$
381,070

24.4
%

$
676,304

29.4
%

$
(295,234)

(43.7)
%
Technology and value-added services

72,683

69.1

90,433

72.3

(17,750)

(19.6)

Total excluding Corporate TSA revenues

453,753

27.3

766,737

31.6

(312,984)

(40.8)

Corporate TSA revenues

541

2.7

694

2.9

(153)

(22.0)

Total

$
454,294

27.0

$
767,431

31.4

$
(313,137)

(40.8)

March 27,

Gross

March 28,

Gross

Increase / (Decrease)

2021

Margin %

2020

Margin %

Health care distribution

789,984

28.4

653,316

28.7

136,668

20.9

Technology and value-added services

100,867

70.5

92,085

69.8

8,782

9.5

Total excluding Corporate TSA revenues

890,851

30.5

745,401

31.0

145,450

19.5

Corporate TSA revenues

613

2.9

(613)

Total

890,851

30.5

746,014

30.7

144,837

19.4

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

throughout our

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

realize substantially higher gross margin percentages in our technology segment than in

our health care distribution

segment. These higher gross margins result from being both the developer and

seller of software products and

services, as well as certain financial services. The software industry

typically realizes higher gross margins to

recover investments in research and development.

~~In connection with the completion of the Animal Health Spin-off (see Note 2 for additional details), we entered into a~~

During December 2020, our previous transition services agreement with

Covetrus, ~~pursuant~~in connection with the

completion of the Animal-Health Spin-off, concluded.

Under this agreement, Covetrus had agreed to ~~which Covetrus purchases~~ purchase

certain products from ~~us. The agreement provides that these products will be sold to Covetrus~~us at a mark-up that ~~ranges~~ranged from 3% to 6% of our product

cost to cover handling costs. ~~We expect these sales to continue through October 2020.~~

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

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

been the most significant drivers affecting

our gross profit margin. For example, sales of pharmaceutical products are generally

at lower gross profit margins

than other products. Conversely, sales of our private label products achieve gross profit margins that are higher than

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

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

who

normally purchase lower volumes at greater frequencies.

Health care distribution gross profit ~~decreased $295.2~~increased $136.7 million, or ~~43.7%~~20.9%, for

the three months ended ~~June~~March 27, ~~2020~~ 2021

compared to the prior year period, due primarily to the ~~COVID-19 pandemic.~~ increase in net sales

discussed above.

Health care

distribution gross profit margin decreased to ~~24.4%~~28.4% for the three months ended ~~June~~March 27, ~~2020~~

2021 from ~~29.4%~~28.7% for the

comparable prior year ~~period.~~ period due to adjustments recorded for PPE inventory

and COVID-19 related products, as

well as influenza diagnostic kits, caused by volatility of pricing and demand

experienced during the quarter.

Such

conditions may recur and adversely impact gross profit margins in future periods,

although we do not expect further

material inventory adjustments in 2021.

The overall ~~decrease~~increase in our health care distribution gross profit

attributable to ~~a decrease~~an increase of ~~$236.1~~$120.5 million infrom internally generated

revenue ~~a $58.4~~and $27.2 million increase in gross

profit from acquisitions, partially offset by an $11.0 million decline in gross profit due to the decrease

in the gross

margin rates and $0.7 million reduction in gross profit from acquisitions. Gross profit margin was negatively affected by lower gross profit on sales of PPE products as well as significant charges recorded for PPE inventory due to volatility of pricing for PPE, which may recur in future periods; a greater mix of sales outside of North America where margins are typically lower, and by fixed costs included in cost of goods sold that adversely affect gross margin rates when sales are lower. During the quarter, we continued to earn lower vendor rebates, due to lower purchase volumes, during the year in our health care distribution segment, which also contributes to the lower gross profit margin.

rates.

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Technology and value-added services gross profit ~~decreased $17.8~~increased $8.8 million, or ~~19.6%~~9.5%, for the three months ended ~~June~~

March 27, ~~2020~~2021 compared to the prior year period.

The overall ~~decrease~~increase in our Technology and value-added

services gross profit is attributable to a ~~$15.7~~$4.5 million ~~decrease~~increase in internally

generated revenue, ~~primarily due to the COVID-19 pandemic~~ $4.2 million additional

gross profit from acquisitions,

and ~~a decrease~~an increase of ~~$3.7~~$0.1 million from gross margin ~~rates, partially offset by $1.6 million additional gross profit from acquisitions.~~ rates.

Technology and ~~value-added~~value-

added services gross profit margin ~~decreased~~increased to ~~69.1%~~70.5% for the three months ended ~~June~~March 27, ~~2020~~ 2021

from ~~72.3%~~69.8% for

the comparable prior year period primarily due to ~~a decrease~~an increase in the volume of

our transactional revenue from

eClaims and credit card processing.

Selling, General and Administrative

Selling, general and administrative expenses by segment and in

total for the three months ended ~~June~~March 27, ~~2020~~ 2021

and ~~June 29, 2019~~March 28, 2020 were as follows (in thousands):

% of

% of

June 27,

Respective

June 29,

Respective

Decrease

2020

Net Sales

2019

Net Sales

$

%
Health care distribution

$
406,958

26.1
%

$
542,082

23.6
%

$
(135,124)

(24.9)
%
Technology and value-added services

54,769

52.0

63,061

50.4

(8,292)

(13.1)

Total

$
461,727

27.4

$
605,143

24.7

$
(143,416)

(23.7)

% of

March 27,

Respective

March 28,

Respective

Increase

2021

Net Sales

2020

Net Sales

Health care distribution

592,052

21.3

505,762

22.2

86,290

17.1

Technology and value-added services

68,871

48.2

66,387

50.3

2,484

3.7

Total

660,923

22.6

572,149

23.6

88,774

15.5

Selling, general and administrative expenses (including restructuring costs

in the three months ended ~~June~~March 27, ~~2020~~

2021 and ~~June 27,~~March 28, 2020) ~~decreased $143.4~~increased $88.8 million, or ~~23.7%~~15.5%, for the three

months ended ~~June~~March 27, ~~2020~~2021 from the

comparable prior year period.

The ~~$135.1~~$86.3 million ~~decrease~~increase in selling, general and administrative expenses

within our

health care distribution segment for the three months ended ~~June~~March 27, ~~2020~~ 2021

as compared to the prior year period

was attributable to ~~a reduction~~an increase of ~~$141.1~~$64.8 million of operating costs ~~primarily as a result of cost-saving measures taken in response to the COVID-19 pandemic, partially offset by increases of $2.0~~(including

$12.8 million of settlement and

litigation costs), an increase of $23.3 million of additional

costs from acquired companies, ~~and an increase~~partially offset by a

decrease of ~~$4.0~~$1.8 million in restructuring costs.

The ~~$8.3~~$2.5 million ~~decrease~~increase in selling, general and administrative

expenses within our technology and value-added services segment for the three

months ended ~~June~~March 27, ~~2020~~2021 as

compared to the prior year period was attributable to ~~a reduction of $9.9 million of operating costs, primarily as a result of cost-saving measures taken in response to the COVID-19 pandemic, partially offset by~~ an increase of ~~$1.6~~ $3.5

million of additional costs from acquired ~~companies.~~

companies, partially offset by a decrease of $1.0 million of operating costs.

As a percentage of net sales, selling,

general and administrative expenses ~~increased~~decreased to ~~27.4%~~22.6% from ~~24.7%~~23.6% for

the comparable prior year ~~period, primarily due to a decreased sales base.~~

period.

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

expenses ~~decreased $112.4~~increased $12.9 million, or ~~30.7%~~

3.5% to ~~$253.6~~$384.7 million, for the three months ended ~~June~~March 27, ~~2020~~2021 from

the comparable prior year ~~period, primarily due to a decrease in sales as a result of the COVID-19 pandemic.~~ period.

As a

percentage of net sales, selling expenses ~~increased~~decreased to ~~15.1%~~13.2% from ~~15.0%~~ 15.3%

for the comparable prior year period.

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

and administrative expenses ~~decreased $31.0~~

increased $75.9 million, or ~~13.0%~~37.9% to ~~$208.1~~$276.2 million, for the three months

ended ~~June~~March 27, ~~2020~~2021 from the

comparable prior year period, primarily due to ~~cost-saving measures taken~~an increase in ~~response to the COVID-19 pandemic.~~ payroll and payroll

related costs.

As a percentage of

net sales, general

and administrative expenses increased to ~~12.4%~~9.4% from ~~9.8%~~8.2% for the

comparable prior year period.

Our selling, general and administrative expenses for the three months

ended March 28, 2020 were affected by

certain estimates we made due to the adverse business environment brought

on by the COVID-19 pandemic.

For

example, in the prior-year quarter we recorded incremental bad debt reserves of approximately

$10 million for our

global dental business. We also recognized a net credit of approximately $17.5 million in stock-based compensation

expense during the prior-year quarter as we had estimated that no performance shares granted

in 2018, 2019 or

2020 would ultimately vest. In contrast, for the three months ended March

27, 2021, we recorded $12.8 million in

stock-based compensation expense.

Additionally, in the prior-year quarter we recorded total impairment charges of

approximately $6.1 million during the quarter related to prepaid royalty

expenses and a customer relationship

intangible asset. We recorded no such impairment charges in the three months ended March 27, 2021.

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Other Expense, Net

Other expense, net, for the three months ended ~~June~~March 27, ~~2020~~2021 and ~~June 29, 2019~~March

28, 2020 was as follows (in thousands):

June 27,

June 29,

Variance

2020

2019

$

%
Interest income

$
1,997

$
3,654

$
(1,657)

(45.3)
%
Interest expense

(10,486)

(12,785)

2,299

18.0

Other, net

(291)

(1,416)

1,125

79.4

Other expense, net

$
(8,780)

$
(10,547)

$
1,767

16.8

March 27,

March 28,

Variance

2021

2020

Interest income

1,983

3,190

(1,207)

(37.8)

Interest expense

(6,485)

(7,812)

1,327

17.0

Other, net

309

(220)

529

240.5

Other expense, net

(4,193)

(4,842)

649

13.4

Interest income decreased ~~$1.7~~$1.2 million primarily due to lower ~~interest rates~~ investment

and ~~reduced~~ late fee income.

Interest expense

decreased ~~$2.3~~$1.3 million primarily due to ~~reduced interest expense resulting from~~ decreased borrowings under our ~~U.S trade accounts receivable securitization and~~

bank credit lines as well as lower interest ~~rates, partially offset by increased borrowings under our bank credit lines.~~

rates.

Income Taxes

For the three months ended ~~June~~March 27, ~~2020~~,2021, our effective tax rate was ~~5.9~~% 25.1% compared

to ~~23.7~~% 22.4% for the prior year

period.

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

three months ended ~~June~~

March 27, ~~2020,~~2021, was primarily ~~relates~~due to state and foreign income taxes and ~~a valuation allowance recognized on a portion of a deferred tax asset.~~ interest

expense.

The difference between

our effective tax rate and the federal statutory tax rate for the three months ended ~~June 29, 2019, primarily~~ ~~relates to state and foreign income taxes and interest expense. Further, our effective tax rate was distorted due to our low pretax loss during the second quarter ended June 27, 2020.~~

~~Table of Contents~~

~~Six Months Ended June 27, 2020 Compared to Six Months Ended June 29, 2019~~

~~Net Sales~~

~~Net sales for the six months ended June 27, 2020 and June 29, 2019 were as follows (in thousands):~~

June 27,

% of

June 29,

% of

Increase/(Decrease)

2020

Total

2019

Total

$

%
Health care distribution ⁽¹⁾

Dental

$
2,416,368

58.7
%

$
3,147,730

65.5
%

$
(731,362)

(23.2)
%

Medical

1,418,498

34.5

1,381,218

28.7

37,280

2.7

Total health care distribution

3,834,866

93.2

4,528,948

94.2

(694,082)

(15.3)

Technology and value-added services ⁽²⁾

237,192

5.8

240,649

5.0

(3,457)

(1.4)

Total excluding Corporate TSA revenue

4,072,058

99.0

4,769,597

99.2

(697,539)

(14.6)

Corporate TSA revenue ⁽³⁾

41,212

1.0

38,498

0.8

2,714

7.0

Total

$
4,113,270

100.0
%

$
4,808,095

100.0
%

$
(694,825)

(14.5)

(1)
Consists of consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

(2)
Consists of practice management software and other value-added products, which are distributed primarily to health care providers, and financial services on a non-recourse basis, e-services, continuing education services for practitioners, consulting and other services.

(3)
Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in connection with the Animal Health Spin-off, which we expect to continue through October 2020.

The 14.5% decrease in net sales for the six months ended June 27, 2020 includes a decrease of 13.5% in local currency revenue (14.5% decrease in internally generated revenue, partially offset by 1.0% growth from acquisitions) and a decrease of 1.0% related to foreign currency exchange. Excluding sales of products under the transition services agreement with Covetrus, our net sales decreased 14.6%, including a decrease in local currency revenue of 13.6% (14.7% decrease in internally generated revenue, partially offset by 1.1% growth from acquisitions) and a decrease of 1.0% related to foreign currency exchange.

The 23.2% decrease in dental net sales for the six months ended June 27, 2020 includes a decrease of 21.8% local currency revenue (22.2% decrease in internally generated revenue, partially offset by 0.4% growth from acquisitions) and a decrease of 1.4% related to foreign currency exchange. The 21.8% decrease in local currency sales was attributable to a decrease in dental consumable merchandise revenue of 21.8% (22.3% decrease in internally generated revenue, partially offset by 0.5% growth from acquisitions), and a decrease in dental equipment sales and service revenues of 22.0%, all of which is attributable to a decrease in internally generated revenue. The COVID-19 pandemic began to adversely impact our worldwide dental revenue beginning in mid-March as many dental offices progressively closed or began seeing a limited number of patients. However, in the second half of the quarter ended and in the year-to-date ended June 27, 2020 our dental sales began to improve as dental practices began to resume activities and patient traffic increased.

The 2.7% increase in medical net sales for the six months ended June 27, 2020 includes an increase of 2.8% local currency growth (0.9% increase in internally generated revenue and 1.9% growth from acquisitions) partially offset by a decrease of 0.1% related to foreign currency exchange. The COVID-19 pandemic began to adversely impact our medical revenue beginning in mid-March and continuing into the first half of the second quarter, as many medical offices progressively closed or began seeing a limited number of patients. Economic conditions relating to the COVID-19 pandemic have had less of an impact on the performance of our medical group versus dental, in part due to continued strong sales of PPE, such as masks, gowns and face shields.

The 1.4% decrease in technology and value-added services net sales for the six months ended June 27, 2020 includes a decrease of 1.0% in local currency revenue (5.8% decrease in internally generated revenue, partially offset 4.8% growth from acquisitions) and a decrease of 0.4% related to foreign currency exchange. During the second quarter, in line with the resumption of dental practice operations, the trend for transactional software revenues improved as more patients visited dental practices worldwide.

~~Table of Contents~~

Although dental and medical practices began to re-open globally in the latter half of the second quarter, patient volumes are below pre-COVID-19 levels and a number of regions in the U.S and certain international geographies are experiencing an uptick in COVID-19 cases. As such, there is an ongoing risk that the COVID-19 pandemic continue to have a material adverse effect on our net sales in future periods.

~~Gross Profit~~

~~Gross profit and gross margin percentages by segment and in total for the six months ended June 27, 2020 and June 29, 2019 were as follows (in thousands):~~

June 27,

Gross

June 29,

Gross

Increase/(Decrease)

2020

Margin %

2019

Margin %

$

%
Health care distribution

$
1,034,411

27.0
%

$
1,344,171

29.7
%

$
(309,760)

(23.0)
%
Technology and value-added services

164,768

69.5

173,801

72.2

(9,033)

(5.2)

Total excluding Corporate TSA revenues

1,199,179

29.4

1,517,972

31.8

(318,793)

(21.0)

Corporate TSA revenues

1,154

2.8

1,149

3.0

5

0.4

Total

$
1,200,333

29.2

$
1,519,121

31.6

$
(318,788)

(21.0)

As a result of different practices of categorizing costs associated with distribution networks throughout our industry, our gross margins may not necessarily be comparable to other distribution companies. Additionally, we realize substantially higher gross margin percentages in our technology and value-added services segment than in our health care distribution segment. These higher gross margins result from being both the developer and seller of software products and services, as well as certain financial services. The software industry typically realizes higher gross margins to recover investments in research and development.

In connection with the completion of the Animal Health Spin-off (see Note 2 for additional details), we entered into a transition services agreement with Covetrus, pursuant to which Covetrus purchases certain products from us. The agreement provides that these products will be sold to Covetrus at a mark-up that ranges from 3% to 6% of our product cost to cover handling costs. We expect these sales to continue through October 2020.

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. With respect to customer mix, sales to our large-group customers are typically completed at lower gross margins due to the higher volumes sold as opposed to the gross margin on sales to office-based practitioners, who normally purchase lower volumes at greater frequencies.

Health care distribution gross profit decreased $309.8 million, or 23.0%, for the six months ended June 27, 2020 compared to the prior year period, due primarily to the COVID-19 pandemic. Health care distribution gross profit margin decreased to 27.0% for the six months ended June 27, 2020 from 29.7% for the comparable prior year period. The overall decrease in our health care distribution gross profit is attributable to a $247.7 decrease in internally generated revenue and a $73.4 million decline in gross profit due to the decrease in the gross margin rates, partially offset by $11.3 million additional gross profit from acquisitions. Gross profit margin was negatively affected by lower gross profit on sales of PPE products as well as significant charges recorded for PPE inventory due to volatility of pricing for PPE, which may recur in future periods; a greater mix of sales outside of North America where margins are typically lower, and by fixed costs included in cost of goods sold that adversely affect gross margin rates when sales are lower. During the year, we continued to earn lower vendor rebates, due to lower purchase volumes, in our health care distribution segment, which also contributes to the lower gross profit margin.

Technology and value-added services gross profit decreased $9.0 million, or 5.2%, for the six months ended June 27, 2020 compared to the prior year period. The overall decrease in our Technology and value-added services gross profit is attributable to a decrease of $10.7 in internally generated revenue, primarily due to the COVID-19 pandemic and a $7.8 million decline in gross profit due to the decrease in the gross margin rates, partially offset by $9.4 million additional gross profit from acquisitions. Technology and value-added services gross profit margin decreased to 69.5% for the six months ended June 27, 2020 from 72.2% for the comparable prior year period primarily due to a decrease in the volume of our transactional revenue from eClaims and credit card processing.

~~Table of Contents~~

~~Selling, General and Administrative~~

~~Selling, general and administrative expenses by segment and in total for the six months ended June 27, 2020 and June 29, 2019 were as follows (in thousands):~~

% of

% of

June 27,

Respective

June 29,

Respective

Increase / (Decrease)

2020

Net Sales

2019

Net Sales

$

%
Health care distribution

$
912,745

23.8
%

$
1,065,880

23.5
%

$
(153,135)

(14.4)
%
Technology and value-added services

121,156

51.1

118,512

49.2

2,644

2.2

Total

$
1,033,901

25.1

$
1,184,392

24.6

$
(150,491)

(12.7)

Selling, general and administrative expenses (including restructuring costs in the six months ended June 27, 2020 and June 27, 2020) decreased $150.5 million, or 12.7%, for the six months ended June 27, 2020 from the comparable prior year period. The $153.1 million decrease in selling, general and administrative expenses within our health care distribution segment for the six months ended June 27, 2020 as compared to the prior year period was attributable to a reduction of $171.2 million of operating costs, primarily as a result of cost-saving measures taken in response to the COVID-19 pandemic, partially offset by increases of $14.0 million of additional costs from acquired companies and an increase of $4.1 million in restructuring costs. The $2.6million increase in selling, general and administrative expenses within our technology and value-added services segment for the six months ended June 27, 2020 as compared to the prior year period was attributable to an increase of $7.7 million of additional costs from acquired companies, partially offset by a reduction of $5.1 million of operating costs. As a percentage of net sales, selling, general and administrative expenses increased to 25.1% from 24.6% for the comparable prior year period.

As a component of total selling, general and administrative expenses, selling expenses decreased $91.5 million, or 12.6% to $ 635.2 million, for the six months ended June 27, 2020 from the comparable prior year period, primarily as a result of cost-saving measures taken in response to the COVID-19 pandemic. As a percentage of net sales, selling expenses increased to 15.4% from 15.1% for the comparable prior year period.

As a component of total selling, general and administrative expenses, general and administrative expenses decreased $59.0 million, or 12.9% to $ 398.7 million, for the six months ended June 27, 2020 from the comparable prior year period, primarily as a result of cost-saving measures taken in response to the COVID-19 pandemic. As a percentage of net sales, general and administrative expenses decreased to 9.7% from 9.5% for the comparable prior year period.

Our selling, general and administrative expenses for the six months ended June 27, 2020 continued to be affected by certain estimates we made due to the adverse business environment brought on by the COVID-19 pandemic. For example, in the quarter ended March 28, 2020 we recorded incremental bad debt reserves of approximately $10 million for our global dental business. As of June 27, 2020, we have retained the $10 million incremental bad debt reserves due to the ongoing uncertainties in the markets we serve.

In the quarter ended March 28, 2020, we also recognized a net credit of approximately $17.5 million in stock-based compensation expense during the quarter due to our previous estimate that no performance shares granted in 2018, 2019 or 2020 will ultimately vest. Our assumptions regarding vesting of performance shares under our 2018, 2019 and 2020 LTIP remain largely unchanged from those as of March 28, 2020. Accordingly, we did not recognize any significant stock compensation expense related to performance shares during the six months ended June 27, 2020.

During the quarter ended March 28, 2020, we recorded total impairment charges of approximately $6.1 million during the quarter related to prepaid royalty expenses and a customer relationship intangible asset.

~~Table of Contents~~

~~Other Expense, Net~~

~~Other expense, net, for the six months ended June 27, 2020 and June 29, 2019 was as follows (in thousands):~~

June 27,

June 29,

Variance

2020

2019

$

%
Interest income

$
5,187

$
8,425

$
(3,238)

(38.4)
%
Interest expense

(18,298)

(29,086)

10,788

37.1

Other, net

(511)

(1,835)

1,324

72.2

Other expense, net

$
(13,622)

$
(22,496)

$
8,874

39.4

Interest income decreased $3.2 million primarily due to lower interest rates and reduced late fee income. Interest expense decreased $10.8 million primarily due to decreased borrowings under our U.S trade accounts receivable securitization and lower interest rates, partially offset by increased borrowings under our bank credit lines.

~~Income Taxes~~

~~For the six months ended June 27, 2020, our effective tax rate was 24.2% compared to 24.1~~% ~~for the prior year period. The difference between our effective tax rates and the federal statutory tax rate for the six months ended June 27, 2020,~~ primarily relates

to state and foreign income taxes and interest expense as well as tax charges and credits associated

with legal entity

reorganizations outside the U.S and a valuation allowance recognized on a portion of a deferred tax asset. The difference between our effective tax rate and the federal statutory tax rate for the six months ended June 29, 2019, primarily relates to state and foreign income taxes and interest expense.

United States.

~~Table of Contents~~

Liquidity and Capital Resources

Our principal capital requirements have included funding of acquisitions, ~~(which have largely been temporarily suspended),~~ purchases

of additional noncontrolling

interests, repayments of debt principal, the funding of working capital needs,

purchases of fixed assets and

repurchases of common stock (which ~~have~~had been temporarily ~~suspended)~~suspended, but were

resumed during the three months

ended March 27, 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 ~~third and fourth quarters~~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.

The pandemic and the governmental responses to it ~~have~~ had a material adverse

effect on our cash ~~flows. Although dental and medical practices began to re-open globally~~flows in the second

quarter of 2020.

In the latter half of the second quarter of 2020 and continuing

through year-end, dental and

medical practices began to re-open worldwide.

During the first quarter of 2021, patient ~~volumes are below pre-COVID-19~~traffic levels ~~and a number of~~returned to

levels approaching pre-pandemic levels, although certain regions in the ~~U.S~~ U.S.

and ~~certain international geographies~~internationally are experiencing an ~~uptick~~

increase in COVID-19 cases. ~~As such, there~~There is an ongoing risk that the COVID-19

pandemic may ~~continue to~~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 ~~cash flows in future periods.~~financial condition and liquidity. However, the extent of the potential impact cannot be reasonably estimated at

this time.

As part of a broad-based effort to support plans for the long-term health of Henry Schein’s business and to strengthen the Company’s financial flexibility, Henry Schein has implemented cost reduction measures that include certain reductions in payroll, substantially decreasing capital expenditures, reducing planned corporate spending and eliminating certain non-strategic targeted expenditures. Recently, certain customer-facing employees have begun to return from furloughs and reduced hours as certain markets have begun to recover. As the COVID-19 pandemic continues to unfold, the Company will continue to evaluate appropriate actions for its business.

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

placements.

Our ability to generate sufficient cash flows from operations is dependent

on the continued demand of

our customers for our products and services, and access to products and

services from our suppliers.

Our business requires a substantial investment in working capital, which

is susceptible to fluctuations during the

year as a result of inventory purchase patterns and seasonal demands.

Inventory purchase activity is a function of

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

We anticipate

future increases in our working capital requirements.

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.

Table of Contents

We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,

and our available funds under existing credit facilities provide us with

sufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

We have no off-balance sheet arrangements.

On February 7, 2019, we completed the Animal Health Spin-off. On the Distribution Date we received a tax free distribution of $1,120 million from Covetrus, which has been used to pay down our debt, thereby generating additional debt capacity that can be used for general corporate purposes, including share repurchases and mergers and acquisitions.

Net cash from continuing operations ~~used~~provided by operating activities was ~~$0.8~~

$63.3 million for the ~~six~~three months ended ~~June~~

March 27, ~~2020,~~2021, compared to net cash from continuing operations provided

by operating activities of ~~$298.8~~$78.8 million

for the comparable prior year period.

The net change of ~~$299.6~~$15.4 million was primarily attributable to ~~lower net income, lower distributions from equity affiliates, and~~ increased

working capital requirements, specifically ~~a lower decrease in inventories and~~ an increase in ~~prepaid~~ inventories due

to stocking of PPE and other COVID-19

related products, partially offset by ~~lower~~decreased accounts receivable due to lower days

sales ~~volume.~~outstanding. The ~~decrease in distributions~~effect

on operating cash flows from ~~equity affiliates is~~ the result of having sold our equity investment in Hu-Friedy Mfg. Co., LLC in the fourth quarter of 2019. The increase in other current assets is related to payments, for prepaid inventories, made during the second quarter of 2020 to secure adequate levels of PPE inventory.

increased working capital requirements

was partially offset by higher net income.

~~Table of Contents~~

Net cash from continuing operations used in investing activities was ~~$81.6~~

$223.2 million for the ~~six~~three months ended ~~June~~

March 27, ~~2020,~~2021, compared to ~~$635.5~~$53.6 million for the comparable prior

year period.

The net change of ~~$553.9~~$169.6 million

was ~~primarily~~ attributable to ~~decreased activity and~~increased payments for equity investments and

business acquisitions.

Net cash from continuing operations ~~provided by~~used in financing activities was ~~$262.1~~$119.4 million for the ~~six~~ three

months ended ~~June~~

March 27, ~~2020,~~2021, compared to net cash provided by financing activities

of ~~$360.3~~$491.6 million for the comparable prior

year period.

The net change of ~~$98.2~~$611.1 million was primarily due to ~~proceeds received during the prior year related to the Animal Health Spin-off and a reduction in~~decreased net proceeds from ~~noncontrolling subsidiaries, partially offset by increased~~ bank ~~borrowings and proceeds from issuance of long-term debt, reduced payments to the Henry Schein Animal Health Business and decreased repurchases of our common stock.~~

borrowings.

The following table summarizes selected measures of liquidity and capital

resources (in thousands):

June 27,

December 28,

2020

2019

Cash and cash equivalents

$
296,110

$
106,097

Working capital⁽¹⁾

1,101,965

1,188,133

Debt:

Bank credit lines

$
503,178

$
23,975

Current maturities of long-term debt

109,587

109,849

Long-term debt

515,802

622,908

Total debt

$
1,128,567

$
756,732

Leases:

Current operating lease liabilities

$
61,710

$
65,349

Non-current operating lease liabilities

163,342

176,267

(1)
Includes $0 million and $127 million of accounts receivable which serve as security for U.S. trade accounts receivable securitization at June 27, 2020 and December 28, 2019 respectively.

March 27,

December 26,

2021

2020

Cash and cash equivalents

144,538

421,185

Working

capital

(1)

1,447,857

1,508,313

Debt:

Bank credit lines

67,415

73,366

Current maturities of long-term debt

111,176

109,836

Long-term debt

506,461

515,773

Total debt

685,052

698,975

Leases:

Current operating lease liabilities

68,580

64,716

Non-current operating lease liabilities

248,624

238,727

(1)

At March 27, 2021 and December 26, 2020, there were no trade accounts receivable that were restricted to settle obligations of this VIE,

nor were there liabilities of the VIE where the creditors have recourse to us.

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations ~~increased~~ decreased

to ~~52.4~~42.8 days as of ~~June~~March 27, ~~2020~~2021 from ~~45.1~~

45.9 days as of ~~June 29, 2019.~~ March 28, 2020.

During the ~~six~~three months ended ~~June~~March 27, ~~2020,~~2021, we wrote

off approximately ~~$3.9~~ $3.3

million of fully reserved accounts receivable against our trade receivable

reserve.

Our inventory turns from

operations ~~decreased~~increased to ~~4.2~~5.2 as of ~~June~~March 27, ~~2020~~2021 from ~~4.8~~4.9 as of ~~June 29, 2019.~~ March 28, 2020.

Our working capital accounts

may be impacted by current and future economic conditions.

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Bank Credit Lines

Bank credit lines consisted of the following:

June 27,

December 28,

2020

2019
Revolving credit agreement

$
-

$
-
364-day credit agreement

500,000

-
Other short-term bank credit lines

3,178

23,975
Total

$
503,178

$
23,975

~~The increase in the level of borrowings under our~~

March 27,

December 26,

2021

2020

Revolving credit agreement

Other short-term bank credit lines ~~as of June 27, 2020 was attributable to potential cash requirements due to the impact of the COVID-19 pandemic.~~

~~Table of Contents~~

67,415

73,366

Total

67,415

73,366

Revolving Credit Agreement

On April 18, 2017, we entered into a $750 million revolving credit agreement ~~(the~~

(the “Credit Agreement”), which

matures in April 2022.

The interest rate is based on the USD LIBOR

plus a spread based on our leverage ratio at

the end of each financial reporting quarter.

We expect ~~the~~most LIBOR ~~rate~~rates to be discontinued ~~at some point during~~immediately after

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

immediately after June 30, 2023, which

will require an amendment to our debt agreements to reflect a new

reference rate. We do not expect the

discontinuation of LIBOR as a reference rate in our debt agreements

to have a material adverse effect on our

financial position or to materially affect our interest expense.

The Credit Agreement also requires, among other

things, that we maintain maximum leverage ratios. Additionally, the Credit Agreement contains customary

representations, warranties and affirmative covenants as well as customary negative

covenants, subject to

negotiated exceptions on liens, indebtedness, significant corporate changes ~~(including~~

(including mergers), dispositions and

certain restrictive agreements.

As of ~~June~~March 27, ~~2020~~2021, and December ~~28, 2019, the~~26, 2020, we had no borrowings

on this

revolving credit ~~facility~~facility.

As of March 27, 2021, and December 26, 2020, there were ~~$0.0~~ $9.3

million and ~~$0.0~~$9.5 million ~~respectively. As of June 27, 2020 and December 28, 2019, there were $9.4 million and $9.6 million~~

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

On April 17, 2020, we amended the Credit Agreement to, among other

things, (i) modify the financial covenant

from being based on total leverage ratio to net leverage ratio, (ii) adjust the

pricing grid to reflect the net leverage

ratio calculation, and (iii) increase the maximum maintenance leverage ratio

through March 31, 2021.

364-Day Credit Agreement

On ~~April 17, 2020,~~March 4, 2021 we ~~entered into a new~~repaid the outstanding obligations and terminated

the lender commitments under our $700

million 364-day credit agreement ~~with JPMorgan Chase Bank, N.A. and U.S. Bank National Association as joint lead arrangers and joint bookrunners.~~ which was entered into on April 17, 2020.

This facility ~~matures~~was originally scheduled

to mature on April 16, 2021. As of June 27, 2020, the borrowings on this credit facility were $500 million. We have the ability to borrow the remaining $200 million on a revolving basis as needed, subject to the terms and conditions of the credit agreement. The interest rate for borrowings under this facility will fluctuate based on our net leverage ratio. At June 27, 2020, the interest rate on this facility was 2.81%. The proceeds from this facility can be used for working capital requirements and general corporate purposes, including, but not limited to, permitted refinancing of existing indebtedness.

Other Short-Term Credit

Lines

As of ~~June~~March 27, ~~2020~~2021 and December ~~28, 2019,~~26, 2020, we had various other short-term

bank credit lines available, of

which ~~$3.2~~$67.4 million and ~~$24~~$73.4 million, respectively, were outstanding.

At ~~June~~March 27, ~~2020~~2021 and December ~~28, 2019,~~26,

2020, borrowings under all of these credit lines had a weighted average

interest rate of ~~2.86%~~4.52% and ~~3.45%~~4.14%, ~~respectively.~~

The decrease during the quarter ended June 27, 2020 in the weighted average interest rate under all of our credit lines was attributable to the Federal Reserve lowering borrowing rates during March 2020 in response to the COVID-19 pandemic.

respectively.

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Long-term debt

Long-term debt consisted of the following:

June 27,

December 28,

2020

2019
Private placement facilities

$
613,469

$
621,274
U.S. trade accounts receivable securitization

-

100,000
Note payable due in 2025 with an interest rate of 3.1%

at June 27, 2020

1,454

-
Various collateralized and uncollateralized loans payable with interest,

in varying installments through 2023 at interest rates

ranging from 2.62% to 4.22% at June 27, 2020 and

ranging from 2.56% to 10.5% at December 28, 2019

4,548

6,089
Finance lease obligations (see Note 7)

5,918

5,394

Total

625,389

732,757
Less current maturities

(109,587)

(109,849)

Total long-term debt

$
515,802

$
622,908

March 27,

December 26,

2021

2020

Private placement facilities

606,355

613,498

Note payable

1,554

Various

collateralized and uncollateralized loans payable with interest,

in varying installments through 2023 at interest rates

ranging from 2.45% to 4.27% at March 27, 2021 and

ranging from 2.62% to 4.27% at December 26, 2020

5,969

4,596

Finance lease obligations (see Note 7)

5,313

5,961

Total

617,637

625,609

Less current maturities

(111,176)

(109,836)

Total long-term debt

506,461

515,773

Private Placement Facilities

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

Our private placement facilities, with three insurance companies, to

have a total facility amount of $1 billion, and ~~extended the expiration date to September 15, 2020. On June 23, 2020, the expiration date for our private placement facilities was extended through June 23, 2023. 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 June 23, 2023.

The facilities allow us to issue senior promissory notes to the

lenders at a fixed

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

the time of issuance.

The term of each

possible issuance will be selected by us and can range from five to 15 years ~~(with~~

(with an average life no longer than 12

years).

The proceeds of any issuances under the facilities will be used

for general corporate purposes, including

working capital and capital expenditures, to refinance existing indebtedness

and/or to fund potential acquisitions. On June 29, 2018, we amended and restated the above private placement facilities to, among other things, (i) permit the consummation of the Animal Health Spin-off and (ii) provide for the issuance of notes in Euros, British Pounds and Australian Dollars, in addition to U.S. Dollars.

The agreements provide, among other things, that we maintain

certain maximum leverage ratios, and contain

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

of assets and certain changes in

ownership.

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

pay off the facilities prior to the

applicable due dates.

On March 5, 2021, we amended the private placement facilities

to, among other things, (a) modify the financial

covenant from being based on a net leverage ratio to a total leverage

ratio and (b) restore the maximum

maintenance total leverage ratio to 3.25x and remove the 1.00% interest

rate increase triggered if the net leverage

ratio were to exceed 3.0x.

The components of our private placement facility borrowings as

of ~~June~~March 27, ~~2020~~2021 are presented in the following

table (in thousands):

Amount of

Borrowing

Borrowing

Date of Borrowing

Outstanding

Rate

Due Date
September 2, 2010⁽¹⁾

$
100,000

3.79
%

September 2, 2020
January 20, 2012⁽²⁾

14,286

3.09

January 20, 2022
January 20, 2012

50,000

3.45

January 20, 2024
December 24, 2012

50,000

3.00

December 24, 2024
June 2, 2014

100,000

3.19

June 2, 2021
June 16, 2017

100,000

3.42

June 16, 2027
September 15, 2017

100,000

3.52

September 15, 2029
January 2, 2018

100,000

3.32

January 2, 2028
Less: Deferred debt issuance costs

(817)

$
613,469

(1) During April 2020, we took certain steps to lock-in a lower interest rate to refinance our $100 million private placement borrowing at 3.79%, coming due on September 2, 2020 with a similar 10 year borrowing at 2.35% maturing on September 2, 2030.

(2) Annual repayments of approximately $7.1 million for this borrowing commenced on January 20, 2016.

Amount of

Borrowing

Date of Borrowing

Outstanding

Rate

Due Date

January 20, 2012

(1)

7,143

3.09

January 20, 2022

January 20, 2012

50,000

3.45

January 20, 2024

December 24, 2012

50,000

3.00

December 24, 2024

June 2, 2014

100,000

3.19

June 2, 2021

June 16, 2017

100,000

3.42

June 16, 2027

September 15, 2017

100,000

3.52

September 15, 2029

January 2, 2018

100,000

3.32

January 2, 2028

September 2, 2020

100,000

2.35

September 2, 2030

Less: Deferred debt issuance costs

(788)

606,355

(1)

Annual repayments of approximately $7.1 million for this borrowing commenced on January 20, 2016.

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U.S. Trade Accounts Receivable Securitization

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

receivable that is structured as an asset-backed securitization program with pricing

committed for up to three years.

Our current facility, which has a purchase limit of $350 million, was scheduled to expire on April 29, 2022.

June 22, 2020, the expiration date for this facility was extended to

June 12, ~~2023.~~ 2023 and was amended to adjust certain

covenant levels for 2020.

As of ~~June~~March 27, ~~2020~~2021 and December ~~28, 2019, the~~26, 2020, there were no borrowings

outstanding

under this securitization facility.

At March 27, 2021, the interest rate on borrowings under this

facility ~~were $0 million and $100 million, respectively.~~ was based

on the asset-backed commercial paper rate of 0.18% plus 0.95%, for a combined

rate of 1.13%.

At ~~June 27,~~ December 26,

2020, the interest rate on borrowings under this facility was based

on the asset-backed commercial paper rate of ~~0.57%~~

0.22% plus 0.95%, for a combined rate of ~~1.52%~~1.17%. ~~At December 28, 2019, the interest rate on borrowings under this facility was based on the asset-backed commercial paper rate of 1.90% plus 0.75%, for a combined rate of 2.65%.~~

If our accounts receivable collection pattern changes due to customers either

paying late or not making payments,

our ability to borrow under this facility may be reduced.

We are required to pay a commitment fee of 25 to 45 basis points depending upon program utilization.

~~Borrowings under this facility are presented as a component of Long-term debt within our consolidated balance sheets.~~

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 15 years, some of

which may include options to extend the leases for up to 10 years.

As of ~~June~~March 27, ~~2020,~~2021, our right-of-use assets

related to operating leases were ~~$211.5~~$301.8 million and our current and non-current

operating lease liabilities were ~~$61.7~~

$68.6 million and ~~$163.3~~$248.6 million, respectively.

Stock Repurchases

On March 8, 2021, we announced the reinstatement of our share repurchase

program.

From March 3, 2003 through ~~June~~March 27, ~~2020,~~2021, we repurchased ~~$3.6~~$3.7 billion,

or ~~75,563,289~~76,888,531 shares, under our

common stock repurchase programs, with ~~$201.2~~$112.6 million available as of ~~June~~March 27, ~~2020~~2021 for future

common stock

share repurchases.

As a result of the COVID-19 pandemic, on April 6, 2020, we announced a temporary suspension of our share repurchase program in an effort to preserve cash and exercise caution during this uncertain period.

~~Table of Contents~~

Redeemable Noncontrolling Interests

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

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

Accounting Standards Codification Topic 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling

interest holder under the terms of a put

option contained in contractual agreements.

The components of the change in the ~~Redeemable~~redeemable noncontrolling

interests for the ~~six~~three months ended ~~June~~March 27, ~~2020~~2021 and the year ended December ~~28, 2019~~

26, 2020 are presented in the

following table:

June 27,

December 28,

2020

2019
Balance, beginning of period

$
287,258

$
219,724
Decrease in redeemable noncontrolling interests due to

redemptions

(12,636)

(2,270)
Increase in redeemable noncontrolling interests due to

business acquisitions

25,369

74,865
Net income attributable to redeemable noncontrolling interests

1,161

14,838
Dividends declared

(4,068)

(10,264)
Effect of foreign currency translation loss attributable to

redeemable noncontrolling interests

(12,276)

(2,335)
Change in fair value of redeemable securities

(5,583)

(7,300)
Balance, end of period

$
279,225

$
287,258

March 27,

December 26,

2021

2020

Balance, beginning of period

327,699

287,258

Decrease in redeemable noncontrolling interests due to

redemptions

(17,241)

Increase in redeemable noncontrolling interests due to business

acquisitions

85,037

28,387

Net income attributable to redeemable noncontrolling interests

7,053

13,363

Dividends declared

(6,237)

(12,631)

Effect of foreign currency translation loss attributable to

redeemable noncontrolling interests

(6,173)

(4,279)

Change in fair value of redeemable securities

45,520

32,842

Balance, end of period

452,899

327,699

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Changes in the estimated redemption amounts of the noncontrolling

interests subject to put options are adjusted at

each reporting period with a corresponding adjustment to Additional paid-in

capital.

Future reductions in the

carrying amounts are subject to a floor amount that is equal to the

fair value of the redeemable noncontrolling

interests at the time they were originally recorded.

The recorded value of the redeemable noncontrolling interests

cannot go below the floor level.

These adjustments do not impact the calculation of earnings per

share.

Additionally, some prior owners of such acquired subsidiaries are eligible to receive additional purchase price cash

consideration if certain financial targets are met.

Any adjustments to these accrual amounts are recorded in our

consolidated statements

of income.

For the ~~six~~three months ended ~~June~~March 27, ~~2020~~2021 and ~~June 29, 2019,~~ March 28, 2020,

there were no

material adjustments recorded in our consolidated statements

of income relating to changes in estimated contingent

purchase price liabilities.

Noncontrolling Interests

Noncontrolling interests represent our less than 50% ownership interest

in an acquired subsidiary. Our net income

is reduced by the portion of the subsidiaries net income that is attributable

to noncontrolling interests.

~~Table of Contents~~

Critical Accounting Policies and Estimates

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

estimates from those disclosed in Item

7 of our Annual Report on Form 10-K for the year ended December ~~28, 2019,~~ 26, 2020,

except accounting policies adopted

as of December ~~29, 2019,~~27, 2020, which are discussed in

Note 3 2-Critical Accounting Policies, Accounting Pronouncements

Adopted and Recently Issued Accounting Standards

of the Notes to the Consolidated Financial Statements included in

under Item 1.

Our financial results for the ~~six~~three months ended ~~June~~March 27, ~~2020~~2021 were

affected by certain estimates we made due to

the adverse business environment brought on by the COVID-19 pandemic.

For example, in the quarter ended

March 28, 2020 we recorded incremental bad debt reserves of approximately ~~$10.0~~

$10.0 million for our global dental ~~business and continued to retain those incremental reserves through the quarter ended June 27, 2020.~~

business.

During the quarter ended March 28, 2020, we also recognized a net credit

of approximately $17.5 million

in stock-based compensation

expense due to our estimate that no performance shares granted in 2018,

2019 or 2020 ~~will~~

would ultimately vest. ~~For~~

In contrast, for the ~~quarter~~three months ended ~~June~~March 27, ~~2020,~~2021, we ~~continued to estimate that no such performance-based shares will ultimately vest.~~

recorded $12.8 million in stock-

based compensation expense.

Additionally in the quarter ended March 28, 2020, we recorded total impairment

charges of approximately $6.1 million related to prepaid royalty expenses and a customer

relationship intangible

asset.

We had no material impairment charges in the quarter ended ~~June~~March 27, ~~2020.~~ 2021.

Although our selling, general

and administrative expenses for the ~~six~~three months ended ~~June~~March 27, ~~2020~~ 2021

represent management's best estimates and

assumptions that affect the reported amounts, our judgment could change in the future due

to the significant

uncertainty surrounding the macroeconomic effect of the COVID-19 pandemic.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted, ~~in the future, please refer to~~ see

Note 3 2-Critical

Accounting Policies, Accounting Pronouncements Adopted and RecentlyIssued 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 ~~28, 2019.~~

26, 2020.

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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 ~~June~~ March

27, ~~2020~~2021, to ensure that all

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

or submit under the Exchange Act is

accumulated and communicated to them as appropriate to allow timely

decisions regarding required disclosure and

that all such information is recorded, processed, summarized and reported

within the time periods specified in the

SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

The combination of acquisitions and continued acquisition integrations ~~and systems implementations~~ undertaken

during the quarter and carried

over from prior quarters, as well as changes to the operating methods of some

of our internal controls over financial

reporting due to the COVID-19 pandemic, when considered in the aggregate,

represents a material change in our

internal control over financial reporting.

During the quarter ended ~~June~~March 27, ~~2020,~~ 2021, we completed the acquisition of

dental and medical businesses in North

America and Europe with approximate aggregate annual revenues of approximately

$354 million.

In addition,

post-acquisition integration related activities continued for our North American

medical and global dental ~~and North American medical~~

businesses acquired during prior quarters, representing aggregate annual

revenues of approximately ~~$370~~ $299

million.

These acquisitions, the majority of which utilize separate

information and financial accounting systems,

have been included in our consolidated financial statements since their respective

dates of acquisition. Also, during the quarter ended June 27, 2020, we completed systems implementation activities for integrating one of our Brazil dental businesses onto an existing ERP system. This business represents approximate aggregate annual revenues of $97 million.

All acquisitions and continued acquisition integrations ~~and systems implementations involved~~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.

In addition, as a result of a combination of continued governmental imposed

and Company directed closures of

some of our facilities due to the COVID-19 pandemic, we have had

to maintain a number of changes to the

operating methods of some of our internal controls. For example, moving

from manual sign-offs and in-person

meetings to electronic sign-offs and electronic communications such as email and

telephonic or video conference

due to out-of-office working arrangements. However, the design of our internal control framework and objectives

over financial reporting remains unchanged and ~~the Company does~~we do not believe that these

changes have materially affected, or

are reasonably likely to materially affect, the effectiveness of ~~the Company’s~~our internal control over financial

reporting.

Limitations of the Effectiveness of Internal Control

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

only reasonable, not absolute, assurance

that the objectives of the internal control system are met. Because of

the inherent limitations of any internal control

system, no evaluation of controls can provide absolute assurance that

all control issues, if any, within a company

have been detected.

Table of Contents

PART

II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

For a discussion of Legal Proceedings, see

Note 17–Legal Proceedings

~~PART II. OTHER INFORMATION~~

~~ITEM 1. LEGAL PROCEEDINGS~~

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 U.S. District Court for the Eastern District of Texas, Civil Action No. 2:12-CV-00572-JRG, styled as an antitrust action under Section 1 of the Sherman Act, and the Texas Free Enterprise Antitrust Act. Archer alleges a conspiracy between Henry Schein, an unnamed company and the Danaher Defendants to terminate or limit Archer’s distribution rights. On August 1, 2017, Archer filed an amended complaint, adding Patterson Companies, Inc. (“Patterson”) and Benco Dental Supply Co. (“Benco”) as defendants, and alleging that Henry Schein, Patterson, Benco and Burkhart Dental Supply conspired to fix prices and refused to compete with each other for sales of dental equipment to dental professionals and agreed to enlist their common suppliers, the Danaher Defendants, to join a price-fixing conspiracy and boycott by reducing the distribution territory of, and eventually terminating, their price-cutting competing distributor Archer. Archer seeks damages in an amount to be proved at trial, to be trebled with interest and costs, including attorneys’ fees, jointly and severally, as well as injunctive relief. On October 30, 2017, Archer filed a second amended complaint, to add additional allegations that it believes support its claims. The named parties and causes of action are the same as the August 1, 2017 amended complaint.

On October 1, 2012, we filed a motion for an order: (i) compelling Archer to arbitrate its claims against us; (2) staying all proceedings pending arbitration; and (3) joining the Danaher Defendants’ motion to arbitrate and stay. On May 28, 2013, the Magistrate Judge granted the motions to arbitrate and stayed proceedings pending arbitration. On June 10, 2013, Archer moved for reconsideration before the District Court judge. On December 7, 2016, the District Court Judge granted Archer’s motion for reconsideration and lifted the stay. Defendants appealed the District Court’s order. On December 21, 2017, the U.S. Court of Appeals for the Fifth Circuit affirmed the District Court’s order denying the motions to compel arbitration. On June 25, 2018, the Supreme Court of the United States granted defendants’ petition for writ of certiorari. On October 29, 2018, the Supreme Court heard oral arguments. On January 8, 2019, the Supreme Court issued its published decision vacating the judgment of the Fifth Circuit and remanding the caseNotes to the Fifth Circuit for further proceedings consistent with the Supreme Court’s opinion. On April 2, 2019, the District Court stayed the proceeding in the trial court pending resolution by the Fifth Circuit. The Fifth Circuit heard oral argument on May 1, 2019 on whether the case should be arbitrated. The Fifth Circuit issued its opinion on August 14, 2019 affirming the District Court’s order denying defendants’ motions to compel arbitration. Defendants filed a petition for rehearing en banc before the Fifth Circuit. The Fifth Circuit denied that petition. On October 1, 2019, the District Court set the case for trial on February 3, 2020, which was subsequently moved to January 29, 2020. On January 24, 2020 the Supreme Court granted our motion to stay the District Court proceedings, pending the disposition of our petition for writ of certiorari, which was filed on January 31, 2020. Archer conditionally cross petitioned for certiorari on an arbitration issue on March 2, 2020. On June 15, 2020, the Supreme Court granted our petition for writ of certiorari, and denied Archer’s conditional petition for certiorari, and thus the District Court proceedings remain stayed. Patterson and the Danaher Defendants settled with Archer and they have been dismissed from the case with prejudice. Benco is still a defendant and filed a notice of joinder in Henry Schein’s motion to compel arbitration with the District Court. We intend to defend ourselves vigorously against this action.

Statements included matters relating to the issues in the In re Dental Supplies Antitrust Litigation, which Henry Schein settled and which the court dismissed in June 2019, and in the United States Federal Trade Commission (“FTC”) administrative proceeding, in which an administrative law judge ruled in Henry Schein’s favor in October

under Item 1.

~~Table of Contents~~

2019 after a trial, as described in our prior filings with the SEC. The complaint sought unspecified monetary damages and a jury trial. Pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), the court appointed lead plaintiff and lead counsel on June 22, 2018 and recaptioned the putative class action as In re Henry Schein, Inc. Securities Litigation, under the same case number. Lead plaintiff filed a consolidated class action complaint on September 14, 2018. The consolidated class action complaint asserts similar claims against the same defendants (plus Timothy Sullivan) on behalf of the same putative class of purchasers during the Class Period. It alleges that Henry Schein’s stock price was inflated during that period because Henry Schein had misleadingly portrayed its dental-distribution business “as successfully producing excellent profits while operating in a highly competitive environment” even though, “in reality, [Henry Schein] had engaged for years in collusive and anticompetitive practices in order to maintain Schein’s margins, profits, and market share.” The complaint alleges that the stock price started to fall from August 8, 2017, when the company announced below-expected financial performance that allegedly “revealed that Schein’s poor results were a product of abandoning prior attempts to inflate sales volume and margins through anticompetitive collusion,” through February 13, 2018, after the FTC filed a complaint against Benco, Henry Schein and Patterson alleging that they violated U.S. antitrust laws. The complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 and Section 20(a) of the Exchange Act. On September 27, 2019, the court issued a decision partially granting and partially denying defendants’ motion to dismiss the securities action. The court dismissed all claims against Messrs. Bergman and Paladino as well as the Section 10(b) claim against Henry Schein to the extent that that claim relied on the Company’s financial results and margins to allege a material misstatement or omission. The court also dismissed the Section 10(b) claim against Henry Schein to the extent that it relied on the Company’s August 8, 2017 disclosure to allege loss causation. The court otherwise denied the motion as to Henry Schein and Mr. Sullivan. Henry Schein and Mr. Sullivan moved for partial reconsideration of the court’s decision. Pursuant to all parties’ request, the court temporarily took the motion off the calendar after it was fully briefed. The parties later agreed to resolve this matter in exchange for a cash payment of $35 million, which will be covered by the Company’s insurance and will have no earnings impact to the Company. The proposed settlement is subject to various conditions, including court approval. The Court preliminarily approved the proposed settlement on May 5, 2020 and has scheduled a fairness hearing for September 16, 2020.

On May 3, 2018, a purported class action complaint, Marion Diagnostic Center, LLC, et al. v. Becton, Dickinson, and Co., et al., Case No. 3:18-cv-010509, was filed in the U.S. District Court for the Southern District of Illinois against Becton, Dickinson, and Co. (“Becton”); Premier, Inc. (“Premier”), Vizient, Inc. (“Vizient”), Cardinal Health, Inc. (“Cardinal”), Owens & Minor Inc. (“O&M”), Henry Schein, Inc., and Unnamed Becton Distributor Co-Conspirators. The complaint alleges that the defendants entered into a vertical conspiracy to force health care providers into long-term exclusionary contracts that restrain trade in the nationwide markets for conventional and safety syringes and safety IV catheters and inflate the prices of certain Becton products to above-competitive levels. The named plaintiffs seek to represent three separate classes consisting of all health care providers that purchased (i) Becton’s conventional syringes, (ii) Becton’s safety syringes, or (iii) Becton’s safety catheters directly from Becton, Premier, Vizient, Cardinal, O&M or Henry Schein on or after May 3, 2014. The complaint asserts a single count under Section 1 of the Sherman Act, and seeks equitable relief, treble damages, reasonable attorneys’ fees and costs and expenses, and pre-judgment and post-judgment interest. On June 15, 2018, an amended complaint was filed asserting the same allegations against the same parties and adding McKesson Medical-Surgical, Inc. as a defendant. On November 30, 2018, the District Court granted defendants’ motion to dismiss and entered a final judgment, dismissing plaintiffs’ complaint with prejudice. On December 27, 2018, plaintiffs appealed the District Court’s decision to the Seventh Circuit Court of Appeals. The parties argued the appeal on September 27, 2019. On March 5, 2020, the Seventh Circuit Court of Appeals reversed the District Court’s decision. The Seventh Circuit held that plaintiffs failed to adequately allege the necessary conspiracy by the defendants, but should be provided an opportunity to amend their complaint. The Seventh Circuit vacated the District Court’s judgment, and remanded the case for further proceedings consistent with its opinion. Plaintiffs’ counsel have indicated that they intend to amend their complaint.

On May 29, 2018, an amended complaint was filed in the MultiDistrict Litigation (“MDL”) proceeding In Re National Prescription Opiate Litigation (MDL No. 2804; Case No. 17-md-2804) in an action entitled The County of Summit, Ohio et al. v. Purdue Pharma, L.P., et al., Civil Action No. 1:18-op-45090-DAP (“County of Summit Action”), in the U.S. District Court for the Northern District of Ohio, adding Henry Schein, Inc., Henry Schein Medical Systems, Inc. and others as defendants. Summit County alleges 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

~~Table of Contents~~

that the entities in the supply chain (including Henry Schein, Inc. and Henry Schein Medical Systems, Inc.) reaped financial rewards by refusing or otherwise failing to monitor appropriately and restrict the improper distribution of those drugs. On October 29, 2019, the Company was dismissed with prejudice from this lawsuit. Henry Schein, working with Summit County, donated $1 million to a foundation and paid $250,000 of Summit County’s expenses, as described in our prior filing with the SEC.

In addition to the County of Summit Action, Henry Schein and/or one or more of its affiliated companies have currently been named as a defendant in multiple lawsuits (currently less than one-hundred and fifty (150)), which allege claims similar to those alleged in the County of Summit Action. At this time, the only cases set for trial are the action filed by Tucson Medical Center et al., which is currently scheduled for a 30-day trial beginning on June 1, 2021, and the action filed by West Virginia University Hospitals, Inc. et al., which is currently scheduled for a non-jury liability trial on Plaintiffs’ public nuisance claims on March 22, 2021. These actions consist of some that have been consolidated within the MDL and are currently abated for discovery purposes, and others which remain pending in state courts and are proceeding independently and outside of the MDL. Of Henry Schein’s 2019 revenue of approximately $10 billion from continuing operations, sales of opioids represented less than one-tenth of 1 percent. Opioids represent a negligible part of our business. We intend to defend ourselves vigorously against these actions.

On September 30, 2019, the City of Hollywood Police Officers Retirement System, individually and on behalf of all others similarly situated, filed a putative class action complaint for violation of the federal securities laws against Henry Schein, Inc., Covetrus, Inc., and Benjamin Shaw and Christine Komola (Covetrus’s then Chief Executive Officer and Chief Financial Officer, respectively) in the U.S. District Court for the Eastern District of New York, Case No. 2:19-cv-05530-FB-RLM. The complaint seeks to certify a class consisting of all persons and entities who, subject to certain exclusions, purchased or otherwise acquired Covetrus common stock from February 8, 2019 through August 12, 2019. The case relates to the Animal Health Spin-off and Merger of the Henry Schein Animal Health Business with Vets First Choice in February 2019. The complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 and asserts that defendants’ statements in the offering documents and after the transaction were materially false and misleading because they purportedly overstated Covetrus’s capabilities as to inventory management and supply-chain services, understated the costs of integrating the Henry Schein Animal Health Business and Vets First Choice, understated Covetrus’s separation costs from Henry Schein, and understated the impact on earnings from online competition and alternative distribution channels and from the loss of an allegedly large customer in North America just before the Separation and Merger. The complaint seeks unspecified monetary damages and a jury trial. Pursuant to the provisions of the PSLRA, the court appointed lead plaintiff and lead counsel on December 23, 2019. Lead plaintiff filed a Consolidated Class Action Complaint on February 21, 2020. Lead plaintiff added Steve Paladino, our Chief Financial Officer, as a defendant in the action. Lead plaintiff filed an Amended Consolidated Class Action Complaint on May 21, 2020, in which it added a claim that Mr. Paladino is a “control person” of Covetrus. We intend to defend ourselves vigorously against this action.

On November 15, 2019, Frank Finazzo filed a putative shareholder derivative action on behalf of Henry Schein, Inc. against various present and former directors and officers of Henry Schein in the U.S. District Court for the Eastern District of New York, Case No. 1:19-cv-6485-LDH-JO. The named defendants in the action are Stanley M. Bergman, Steven Paladino, Timothy J. Sullivan, Barry J. Alperin, Lawrence S. Bacow, Gerald A. Benjamin, James P. Breslawski, Paul Brons, Shira Goodman, Joseph L. Herring, Donald J. Kabat, Kurt Kuehn, Philip A. Laskawy, Anne H. Margulies, Karyn Mashima, Norman S. Matthews, Mark E. Mlotek, Carol Raphael, E. Dianne Rekow, Bradley T. Sheares, and Louis W. Sullivan, with Henry Schein named as a nominal defendant. The Complaint asserts claims under the federal securities laws and state law relating to the allegations in the antitrust actions, the In re Henry Schein, Inc. Securities Litigation, and the City of Hollywood securities class action described above. The complaint seeks declaratory, injunctive, and monetary relief on behalf of Henry Schein. On January 6, 2020, counsel who filed the Finazzo case filed another, virtually identical putative shareholder derivative action on behalf of Henry Schein against the same defendants, asserting the same claims and seeking the same relief. That case, captioned Mark Sloan v. Stanley M. Bergman, et al., is also pending in the U.S. District Court for the Eastern District of New York, Case No. 1:20-cv-0076. On January 24, 2020, the court consolidated the Finazzo and Sloan cases under the new caption In re Henry Schein, Inc. Derivative Litigation, No. 1:19-cv-06485-LDH-JO, and appointed the counsel in these cases as co-lead counsel for the consolidated action. The parties agreed to a resolution of this matter subject to various conditions, including court approval. The contemplated settlement, if

~~Table of Contents~~

finally approved, would involve the adoption of certain procedures but would not involve the payment of any money except a fee to the plaintiffs’ attorneys that is immaterial. The Court preliminarily approved the proposed settlement on June 10, 2020, and has scheduled a fairness hearing for September 22, 2020.

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 June 27, 2020, we had accrued our best estimate of potential losses relating to claims that were probable to result in liability and for which we were able to reasonably estimate a loss. This accrued amount, as well as related expenses, was not material to our financial position, results of operations or cash flows. Our method for determining estimated losses considers currently available facts, presently enacted laws and regulations and other factors, including probable recoveries from third parties.

~~Table of Contents~~

ITEM 1A. RISK FACTORS

~~In addition to~~

There have been no material changes from the ~~other information set forth~~risk factors disclosed in ~~this report, you should carefully consider the factors discussed in~~

Part 1, Item ~~1A. "Risk factors" in~~1A, of our Annual Report on

Form 10-K for the year ended December ~~28, 2019. We provide an update to the following risk factor.~~

The recent COVID-19 pandemic and the responses of governments to it have had, and may continue to have, a material adverse effect on our business, results of operations and cash flows and may result in a material adverse effect on our financial condition and liquidity. In the future, our business, results of operations, cash flows, financial condition and liquidity may be negatively impacted by the effects of other disease outbreaks, epidemics, pandemics, or similar wide spread public health concerns and other natural disasters.

The COVID-19 pandemic has had, and continues to have, an unprecedented impact on society, worldwide economic activity, and the health care sector (particularly, the dental market). As a global healthcare solutions company, the COVID-19 pandemic and the governmental responses to it have had, and may continue to have, a material adverse effect on our business, results of operations and cash flows and may result in a material adverse effect on our financial condition and liquidity. In March and April 2020, the dental market was severely impacted by COVID-19, with many, if not a majority, of practices being closed or open on a limited basis only. Although dental practice openings and patient volume recovery in the United States and many other countries have rebounded faster than originally anticipated, they still remain below pre-COVID-19 levels, material uncertainty remains and the potential for one or more significant resurgences of COVID-19 could cause a significant reduction in dental practice openings and patient volume recovery, or further delay the return to normal operations. Even after COVID-19 has subsided, we may continue to experience material adverse impacts to our business, results of operations and cash flows as a result of, among other things, its global economic impact, including any recession that has occurred or may occur in the future, or a prolonged period of economic slowdown or the reluctance of patients to return for elective dental or medical care.

~~The impacts and potential impacts from the COVID-19 pandemic include, but are not limited to:~~

• ~~Significant reductions in demand or significant volatility in demand for certain of our products.~~ For example, in March and April 2020, many dental offices in the United States performed only emergency procedures, and rescheduled wellness exams and elective procedures. Dental offices in other countries also have experienced closures or restricted operations, as have medical offices around the world. Such closures and restrictions impacted our customers’ spending with us and have had a material adverse effect on our business, results of operations and cash flows. Although dental practice openings and patient volume recovery have rebounded faster than originally anticipated, capacity constraints in offices and demand-side factors may lead to continued reductions in demand or significant volatility in demand for our products. Additionally, significant reduction in demand for certain of our products or customers’ decisions to delay the purchase of large equipment may result in us having increased inventory;

• ~~Shortage of Personal Protective Equipment (PPE~~). Supply chain disruptions for PPE and an increased demand for these products has resulted, and may continue to result, in backorders of PPE and a potential scarcity in raw materials to make PPE. Prices for PPE have also increased. Although we have expanded our sourcing in critical product categories, added substitute products, and adapted our transportation model to shorten lead-times in product delivery, among other improvements, we still may not be able to supply our customers with the quantity of PPE products they demand, which may lead to our customers seeking alternative sources of supply. Furthermore, healthcare professionals’ inability to obtain a sufficient quantity of PPE from us and other suppliers could limit capacity at such offices, which could result in the furtherance of the current material adverse impacts on our business, results of operations and cash flows, and could materially adversely affect our financial condition and liquidity. Conversely, we recorded significant charges in the second quarter for PPE inventory due to volatility of pricing for PPE, and, depending upon the course of the pandemic, if PPE demand suddenly decreases upon an oversupply relative to demand, our margins and the value of our PPE inventory could be further negatively impacted in future periods, which could result in a material adverse impact on our business, results of operations and cash flows;

26, 2020.

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• ~~Reduction in Peoples’ Ability and Willingness to be in Public.~~ Although some restrictions recommended by several public health organizations, and implemented by many local governments, to slow and limit the transmission of COVID-19 (including business closures and restrictions, stay-at-home and similar measures) have been lifted or partially lifted, ongoing social distancing ordinances and similar restrictions, and the potential for one or more significant resurgences of COVID-19 may result in the re-imposition of governmental social distancing and other restrictions, and/or cause people to be less willing to go to elective medical and dental appointments, which could continue to materially adversely affect demand for our products. A lengthened period of materially suppressed demand would result in the furtherance of the current material adverse impacts on our business, results of operations and cash flows and could materially adversely affect our financial condition and liquidity;

• ~~Potential delays in customer payments, or defaults on our customer credit arrangements.~~ We generally sell products to customers with payment terms. If customers’ cash flows or operating and financial performance deteriorate, or if they are unable to make scheduled payments or obtain credit, they may not be able to pay, or may delay payment to us. Likewise, for similar reasons, suppliers may restrict credit or impose more stringent payment terms. The inability of current and/or potential customers to pay us for our products and/or services or any demands by suppliers for more stringent payment terms may materially adversely affect our business, results of operations, cash flows, financial condition and liquidity and may limit the amounts we can borrow under our trade accounts receivable securitization;

• ~~Impact on third parties’ ability to meet their obligations to the Company; impact on our ability to meet obligations to third parties.~~ Failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, contractors (including third party shippers), banks, joint venture partners and external business partners, to meet their obligations to the Company, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties, or by travel restrictions and border closures, may materially adversely affect our business, results of operations, cash flows, financial condition and liquidity. Certain of our contracts with supply partners contain minimum purchase requirements or include rebate provisions if we satisfy certain sales or purchasing targets that we may not be able to satisfy due to the impact of the COVID-19 pandemic. Rebate income recognized to date this year is less than rebates earned over the same period last year. Our failure to satisfy such contractual provisions or renegotiate more favorable terms could materially adversely affect our business, results of operations and cash flows;

• ~~Negative impact on our workforce and impact of adapted business practices.~~ The spread of COVID-19 has caused us to implement cost reduction measures (including a payroll cost reduction plan centered around furloughs, reduced pay and work hours, voluntary unpaid time off, suspension of the 401(k) match, and job reductions), modify our business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees. Many of our employees shifted abruptly to working remotely and continue to do so. An extended period of modified pay and business practices and remote work arrangements could have a negative impact on employee morale, strain our business continuity plans, introduce operational risk (including but not limited to cybersecurity risks), and impair our ability to efficiently operate our business;

• ~~Significant changes in political conditions.~~ Significant changes in political conditions in markets in which we purchase and distribute our products have occurred and are expected to continue at least during the pendency of the pandemic, including quarantines, governmental or regulatory actions, closures or other restrictions that limit or close our operating facilities, restrict our employees’ ability to travel or perform necessary business functions, or otherwise constrain the operations of our business partners, suppliers, or customers, which may materially adversely affect our business, results of operations, cash flows, financial condition and liquidity;

• ~~Potential impact on our ability to meet obligations under credit facilities.~~ Although we recently entered into amendments to our material credit facilities to, among other things, extend the maturity dates and temporarily provide additional flexibility under certain covenants, an extended negative impact of COVID-19 on our business, results of operations, cash flows, financial condition and liquidity could impact our ability to meet our obligations under credit facilities or outstanding long term debt, which contain maximum leverage ratios, and customary representations, warranties and affirmative covenants;

~~Table of Contents~~

• ~~Volatility in the financial markets.~~ ~~Volatility in the financial markets may materially adversely affect the availability and cost of credit to us;~~

• ~~Refocusing management resources to mitigate effects of COVID-19~~. Our management is focused on mitigating the effects of COVID-19, which has required, and may continue to require for the duration of the pandemic, a large investment of time and resources across the Company, and may delay certain strategic and other plans which could materially adversely affect our business;

• ~~Potentialincreased costs associated with our self-insured medical insurance programs.~~ We may incur significant employee health care costs under our self-insurance medical insurance program if a large number of our employees and/or their covered family members become ill from COVID-19; and

• ~~Reputational risk associated with response to COVID-19.~~If we do not respond appropriately to the COVID-19 pandemic, or if customers do not perceive our response to be adequate, we could suffer damage to our reputation and our brands, which could materially adversely affect our business.

The impact of COVID-19 may also exacerbate other risks discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 28, 2019, any of which could have a material adverse effect on us.

More generally, in the future our business, results of operations, cash flows, financial condition and liquidity may be negatively impacted by the effects of other disease outbreaks, epidemics, pandemics, similar wide spread public health concerns, and other natural disasters.

~~Table of Contents~~

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. ~~As summarized in the table below, subsequent~~

Subsequent additional

increases totaling $3.7 billion, authorized by our Board of Directors,

to the repurchase program provide for a total

of $3.8 billion of shares of our common stock to be repurchased under this

program.

Date of

Amount of Additional

Authorization

Repurchases Authorized

June 21, 2004

$
100,000,000

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

December 12, 2018

400,000,000

October 30, 2019

400,000,000

On March 8, 2021, we announced the reinstatement of our share repurchase

program.

As of ~~June~~March 27, ~~2020,~~2021, we had repurchased approximately ~~$3.6~~$3.7 billion of common

stock ~~(75,563,289~~(76,888,531 shares) under

these initiatives, with ~~$201.2~~$112.6 million available for future common stock share repurchases.

~~As a result of the COVID-19 pandemic, on April 6, 2020, we announced a temporary suspension of our share repurchase program in an effort to preserve cash and exercise caution in this uncertain period.~~

~~During the fiscal quarter ended June 27, 2020, we did not make any~~

The following table summarizes repurchases of our common ~~stock.~~ stock

under our stock repurchase program during the

fiscal quarter ended March 27, 2021.

Total Number

Maximum Number

Total

of Shares

Number

Average

Purchased as Part

that May Yet

of Shares

Price Paid

of Our Publicly

Be Purchased Under

Fiscal Month

Purchased (1)

Per Share

Announced Program

Our Program (2)

12/27/20 through 1/30/2021

3,055,600

1/31/21 through 2/27/2021

3,253,214

2/28/21 through 3/27/2021

1,325,242

66.90

1,325,242

1,655,664

1,325,242

(1)

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

(2)

The maximum number of shares that ~~could~~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. ~~The maximum number~~

This table excludes shares withheld from employees to satisfy minimum tax withholding

requirements for equity-based transactions.

Table of ~~shares that could be repurchased~~Contents

ITEM 6.

EXHIBITS

4.1

Second Amendment to Second Amended and Restated Multicurrency Private

Shelf Agreement, dated as of ~~April 25,~~ March 5, 2021, by and among us, PGIM, Inc.and

each Prudential affiliate which becomes party thereto

(Incorporated by

reference to Exhibit 4.1 to our Current Report on Form 8-K filed on March8,

2021.)

4.2

Second Amendment to Second Amended and Restated Master Note Facility,

dated as of March 5, 2021, by and among us, NYL Investors LLC and each

New YorkLife affiliate which becomes party thereto

(Incorporated by

reference to Exhibit 4.2 to our Current Report on Form 8-K filed on March8,

2021.)

4.3

Second Amendment to Second Amended and Restated MulticurrencyMaster

Note Purchase Agreement, dated as of March 5, 2021, by and among us,

Metropolitan Life Insurance Company, MetLife Investment Management, LLC

and each MetLife affiliate which becomes party thereto

(Incorporated by

reference to Exhibit 4.3 to our Current Report on Form 8-K filed on March8,

2021.)

10.1

Form of 2021 Stock Option Agreement pursuant to the Henry Schein, Inc.2020

Stock Incentive Plan (as amended and restated effective as of May ~~30, 2020,~~21, 2020)

(Incorporated by reference to Exhibit 10.1 to our Current Reporton Form 8-K

filed on March 8,

2021.)**

10.2

Form of 2021 Special Pandemic Recognition Award Restricted Stock Unit

Agreement for time-based restricted stock unit awards pursuant to the Henry

Schein, Inc. 2013 Stock Incentive Plan (as amended and ~~June~~restatedeffective as of

May 14, 2013).**+

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 27, ~~2020 were 3,840,642, 3,313,756 and 3,550,578, respectively.~~

2021, formatted in Inline XBRL (included within

~~Table of Contents~~

Exhibit 101 attachments).+

~~ITEM 6. EXHIBITS~~

~~Exhibits.~~

	~~4.1~~	First Amendment to Second Amended and Restated Multicurrency Private Shelf Agreement, dated as of June 23, 2020, by and among us, PGIM, Inc. and each Prudential affiliate which becomes party thereto. (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on June 25, 2020.)
	~~4.2~~	First Amendment to Second Amended and Restated Master Note Facility, dated as of June 23, 2020, by and among us, NYL Investors LLC and each New York Life affiliate which becomes party thereto. (Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on June 25, 2020.)
	~~4.3~~	First Amendment to Second Amended and Restated Multicurrency Master Note Purchase Agreement, dated as of June 23, 2020, by and among us, Metropolitan Life Insurance Company, MetLife Investment Management, LLC and each MetLife affiliate which becomes party thereto. (Incorporated by reference to Exhibit 4.3 to our Current Report on Form 8-K filed on June 25, 2020.)
	~~10.1~~	Credit Agreement, dated as of April 17, 2020, among us, the several lenders parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, joint lead arranger and joint bookrunner, and U.S. Bank National Association, as joint lead arranger and joint bookrunner. ~~(Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 20, 2020.)~~
	~~10.2~~	Second Amendment, dated as of April 17, 2020, among us, the several lenders parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on April 20, 2020.)
	~~10.3~~	Amendment Number Two to the Henry Schein, Inc. Supplemental Executive Retirement Plan, amended and restated effective as of January 1, 2014. (Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed for the quarter ended March 28, 2020 filed on May 5, 2020.)**
	~~10.4~~	Amendment Number Six to the Henry Schein, Inc. Deferred Compensation Plan. (Incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q filed for the quarter ended March 28, 2020 filed on May 5, 2020.)**
	~~10.5~~	Voluntary Salary Waiver effective April 6, 2020, by and between Henry Schein, Inc. and Stanley M. Bergman. (Incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q filed for the quarter ended March 28, 2020 filed on May 5, 2020.)**
	~~10.6~~	~~Henry Schein, Inc. Stock Incentive Plan, as amended and restated effective as of May 21, 2020. (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 26, 2020.)~~**
	~~10.7~~	Limited Waiver dated as of May 22, 2020 to Receivables Purchase Agreement, dated as of April 17, 2013, by and among us, as servicer, HSFR, Inc., as seller, lender, as agent and the various purchaser groups from time to time party thereto, as amended.+
	~~10.8~~	Amendment No. 6 dated as of June 22, 2020 to the Receivables Purchase Agreement, dated as of April 17, 2013, by and among us, as servicer, HSFR, Inc., as seller, lender, as agent and the various purchaser groups from time to time party thereto, as amended. (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 25, 2020.)
	~~10.9~~	~~Voluntary Salary Waiver effective June 19, 2020, by and between Henry Schein, Inc. and Stanley M. Bergman.**+~~
	~~31.1~~	~~Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+~~

~~Table of Contents~~

	~~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 June 27, 2020, formatted in Inline XBRL (included within Exhibit 101 attachments).+~~

+ Filed or furnished herewith.

** Indicates management contract or compensatory plan or agreement.

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the

Registrant has duly caused this Report to

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

	~~Henry Schein, Inc.~~
	~~(Registrant)~~


	~~By: /s/ Steven Paladino~~
	~~Steven Paladino~~
	~~Executive Vice President and~~
	~~Chief Financial Officer~~
	~~(Authorized Signatory and Principal Financial~~
	~~and Accounting Officer)~~

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: ~~August~~May 4, ~~2020~~

2021

~~Delaware~~	~~11-3136595~~
~~(State or other jurisdiction of~~	~~(I.R.S. Employer Identification No.)~~
~~incorporation or organization)~~

~~Title of each class~~	~~Trading Symbol(s)~~	~~Name of each exchange on which registered~~
~~Common Stock, par value $.01 per share~~	~~HSIC~~	~~The Nasdaq Global Select Market~~

~~Large accelerated filer~~ ☒		~~Accelerated filer~~ ☐
~~Non-accelerated filer~~ ☐		~~Smaller reporting company~~ ☐
		~~Emerging growth company~~ ☐


PART ~~I. FINANCIAL INFORMATION~~
				~~Page~~
~~ITEM 1.~~	~~Consolidated Financial Statements:~~

		~~Balance Sheets as of June 27, 2020 and December 28, 2019~~		3

		~~Statements of Income for the three and six months ended~~
			~~June 27, 2020 and June 29, 2019~~	4

		~~Statements of Comprehensive Income for the three and six months ended~~
			~~June 27, 2020 and June 29, 2019~~	5

		~~Statement of Changes in Stockholders' Equity for the three months ended~~
			~~June 27, 2020 and June 29, 2019~~	6

		~~Statement of Changes in Stockholders' Equity for the six months ended~~
			~~June 27, 2020 and June 29, 2019~~	7

		~~Statements of Cash Flows for the six months ended~~
			~~June 27, 2020 and June 29, 2019~~	8

		~~Notes to Consolidated Financial Statements~~		9
			~~Note 1 – Basis of Presentation~~	9
			~~Note 2 – Discontinued Operations~~	11
			~~Note 3 – Critical Accounting Policies, Accounting Pronouncements Adopted~~
			~~and Recently Issued Accounting Standards~~	14
			~~Note 4 – Revenue from Contracts with Customers~~	15
			~~Note 5 – Segment Data~~	16
			~~Note 6 – Debt~~	17
			~~Note 7 – Leases~~	20
			~~Note 8 – Redeemable Noncontrolling Interests~~	22
			~~Note 9 – Comprehensive Income~~	23
			~~Note 10 – Fair Value Measurements~~	24
			~~Note 11 – Business Acquisitions~~	26
			~~Note 12 – Plans of Restructuring~~	27
			~~Note 13 – Earnings Per Share~~	28
			~~Note 14 – Income Taxes~~	29
			~~Note 15 – Derivatives and Hedging Activities~~	30
			~~Note 16 – Stock-Based Compensation~~	31
			~~Note 17 – Supplemental Cash Flow Information~~	33
			~~Note 18 – Legal Proceedings~~	33
			~~Note 19 – Related Party Transactions~~	37

~~ITEM 2.~~	~~Management's Discussion and Analysis of~~
			~~Financial Condition and Results of Operations~~	38

~~ITEM 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~			58

~~ITEM 4.~~	~~Controls and Procedures~~			59

~~PART II. OTHER INFORMATION~~

~~ITEM 1.~~	~~Legal Proceedings~~			60

~~ITEM 1A.~~	~~Risk Factors~~			64

~~ITEM 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~			67


~~ITEM 6.~~	~~Exhibits~~			68

	~~Signature~~			70

			Three Months Ended						Six Months Ended
			June 27, 2020						June 27, 2020
			North America		International		Global		North America		International		Global
Revenues:
Health care distribution
	Dental		$	515,946	$	425,346	$	941,292	$	1,404,318	$	1,012,050	$	2,416,368
	Medical			596,588		21,222		617,810		1,374,616		43,882		1,418,498
		Total health care distribution		1,112,534		446,568		1,559,102		2,778,934		1,055,932		3,834,866
Technology and value-added services				92,927		12,300		105,227		206,425		30,767		237,192
Total excluding Corporate TSA revenues ⁽¹⁾				1,205,461		458,868		1,664,329		2,985,359		1,086,699		4,072,058
Corporate TSA revenues ⁽¹⁾				-		20,070		20,070		-		41,212		41,212
		Total revenues	$	1,205,461	$	478,938	$	1,684,399	$	2,985,359	$	1,127,911	$	4,113,270

			Three Months Ended						Six Months Ended
			June 29, 2019						June 29, 2019
			North America		International		Global		North America		International		Global
Revenues:
Health care distribution
	Dental		$	975,371	$	625,979	$	1,601,350	$	1,898,877	$	1,248,853	$	3,147,730
	Medical			678,358		19,200		697,558		1,340,653		40,565		1,381,218
		Total health care distribution		1,653,729		645,179		2,298,908		3,239,530		1,289,418		4,528,948
Technology and value-added services				108,505		16,546		125,051		207,510		33,139		240,649
Total excluding Corporate TSA revenues ⁽¹⁾				1,762,234		661,725		2,423,959		3,447,040		1,322,557		4,769,597
Corporate TSA revenues ⁽¹⁾				1,760		22,108		23,868		3,021		35,477		38,498
		Total revenues	$	1,763,994	$	683,833	$	2,447,827	$	3,450,061	$	1,358,034	$	4,808,095

(1)	Corporate TSA revenues represents sales of certain animal health products to Covetrus under the transition services agreement entered
	into in connection with the Animal Health Spin-off, which we expect to continue through October 2020.

				June 27,		December 28,
				2020		2019
				(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents			$	296,110	$	106,097
	Accounts receivable, net of reserves of $80,825 and $60,002				1,101,201		1,246,246
	Inventories, net				1,406,719		1,428,799
	Prepaid expenses and other				605,176		445,360
			Total current assets		3,409,206		3,226,502
Property and equipment, net					335,898		329,645
Operating lease right-of-use assets, net					211,473		231,662
Goodwill					2,471,108		2,462,495
Other intangibles, net					527,875		572,878
Investments and other					362,565		327,919
			Total assets	$	7,318,125	$	7,151,101

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	734,957	$	880,266
	Bank credit lines				503,178		23,975
	Current maturities of long-term debt				109,587		109,849
	Operating lease liabilities				61,710		65,349
	Accrued expenses:
		Payroll and related			212,178		265,206
		Taxes			210,439		165,171
		Other			475,192		528,553
			Total current liabilities		2,307,241		2,038,369
Long-term debt					515,802		622,908
Deferred income taxes					56,925		64,989
Operating lease liabilities					163,342		176,267
Other liabilities					374,045		331,173
			Total liabilities		3,417,355		3,233,706

Redeemable noncontrolling interests					279,225		287,258
Commitments and contingencies

Stockholders' equity:
	Preferred stock, $.01 par value, 1,000,000 shares authorized,
		none outstanding			-		-
	Common stock, $.01 par value, 480,000,000 shares authorized,
		142,438,127 outstanding on June 27, 2020 and
		143,353,459 outstanding on December 28, 2019			1,424		1,434
	Additional paid-in capital				16,475		47,768
	Retained earnings				3,172,439		3,116,215
	Accumulated other comprehensive loss				(199,251)		(167,373)
		Total Henry Schein, Inc. stockholders' equity			2,991,087		2,998,044
	Noncontrolling interests				630,458		632,093
			Total stockholders' equity		3,621,545		3,630,137
		Total liabilities, redeemable noncontrolling interests and stockholders' equity		$	7,318,125	$	7,151,101


					Six Months Ended
					June 27,		June 29,
					2020		2019
Cash flows from operating activities:
	Net income				$	120,298	$	233,840
	Income (loss) from discontinued operations					303		(11,217)
	Income from continuing operations					119,995		245,057
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
			Depreciation and amortization			96,095		89,355
			Stock-based compensation (credit) expense			(12,358)		19,772
			Provision for losses on trade and other accounts receivable			28,758		3,976
			Provision for (benefit from) deferred income taxes			(32,871)		2,284
			Equity in earnings of affiliates			(4,145)		(8,186)
			Distributions from equity affiliates			4,220		61,357
			Changes in unrecognized tax benefits			1,380		4,435
			Other			227		(1,045)
			Changes in operating assets and liabilities, net of acquisitions:
				Accounts receivable		99,672		(17,452)
				Inventories		13,700		86,803
				Other current assets		(176,616)		(62,098)
				Accounts payable and accrued expenses		(138,900)		(125,472)
Net cash provided by (used in) operating activities from continuing operations						(843)		298,786
Net cash provided by (used in) operating activities from discontinued operations						573		(169,294)
Net cash provided by (used in) operating activities						(270)		129,492
Cash flows from investing activities:
	Purchases of fixed assets					(30,588)		(30,708)
	Payments related to equity investments and business
		acquisitions, net of cash acquired				(37,725)		(622,441)
	Proceeds from sale of equity investment					-		10,500
	Proceeds from (repayments to) loan to affiliate					(1,729)		15,868
	Other					(11,599)		(8,762)
Net cash used in investing activities from continuing operations						(81,641)		(635,543)
Net cash used in investing activities from discontinued operations						-		(2,064)
Net cash used in investing activities						(81,641)		(637,607)
Cash flows from financing activities:
	Net change in bank borrowings					479,702		(709,012)
	Proceeds from issuance of long-term debt					501,421		741
	Principal payments for long-term debt					(609,580)		(9,038)
	Debt issuance costs					(3,655)		(391)
	Proceeds from issuance of stock upon exercise of stock options					-		34
	Payments for repurchases of common stock					(73,789)		(226,782)
	Payments for taxes related to shares withheld for employee taxes					(13,713)		(10,527)
	Distribution received related to Animal Health Spin-off					-		1,120,000
	Proceeds related to Animal Health Share Sale					-		361,090
	Proceeds from (distributions to) noncontrolling shareholders					(3,466)		49,398
	Acquisitions of noncontrolling interests in subsidiaries					(14,934)		(2,270)
	Proceeds from (payments to) Henry Schein Animal Health Business					64		(212,957)
Net cash provided by financing activities from continuing operations						262,050		360,286
Net cash provided by (used in) financing activities from discontinued operations						(573)		150,274
Net cash provided by financing activities						261,477		510,560
Effect of exchange rate changes on cash and cash equivalents from continuing operations						10,447		4,510
Effect of exchange rate changes on cash and cash equivalents from discontinued operations						-		(2,240)
Net change in cash and cash equivalents from continuing operations						190,013		28,039
Net change in cash and cash equivalents from discontinued operations						-		(23,324)
Cash and cash equivalents, beginning of period						106,097		56,885
Cash and cash equivalents, end of period					$	296,110	$	84,924

			February 7,		December 29,
			2019		2018


Cash and cash equivalents			$	6,815	$	23,324
Accounts receivable, net				432,812		434,935
Inventories, net				536,637		555,230
Prepaid expenses and other				120,546		69,525
		Total current assets of discontinued operations		1,096,810		1,083,014
Property and equipment, net				69,790		68,177
Operating lease right-of-use asset, net				57,012		-
Goodwill				742,931		739,266
Other intangibles, net				205,793		208,213
Investments and other				120,518		118,003
		Total long-term assets of discontinued operations		1,196,044		1,133,659
Total assets of discontinued operations			$	2,292,854	$	2,216,673

Accounts payable			$	316,162	$	441,453
Current maturities of long-term debt				657		675
Operating lease liabilities				18,951		-
Accrued expenses:
	Payroll and related			36,847		36,888
	Taxes			24,060		17,552
	Other			80,400		81,039
		Total current liabilities of discontinued operations		477,077		577,607
Long-term debt				1,176,105		23,529
Deferred income taxes				17,019		4,352
Operating lease liabilities				38,668		-
Other liabilities				29,209		34,572
		Total long-term liabilities of discontinued operations		1,261,001		62,453
Total liabilities of discontinued operations			$	1,738,078	$	640,060
Redeemable noncontrolling interests			$	28,270	$	92,432


Supplemental balance sheet information related to leases is as follows:

		June 27,			December 28,
		2020			2019
Operating Leases:
Operating lease right-of-use assets		$	211,473		$	231,662

Current operating lease liabilities			61,710			65,349
Non-current operating lease liabilities			163,342			176,267
	Total operating lease liabilities	$	225,052		$	241,616

Finance Leases:
Property and equipment, at cost		$	9,557		$	10,268
Accumulated depreciation			(3,386)			(4,581)
Property and equipment, net of accumulated depreciation		$	6,171		$	5,687

Current maturities of long-term debt		$	2,192		$	1,736
Long-term debt			3,726			3,658
	Total finance lease liabilities	$	5,918		$	5,394

Weighted Average Remaining Lease Term in Years:
	Operating leases		5.6			5.5
	Finance leases		4.5			5.0

Weighted Average Discount Rate:
	Operating leases		3.3	%		3.4	%
	Finance leases		2.0	%		2.2	%

Supplemental cash flow information related to leases is as follows:

			Six Months Ended
		June 27,		June 29,
		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
	Operating cash flows for operating leases	$	38,579	$	40,210
	Operating cash flows for finance leases		50		44
	Financing cash flows for finance leases		947		592
Right-of-use assets obtained in exchange for lease obligations:
	Operating leases	$	14,926	$	271,268
	Finance leases		1,814		413

Maturities of lease liabilities are as follows:

		June 27,2020
		Operating		Finance
		Leases		Leases
2020	$	35,286	$	1,244
2021		61,117		1,992
2022		42,443		1,141
2023		29,236		383
2024		20,542		288
Thereafter		58,589		1,119
Total future lease payments		247,213		6,167
Less imputed interest		(22,161)		(249)
Total	$	225,052	$	5,918

			Technology and
	Health Care		Value-Added
	Distribution		Services		Total
Balance, December 29, 2018	$	30,291	$	1,434	$	31,725
Provision		13,935		770		14,705
Payments and other adjustments		(30,853)		(1,767)		(32,620)
Balance, December 28, 2019	$	13,373	$	437	$	13,810
Provision		19,945		776		20,721
Payments and other adjustments		(17,778)		(598)		(18,376)
Balance, June 27, 2020	$	15,540	$	615	$	16,155

	Time-Based Restricted Stock/Units
		Weighted Average
		Grant Date Fair		Intrinsic Value
	Shares/Units	Value Per Share		Per Share
Outstanding at beginning of period	1,417	$	58.72
Granted	379		60.00
Vested	(290)		66.03
Forfeited	(34)		60.05
Outstanding at end of period	1,472	$	57.58	$	56.67

	Performance-Based Restricted Stock/Units
		Weighted Average
		Grant Date Fair		Intrinsic Value
	Shares/Units	Value Per Share		Per Share
Outstanding at beginning of period	1,459	$	61.41
Granted	(1,105)		57.30
Vested	(319)		67.55
Forfeited	(31)		57.78
Outstanding at end of period	4	$	52.62	$	56.67

Date of	Amount of Additional
Authorization	Repurchases Authorized
June 21, 2004	$	100,000,000
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
December 12, 2018		400,000,000
October 30, 2019		400,000,000